CYPRESS CAPITAL INC/NV, 10SB12G/A, 2000-01-18

CYPRESS CAPITAL INC/NV
10SB12G/A, 2000-01-18
NON-OPERATING ESTABLISHMENTS

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U. S. Securities and Exchange Commission

Washington, D.C. 20549

Form 10-SB/A

File No.: __________________

CIK: 0001101217

GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS

Under Section 12(b) or (g) of the Securities Exchange Act of 1934

CYPRESS CAPITAL, INC.
----------------------------------
(Name of Small Business Issuer in its charter)

Nevada 84-1521101
State or other jurisdiction of IRS Employer ID Number
incorporation or organization

234 Columbine, Suite 300B, Denver, CO 80206
-----------------------------------------------
(Address of principal executive offices) (Zip Code)

Issuer's telephone number: (303) 422-8127

Securities to be registered under Section 12(b) of the Act:

Title of each class Name of each exchange on which
to be so registered each class is to be registered

Not Applicable

Securities to be registered under Section 12(g) of the Act:

Common Stock
(Title of class)

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TABLE OF CONTENTS

PART I

Page

Item 1. Business.....................................................3

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................40

Item 3. Properties..................................................41

Item 4. Security Ownership of Certain Beneficial Owners and
Management..................................................41

Item 5. Directors and Executive Officers of the Registrant..........42

Item 6. Executive Compensation......................................46

Item 7. Certain Relationships and Related Transactions..............47

Item 8. Description of Securities...................................47

PART II

Item 1. Market for Registrant's Common Stock and Security Holder
Matters.....................................................48

Item 2. Legal Proceedings...........................................49

Item 3. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure....................................49

Item 4. Recent Sales of Unregistered Securities.....................49

Item 5. Indemnification of Directors and Officers...................50

PART F/S

Financial Statements and Supplementary Data..................................F-1

Signature Page................................................................51

Exhibits, Financial Statement Schedule and Reports on Form 8-K................63

<PAGE>

PART I

Item 1. Description of Business.

General

Cypress Capital, Inc. ("the Company") was incorporated under the laws of the
State of Nevada on November 3, 1999, and is in the developmental stage. For the
period of inception in 1999 through date hereof, the Company had no revenues or
business. The Company has no commercial operations as of date hereof. The
Company has no full-time employees and owns no real estate.

The Company has been incorporated in Nevada in November of 1999 as a holding
company for mortgage broker subsidiaries, which it plans to acquire in the
future. The Company has no operations of mortgage broker businesses as of the
date of the Registration Statement.

Through itself and its mortgage broker subsidiaries, the Company plans to
provide residential mortgage loans to various consumers including "prime" credit
borrowers who desire conventional conforming loans and borrowers seeking
"sub-prime" loans. Those Borrowers typically have what is referred to in banking
as "B," "C," or "D" credit standings that usually indicate a "non-conventional"
loan. The Company provides "no-doc" or "reduced-doc" loans to Borrowers. These
"no-doc" or "reduced-doc" loans are typically provided to self-employed persons,
persons with blemished credit histories, or Borrowers with prime credit ratings
who desire to maintain their privacy with regard to their income. Funding for
the Company's loans will result from funding from warehouse lines of credit with
third party purchasers, which funds the loans the Company originates at the loan
closing. The Company will sell its loans with servicing releases and as such
does not expect to service any loans at this time itself.

To minimize risk, the Company will employ standard operating procedures that
require contact with the Borrower by phone or in person for the Borrower's
completion of a loan application and signature on Real Estate Settlement
Procedures disclosure documents. The Borrower must also provide a credit release
authorization to obtain credit reports and any other documentation required for
loan approval. This documentation may include, but is not limited to, bank
statements, pay stubs, W-2 forms, tax returns, divorce decrees, property
settlements, and proof of self-employment via a business license or a statement
from the self-employed's Certified Public Accountant. Further, the Borrower may
be required to provide verification of all assets, property ownership, and
considerable other documentation required by the secondary purchaser of the
loan.

Typically, the Company assembles the borrower information and verifies the
Borrower's credit history through Equifax, Trans Union, and Experian TRW. This
information is required by the secondary purchaser. Additionally, the Company's
risk is reduced by this procedure.

The Company's current business plan is to seek, investigate, and, if warranted,
acquire assets or shares of one or more mortgage broker businesses, and to
pursue other related activities intended to enhance shareholder value. The
acquisition of a business opportunity may be made by purchase, merger, exchange
of stock, or otherwise, and may encompass assets or a business entity, such as a
corporation, joint venture, or partnership. The Company has no capital, and it
is unlikely that the Company will be able to take advantage of possible

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purchases which require cash. The Company intends to seek opportunities
demonstrating the potential of profitable long term revenues.

Sales and Marketing

The Company subsidiaries, if and when acquired, will derive the majority of its
loan origination business from referrals by Realtors, real estate sales
associates and past customers. A small portion may be derived from referrals by
financial planners, builders, architects, and Internet sales.

Management will utilize a strategy of building referral relationships, within
the real estate community that consists of:

* professional, consistent conduct of business practices to
position the Company as highly dependable and desirable.
* utilization of the Company's track record and tenure of
service to increase awareness and brand name recognition in
its markets.
* generation of qualified leads and identification of potential
new markets through networking in professional associations.

Only a small portion of the Company's business may be derived from advertising.
The Company will utilize a multi-media approach designed to produce materials
and events that continually prompt recognition of the Company's name and
services. By "branding" the Company's services, the Company's referral base may
be consistently reinforced with positive images.

The Company will develop marketing and advertising strategies with its loan
officers, marketing and advertising coordinator, and Chief Executive Officer.
This approach to establishing "brand name" recognition for the Company may be
accomplished by the following:

* gathering mortgage leads through media advertising using local
marketing companies who place ads in newspapers, real estate
publications, and yellow page directories;
* coordination of all advertising and marketing materials "in
house";
* co-operative ad programs with Realtors and developers;
* event sponsorship including charitable fund-raising golf
tournaments, sports teams, community events, and real estate
functions;
* involvement with affordable housing committees, and
alternative energy and energy efficient home agencies.

Revenue

The Company will derive its revenues by generating "loan origination fees"
through subsidiaries which are paid by Purchasers of primary and secondary
residences and income properties. These fees are typically one percent (1%) of
the face amount of the loan. Other revenues include premiums paid by the loan
investor to the Company. These premiums are based upon the interest rate of the
loan, typically between zero percent (0%) and three percent (3%), and are paid
as service release or yield spread premiums. Fees paid by the Borrower to the
Company may include processing fees, document preparation fees, and
administrative charges.

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The Company expects to average approximately two percent (2.00%) of each loan
closed (from the fees and service charges described above) in gross revenues or
$2,000 per $100,000 of loans placed.

The Company's mortgage loans when generated, with servicing rights to the loans,
may be sold immediately to institutional investors.

Management believes that the expansion of its operations through acquisition of
existing in place mortgage operations will result in continued growth.

The Company intends to establish a high standard of service through the use of a
quality control procedure manual, employee handbook, written investor
guidelines, and professional team orientated approach. Each loan will be
reviewed and approved by a senior loan processor. The Company believes that an
experienced loan processors will provide it with the infrastructure required to
manage and sustain the Company's growth while maintaining high quality of
originated loans.

Competition

There are several dominant lenders in any of the markets which may be entered by
the Company. Management believes that no single lender will remain the dominant
loan originator for the entire region for all types of loans.

Growth Strategy

The Company's growth strategy consists of the following planned initiatives:

To support growth, the Company has four principal business strategy elements.

o Focus primarily on the retail origination channel. This channel allows
control of the loan origination process and provides the Company with
direct access to sources of mortgages and to the consumer.

o The Company intends to leverage its banker/broker structure in order to
consistently offer the consumers low rates on a broad array of mortgage
products, and take advantage of the back end profits accrued in being a
true mortgage banker.

o It utilizes the base of customers to create portfolio loan transactions.
Portfolio servicing, and re-marketing to the customers in the portfolio
allows the Company to increase revenues without significant capital
investment.

o The Company employs a commission and stock incentive system for loan
originators and an incentive compensation system for operations employees
that motivates them to maximize loan volume and profitability while
simultaneously creating a variable cost structure for the Company which is
adaptable to changes in origination volume.

The Company intends to acquire companies with seasoned and talented management
and recruit highly skilled employees with mortgage industry experience and seek
technologies and process improvements that streamline the origination process to
ensure the continuous delivery of superior customer service.

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Public offering of the stock of the holding company may be optimally made upon
the holding company's origination volume reaching approximately three to ten
billion dollars or greater with appropriate pre tax profits.

There is no guarantee the Company will be successful in implementing its growth
strategy or if this strategy will result in increased revenue or income to the
Company.

At the present time the Company has not identified any specific business
opportunity that it plans to pursue, nor has the Company reached any agreement
or definitive understanding with any person concerning an acquisition. The
Company is filing Form 10-SB on a voluntary basis in order to become a 12(g)
registered company under the Securities Exchange Act of 1934. As a "reporting
company," the Company may be more attractive to a private acquisition target
because it may be listed to trade its shares on the OTCBB.

It is anticipated that the Company's officers and directors will contact
mortgage bankers and other persons with whom they are acquainted who are
involved in corporate finance matters to advise them of the Company's existence
and to determine if any companies or businesses they represent have an interest
in considering a merger or acquisition with the Company. No assurance can be
given that the Company will be successful in finding or acquiring a desirable
business opportunity, given that no funds that are available for acquisitions,
or that any acquisition that occurs will be on terms that are favorable to the
Company or its stockholders.

The Company's search will be directed toward small and medium-sized enterprises
which have a desire to become part of a public corporation. The Company
anticipates that the business opportunities presented to it may (i) be recently
organized with no operating history, or a history of losses attributable to
under-capitalization or other factors; (ii) be experiencing financial or
operating difficulties; (iii) be in need of funds to develop a new product or
service or to expand into a new market; (iv) be relying upon an untested product
or marketing concept; or (v) have a combination of the characteristics mentioned
in (i) through (iv). The Company intends to concentrate its acquisition efforts
on properties or businesses that it believes to be undervalued. The Company
intends to concentrate its acquisition efforts on properties or businesses that
it believes to be undervalued. Given the above factors, investors should expect
that any acquisition candidate may have a history of losses or low
profitability.

The Company does not propose to restrict its search for investment opportunities
to any particular geographical area. The Company's discretion in the selection
of business opportunities is unrestricted, subject to the availability of such
opportunities, economic conditions, and other factors.

As a consequence of this registration of its securities, any entity which has an
interest in being acquired by, or merging into the Company, is expected to be an
entity that desires to become a public company and establish a public trading
market for its securities. In connection with such a merger or acquisition, it
is highly likely that an amount of stock constituting control of the Company
would be issued by the Company or purchased from the current principal
shareholders of the Company by the acquiring entity or its affiliates. If stock
is purchased from the current shareholders, the transaction is very likely to
result in substantial gains to them relative to their purchase price for such

<PAGE>

stock. In the Company's judgment, none of its officers and directors would
thereby become an "underwriter" within the meaning of the Section 2(11) of the
Securities Act of 1933, as amended. The sale of a controlling interest by
certain principal shareholders of the Company could occur at a time when the
other shareholders of the Company remain subject to restrictions on the transfer
of their shares.

Depending upon the nature of the transaction, the current officers and directors
of the Company may resign management positions with the Company in connection
with the Company's acquisition of a business opportunity. See "Form of
Acquisition," below, and "Risk Factors - The Company - Lack of Continuity in
Management." In the event of such a resignation, the Company's current
management would not have any control over the conduct of the Company's business
following the Company's combination with a business opportunity.

It is anticipated that business opportunities will come to the Company's
attention from various sources, including its officers and directors, its other
stockholders, professional advisors such as attorneys and accountants,
securities broker-dealers, venture capitalists, members of the financial
community, and others who may present unsolicited proposals. The Company has no
plans, understandings, agreements, or commitments with any individual for such
person to act as a finder of opportunities for the Company.

The Company may enter into a merger or acquisition transaction with any business
with which its officers or directors are currently affiliated. Should the
Company determine in the future, that a transaction with an affiliate would be
in the best interests of the Company and its stockholders, the Company is in
general permitted by Nevada law to enter into such a transaction if:

1. The material facts as to the relationship or interest of the affiliate and as
to the contract or transaction are disclosed or are known to the Board of
Directors, and the Board in good faith authorizes the contract or transaction by
the affirmative vote of a majority of the disinterested directors, even though
the disinterested directors constitute less than a quorum; or

2. The material facts as to the relationship or interest of the affiliate and as
to the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or

3. The contract or transaction is fair as to the Company as of the time it is
authorized, approved or ratified, by the Board of Directors or the stockholders.

Investigation and Selection of Business Opportunities

To a large extent, a decision to participate in a specific business opportunity
may be made upon management's analysis of the quality of the other company's
management and personnel, the anticipated acceptability of new products or
marketing concepts, the merit of technological changes, the perceived benefit
the Company will derive from becoming a publicly held entity, and numerous other
factors which are difficult, if not impossible, to analyze through the
application of any objective criteria. In many instances, it is anticipated that
the historical operations of a specific business opportunity may not necessarily

<PAGE>

be indicative of the potential for the future because of the possible need to
shift marketing approaches substantially, expand significantly, change product
emphasis, change or substantially augment management, or make other changes. The
Company will be dependent upon the owners of a business opportunity to identify
any such problems which may exist and to implement, or be primarily responsible
for the implementation of, required changes. Because the Company may participate
in a business opportunity with a newly organized firm or with a firm which is
entering a new phase of growth, it should be emphasized that the Company will
incur further risks, because management in many instances will not have proved
its abilities or effectiveness, the eventual market for such company's products
or services will likely not be established, and such company may not be
profitable when acquired.

It is anticipated that the Company will not be able to diversify, but will
essentially be limited to one such venture because of the Company's limited
financing. This lack of diversification will not permit the Company to offset
potential losses from one business opportunity against profits from another, and
should be considered an adverse factor affecting any decision to purchase the
Company's securities.

It is emphasized that management of the Company may effect transactions having a
potentially adverse impact upon the Company's shareholders pursuant to the
authority and discretion of the Company's management to complete acquisitions
without submitting any proposal to the stockholders for their consideration.
Holders of the Company's securities should not anticipate that the Company
necessarily will furnish such holders, prior to any merger or acquisition, with
financial statements, or any other documentation, concerning a target company or
its business. In some instances, however, the proposed participation in a
business opportunity may be submitted, to the stockholders for their
consideration, either voluntarily by such directors, to seek the stockholders'
advice and consent, or because state law so requires.

The analysis of business opportunities will be undertaken by or under the
supervision of the Company's officers and directors President, who are not a
professional business analysts. See "Management." Although there are no current
plans to do so, Company management might hire an outside consultant to assist in
the investigation and selection of business opportunities, and might pay a
finder's fee. Since Company management has no current plans to use any outside
consultants or advisors to assist in the investigation and selection of business
opportunities, no policies have been adopted regarding use of such consultants
or advisors, the criteria to be used in selecting such consultants or advisors,
the services to be provided, the term of service, or regarding the total amount
of fees that may be paid. However, because of the limited resources of the
Company, it is likely that any such fee the Company agrees to pay would be paid
in stock and not in cash. Otherwise, the Company anticipates that it will
consider, among other things, the following factors:

1. Potential for growth and profitability, indicated by new technology,
anticipated market expansion, or new products;

2. The Company's perception of how any particular business opportunity will be
received by the investment community and by the Company's stockholders;

3. Whether, following the business combination, the financial condition of the
business opportunity would be, or would have a significant prospect in the

<PAGE>

foreseeable future of becoming sufficient to enable the securities of the
Company to qualify for listing on an exchange or on a national automated
securities quotation system, such as NASDAQ, so as to permit the trading of such
securities to be exempt from the requirements of Rule 15c2-6 recently adopted by
the Securities and Exchange Commission. See "Risk Factors - The Company -
Regulation of Penny Stocks."

4. Capital requirements and anticipated availability of required funds, to be
provided by the Company or from operations, through the sale of additional
securities, through joint ventures or similar arrangements, or from other
sources;

5. The extent to which the business opportunity can be advanced;

6. Competitive position as compared to other companies of similar size and
experience within the industry segment as well as within the industry as a
whole;

7. Strength and diversity of existing management, or management prospects that
are scheduled for recruitment;

8. The cost of participation by the Company as compared to the perceived
tangible and intangible values and potential; and

9. The accessibility of required management expertise, personnel, raw materials,
services, professional assistance, and other required items.

In regard to the possibility that the shares of the Company would qualify for
listing on NASDAQ, the current standards include the requirements that the
issuer of the securities that are sought to be listed have and net assets of at
least $4,000,000. Many, and perhaps most, of the business opportunities that
might be potential candidates for a combination with the Company would not
satisfy the NASDAQ listing criteria.

No one of the factors described above will be controlling in the selection of a
business opportunity, and management will attempt to analyze all factors
appropriate to each opportunity and make a determination based upon reasonable
investigative measures and available data. Potentially available business
opportunities may occur in many different industries and at various stages of
development, all of which will make the task of comparative investigation and
analysis of such business opportunities extremely difficult and complex.
Potential investors must recognize that, because of the Company's limited
capital available for investigation and management's limited experience in
business analysis, the Company may not discover or adequately evaluate adverse
facts about the opportunity to be acquired.

The Company is unable to predict when it may participate in a business
opportunity. It expects, however, that the analysis of specific proposals, if
and when any are received, and the selection of a business opportunity may take
several months or more.

The Company has no business proposals under consideration as of the date of this
registration statement.

Prior to making a decision to participate in a business opportunity, the Company
will generally request that it be provided with written materials regarding the

<PAGE>

business opportunity containing such items as a description of products,
services and company history; management resumes; financial information;
available projections, with related assumptions upon which they are based; an
explanation of proprietary products and services; evidence of existing patents,
trademarks, or services marks, or rights thereto; present and proposed forms of
compensation to management; a description of transactions between such company
and its affiliates during relevant periods; a description of present and
required facilities; an analysis of risks and competitive conditions; a
financial plan of operation and estimated capital requirements; audited
financial statements, or if they are not available, unaudited financial
statements, together with reasonable assurances that audited financial
statements would be able to be produced within a reasonable period of time not
to exceed 60 days following completion of a merger transaction; and other
information deemed relevant.

As part of the Company's investigation, the Company's executive officers and
directors may meet personally with management and key personnel, may visit and
inspect material facilities, obtain independent analysis or verification of
certain information provided, check references of management and key personnel,
and take other reasonable investigative measures, to the extent of the Company's
limited financial resources and management expertise.

It is possible that the range of business opportunities that might be available
for consideration by the Company could be limited by the impact of Securities
and Exchange Commission regulations regarding purchase and sale of "penny
stocks." The regulations would affect, and possibly impair, any market that
might develop in the Company's securities until such time as they qualify for
listing on NASDAQ or on another exchange which would make them exempt from
applicability of the "penny stock" regulations. See "Risk Factors - Regulation
of Penny Stocks."

Company management believes that various types of potential merger or
acquisition candidates might find a business combination with the Company to be
attractive. These include acquisition candidates desiring to create a public
market for their shares in order to enhance liquidity for current shareholders,
acquisition candidates which have long-term plans for raising capital through
the public sale of securities and believe that the possible prior existence of a
public market for their securities would be beneficial, and acquisition
candidates which plan to acquire additional assets through issuance of
securities rather than for cash, and believe that the possibility of development
of a public market for their securities will be of assistance in that process.
Acquisition candidates which have a need for an immediate cash infusion are not
likely to find a potential business combination with the Company to be an
attractive alternative.

There are no loan arrangements or arrangements for any financing whatsoever
relating to any business opportunities.

Form of Acquisition

It is impossible to predict the manner in which the Company may participate in a
business opportunity. Specific business opportunities will be reviewed as well
as the respective needs and desires of the Company and the promoters of the
opportunity and, upon the basis of that review and the relative negotiating
strength of the Company and such promoters, the legal structure or method deemed
by management to be suitable will be selected. Such structure may include, but
is not limited to leases, purchase and sale agreements, licenses, joint ventures

<PAGE>

and other contractual arrangements. The Company may act directly or indirectly
through an interest in a partnership, corporation or other form of organization.
Implementing such structure may require the merger, consolidation or
reorganization of the Company with other corporations or forms of business
organization, and although it is likely, there is no assurance that the Company
would be the surviving entity. In addition, the present management and
stockholders of the Company most likely will not have control of a majority of
the voting shares of the Company following a reorganization transaction. As part
of such a transaction, the Company's existing directors may resign and new
directors may be appointed without any vote by stockholders.

It is likely that the Company will acquire its participation in a business
opportunity through the issuance of Common Stock or other securities of the
Company. Although the terms of any such transaction cannot be predicted, it
should be noted that in certain circumstances the criteria for determining
whether or not an acquisition is a so-called "tax free" reorganization under the
Internal Revenue Code of 1986, depends upon the issuance to the stockholders of
the acquired company of a controlling interest (i.e. 80% or more) of the common
stock of the combined entities immediately following the reorganization. If a
transaction were structured to take advantage of these provisions rather than
other "tax free" provisions provided under the Internal Revenue Code, the
Company's current stockholders would retain in the aggregate 20% or less of the
total issued and outstanding shares. This could result in substantial additional
dilution in the equity of those who were stockholders of the Company prior to
such reorganization. Any such issuance of additional shares might also be done
simultaneously with a sale or transfer of shares representing a controlling
interest in the Company by the current officers, directors and principal
shareholders. (See "Description of Business - General").

It is anticipated that any new securities issued in any reorganization would be
issued in reliance upon exemptions, if any are available, from registration
under applicable federal and state securities laws. In some circumstances,
however, as a negotiated element of the transaction, the Company may agree to
register such securities either at the time the transaction is consummated, or
under certain conditions or at specified times thereafter. The issuance of
substantial additional securities and their potential sale into any trading
market that might develop in the Company's securities may have a depressive
effect upon such market.

The Company will participate in a business opportunity only after the
negotiation and execution of a written agreement. Although the terms of such
agreement cannot be predicted, generally such an agreement would require
specific representations and warranties by all of the parties thereto, specify
certain events of default, detail the terms of closing and the conditions which
must be satisfied by each of the parties thereto prior to such closing, outline
the manner of bearing costs if the transaction is not closed, set forth remedies
upon default, and include miscellaneous other terms.

As a general matter, the Company anticipates that it, and/or its officers and
principal shareholders will enter into a letter of intent with the management,
principals or owners of a prospective business opportunity prior to signing a
binding agreement. Such a letter of intent will set forth the terms of the
proposed acquisition but will not bind any of the parties to consummate the
transaction. Execution of a letter of intent will by no means indicate that
consummation of an acquisition is probable. Neither the Company nor any of the

<PAGE>

other parties to the letter of intent will be bound to consummate the
acquisition unless and until a definitive agreement concerning the acquisition
as described in the preceding paragraph is executed. Even after a definitive
agreement is executed, it is possible that the acquisition would not be
consummated should any party elect to exercise any right provided in the
agreement to terminate it on specified grounds.

It is anticipated that the investigation of specific business opportunities and
the negotiation, drafting and execution of relevant agreements, disclosure
documents and other instruments will require substantial management time and
attention and substantial costs for accountants, attorneys and others. If a
decision is made not to participate in a specific business opportunity, the
costs theretofore incurred in the related investigation would not be
recoverable. Moreover, because many providers of goods and services require
compensation at the time or soon after the goods and services are provided, the
inability of the Company to pay until an indeterminate future time may make it
impossible to procure goods and services.

In all probability, upon completion of an acquisition or merger, there will be a
change in control through issuance of substantially more shares of common stock.
Further, in conjunction with an acquisition or merger, it is likely that
management may offer to sell a controlling interest at a price not relative to
or reflective of any value of the shares sold by management, and at a price
which could not be achieved by individual shareholders at the time.

Investment Company Act and Other Regulation

The Company may participate in a business opportunity by purchasing, trading or
selling the securities of such business. The Company does not, however, intend
to engage primarily in such activities. Specifically, the Company intends to
conduct its activities so as to avoid being classified as an "investment
company" under the Investment Company Act of 1940 (the "Investment Act"), and
therefore to avoid application of the costly and restrictive registration and
other provisions of the Investment Act, and the regulations promulgated
thereunder.

Section 3(a) of the Investment Act contains the definition of an "investment
company," and it excludes any entity that does not engage primarily in the
business of investing, reinvesting or trading in securities, or that does not
engage in the business of investing, owning, holding or trading "investment
securities" (defined as "all securities other than government securities or
securities of majority-owned subsidiaries") the value of which exceeds 40% of
the value of its total assets (excluding government securities, cash or cash
items). The Company intends to implement its business plan in a manner which
will result in the availability of this exception from the definition of
"investment company." Consequently, the Company's participation in a business or
opportunity through the purchase and sale of investment securities will be
limited.

The Company's plan of business may involve changes in its capital structure,
management, control and business, especially if it consummates a reorganization
as discussed above. Each of these areas is regulated by the Investment Act, in
order to protect purchasers of investment company securities. Since the Company
will not register as an investment company, stockholders will not be afforded
these protections.

<PAGE>

Any securities which the Company might acquire in exchange for its Common Stock
are expected to be "restricted securities" within the meaning of the Securities
Act of 1933, as amended (the "Act"). If the Company elects to resell such
securities, such sale cannot proceed unless a registration statement has been
declared effective by the Securities and Exchange Commission or an exemption
from registration is available. Section 4(1) of the Act, which exempts sales of
securities not involving a distribution, would in all likelihood be available to
permit a private sale. Although the plan of operation does not contemplate
resale of securities acquired, if such a sale were to be necessary, the Company
would be required to comply with the provisions of the Act to effect such
resale.

An acquisition made by the Company may be in an industry which is regulated or
licensed by federal, state or local authorities. Compliance with such
regulations can be expected to be a time-consuming and expensive process.

Competition

The Company expects to encounter substantial competition in its efforts to
locate attractive opportunities, primarily from business development companies,
venture capital partnerships and corporations, venture capital affiliates of
large industrial and financial companies, small investment companies, and
wealthy individuals. Many of these entities will have significantly greater
experience, resources and managerial capabilities than the Company and will
therefore be in a better position than the Company to obtain access to
attractive business opportunities. The Company also will possibly experience
competition from other public "Blank Check" companies, some of which may have
more funds available than does the Company.

No Rights of Dissenting Shareholders

The Company does not intend to provide Company shareholders with complete
disclosure documentation including audited financial statements, concerning a
possible target company prior to acquisition, because Nevada Business
Corporation Act vests authority in the Board of Directors to decide and approve
matters involving acquisitions within certain restrictions. If any transaction
is structured as an acquisition, not a merger, with the Registrant being the
parent company and the acquiree being merged into a wholly owned subsidiary, a
shareholder will have no right of dissent under Nevada law.

Administrative Offices

The Company currently maintains a mailing address at 234 Columbine, Suite 300B,
Denver, CO 80206 which is the office address of its President. Other than this
mailing address, the Company does not currently maintain any other office
facilities, and does not anticipate the need for maintaining office facilities
at any time in the foreseeable future. The Company pays no rent or other fees
for the use of this mailing address.

Employees

The Company is a development stage company and currently has no employees.
Management of the Company expects to use consultants, attorneys and accountants
as necessary, and does not anticipate a need to engage any full-time employees
so long as it is seeking and evaluating business opportunities. The need for

<PAGE>

employees and their availability will be addressed in connection with the
decision whether or not to acquire or participate in specific business
opportunities. Although there is no current plan with respect to its nature or
amount, remuneration may be paid to or accrued for the benefit of, the Company's
officers prior to, or in conjunction with, the completion of a business
acquisition for services actually rendered, if for. See "Executive Compensation"
and under "Certain Relationships and Related Transactions."

BUSINESS PLAN RISKS

In addition to the other information included or incorporated by reference in
this report, the following business risk factors should be considered carefully
in evaluating the Company and its business. This report contains forward-looking
statements that involve risks and uncertainties. The Company's actual results
may differ materially from the results discussed in the forward-looking
statements. Factors that might cause such a difference include, but are not
limited, but are not limited to, those discussed in here and elsewhere in this
report. The discussion of the Company's Business Plan incorporates management's
current best estimate and analysis of the potential market, opportunities and
difficulties that face the Company. There can be no assurances that the
underlying assumptions accurately reflect the Company's opportunities and
potential for success. Competitive and economic forces make forecasting of
revenues and costs extremely difficult and unpredictable.

RISKS RELATED TO ACQUISITION STRATEGY

A key element of the Company's growth strategy is to expand its operations
through selective acquisitions of independent mortgage brokers and bankers.
Since substantial competition exists for acquisition opportunities in the
mortgage industry which could result in an increase in the price of, and a
decrease in the number of, attractive acquisition targets, the Company may not
be able to successfully acquire attractive targets on terms that are deemed
acceptable. In addition, there is no assurance that the Company will be able to
obtain the additional financing it may need for its acquisition program on terms
that are deemed acceptable. Acquisitions may also involve a number of special
risks, including adverse short-term effects on results of operations, dilution
resulting from issuances of common stock, diversion of management's time, strain
on financial and administrative infrastructure and unanticipated legal
liabilities. There is no assurance that the Company will be able to overcome
these acquisition risks.

The Company's growth strategy for the foreseeable future is based primarily upon
the expansion of its business goals. There can be no assurance that the Company
will achieve its expansion in a timely and cost-effective manner or, if
achieved, that the expansion will result in profitable operations. The failure
of the Company to succeed in its expansion may have a materially adverse effect
on the Company's business, prospects, financial condition and results of
operations.

In the acquisition of mortgage bankers and brokers the Company may underestimate
the liabilities of one of the target companies which may negatively impact its
ability to operate under a projected budget, or operate profitably at all.

The Company's growth strategy, whether or not successful, is expected to place a
significant strain on the Company's limited managerial, operational and

<PAGE>

financial resources. The Company intends to expand its operational and financial
systems and will be required to attract and retain additional experienced
personnel. The Company faces competition for such personnel from other financial
institutions and more established organizations, many of which have
significantly larger operations and greater financial, marketing, human and
other resources than the Company. There can be no assurance that the Company
will be successful in attracting and retaining qualified personnel on a timely
basis, on competitive terms, or at ail. In the event that the Company is not
successful in attracting and retaining such personnel, the Company's business,
prospects, financial condition, and results of operations will be materially
adversely affected. The failure to manage growth effectively and to integrate
new executives and other skilled personnel may adversely affect the Company's
business, prospects, financial condition and results of operations.

UNCERTAINTY OF WAREHOUSE FINANCING SOURCES

Funding for the Company's future mortgage banking activities will be provided
primarily through financial institutions. The Company's business plan entails,
and depends in part on the Company's ability to establish credit facilities and
negotiate additional credit facilities for the funding of mortgage loans in the
secondary market.

There can be no assurance that any Company credit facilities will be
established, or if established that the terms will be favorable to the Company.
Furthermore, there can be no assurance that credit lines will be available, or
if available, that the terms will be favorable to the Company.

The Company's future Warehouse Facility will provide for acceleration upon
default by the Company. Any such acceleration would have a materially adverse
affect on the operations and business of the Company.

The Company's currently has no existing collateralized Borrowing Agreement for a
warehouse line of credit in any amount. Borrowings for a future warehouse line
will be repaid with the proceeds received by the Company from the sale of its
originated loans to institutional investors. Any commitment by the Warehouse
Facility is dependent upon numerous factors and at the sole discretion of the
Warehouse Facility. The Company's collateralized Borrowing Agreement with any
warehouse lender may be terminable by the lender at any time without cause, upon
thirty 30) days notice to the Company.

Additionally, the Warehouse Facility may demand immediate repayment of all
outstanding debt should their funding be affected by the Warehouse Facility's
lender. As such, there is no guarantee that funds will be extended by the a
Warehouse Facility for mortgages originated by the Company. Unavailability of
funding on terms favorable to the Company, or at all, would have an adverse
effect on the Company's business and financial condition.

<PAGE>

mortgage-backed securitization market could negatively impact the ability of the
Company to complete loan sales, as many of the Company's loan purchasers
securitize the loans they purchase from the Company. Principals of the Company
may be required to give a personal guarantee for the full amount of the
Warehouse Facility.

NEED FOR ADDITIONAL FINANCING

If the Company is required to seek additional capital in order to acquire
businesses, operate or maintain or obtain increases in its Warehouse Facility,
such additional capital may be raised by the offering of shares, which may
result in dilution to the existing shareholders. To date, the Company has made
no attempts to identify possible sources of any future funding and has no
commitments for any future funding. There can be no assurance that the Company
will be able to obtain additional capital in the future. The type, timing and
terms of such funding, if it is available at all, will be determined by
prevailing conditions in the financial markets and the Company's financial
condition, among other factors. If the Company requires, but is unable to obtain
additional capital, it may be required to significantly curtail or cease its
activities.

MARKET RISK

Interest rate movements significantly impact the volume of closed loans.
Interest rate movements represent the primary component of market risk to the
Company. In a higher interest rate environment, borrower demand for mortgage
loans, particularly refinancing of existing mortgages, declines. Interest rate
movements affect the interest income earned on loans the Company holds for sale
in the secondary market, interest expense on warehouse lines, the value of
mortgage loans held for sale in the secondary market and ultimately the gain on
the sale of those mortgage loans. In addition, in an increasing interest rate
environment, the volume of mortgage loans that originated declines.

The Company intends to originate mortgage loans and manage the market risk
related to these loans by pre-selling them on a "best efforts" basis to the
anticipated secondary market investors at the same time that the Company
establishes the borrowers' interest rates. If delivery of mortgage loans within
the time frames established by the secondary market investors can be made, the
Company has no interest rate risk exposure on those loans. However, if the loan
closes but cannot be delivered within those time frames, and if interest rates
increase, the Company may experience a reduced gain or may even incur a loss on
the sale of the loan.

DEPENDENCE ON WAREHOUSE FINANCING SOURCES- IF THE COMPANY IS UNABLE TO MAINTAIN
ADEQUATE FINANCING SOURCES, THE ABILITY TO ORIGINATE AND FUND MORTGAGE LOANS
WILL BE IMPAIRED AND THE REVENUES WILL SUFFER.

The ability to fund mortgage loans depends to a large extent upon the ability to
secure financing on acceptable terms. Loans are funded in part through large
lines of credit known as warehouse lines of credit, or under collateralized loan
repurchase agreements. Several commercial banks and institutional investors
provide these funding sources. Most of these financing arrangements have
one-year terms and some are cancelable by the lenders at any time.

<PAGE>

If the Company is not successful in obtaining or in arranging new financing with
terms on favorable terms, it may be unable to commence origination and funding
activities, which would prevent revenue.

All of the financing arrangements to fund mortgage loans are subject to
financial covenants and other restrictions. Because the Company is actively
investing in growth, at times it may be in default under those covenants and
restrictions and rely on waivers from the various lenders. If it is unable to
operate within the covenants or obtain waivers, all amounts owed under the
financing arrangements could become immediately payable. The termination of a
financing arrangement by a lender, or the acceleration of the debt, would have a
significant negative effect on the Company's business.

Funding for the Company's mortgage banking activities are to be provided
primarily through financial institutions. The business depends in part on the
Company's ability to obtain credit facilities and negotiate additional credit
facilities for the funding of mortgage loans in the secondary market.

There can be no assurance that the Company will obtain any credit facilities, or
if obtained that the terms will be favorable to the Company. Furthermore, there
can be no assurance that additional credit lines will be available, or if
available, that the terms will be favorable to the Company.

The Company contemplates having Collateralized Borrowing Agreements consisting
of several warehouse lines of credit by the Warehouse Facility to allow the
Company to finance its mortgage banking operations. These borrowings will be
repaid with the proceeds received by the Company from the sale of its originated
loans to institutional investors. Any commitment by the Warehouse Facility is
dependent upon numerous factors and at the sole discretion of the Warehouse
Facility. The Company's collateralized Borrowing Agreement with a warehouse
lender may be terminated by the lender at any time without cause, upon thirty
(30) days notice to the Company. Additionally, the Warehouse Facility may demand
immediate repayment of all outstanding debt should their funding be affected by
the Warehouse Facility's lender. As such, there is no guarantee that funds will
be extended by a Warehouse Facility for mortgages originated by the Company.
Unavailability of funding on terms favorable to the Company, or at all, would
have an adverse effect on the Company's business and financial condition.

The Company seeks to generate revenue and positive cash flow by regularly
selling for cash, at a premium, its originated loans to institutional investors.
There can be no assurance that such investors will continue to purchase loans or
that they will be willing to purchase loans on terms similar to which they have
historically purchased such loans. There can be no assurance that such
purchasers will continue to purchase the Company's loans and to the extent that
the Company could not successfully replace such loan purchasers, the Company's
business, prospects, financial condition and results of operations could be
materially and adversely affected. Further, adverse conditions in the
mortgage-backed securitization market could negatively impact the ability of the
Company to complete loan sales, as many of the Company's loan purchasers
securitize the loans they purchase from the Company. Principals of the Company
may be required to give a personal guarantee for the full amount of the
Warehouse Facility.

<PAGE>

ANTICIPATED FLUCTUATIONS IN QUARTERLY OPERATING RESULTS

Several factors affecting the Company's business can cause significant
variations in its quarterly results of operations. These factors include
variations in the volume of the Company's loan origination; the differences
between the Company's cost of funds under a Warehouse Facility and the average
interest rates of originated loans; the inability of the Company to complete
significant loan sales transactions. A delay in closing loan sales transactions
during a particular quarter would postpone recognition of revenue on the sale of
those loans. In addition, unanticipated delays in closing particular loan sales
would also increase interest expense and the Company's exposure to interest rate
fluctuations by lengthening the period during which its variable rate borrowings
under Warehouse Facilities are outstanding. If the Company were unable to sell a
sufficient number of its loans in a particular reporting period, the Company's
revenues for such period would decline, resulting in lower net income and
possibly a net loss for such period, which could have a materially adverse
effect on the Company's result of operations and financial condition. The
Company's expense levels have been established in large part due to its current
expectations for future revenues and its expected development and marketing
requirements. In the event market demand and revenues do not meet expectations,
the Company may be unable to adjust its spending levels on a timely basis to
compensate for unexpected revenue shortfalls. In addition, the Company's
operating expenses will increase substantially in certain periods, and the
Company currently anticipates that its operating expenses will continue to
increase substantially for the foreseeable future as the Company continues to
develop and market its initial products and services, increases its marketing
and sales activities, creates and expands the distribution channels for its
services, and broadens its customer support capabilities. There can be no
assurance that revenues will increase significantly as required for the Company
to attain profitability, or at all. Any material shortfall of demand for the
Company's products and services in relation to the Company's expectations would
have material adverse effect on the Company's business and financial condition
and could cause significant fluctuations in the Company's results of operations.

The Company expects its future operating results over both the short and the
long term will be subject to annual and quarterly fluctuations due to several
factors, many of which are beyond the control of the Company, including, among
others, (i) market acceptance of Internet commerce in general and the concept of
conducting real estate transactions electronically in particular, (ii)
fluctuating market demand for the Company's products and services including the
rate of sales and refinancing of residential real estate, (iii) fluctuations of
mortgage loan interest rates, (iv) the degree of acceptance of the Internet as a
provider of homeownership related-services, (v) the timing and effectiveness of
collaborative marketing efforts initiated by the Company's strategic partners,
(vi) the timing of the introduction of new products and services offered by the
Company, (vii) the timing of the release of enhancements to the Company's
products and services, (viii) product introductions and service offerings by the
Company's competitors, (ix) termination of any strategic alliances on agreements
with key service providers, such as Fannie Mae, or Freddie Mac, (x) the timing
and rate at which the Company increases its expenses to support projected
growth, (xi) the cost of compliance with applicable federal and state government
regulations, (xii) competitive conditions in the Company's marketplace, and
(xiii) general economic conditions. Due to the foregoing factors, among others,
it is possible that the Company's future quarterly or annual operating results

<PAGE>

from time to time will not meet the expectations of market analysts or
investors, which may have a material adverse effect on the price of the
Company's Common Stock.

EARLY MORTGAGE LOAN PAYMENT DEFAULTS MAY CAUSE LOSSES.

If borrowers default in the first few months after the loan is originated, the
Company may be required to repurchase those loans from the secondary market
investors to whom the Company sold those loans. The Company may not be able to
resell those loans in the secondary market. The Company's financial performance
may be adversely affected during economic downturns when the frequency of loan
defaults tends to increase.

ECONOMIC CONDITIONS

Residential mortgage loans compromise 100% of the loans originated by the
Company. As such all of the Company's future revenue is expected to come from
residential mortgage loans. The Company's business will be adversely affected by
periods of economic slowdown or recession, which may be accompanied by decreased
demand for consumer credit and declining real estate values. Any material
decline in real estate values results in increased loan-to-value ratios thereby
weakening collateral coverage and increasing the possibility of a loss in the
event of default. To the extent that prospective borrowers do not meet the
Company's underwriting criteria, the volume of loans originated by the Company
could decline. A decline in loan origination volumes could have a materially
adverse effect on the Company's business, prospects, financial condition and
results of operations. Changes in the level of consumer confidence, real estate
values, prevailing interest rates and investment returns expected by the
financial community could make mortgage loans of the types whether developed or
purchased, serviced and sold, by the Company, less attractive to borrowers or
investors because among other things the actual rates of delinquencies and
foreclosures on such loans could be higher under adverse economic conditions
than those currently experienced in the mortgage lending industry in general.

POSSIBLE ENVIRONMENTAL LIABILITIES

It is possible that the Company may foreclose on properties securing its
mortgage loans. Under various federal, state and local environmental laws,
ordinances and regulations, a current or previous owner or operator of real
estate may be required to investigate and clean up hazardous or toxic substances
or chemical releases at such property and may be held liable to a governmental
entity or to third parties for property damage, personal injury, and
investigation and clean up costs incurred by such parties in connection with the
contamination. Liability under such laws has been interpreted to be joint and
several unless the harm is divisible and there is a reasonable basis for
allocation of responsibility. Although the Company has not incurred any losses
as a result of liabilities under environmental laws, there can be no assurance
that the Company will not experience such losses in the future. Such liabilities
may not be covered by insurance.

IF THE COMPANY IS UNABLE TO COMPLY WITH MORTGAGE BANKING RULES AND REGULATIONS,
THE ABILITY TO ORIGINATE AND FUND MORTGAGE LOANS MAY BE RESTRICTED.

The mortgage banking business is subject to the rules and regulations of various
federal, state and local regulatory agencies in connection with originating,

<PAGE>

processing, underwriting and selling mortgage loans. These rules and
regulations, among other things, impose licensing obligations, prohibit
discrimination, establish underwriting guidelines and mandate disclosures and
notices to borrowers. The Company also is required to comply with each
regulatory entity's financial requirements. If the Company does not comply with
these rules, regulations and requirements, the regulatory agencies may restrict
the ability to originate and fund mortgage loans.

The Company also must comply with state usury laws. If it fails to comply with
these laws, the states can impose civil and criminal liability and restrict the
ability to operate in those states. In addition, secondary market investors may
demand indemnification or require us to repurchase loans sold in the secondary
market. The Company also may be subject to class action lawsuits for usury
violation. Any of these events could impair the Company's ability to originate
and fund loans, which would prevent revenues.

CHANGES IN REGULATORY REQUIREMENTS OR THE INTERPRETATIONS OF THOSE REQUIREMENTS
COULD INCREASE THE COSTS OF DOING BUSINESS OR OTHERWISE HURT FINANCIAL
PERFORMANCE.

Regulatory and legal requirements are subject to change and may become more
restrictive, making its compliance more difficult or expensive or otherwise
restricting the ability to conduct company business if any is developed or
acquired. Changes in these regulatory and legal requirements could increase the
Company's costs of doing business.

Many states prohibit non-employees of a licensed mortgage company from
conducting business under that licensed mortgage company's name. Divisions or
subsidiaries of the Company may often use the Company to provide back office
functions, such as processing and underwriting. Because providing these back
office services is a relatively new concept in the industry, most state
regulations do not specifically address the provision of back office services.
As state regulators become more familiar with these practices, it is possible
that they may interpret current regulations or enact new regulations to restrict
the ability to perform these back office services for divisions or subsidiaries,
either of which would adversely affect the Company's financial performance.

IF THE COMPANY FAILS TO MAINTAIN MORTGAGE BANKING AUTHORITY IN THE STATES WHERE
IT DOES BUSINESS, IT MAY INCUR LIABILITY.

If the Company fails to establish and maintain licensing approvals and
exemptions in business jurisdictions, it may incur liability and may be unable
to transact business in those jurisdictions.

The Company does not have license applications are pending in any states.

Some states require prior approval before a change of control of company occurs.
Because the Company anticipates being a public company in the future, it may not
have advance notice of a change of control occasioned by a stockholder's
purchase of its stock in the open market. It also will not be able to control
who purchases voting stock in the open market. If any person holding 10% or more
of the stock fails to meet a state's criteria, or refuses to comply with state
regulatory requirements, the Company could lose its authority to originate
mortgage loans in that state, which could hurt the business, results of
operations and financial condition.

<PAGE>

A DISCONTINUATION OR REDUCTION IN SECONDARY MARKET PROGRAMS WOULD HURT FINANCIAL
PERFORMANCE.

The ability to sell mortgage loans to institutional investors in the secondary
market is largely dependent upon the continuation of programs administered by
Fannie Mae, Freddie Mac, Ginnie Mae and private mortgage investors. These
entities facilitate the sale of mortgage loans and mortgage-backed securities
through the secondary market. Any discontinuation of or reduction in the
operation of those programs or any significant impairment of the Company's
eligibility to participate in those programs would hurt the Company's financial
performance. Also, any significant adverse change in the secondary market level
of activity or the underwriting criteria of Fannie Mae, Freddie Mac, Ginnie Mae
or other private mortgage investors would reduce potential revenues.

IF THE ECONOMIES OF CERTAIN STATES WHICH EXPERIENCE HIGHER QUALITY MORTGAGE
ORIGINATION EXPERIENCE A DOWNTURN, THE BUSINESS MAY BE SIGNIFICANTLY AFFECTED.

Although the Company expects its mortgage loan business to have a greater
national scope in the future, the Company's short-term results of operations and
financial condition will be negatively affected by poor economic conditions
those states in which it intends to acquire companies and originate mortgage
loans, particularly in their residential real estate markets.

In addition, despite the implementation of network security measures, the
Company's servers are vulnerable to computer viruses, break-ins, and similar
disruptions from unauthorized tampering with its computer systems.

The Company does not carry sufficient insurance to compensate for losses that
may occur as a result of any of these events.

RELIANCE ON THIRD PARTIES FOR DEVELOPMENT AND MAINTENANCE OF INDUSTRY STANDARD
SOFTWARE MAY PUT THE COMPANY AT RISK FOR INTERRUPTIONS OR SLOW DOWNS IN
BUSINESS.

The Company's products and services rely on software licensed by third parties.
If the Company has to replace third-party software, the business could suffer
during the replacement period.

The Company believes there are other sources for most of the specialized
software it uses through these licenses and that it could replicate the
functionality of this software. However, because the Company licenses from third
parties industry standard software products that cannot be replicated, it
depends on those third parties to deliver and support reliable products, enhance
their current products, develop new products on a timely and cost-effective
basis, and respond to emerging industry standards and other technological
changes.

RISKS OF MORTGAGE LENDING TO SUB-PRIME BORROWERS

The Company's mortgage lending activities include mortgage loan originations for
"B," "C," "D" or "sub-prime" credit classified borrowers. Loans made to such
borrowers may entail a greater risk of delinquency and greater losses than those
loans made to borrowers who utilize conventional mortgage sources.
Delinquencies, foreclosures and losses generally increase during economic

<PAGE>

slowdowns or recessions. Although the Company sells these mortgages (as well as
other mortgages) to investors usually on a non-recourse basis (thereby limiting
its risk of delinquency or default) at prices which reflect the credit risk
associated with such borrowers, any sustained period of increased delinquencies,
foreclosures or losses on such loans after tile loans are sold could adversely
affect the pricing of the Company's future loan sales and/or the willingness of
investors to purchase such loans from the Company or in the general future,
which could have an effect on the Company's financial condition.

GEOGRAPHIC CONCENTRATION OF OPERATIONS

The Company's business, prospects, financial condition and results of operations
are dependent, in part, upon general trends in the economy and the residential
real estate market in regions where it may operate.

The Company's results of operations and financial condition are dependent upon
general trends in the markets in which concentrations exist and more
specifically, their respective residential real estate markets. Such a decline
may adversely affect the values of properties securing the Company's loans such
that the principal balances of such loans together with any primary financing on
the mortgaged properties may equal or exceed the value of the mortgaged
properties, making the Company's ability to recover losses in the event of a
borrower's default extremely unlikely. There are also uninsured disasters that
may adversely impact borrowers' ability to repay loans made by the Company and
the value of collateral underlying such loans, which could have a materially
adverse effect on the Company's results of operations and financial condition.

COMPETITION

The Company faces intense competition in all aspects of its proposed mortgage
banking/brokerage business. The Company may compete with numerous financial
intermediaries, such as other mortgage banking companies, commercial banks,
savings associations, credit unions, loan brokers and insurance companies in the
origination of mortgage loans. Competition can take many forms, including
convenience in obtaining a loan, customer service, marketing and distribution
channels and interest rates charged to borrowers. Among other things,
competition may be affected by fluctuations in interest rates and general
economic conditions although the Company believes that it is competitive in
these areas. There can be no assurance that the Company will be able to compete
effectively in this highly competitive industry, which could materially
adversely affect the Company's business, prospects, financial condition, and
results of operations.

The potential level of gains realized by the Company and its competitors on the
origination and sale of sub-prime mortgage loans could attract additional
competitors into this market. Further, there are low barriers to entry in the
Company's market and these low barriers to entry permit new competitors to enter
this market quickly and compete with the Company's business.

Additional competition may lower the rates that the Company may charge
borrowers, thereby potentially lowering the gain on future loan sales. Increased
competition may also reduce the volume of the Company's loan originations and
loan sales and increase the demand for the Company's experienced personnel. The
Company also faces a risk that their personnel will seek employment with a
competitor of the Company.

<PAGE>

STATES MAY LEGISLATE TO LIMIT FEES CHARGED BY MORTGAGE ENTITIES

In the course of consumer protection legislation individual states may enact
legislation which may limit the amount and type of fees charged to borrowers in
the mortgage loan process. Such limitations may cause the Company's income to
decrease greatly.

COMPETITORS IN THE MORTGAGE BANKING MARKET ARE OFTEN LARGER, MORE EXPERIENCED
AND HAVE GREATER FINANCIAL RESOURCES, WHICH WILL MAKE IT DIFFICULT FOR THE
COMPANY TO SUCCESSFULLY COMPETE.

The Company may compete with other mortgage banking companies, commercial banks,
savings associations, credit unions, insurance companies and other financial
institutions in every aspect of business. Many of these companies and financial
institutions are larger, more experienced and have greater financial resources.
Accordingly, the Company may not be able to successfully compete in the mortgage
banking market. Competitors may be able to respond more quickly to take
advantage of new or changing opportunities, technologies and customer
requirements. They also may be able to undertake more extensive promotional
activities, offer more attractive terms to borrowers and adopt more aggressive
pricing policies.

CYCLICAL INDUSTRY

The residential real estate and mortgage business is dependent upon the sale and
refinancing of residential real estate as well as on mortgage loan interest
rates and is, therefore, a cyclical industry. Shifts in the economy, as well as
in residential real estate values, generally affect the number of home sales and
new housing start. The demand for mortgage loan financing increases as the
frequency of home sales increases. Declining interest rates generally increase
mortgage loan financing activity as homeowners refinance existing mortgage loans
to obtain more favorable interest rates. Rising interest rates, in contrast,
discourage refinancing activities and generally reduce the number of home sales
that occur. Any large fluctuation in interest rates or adverse change in general
economic conditions, both of which are outside the Company's control, could have
a material adverse impact upon the Company's business, financial condition and
results of operations.

The effect of interest rate changes tends to be greater on the market for
refinancing loans than they are on the market for purchase loans, since
refinancing a mortgage loan is voluntary and motivated primarily by a
homeowner's desire to lower its financing costs, whereas home purchasers are
motivated by a need or desire for a new home. Accordingly, the annual volume of
new home acquisition loans is relatively stable, whereas the annual volume of
new mortgage refinance loans is quite volatile. There can be no assurance
regarding future interest rate trends, their impact on the Company's business,
or the Company's ability to manage its business mix. In addition, a major thrust
of the Company's business strategy is developing relationships with realtors,
which is intended to provide a more stable flow of purchase financing. The
Company's failure to anticipate or make timely adjustments in its business
strategies to compensate for fluctuations in interest rates in the future, or to
establish strong relationships with realtors could have a material adverse
effect on the Company's business, financial condition and results of operations.

<PAGE>

DEPENDENCE ON LENDERS AS A MORTGAGE BROKER

Lenders that the Company may represent as mortgage broker are under no
obligation to continue their relationship with the Company or to make loans to
any potential borrower presented to them by the Company or its affiliates. While
the Company maintains relationships with several lenders, most of the loans
originated by the Company are originated through a small subset of these
lenders. The Company believes that if and when other lenders offer comparable
terms, the sources of loans will shift accordingly. If lenders with the most
competitive terms do not continue to accept loans originated by the Company or
its affiliates, the Company's business, financial condition and results of
operations could be materially adversely affected. Some lenders have attempted
to enter into agreements with the Company that would require the Company to
repurchase certain mortgage loans funded by such lenders in the event of fraud
by the Company or the discovery of misrepresentations or inaccuracies in
borrowers' loan applications.

POTENTIAL LIABILITIES TO BORROWERS

Borrowers could claim to have suffered adverse financial effects from
utilization of the Company's products and services. The most common instance of
complaint in the industry occurs when a borrower fails to lock in an interest
rate and, at the time of the closing of the transaction; the available rate has
increased from the rate available at the time of application. While assessment
of such claims is highly subjective, there have been a few instances where it is
considered possible that the borrower had not been made sufficiently aware of
the possibility of rate increases and the protection afforded by a rate lock. In
these instances, the Company resolved the matter to the borrower's satisfaction
by discounting its fees. There can be no assurance that there will not be
similar situations in the future, or that the Company will be able to
successfully resolve such situations. Any failure by the Company in the future
to successfully resolve such situations could have a material adverse effect on
the Company's business, financial condition and results of operations.

THE PRACTICE OF HAVING LENDERS PAY MORTGAGE BROKERS HAS BEEN, IS BEING, AND MAY
CONTINUE TO BE LITIGATED

Numerous lawsuits seeking class certification have been filed against mortgage
lenders alleging that certain direct and indirect payments to mortgage brokers
by those lenders violate the Real Estate Settlement Procedures Act ("RESPA").
These lawsuits have generally been filed on behalf of a purported nationwide
class of borrowers and allege that various forms of direct and indirect payments
to mortgage brokers are referral fees or unearned fees prohibited under RESPA,
or that consumers were not informed of the brokers' compensation, in violation
of law. Several federal district courts construing RESPA in these cases have
reached conflicting results. In the only appellate decision addressing the issue
to date, the United States Court of Appeals for the Eleventh Circuit in
CULPEPPER V. INLAND MORTGAGE CORPORATION reversed the lower court's summary
judgment in favor of the lender defendant on the grounds that the lender had
failed to establish that the indirect payment in the form of a "yield spread
premium" made to a broker in a particular transaction was not a referral fee
prohibited by RESPA. The case was remanded to the district court for further
proceedings. HUD, acting upon Congress' direction, issued a policy statement in
January 1999 setting forth its position that the legality of lender payments to
mortgage brokers depends on a case-by-case analysis that takes into
consideration all direct and indirect compensation received by the mortgage

<PAGE>

broker to determine whether (1) goods or facilities have been actually furnished
or services performed for the compensation paid, and (2) the compensation is
reasonably related to the value of the goods or facilities actually furnished or
services actually performed.

The Company receives various forms of direct and indirect payments from lenders
for loans it brokers. If the pending cases on lender payments to brokers are
ultimately resolved against the lenders, it may cause an industry-wide change in
the way independent mortgage brokers are compensated. In addition, future
legislation, regulatory interpretations or judicial decisions may require the
Company to change broker compensation programs or subject the Company to
material monetary judgments or other penalties. Any changes or penalties may
have a material adverse effect on the Company business and results of
operations. For a more detailed description of government regulation, please
refer to "Government Regulation."

GOVERNMENT REGULATION

The Company's business is subject to extensive and complex rules and regulations
of, and examinations by various federal, state and local government authorities.
These rules and regulations impose obligations and restrictions on the Company's
loan originations and credit activities. In addition, these rules limit the
interest rates, finance charges and other fees the Company may assess, mandate
extensive disclosure to the Company's customers, prohibit discrimination and
impose multiple qualifications and obligations on the Company. The Company's
loan origination activities are subject to the laws and regulations in each of
the states in which those activities are conducted. The Company's lending
activities are also subject to various federal laws, including the Federal
Truth-in-Lending Act and Regulation Z promulgated thereunder, the Homeownership
and Equity Protection Act of 1994, the Federal Equal Credit Opportunity Act and
Regulation B promulgated thereunder, the Fair Credit Reporting Act of 1970, the
Real Estate Settlement Procedures Act of 1974 and Regulation X promulgated
thereunder, the Fair Housing Act, the Home Mortgage Disclosure Act and
Regulation C promulgated thereunder and the Federal Debt Collection Practices
Act, as well as other Federal and State statutes and regulations affecting the
Company's activities.

These rules and regulations, among other things, impose licensing obligations on
tile Company, establish eligibility criteria for mortgage loans, prohibit
discrimination, provide for inspections and appraisals of properties, require
credit reports on prospective borrowers, regulate assessment, collection,
foreclosure and claims handling, regulate investment and interest payments on
escrow balances, regulate payment features, mandate certain disclosures and
notices to borrowers and, in some cases, fix maximum interest rates, fees and
mortgage loan amounts. Failure to comply with these requirements can lead to
loss of approved status by the banking regulators of the various state
governments where the Company operates, demands for indemnification or mortgage
loan repurchases, certain rights of rescission for mortgage loans, class action
lawsuits and administrative enforcement actions by federal and state
governmental agencies.

Although the Company believes that it has systems and procedures to insure
compliance with these requirements and believes that it is currently in
compliance in all material respects with applicable federal, state and local
laws, rules and regulations, there can be no assurance of full compliance with

<PAGE>

current laws, rules and regulations or that more restrictive laws, rules and
regulations will not be adopted in the future that could make compliance
substantially more difficult or expensive. In the event that the Company is
unable to comply with such laws or regulations, its business, prospects,
financial condition and results of operations may be materially adversely
affected.

Members of Congress, government officials and political candidates have from
time to time suggested the elimination of the mortgage interest deduction for
federal income tax purposes, either entirely or in part, based on borrower
income, type of loan or principal amount. Because many of the Company's loans
are made to borrowers for the purpose of consolidating consumer debt or
financing other consumer needs, the competitive advantage of tax deductible
interest, when compared with alternative sources of financing, could be
eliminated or seriously impaired by such government action. Accordingly, the
reduction or elimination of these tax benefits could have a materially adverse
effect on the demand for mortgage loans of the kind offered by the Company.

A DELAY IN THE RECEIPT OF SERVICES FROM THIRD PARTIES MAY REDUCE REVENUES.

The Company may rely on third party sources for some of the information used in
the mortgage loan underwriting process, including credit reports, appraisals and
title searches. Any interruptions or delays in obtaining these services may
cause delays in processing and closing of mortgage loans, which could create
customer dissatisfaction and injure market position, if any is ever established.

DELINQUENCY AND FORECLOSURE PORTFOLIO

A portion of the loans granted by the Company may include loans that develop
payment delinquencies. Although the Company plans to perform extensive due
diligence procedures at the time loans are granted the risk of continuing or
recurrent delinquency remains. The Company will assume substantially all risk of
loss associated with its lending practices in the case of foreclosure should the
secondary purchaser default on its repurchase obligations. This risk includes
the cost of the foreclosure, the loss of interest, and the potential loss of
principal to the extent that the value of the underlying collateral is not
sufficient to cover the Company's investment in the loan.

INTEREST RATE RISKS-NET INTEREST INCOME MAY BE REDUCED BY FLUCTUATIONS IN
INTERMEDIATE-TERM AND SHORT-TERM INTEREST RATES AND HAVE NEGATIVE EFFECTS ON
ASSET AND LIABILITY MANAGEMENT

The Company's earnings depend in part upon the level of its net interest income.
Net interest income is the difference between the interest income received from
interest-earning assets and the interest expense incurred in connection with
interest-bearing liabilities. Accordingly, the Company is vulnerable to an
increase in interest rates to the extent that its interest-earning assets, such
as mortgage loans, have longer effective maturities than, or do not adjust as
quickly as, its interest-bearing liabilities. Under such circumstances, material
and prolonged increases in interest rates generally would materially and
adversely affect net interest income and the value of interest-earning assets,
while material and prolonged decreases in interest rates generally would have a
favorable effect on net interest income and the value of interest-earning
assets.

<PAGE>

When intermediate-term interest rates approach or sink below short-term interest
rates, the Company's net interest income is reduced or it suffers net interest
losses. The Company earns net interest income or suffers net interest losses
from the time it funds a mortgage loan until it is delivered to an investor in
the secondary market. That time period generally consists of 25-40 days. Whether
the Company earns net interest income or suffers net interest losses depends on
the difference between the interest rates on mortgage loans funded and the
interest rates on the money the Company borrows to fund those mortgage loans.

Fluctuating interest rates also may affect the net interest income earned by the
Company resulting from the difference between the yield to the Company on
mortgage loans held prior to sale and the interest paid by the Company for funds
advanced under the Company's warehouse lines of credit to purchase such mortgage
loans. The process of balancing the maturities of the Company's assets and
liabilities necessarily involves estimates as to how changes in the general
level of interest rates will impact the yields earned on assets and the rates
paid on liabilities. These estimates may prove to be inaccurate.

The interest rates on mortgage loans the Company funds are affected by
intermediate-term rates in the United States. The interest rates on the money
the Company borrows to fund mortgage loans are affected by short-term rates
based on the London Interbank Offered Rate (LIBOR) and other financial indices.
If the intermediate-term rates in the United States approach the LIBOR rate, the
net interest income is reduced or the Company suffers net interest losses.

In general, when the Company establishes an interest rate at the origination of
a mortgage loan, it attempts to contemporaneously lock in an interest yield to
the institutional investor purchasing that loan from the Company. By quickly
selling these mortgage loans, the Company limits its exposure to interest rate
fluctuations. However, the operations and profitability of the Company are
likely to be adversely affected during any period of unexpected or rapid changes
in interest rates. For example, a substantial or sustained increase in interest
rates could adversely affect the ability of the Company to originate loans.
While the Company monitors the interest rate environment, there can be no
assurance that the profitability of the Company would not be adversely affected
during any period of changes in interest rates.

GAINS AND LOSSES ON SALES OF MORTGAGE LOANS IN THE SECONDARY MARKET ARE AFFECTED
BY RISING INTEREST RATES AND ANY HEDGING STRATEGY THE COMPANY MAY IMPLEMENT MAY
NOT OFFSET THE RISK.

The ability to generate net gains on the sale of loans in the secondary market
may be adversely affected by increases in interest rates. The Company typically
will establish interest rates on mortgage loans originated at the same time it
obtains commitments from the anticipated purchasers of the loans. The mortgage
loan purchase commitments obtained are contingent upon delivery of the loans to
the purchasers within specified periods. If the Company is unable to deliver
closed loans on time and interest rates increase, it may experience no gain, or
even a loss, on the sale of these loans. The Company currently does not use
derivative financial instruments to hedge these risks and are therefore exposed
to losses caused by rising interest rates.

<PAGE>

Management is currently evaluating hedging strategies to protect us against this
risk. Hedging strategies involve buying and selling mortgage-backed securities
so that if interest rates increase and the Company expects to suffer a loss on
the sale of those loans, the buying and selling of mortgage-backed securities
will offset the loss. An effective hedging strategy is complex and no hedging
strategy can completely eliminate risk. To the extent that the Company
implements a hedging strategy but is unable to effectively match purchases and
sales of mortgage-backed securities with the sale of the loans originated, its
gain on sales of mortgage loans may be reduced.

IF THE COMPANY ADOPTS A HEDGING STRATEGY, IT MAY ALSO CHANGE THE WAY THE COMPANY
SELLS LOANS IN THE SECONDARY MARKET, WHICH WOULD EXPOSE IT TO LOSSES IF INTEREST
RATES DECLINE SHARPLY.

If the Company adopts a hedging strategy to manage its risks, it may also begin
selling more loans on a mandatory delivery basis. Selling on a mandatory
delivery basis means the Company is required to sell the loans to a secondary
market investor at a price agreed upon, regardless of whether the loans close.
This strategy potentially generates greater revenue because secondary market
investors are willing to pay more for this type of commitment. However, it also
exposes the Company to greater losses if interest rates decline sharply and
borrowers choose not to close on the higher interest rate loans that are
promised them prior to the decline in interest rates.

Any hedging strategy adopted would help manage the risk of selling loans on a
mandatory delivery basis. However, as with hedging strategies to protect against
rising interest rates, no hedging strategy is perfect. To the extent that the
Company is unable to effectively match purchases and sales of mortgage-backed
securities with the sale of the loans originated, the greater risks associated
with loans sold on a mandatory delivery basis may cause the Company to lose
money on the sale of those loans.

PIPELINE LOAN RISKS

The Company may sell, at any given time, substantially all of its mortgage loans
that are closed and a percentage of the mortgage loans that are not yet closed
but for which the interest rate has been established (called "pipeline loans").
Losses on sales of originated mortgage loans may result from changes in interest
rates from the time the interest rate on the customer's mortgage loan
application is established to the time the Company sells the loan. Such a change
in interest rates could result in a loss upon the sale of such loans. In order
to hedge this risk and to minimize the effect of interest rate changes on the
sale of originated loans, the Company commits to sell mortgage loans to
investors for delivery at a future time for a stated price. If an unanticipated
change in interest rates occurs, the actual percentage of mortgage loans that
close may differ from the projected percentage. The resulting mismatch of
commitments to originate loans and commitments to sell loans may have an adverse
effect on the results of operations of the Company. A sudden increase in
interest rates can cause a lower percentage of mortgage loans to close than
projected. To the degree this may not have been anticipated, the Company may not
have made commitments to sell these additional loans and consequently may incur
significant losses upon their sale, adversely affecting results of operations.

The Company may establish policies that set the benchmarks for forward
commitments to deliver loans or mortgage backed securities that are to be

<PAGE>

maintained against the pipeline of loan commitments made to borrowers. In
addition, these policies may stipulate that all closed loans are to be fully
hedged with forward commitments; however, it is difficult for the Company to be
completely hedged when interest rates rapidly and significantly change.

RESIDENTIAL MORTGAGE LOAN SERVICING RIGHTS

The Company may own residential mortgage loan servicing rights sometime in the
future which inherently carry interest rate risk because the total amount of
servicing fees earned, as well as the amortization of the investment in the
servicing rights, fluctuates based on loan prepayments (affecting the expected
average life of a portfolio of residential mortgage servicing rights). The rate
of prepayment of mortgage loans may be influenced by changing national and
regional economic trends, such as recessions or depressed real estate markets,
as well as the difference between interest rates on existing mortgage loans
relative to prevailing mortgage rates. During periods of declining interest
rates, many borrowers refinance their mortgage loans. Accordingly, prepayments
of mortgage loans increase and the loan administration fee income related to the
mortgage loan servicing rights corresponding to a mortgage loan ceases as
underlying loans are prepaid. Consequently, the market value of portfolios of
mortgage loan servicing rights tends to decrease during periods of declining
interest rates, since greater prepayments can be expected. The income derived
from and the market value of the Company's servicing portfolio, therefore, may
be adversely affected during periods of declining interest rates.

FLUCTUATIONS MAY OCCUR IN OPERATING RESULTS DUE TO SEASONALITY AND OTHER
FACTORS, ANY OF WHICH MAY AFFECT THE PRICE OF COMMON STOCK, IF IT IS EVER
TRADED.

Mortgage origination revenue is subject to seasonal and other fluctuations. Due
to these factors, operating results during any given period may suffer, which
could result in a reduction in the trading price of common stock if a market
ever develops.

Home sales typically peak during the spring and fall seasons and decline in the
summer and winter. Operating results may fluctuate significantly as a result of
a variety of other factors, many of which are outside the Company's control.
These factors include: a decline in residential home buying that decreases the
demand for purchase mortgage loans, an increase in interest rates that decreases
the demand for refinancing existing mortgage loans; and the number of
applications generated through a Web site, if any.

THE COMPANY MAY BE REQUIRED TO REPURCHASE LOANS OR INDEMNIFY INVESTORS IF IT
BREACHES REPRESENTATIONS AND WARRANTIES.

When it sells a mortgage loan to a secondary market investor, the Company makes
representations and warranties about characteristics of the mortgage loan, the
borrower and the underlying property. If it breaches any of these
representations and warranties, the Company may be required to repurchase the
loan from the investor or indemnify the investor for any damages caused by the
breach.

With some loan sales, the Company may be required to return a portion of the
premium paid by the investor for the loan if the loan is prepaid within the
first year after its sale. If the Company is regularly required to repurchase

<PAGE>

loans, indemnify investors or return loan premiums, it would have an adverse
effect on its financial performance.

LEGAL PROCEEDINGS

The Company at this time is not a party to any lawsuit.

In the ordinary course of its business, the Company may be subject to claims
made against it by borrowers and private investors arising from, among other
things, losses that are claimed to have been incurred as a result of alleged
breaches of contract and fiduciary obligations, misrepresentations, errors and
omissions of employees, officers and agents of the Company, incomplete
documentation and failures by the Company to comply with various laws and
regulations applicable to its business, including federal and state banking and
consumer lending laws. There can be no assurance that any liability with respect
to any legal actions that might be instituted in the future, would not be
material to the Company's consolidated results of operations, financial
condition or cash flows.

POSSIBLE INADEQUACY OF ALLOWANCE FOR LOAN LOSSES

The Company intends to maintain allowances for loan losses at levels considered
adequate by management to absorb any anticipated losses. The amount of future
losses is susceptible to changes in economic, operating and other conditions,
including changes in interest rates, that may be beyond the Company's control,
and such losses may exceed current estimates. Although management believes that
the Company's allowance for loan losses is adequate to absorb any losses on
existing loans that may become uncollectible, there can be no assurance that the
allowance will prove sufficient to cover actual loan losses on existing loans in
the future.

RELIANCE ON SYSTEMS AND CONTROLS

The Company will depend heavily upon its systems and controls, many of which are
designed specifically for its business. These systems and controls support the
evaluation, acquisition, monitoring, collection and administration of the
Company's mortgage loan portfolios. There can be no assurance that the Company
can continue to provide the systems and controls on which the Company relies or
that the Company's systems and controls, including those specially designed and
built for the Company, are adequate or will continue to be adequate to support
the Company's growth. A failure of the automated systems, including a failure of
data integrity or accuracy, could have a materially adverse effect upon the
Company's business and financial condition.

DEPENDENCE ON KEY PERSONNEL

The success of the Company is dependent on the services and efforts of its
existing key management personnel; however, each of them has a substantial
equity interest in the Company. While the Company believes that it could find
replacements for its executive officers, the loss of their services could have
an adverse effect on the Company's financial condition or results of operations.
The Company may enter into employment agreements with certain of its key
management personnel, which agreements could include two-year non-competition
provisions. The Company's success and plans for future growth will also depend
on its ability to attract and retain additional skilled personnel. There can be
no assurance that experienced and qualified management level personnel will be

<PAGE>

available to the Company in the future on terms satisfactory to the Company. The
Company does not maintain key-man life insurance on any of its executive
officers.

THE COMPANY MAY NOT BE ABLE TO HIRE AND RETAIN SUFFICIENT TECHNICAL AND SUPPORT
PERSONNEL NEEDED TO SUCCEED

The Company's ability to grow and its future success depend on its ability to
identify, attract, hire, train, retain and motivate other highly skilled
technical, managerial, sales and marketing, customer service and professional
personnel. Competition for such personnel is intense, and there can be no
assurance that the Company will be able to successfully attract, assimilate or
retain sufficiently qualified personnel. The failure to retain and attract the
necessary technical, managerial, sales and marketing, customer service personnel
and experienced professionals could have a material adverse effect on the
Company's business, financial condition and results of operations.

MARKET ACCEPTANCE BY CUSTOMERS AND SERVICE PROVIDERS AND POTENTIAL AFFILIATES

The Company's proposed revenues will be, derived primarily from fees for
services related to the purchase and financing of homes. Therefore, the success
and growth of the Company cannot be forecast with confidence and will depend
upon the acceptance of the Company's approach by customers and service
providers, including realtors, mortgage lenders, mortgage brokers, settlement
services providers and homeowner services firms. There can be no assurance of
such acceptance generally and, therefore, no assurance that the Company will be
able to achieve its plans for growth.

The Company's ability to operate profitably will also depend on its ability to
commence loan originations, or acquire origination companies which, in turn,
will depend on the Company's ability to significantly expand the number of
realtors and loan agents and other parties whom may refer customers to the
Company and who offer the Company's services to home buyers and owners. While
the Company believes it offers attractive advantages to homebuyers and mortgage
brokers, there can be no assurance that providers of homeownership-related
services will perceive such advantages to be attractive and thereby offer them
to homeowners and buyers. Failure by the Company to acquire mortgage loan
origination companies will have a material adverse effect on the Company's
business, financial condition and results of operations.

INSURANCE- INSUFFICIENT LIMITS OR LOSS WILL INJURE THE COMPANY

The Company will maintain insurance against personal injury and property damage
for each facility. The Company maintains workers compensation insurance on all
its employees. The Company will maintain a general liability insurance policy.
The Company additionally will maintain a mortgage originator policy with
coverage for certain losses resulting from employee dishonesty, theft of
warehouse lender collateral, and under or uninsured losses to mortgage interest.
This policy will also provide a policy for coverage of professional liability.
There can be no assurance that the Company will be able to maintain adequate
insurance or that such insurance will provide adequate coverage. In the event of
a successful suit against the Company, the lack or insufficiency of insurance
coverage would have a materially adverse impact on the business and financial
condition of the Company.

<PAGE>

CONTROL BY MANAGEMENT AND PRESENT SHAREHOLDERS OF THE COMPANY

Holders of the Company's Common Stock are entitled to one vote per share with no
"cumulative" voting rights. Accordingly, the Company's existing management and
shareholders own and will have the right to vote a substantial majority of the
Company's issued and outstanding shares of Common Stock. They have and will
continue to have the ability to control all of the Company's policies, elect its
board of directors and appoint its officers by reason of such stock ownership
and voting rights.

RELATED PARTY TRANSACTIONS AND POTENTIAL CONFLICTS OF INTEREST

The Company may enter into transactions in the future with officers, directors,
and shareholders of the Company. These transactions were not negotiated at "arms
length" and in the future may not be negotiated at "arms length" and there may
be conflicts with respect to the interpretation and enforcement of any agreement
between the Company, its officers, directors, shareholders, and affiliated
companies. Any dispute with respect to the interpretation or enforcement of
agreements between the Company, its officers, directors, shareholders, and
affiliates may not be resolved in favor of the Company.

There can be no assurance that future transactions or arrangements between the
Company and its officers, directors, shareholders, and their affiliates will be
advantageous to the Company, that conflicts of interest will not arise with
respect thereto, or that if conflicts do arise, that they will be resolved in a
manner favorable to the Company.

NO ASSURANCE OF PROFITABILITY

The Company has, to date, generated no revenues from operations and there is no
assurance that the Company will ever generate revenues or operate profitably.

ABSENCE OF DIVIDENDS

The Company has paid dividends in the past, however, in restructuring the
Company to perform acquisitions of other companies it does not anticipate the
declaration or payments of any dividends in the foreseeable future. The Company
intends to retain earnings, if any, to finance the development and expansion of
its business. Future dividend policy will be subject to the discretion of the
Board of Directors and will be contingent upon future earnings, if any, the
Company's financial condition, capital requirements, general business conditions
and other factors. An agreement between the Company and its warehouse facility
may specifically prohibit the payment of dividends in cash, property or
securities. Therefore, there can be no assurance that cash dividends of any kind
will ever be paid.

Warehouse lines of credit may restrict the ability of the Company to pay
dividends. Specifically dividend payment may be prohibited under financing
arrangements if the Company is in default under the warehouse agreements or is
otherwise not complying with tangible net worth requirements, or it may be
prohibited from declaring and paying dividends in excess of net after-tax income
earned in any fiscal year, as determined on a fiscal year-to-date basis.

<PAGE>

BUSINESS OPERATIONS MAY BE INTERRUPTED BY UNEXPECTED YEAR 2000 PROBLEMS.

Many existing computer systems and software products do not properly recognize
dates after December 31, 1999. This Year 2000 problem could result in data
corruption, system failures or disruptions of operations. Without operations,
the Company is not subject to potential Year 2000 problems affecting products
and services, internal systems, and the systems of third parties on whom it
relies. The Company believes that the technology underlying its products and
services is Year 2000 compliant. However, the Company may discover errors or
defects in internal systems that may be unresolvable or that may result in
material costs. Internal Year 2000 problems could negatively affect business,
operating results and financial condition.

The Company uses third-party equipment, software and content that may not be
Year 2000 compliant. The Company does not independently verify Year 2000
compliance. If third parties on whom the Company relies are not Year 2000
compliant, business could be adversely affected later this year.

The failure of a customer or strategic partner subject to the year 2000 to
convert its systems on a timely basis or a conversion that is incompatible with
the Company's systems could have a material adverse effect on the Company's
business, financial condition and results of operations.

The Company has no comprehensive contingency plan to address situations that may
result from Year 2000 problems.

RISK FACTORS OF PUBLIC COMPANIES OF THIS TYPE

1. CONFLICTS OF INTEREST. Certain conflicts of interest may exist between the
Company and its officers and directors. They have other business interests to
which they devote their attention, and may be expected to continue to do so
although management time should be devoted to the business of the Company. As a
result, conflicts of interest may arise that can be resolved only through
exercise of such judgment as is consistent with fiduciary duties to the Company.
See "Management," and "Conflicts of Interest."

2. NEED FOR ADDITIONAL FINANCING. The Company has very limited funds, and such
funds may not be adequate to take advantage of any available business
opportunities. Even if the Company's funds prove to be sufficient to acquire an
interest in, or complete a transaction with, a business opportunity, the Company
may not have enough capital to exploit the opportunity. The ultimate success of
the Company may depend upon its ability to raise additional capital. The Company
has not investigated the availability, source, or terms that might govern the
acquisition of additional capital and will not do so until it determines a need
for additional financing. If additional capital is needed, there is no assurance
that funds will be available from any source or, if available, that they can be
obtained on terms acceptable to the Company. If not available, the Company's
operations will be limited to those that can be financed with its modest
capital.

3. REGULATION OF PENNY STOCKS. The Company's securities, when available for
trading, will be subject to a Securities and Exchange Commission rule that
imposes special sales practice requirements upon broker-dealers who sell such
securities to persons other than established customers or accredited investors.
For purposes of the rule, the phrase "accredited investors" means, in general

<PAGE>

terms, institutions with assets in excess of $5,000,000, or individuals having a
net worth in excess of $1,000,000 or having an annual income that exceeds
$200,000 (or that, when combined with a spouse's income, exceeds $300,000). For
transactions covered by the rule, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's written
agreement to the transaction prior to the sale. Consequently, the rule may
affect the ability of broker-dealers to sell the Company's securities and also
may affect the ability of purchasers in this offering to sell their securities
in any market that might develop therefore.

In addition, the Securities and Exchange Commission has adopted a
number of rules to regulate "penny stocks." Such rules include Rules 3a51-1,
15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities
Exchange Act of 1934, as amended. Because the securities of the Company may
constitute "penny stocks" within the meaning of the rules, the rules would apply
to the Company and to its securities. The rules may further affect the ability
of owners of Shares to sell the securities of the Company in any market that
might develop for them.

Shareholders should be aware that, according to Securities and Exchange
Commission, the market for penny stocks has suffered in recent years from
patterns of fraud and abuse. Such patterns include (i) control of the market for
the security by one or a few broker-dealers that are often related to the
promoter or issuer; (ii) manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases; (iii) "boiler room"
practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced sales persons; (iv) excessive and undisclosed
bid-ask differentials and markups by selling broker-dealers; and (v) the
wholesale dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired level, along with the resulting
inevitable collapse of those prices and with consequent investor losses. The
Company's management is aware of the abuses that have occurred historically in
the penny stock market. Although the Company does not expect to be in a position
to dictate the behavior of the market or of broker-dealers who participate in
the market, management will strive within the confines of practical limitations
to prevent the described patterns from being established with respect to the
Company's securities.

4. LACK OF OPERATING HISTORY. The Company was formed in December 1999 for the
purpose of seeking a business opportunity in the mortgage business. Due to the
special risks inherent in the investigation, acquisition, or involvement in a
new business opportunity, The Company must be regarded as a new or start-up
venture with all of the unforeseen costs, expenses, problems, and difficulties
to which such ventures are subject.

5. NO ASSURANCE OF SUCCESS OR PROFITABILITY. There is no assurance that the
Company will acquire a favorable business opportunity. Even if the Company
should become involved in a business opportunity, there is no assurance that it
will generate revenues or profits, or that the market price of the Company's
Common Stock will be increased thereby.

6. POSSIBLE BUSINESS - NOT IDENTIFIED AND HIGHLY RISKY. The Company has not
identified and has no commitments to enter into or acquire a specific business
opportunity in the mortgage business and therefore can disclose the risks and
hazards of a business or opportunity that it may enter into in only a general
manner, and cannot disclose the risks and hazards of any specific business or
opportunity that it may enter into. An investor can expect a potential business

<PAGE>

opportunity to be quite risky. The Company's acquisition of or participation in
a business opportunity will likely be highly illiquid and could result in a
total loss to the Company and its stockholders if the business or opportunity
proves to be unsuccessful. See Item 1 "Description of Business."

7. TYPE OF BUSINESS ACQUIRED. The type of business to be acquired may be one
that desires to avoid affecting its own public offering and the accompanying
expense, delays, uncertainties, and federal and state requirements which purport
to protect investors. Because of the Company's limited capital, it is more
likely than not that any acquisition by the Company will involve other parties
whose primary interest is the acquisition of control of a publicly traded
company. Moreover, any business opportunity acquired may be currently
unprofitable or present other negative factors.

8. IMPRACTICABILITY OF EXHAUSTIVE INVESTIGATION. The Company's limited funds and
the lack of full-time management will likely make it impracticable to conduct a
complete and exhaustive investigation and analysis of a business opportunity
before the Company commits its capital or other resources thereto. Management
decisions, therefore, will likely be made without detailed feasibility studies,
independent analysis, market surveys and the like which, if the Company had more
funds available to it, would be desirable. The Company will be particularly
dependent in making decisions upon information provided by the promoter, owner,
sponsor, or others associated with the business opportunity seeking the
Company's participation. A significant portion of the Company's available funds
may be expended for investigative expenses and other expenses related to
preliminary aspects of completing an acquisition transaction, whether or not any
business opportunity investigated is eventually acquired.

9. LACK OF DIVERSIFICATION. Because of the limited financial resources that the
Company has, it is unlikely that the Company will be able to diversify its
acquisitions or operations. The Company's probable inability to diversify its
activities into more than one area will subject the Company to economic
fluctuations within a particular business or industry and therefore increase the
risks associated with the Company's operations.

10. RELIANCE UPON FINANCIAL STATEMENTS. The Company generally will require
audited financial statements from companies that it proposes to acquire. Given
cases where audited financials are available, the Company will have to rely upon
interim period unaudited information received from target companies' management
that has not been verified by outside auditors. The lack of the type of
independent verification which audited financial statements would provide,
increases the risk that the Company, in evaluating an acquisition with such a
target company, will not have the benefit of full and accurate information about
the financial condition and recent interim operating history of the target
company. This risk increases the prospect that the acquisition of such a company
might prove to be an unfavorable one for the Company or the holders of the
Company's securities.

Moreover, the Company will be subject to the reporting provisions of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and thus
will be required to furnish certain information about significant acquisitions,
including audited financial statements for any business that it acquires.
Consequently, acquisition prospects that do not have, or are unable to provide
reasonable assurances that they will be able to obtain, the required audited
statements would not be considered by the Company to be appropriate for

<PAGE>

acquisition so long as the reporting requirements of the Exchange Act are
applicable. Should the Company, during the time it remains subject to the
reporting provisions of the Exchange Act, complete an acquisition of an entity
for which audited financial statements prove to be unobtainable, the Company
would be exposed to enforcement actions by the Securities and Exchange
Commission (the "Commission") and to corresponding administrative sanctions,
including permanent injunctions against the Company and its management. The
legal and other costs of defending a Commission enforcement action would have
material, adverse consequences for the Company and its business. The imposition
of administrative sanctions would subject the Company to further adverse
consequences.

In addition, the lack of audited financial statements would prevent the
securities of the Company from becoming eligible for listing on NASDAQ, or on
any existing stock exchange. Moreover, the lack of such financial statements is
likely to discourage broker-dealers from becoming or continuing to serve as
market makers in the securities of the Company. Without audited financial
statements, the Company would almost certainly be unable to offer securities
under a registration statement pursuant to the Securities Act of 1933, and the
ability of the Company to raise capital would be significantly limited until
such financial statements were to become available.

11. LACK OF CONTINUITY IN MANAGEMENT. The Company does not have an employment
agreement with its officers and directors, and as a result, there is no
assurance they will continue to manage the Company in the future. In connection
with acquisition of a business opportunity, it is likely the current officers
and directors of the Company may resign subject to compliance with Section 14f
of the Securities Exchange Act of 1934. A decision to resign will be based upon
the identity of the business opportunity and the nature of the transaction, and
is likely to occur without the vote or consent of the stockholders of the
Company.

12. INDEMNIFICATION OF OFFICERS AND DIRECTORS. Nevada Statutes provide for the
indemnification of its directors, officers, employees, and agents, under certain
circumstances, against attorney's fees and other expenses incurred by them in
any litigation to which they become a party arising from their association with
or activities on behalf of the Company. The Company will also bear the expenses
of such litigation for any of its directors, officers, employees, or agents,
upon such person's promise to repay the Company therefore if it is ultimately
determined that any such person shall not have been entitled to indemnification.
This indemnification policy could result in substantial expenditures by the
Company which it will be unable to recoup.

13. DIRECTOR'S LIABILITY LIMITED. Nevada Statutes exclude personal liability of
its directors to the Company and its stockholders for monetary damages for
breach of fiduciary duty except in certain specified circumstances. Accordingly,
the Company will have a much more limited right of action against its directors
than otherwise would be the case. This provision does not affect the liability
of any director under federal or applicable state securities laws.

14. DEPENDENCE UPON OUTSIDE ADVISORS. To supplement the business experience of
its officers and directors, the Company may be required to employ accountants,
technical experts, appraisers, attorneys, or other consultants or advisors. The
selection of any such advisors will be made by the Company's President without
any input from stockholders. Furthermore, it is anticipated that such persons
may be engaged on an "as needed" basis without a continuing fiduciary or other

<PAGE>

obligation to the Company. In the event the President of the Company considers
it necessary to hire outside advisors, he may elect to hire persons who are
affiliates, if they are able to provide the required services.

15. LEVERAGED TRANSACTIONS. There is a possibility that any acquisition of a
business opportunity by the Company may be leveraged, i.e., the Company may
finance the acquisition of the business opportunity by borrowing against the
assets of the business opportunity to be acquired, or against the projected
future revenues or profits of the business opportunity. This could increase the
Company's exposure to larger losses. A business opportunity acquired through a
leveraged transaction is profitable only if it generates enough revenues to
cover the related debt and expenses. Failure to make payments on the debt
incurred to purchase the business opportunity could result in the loss of a
portion or all of the assets acquired. There is no assurance that any business
opportunity acquired through a leveraged transaction will generate sufficient
revenues to cover the related debt and expenses.

16. COMPETITION FOR BUSINESS. The search for potentially profitable business
opportunities is intensely competitive. The Company expects to be at a
disadvantage when competing with many firms that have substantially greater
financial and management resources and capabilities than the Company. These
competitive conditions will exist in any industry in which the Company may
become interested.

17. NO FORESEEABLE DIVIDENDS. The Company has not paid dividends on its Common
Stock and does not anticipate paying such dividends in the foreseeable future.

18. LOSS OF CONTROL BY PRESENT MANAGEMENT AND STOCKHOLDERS. The Company may
consider an acquisition or multiple acquisitions in which the Company would
issue as consideration for the business opportunity to be acquired an amount of
the Company's authorized but unissued Common Stock that would, upon issuance,
represent the great majority of the voting power and equity of the Company. The
result of such an acquisition would be that the acquired company's stockholders
and management would control the Company, and the Company's management could be
replaced by persons unknown at this time. Such a merger would result in a
greatly reduced percentage of ownership of the Company by its current
shareholders. In addition, the Company's major shareholders could sell control
blocks of stock at a premium price to the acquired company's stockholders.

19. NO PUBLIC MARKET EXISTS. There is no public market for the Company's common
stock, and no assurance can be given that a market will develop or that a
shareholder ever will be able to liquidate his investment without considerable
delay, if at all. If a market should develop, the price may be highly volatile.
Factors such as those discussed in this "Risk Factors" section may have a
significant impact upon the market price of the securities offered hereby. Owing
to the low price of the securities, many brokerage firms may not be willing to
effect transactions in the securities. Even if a purchaser finds a broker
willing to effect a transaction in these securities, the combination of
brokerage commissions, state transfer taxes, if any, and any other selling costs
may exceed the selling price. Further, many lending institutions will not permit
the use of such securities as collateral for any loans.

<PAGE>

20. RULE 144 SALES. All of the outstanding shares of Common Stock held by
present officers, directors, and stockholders are "restricted securities" within
the meaning of Rule 144 under the Securities Act of 1933, as amended. As
restricted shares, these shares may be resold only pursuant to an effective
registration statement or under the requirements of Rule 144 or other applicable
exemptions from registration under the Act and as required under applicable
state securities laws. Rule 144 provides in essence that a person who has held
restricted securities for one year may, under certain conditions, sell every
three months, in brokerage transactions, a number of shares that does not exceed
the greater of 1.0% of a company's outstanding common stock or the average
weekly trading volume during the four calendar weeks prior to the sale. There is
no limit on the amount of restricted securities that may be sold by a
nonaffiliate after the restricted securities have been held by the owner for a
period of two years. Nonaffiliate shareholders who have held their shares for
under Rule 144(K) two years are eligible to have freely tradable shares. A sale
under Rule 144 or under any other exemption from the Act, if available, or
pursuant to subsequent registration of shares of Common Stock of present
stockholders, may have a depressive effect upon the price of the Common Stock in
any market that may develop. All shares become available for resale (subject to
volume limitations for affiliates) under Rule 144, one year after date of
purchase subject to applicable volume restrictions under the Rule.

21. BLUE SKY CONSIDERATIONS. Because the securities registered hereunder have
not been registered for resale under the blue sky laws of any state, the holders
of such shares and persons who desire to purchase them in any trading market
that might develop in the future, should be aware that there may be significant
state blue-sky law restrictions upon the ability of investors to sell the
securities and of purchasers to purchase the securities. Some jurisdictions may
not under any circumstances allow the trading or resale of blind-pool or
"blank-check" securities. Accordingly, investors should consider the secondary
market for the Company's securities to be a limited one.

22. BLUE SKY RESTRICTIONS. Many states have enacted statutes or rules which
restrict or prohibit the sale of securities of "Blank Check" companies to
residents so long as they remain without specific business companies. To the
extent any current shareholders or subsequent purchaser from a shareholder may
reside in a state which restricts or prohibits resale of shares in a "Blank
Check" company, warning is hereby given that the shares may be "restricted" from
resale as long as the company is a shell company.

In the event of a violation of state laws regarding resale of "Blank Check"
shares the Company could be liable for civil and criminal penalties which would
be a substantial impairment to the Company. At date of this registration
statement, all shareholders' shares bear a "restrictive legend," and the Company
will examine each shareholders' resident state laws at the time of any proposed
resale of shares now outstanding to attempt to avoid any inadvertent breach of
state laws.

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS OR PLAN OF
OPERATIONS.

Liquidity and Capital Resources

The Company remains in the development stage and, since inception, has
experienced significant liquidity problems and has no capital resources or
stockholder's equity. The Company has current assets in the form of cash of $100
and total assets of $2,000 and no current liabilities. The cash assets will not
satisfy cash requirements for the company within the next twelve months. In the
event additional cash is required the company may have to borrow funds from
shareholders or other sources, or seek funds from a private placement among new
investors, none of which can be assured.

The Company will carry out its plan of business as discussed above. The Company
cannot predict to what extent its lack of liquidity and capital resources will
impair the consummation of a business combination or whether it will incur
further operating losses through any business entity which the Company may
eventually acquire.

During the period from November 3, 1999 (inception) through December 1, 1999 the
Company has engaged in no significant operations other than organizational
activities, acquisition of capital and preparation for registration of its
securities under the Securities Exchange Act of 1934, as amended and a limited
venture into offering consulting services to clients seeking debt or equity
financing for start-up ventures. No revenues were received by the Company during
this period. The Company has incurred operating expenses since inception of
$2,543. A total of such expenses were attributed to services of the two founders
which were recorded as an operations cost. The net loss on operations was
($2,543) through December 1, 1999. Such losses will continue unless revenues and
business can be acquired by the Company. There is no assurance that revenues or
profitability will ever be achieved by the Company.

Results of Operations period ended December 1, 1999 compared to 1998

The Company had no revenues in period from inception (November 3, 1999) to
December 1, 1999. The Company incurred $2,543 in expenses to December 1, 1999 as
compared to no expenses in any prior year.

The net operating loss from inception to December 1, 1999 as a result of
organizational costs and expenses was ($2,543).

For the current fiscal year, the Company anticipates incurring a loss as a
result of legal and accounting expenses, expenses associated with registration
under the Securities Exchange Act of 1934, and expenses associated with locating
and evaluating acquisition candidates. The Company anticipates that until a
business combination is completed with an acquisition candidate, it will not
generate revenues other than interest income, and may continue to operate at a
loss after completing a business combination, depending upon the performance of
the acquired business.

Need for Additional Financing

The Company does not have capital sufficient to meet the Company's cash needs,
including the costs of compliance with the continuing reporting requirements of
the Securities Exchange Act of 1934. The Company will have to seek loans or

<PAGE>

equity placements to cover such cash needs. In the event the Company is able to
complete a business combination during this period, lack of its existing capital
may be a sufficient impediment to prevent it from accomplishing the goal of
completing a business combination. There is no assurance, however, that without
funds it will ultimately allow registrant to complete a business combination.
Once a business combination is completed, the Company's needs for additional
financing are likely to increase substantially.

No commitments to provide additional funds have been made by management or other
stockholders. Accordingly, there can be no assurance that any additional funds
will be available to the Company to allow it to cover its expenses as they may
be incurred.

Irrespective of whether the Company's cash assets prove to be inadequate to meet
the Company's operational needs, the Company might seek to compensate providers
of services by issuances of stock in lieu of cash.

Year 2000 Issues

Year 2000 problems result primarily from the inability of some computer software
to property store, recall, or use data after December 31, 1999. These problems
may affect many computers and other devices that contain embedded computer
chips. The Company has no operations, and does not rely on information
technology (IT) systems. Accordingly, the Company does not believe it will be
materially affected by Year 2000 problems.

The Company relies on non-IT systems that may suffer from Year 2000 problems,
including telephone systems and facsimile and other office machines. Moreover,
the Company relies on third-parties that may suffer from Year 2000 problems that
could affect the Company's operations, including banks, companies in the
mortgage and real estate industries, and utilities. In light of the Company's
minimal operations, the Company does not believe that such non-IT systems or
third-party Year 2000 problems will affect the Company in a manner that is
different or more substantial than such problems affect other similarly situated
companies or industry generally. Consequently, the Company does not currently
intend to conduct a readiness assessment of Year 2000 problems or to develop a
detailed contingency plan with respect to Year 2000 problems that may affect the
Company.

Item 3. Description of Property.

The Company has no property. The Company does not currently maintain an office
or any other facilities. It does currently maintain a mailing address at 234
Columbine, Suite 300B, Denver CO 80206. The Company pays no rent for the use of
this mailing address. The Company does not believe that it will need to maintain
an office at any time in the foreseeable future in order to carry out its plan
of operations described herein.

Item 4. Security Ownership of Certain Beneficial Owners and Management.

The following table sets forth, as of the date of this Registration Statement,
the number of shares of Common Stock owned of record and beneficially by
executive officers, directors and persons who hold 5.0% or more of the
outstanding Common Stock of the Company. Also included are the shares held by
all executive officers and directors as a group.

<PAGE>

MANAGEMENT AND 5% OR GREATER NUMBER OF SHARES OWNERSHIP
SHAREHOLDERS/BENEFICIAL OWNERS PERCENTAGE
- -------------------------------------------------------------- ------------------------- --------------------
<S> <C> <C>
Bernard Pracko, President and CEO 15,000,000 80.3%
Gaylen Hansen, Chief Financial Officer 0 0%
M.A. Littman 3,675,000 19.7%

All directors and executive 15,000,000 80.3%
officers as a group (2 persons)

</TABLE>

Each principal shareholder has sole investment power and sole voting power over
the shares owned.

Possible change in control

In the event of a purchase of control by other persons, or a merger, the
shareholders and management listed above will no longer own the percentages set
forth above, and shareholders may be subject to decisions by the new control
parties to which they may not assent.

Item 5. Directors, Executive Officers, Promoters and Control Persons.

The directors and executive officers currently serving the Company are as
follows:

Name Position Held Tenure
- --------------------------------------------------------------------------------
Bernard Pracko President and Director Annual
Gaylen Hansen CFO, Secretary, Treasurer
And Director Annual

The directors named above will serve until the next annual meeting of the
Company's stockholders. Thereafter, directors will be elected for one-year terms
at the annual stockholders' meeting. Officers will hold their positions at the
pleasure of the board of directors, absent any employment agreement, of which
none currently exists or is contemplated. There is no arrangement or
understanding between the directors and officers of the Company and any other
person pursuant to which any director or officer was or is to be selected as a
director or officer.

The directors and officers of the Company will devote such time to the Company's
affairs on an "as needed" basis, but less than 20 hours per month. As a result,
the actual amount of time which they will devote to the Company's affairs is
unknown and is likely to vary substantially from month to month.

Biographical Information

Bernard F. Pracko, II, age 52, entered Investment Real Estate Brokerage in 1984
in Arizona where he also held a mortgage broker's license. He worked with Grubb

<PAGE>

& Ellis Investment Division in Phoenix, Arizona, where he compiled and presented
investment packages to investors on properties of $2MM to $20MM up to 1986. In
1994 he formed Cypress Mortgage, Inc. the operating dba of Fayber Associates,
Inc. operating as President and Director and overseeing loan originators, loan
processors, investor relations, officer personnel, company policy making,
internet web site, internal systems design, financial affairs, negotiation of
legal agreements for broker and correspondent investor relationships. He
obtained a BA at the University of Colorado in 1970 and an MA from Peace
Theological Seminary in 1997. He is a licensed real estate broker in Arizona and
Colorado. He has been a Member of Colorado Association of Mortgage Brokers since
1994. He also serves on the legislative committee of the Colorado Association of
Mortgage Brokers.

Gaylen R. Hansen, age 49, is a partner with the CPA firm of Oatley Bystrom &
Hansen. He is also currently a member and Chairman of the Colorado Securities
Board. From 1993 to 1998, he was self-employed as a Certified Public Accountant.
From 1987 to 1993, he was a partner with Jerome W. Karsh & Co. From 1983 to
1987, he was a Senior Manager with Price Waterhouse. At Arthur Andersen & Co.,
from 1976 to 1983, he was an audit manager. His affiliations include the State
of Colorado - Securities Board, member and Chairman, American Institute of
Certified Public Accountants (AICPA), and Colorado Society of Certified Public
Accountants. Mr. Hansen graduated with a Bachelors degree in business
administration from California State Polytechic University, Pomona in 1975 and
was awarded a Master of Business Administration from California State
University, Fullerton in 1977.

Management will devote minimal time to the operations of the Company, and any
time spent will be devoted to screening and assessing and, if warranted,
negotiating to acquire business opportunities.

None of the Company's officers and/or directors currently receives any
compensation for their respective services rendered to the Company, however at
the inception of the company one received stock compensation. Further
compensation of any officer or director is not expected to occur until the
Company has generated revenues from operations after consummation of a merger or
acquisition. As of the date of filing this report, the Company has no funds
available to pay officers or directors. Further, none of the officers or
directors is accruing any compensation pursuant to any agreement with the
Company. No retirement, pension, profit sharing, stock option or insurance
programs or other similar programs have been adopted by the company for the
benefit of its employees.

It is possible that, after the Company successfully consummates a merger or
acquisition with an unaffiliated entity, that entity may desire to employ or
retain one or a number of members of the Company's management for the purposes
of providing services to the surviving entity, or otherwise provide other
compensation to such persons. However, the Company has adopted a policy whereby
the offer of any post-transaction remuneration to members of management will not
be a consideration in the Company's decision to undertake any proposed
transaction. Each member of management has agreed to disclose to the Company's
Board of Directors any discussions concerning possible compensation to be paid
to them by any entity which proposes to undertake a transaction with the Company
and further, to abstain from voting on such transaction. Therefore, as a
practical matter, if each member of the Company's Board of Directors were
offered compensation in any form from any prospective merger or acquisition
candidate, the proposed transaction would not be approved by the Company's Board

<PAGE>

of Directors as a result of the inability of the Board to affirmatively approve
such a transaction.

It is possible that persons associated with management may refer a prospective
merger or acquisition candidate to the Company. In the event the Company
consummates a transaction with any entity referred by associates of management,
it is possible that such an associate will be compensated for their referral in
the form of a finder's fee. It is anticipated that this fee will be either in
the form of restricted Common Stock issued by the Company as part of the terms
of the proposed transaction, or will be in the form of cash consideration.
However, if such compensation is in the form of cash, such payment will be
tendered by the acquisition or merger candidate, because the Company has
insufficient cash available. The amount of such finder's fee cannot be
determined as of the date of filing this report, but is expected to be
comparable to consideration normally paid in like transactions. No member of
management of the Company will receive any finders fee, either directly or
indirectly, as a result of their respective efforts to implement the Company's
business plan outlined herein.

The officers and directors of the Company will not devote more than a portion of
their time to the affairs of the Company. There will be occasions when the time
requirements of the Company's business conflict with the demands of their other
business and investment activities. Such conflicts may require that the Company
attempt to employ additional personnel. There is no assurance that the services
of such persons will be available or that they can be obtained upon terms
favorable to the Company.

Conflicts of Interest - General.

Certain of the officers and directors of the Company may be directors and/or
principal shareholders of other companies and, therefore, could face conflicts
of interest with respect to potential acquisitions. In addition, officers and
directors of the Company may in the future participate in business ventures
which could be deemed to compete directly with the Company. Additional conflicts
of interest and non-arms length transactions may also arise in the future in the
event the Company's officers or directors are involved in the management of any
firm with which the Company transacts business. The Company's Board of Directors
has adopted a policy that the Company will not seek a merger with, or
acquisition of, any entity in which management serve as officers or directors,
or in which they or their family members own or hold a controlling ownership
interest. Although the Board of Directors could elect to change this policy, the
Board of Directors has no present intention to do so. In addition, if the
Company and other companies with which the Company's officers and directors are
affiliated both desire to take advantage of a potential business opportunity,
then the Board of Directors has agreed that said opportunity should be available
to each such company in the order in which such companies registered or became
current in the filing of annual reports under the Exchange Act subsequent to
January 1, 1999.

The Company's officers and directors may actively negotiate or otherwise consent
to the purchase of a portion of their common stock as a condition to, or in
connection with, a proposed merger or acquisition transaction. It is anticipated
that a substantial premium over the initial cost of such shares may be paid by
the purchaser in conjunction with any sale of shares by the Company's officers
and directors which is made as a condition to, or in connection with, a proposed
merger or acquisition transaction. The fact that a substantial premium may be

<PAGE>

paid to the Company's officers and directors to acquire their shares creates a
potential conflict of interest for them in satisfying their fiduciary duties to
the Company and its other shareholders. Even though such a sale could result in
a substantial profit to them, they would be legally required to make the
decision based upon the best interests of the Company and the Company's other
shareholders, rather than their own personal pecuniary benefit.

Item 6. Executive Compensation.

SUMMARY COMPENSATION TABLE OF EXECUTIVES

Annual Compensation Awards
- ------------------------ ------------ -------------- ------------ ----------------------- -------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Name and Principal Year Salary ($) Bonus ($) Other Annual Restricted Stock Securities
Position Compensation ($) Award(s) Underlying Options/
($) SARs (#)

- ------------------------ ------------ -------------- ------------ ----------------------- -------------------- ---------------------
Bernard Pracko, 1997 0 0 0 0 0
President 1998 0 0 0 0 0

------------ -------------- ------------ ----------------------- -------------------- ---------------------
1999 0 0 0 0 * (see 0
below)
- ------------------------ ------------ -------------- ------------ ----------------------- -------------------- ---------------------
Michael R. Butler
- ------------------------ ------------ -------------- ------------ ----------------------- -------------------- ---------------------
Gaylen Hansen, 1997 0 0 0 0 0
Secretary 1998 0 0 0 0 0
------------ -------------- ------------ ----------------------- -------------------- ---------------------
1999 0 0 0 0 0
- ------------------------ ------------ -------------- ------------ ----------------------- -------------------- ---------------------

</TABLE>

Directors' Compensation

Name Annual Meeting Consulting Number Number of
Retainer Fees Fees/Other of Securities
Fee ($) ($) Fees ($) Shares Underlying
(#) Options
SARs (#)

- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
A. Director 0 0 0 0* 0
Bernard Pracko

B. Director
Gaylen Hansen 0 0 0 0 0

</TABLE>

*15,000,000 shares issued to founding director for cash of $2,000 and services.

Option/SAR Grants Table (None)

Aggregated Option/SAR Exercises in Last Fiscal Year an FY-End Option/SAR value
(None)

Long Term Incentive Plans - Awards in Last Fiscal Year (None)

<PAGE>

No officer or director has received any other remuneration in the two year
period prior to the filing of this registration statement, except as defined in
Certain Transactions, Item 7, immediately following. See "Certain Relationships
and Related Transactions." The Company has no stock option, retirement, pension,
or profit-sharing programs for the benefit of directors, officers or other
employees, but the Board of Directors may recommend adoption of one or more such
programs in the future.

Item 7. Certain Relationships and Related Transactions.

The Company issued to its founders, Bernard Pracko and Michael A. Littman a
total of 18,675,000 shares of Common Stock for cash of a total of $2,000 and
$675, respectively and services. Certificates evidencing the Common Stock issued
by the Company to these persons have all been stamped with a restrictive legend,
and are subject to stop transfer orders by the Company. For additional
information concerning restrictions that are imposed upon the securities held by
current stockholders, and the responsibilities of such stockholders to comply
with federal securities laws in the disposition of such Common Stock, see "Risk
Factors - Rule 144 Sales."

The Company has adopted a policy under which any consulting or finder's fee that
may be paid to a third party or affiliate for consulting services to assist
management in evaluating a prospective business opportunity would be paid in
stock or in cash. Any such issuance of stock would be made on an ad hoc basis.
Accordingly, the Company is unable to predict whether or in what amount such a
stock issuance might be made.

The Company maintains a mailing address at the office of its President, Bernard
Pracko, but otherwise does not maintain an office. As a result, it pays no rent
and incurs no expenses for maintenance of an office and does not anticipate
paying rent or incurring office expenses in the future. It is likely that the
Company will establish and maintain an office after completion of a business
combination.

Although management has no current plans to cause the Company to do so, it is
possible that the Company may enter into an agreement with an acquisition
candidate requiring the sale of all or a portion of the Common Stock held by the
Company's current stockholders to the acquisition candidate or principals
thereof, or to other individuals or business entities, or requiring some other
form of payment to the Company's current stockholders, or requiring the future
employment of specified officers and payment of salaries to them. It is more
likely than not that any sale of securities by the Company's current
stockholders to an acquisition candidate would be at a price substantially
higher than that originally paid by such stockholders. Any payment to current
stockholders in the context of an acquisition involving the Company would be
determined entirely by the largely unforeseeable terms of a future agreement
with an unidentified business entity.

Item 8. Description of Securities.

Common Stock

The Company's Articles of Incorporation authorize the issuance of 100,000,000
shares of Common Stock $.0001 par value. Each record holder of Common Stock is
entitled to one vote for each share held on all matters properly submitted to

<PAGE>

the stockholders for their vote. Cumulative voting for the election of directors
is not permitted by the Articles of Incorporation.

As of December 1, 1999 a total of 18,675,000 common shares were issued and
outstanding.

Preferred Stock

The Company's Articles of Incorporation authorize the issuance of 25,000,000
shares of Preferred Stock. The Board of Directors of the Company is authorized
to issue the Preferred Stock from time to time in classes and series and is
further authorized to establish such classes and series to fix and determine the
variations in the relative rights and preferences as between series, to fix
voting rights, if any, for each class or series, and to allow for the conversion
of Preferred Stock into Common Stock. No Preferred Stock has been issued by the
Company. Preferred Stock may be utilized in making acquisitions.

Holders of outstanding shares of Common Stock are entitled to such dividends as
may be declared from time to time by the Board of Directors out of legally
available funds; and, in the event of liquidation, dissolution or winding up of
the affairs of the Company, holders are entitled to receive, ratably, the net
assets of the Company available to stockholders after distribution is made to
the preferred stockholders, if any, who are given preferred rights upon
liquidation. Holders of outstanding shares of Common Stock have no preemptive,
conversion or redemptive rights. All of the issued and outstanding shares of
Common Stock are, and all unissued shares when offered and sold will be, duly
authorized, validly issued, fully paid, and nonassessable. To the extent that
additional shares of the Company's Common Stock are issued, the relative
interests of then existing stockholders may be diluted.

Shareholders

Each shareholder has sole investment power and sole voting power over the shares
owned by such shareholder.

No shareholder has entered into or delivered any lock up agreement or letter
agreement regarding their shares or options thereon. Under Nevada laws, no lock
up agreement is required regarding the Company's shares as it might relate to an
acquisition.

Transfer Agent

The Company transfer agent is Mountain Share Transfer, Inc., 1625 Abilene Drive,
Broomfield, CO 80020.

Reports to Stockholders

The Company plans to furnish its stockholders with an annual report for each
fiscal year containing financial statements audited by its independent certified
public accountants. In the event the Company enters into a business combination
with another company, it is the present intention of management to continue
furnishing annual reports to stockholders. The Company intends to comply with
the periodic reporting requirements of the Securities Exchange Act of 1934 for
so long as it is subject to those requirements, and to file unaudited quarterly
reports and annual reports with audited financial statements as required by the
Securities Exchange Act of 1934.

<PAGE>

PART II

Item 1. Market Price and Dividends on the Registrant's Common Equity and Other
Shareholder Matters

The Company's shares of common stock have never traded on the Over-the Counter
Bulletin Board or in "Pink Sheets". There have never been any quotes for the
shares.

At December 1, 1999 there were 2 holders of record of the Company's common
stock. The Board of Directors does not anticipate paying dividends at anytime in
the foreseeable future.

Item 2. Legal Proceedings

The Company is not a party to any pending legal proceedings, and no such
proceedings are known to be contemplated.

No director, officer or affiliate of the Company, and no owner of record or
beneficial owner of more than 5.0% of the securities of the Company, or any
associate of any such director, officer or security holder is a party adverse to
the Company or has a material interest adverse to the Company in reference to
any litigation.

Item 3. Changes in and Disagreements with Accountants.

None.

Item 4. Recent Sales of Unregistered Securities.

Since November 3, 1999 (the date of the Company's formation), the Company has
sold its Common Stock to the persons listed in the table below in transactions
summarized as follows:

Purchaser Date of Purchase Shares Consideration Purchase Price Price Per Share
- --------------------- ------------------ ------------------ -------------------- ------------------ ----------------
<S> <C> <C> <C> <C> <C>
Bernard Pracko Nov. 1999 15,000,000 Cash and services $2,000 $.00013

M.A. Littman Nov. 1999 3,675,000 Cash and services $675 $.00018

</TABLE>

Each of the sales listed above was made for cash and services as listed. All of
the listed sales were made in reliance upon the exemption from registration
offered by Section 4(2) of the Securities Act of 1933, as amended. Based upon
Subscription Agreements completed by each of the subscribers, the Company had
reasonable grounds to believe immediately prior to making an offer to the
private investors, and did in fact believe, when such subscriptions were
accepted, that such purchasers (1) were purchasing for investment and not with a
view to distribution, and (2) had such knowledge and experience in financial and
business matters that they were capable of evaluating the merits and risks of
their investment and were able to bear those risks. The purchasers had access to
pertinent information enabling them to ask informed questions. The shares were

<PAGE>

issued without the benefit of registration. An appropriate restrictive legend is
imprinted upon each of the certificates representing such shares, and
stop-transfer instructions have been entered in the Company's transfer records.
All such sales were effected without the aid of underwriters, and no sales
commissions were paid.

Item 5. Indemnification of Directors and Officers

The Nevada Statutes provide that the Company may indemnify its officers and
directors for costs and expenses incurred in connection with the defense of
actions, suits, or proceedings where the officer or director acted in good faith
and in a manner he reasonably believed to be in the Company's best interest and
is a party by reason of his status as an officer or director, absent a finding
of negligence or misconduct in the performance of duty.

<PAGE>

SIGNATURES:

Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

DATED: December 9, 1999

CYPRESS CAPITAL INC.

by: /s/Bernard Pracko
---------------------------
Bernard Pracko, President

by: /s/Gaylen Hansen
---------------------------
Gaylen Hansen, Secretary

Directors:

by:/s/Bernard Pracko
---------------------------
Director

by:/s/Gaylen Hansen
---------------------------
Director

<PAGE>

Cypress Capital I, Inc.
(A Development Stage Company)

Financial Statements

December 1, 1999

<PAGE>

CONTENTS

Page

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-1

BALANCE SHEET F-2

STATEMENT OF OPERATIONS F-3

STATEMENT OF STOCKHOLDERS' EQUITY F-4

STATEMENT OF CASH FLOWS F-5

NOTES TO FINANCIAL STATEMENTS F-6 TO F-7

<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

The Board of Directors and Stockholders of
Cypress Capital, Inc.

We have audited the accompanying balance sheet of Cypress Capital, Inc. (a
development stage company) as of December 1, 1999, and the related statements of
operations, stockholders' equity, and cash flows for the initial period from
inception (November 3, 1999) to December 1, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cypress Capital, Inc. as of
December 1, 1999, and the results of its operations and cash flows for the
initial period then ended in conformity with generally accepted accounting
principles.

/s/ Comiskey & Company

Denver, Colorado
December 6, 1999

PROFESSIONAL CORPORATION

<PAGE>

Cypress Capital, Inc.
(A Development Stage Company)
BALANCE SHEETS

ASSETS December 1,
1999
CURRENT ASSETS
Cash and cash equivalents $ 100
Stock subscription receivable 1,900
----------

Total current assets 2,000

TOTAL ASSETS $ 2,000
==========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES $ -
---------

Total current liabilities -

STOCKHOLDERS' EQUITY
Preferred stock, $.0001 par value; 25,000,000
shares authorized; no shares issued
and outstanding -
Common stock, $.0001 par value; 75,000,000
shares authorized; 18,675,000 shares issued and
Outstanding 1,868
Additional paid-in capital 2,675
Deficit accumulated during the development
Stage (2,543)
--------
2,000
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,000
========

The accompanying notes are an integral part of the financial statements

F-1

<PAGE>

Cypress Capital, Inc.
(A Development Stage Company)
STATEMENT OF OPERATIONS

For the period
from inception
(November 3, 1999)
to December 1, 1999

REVENUES $ -

EXPENSES
Selling, general and administrative 2,543

Total expenses 2,543

NET LOSS (2,543)

Accumulated deficit

Balance, beginning of period -

Balance, end of period $ (2,543)
==================

NET LOSS PER SHARE $ (0.00)
==================

WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 18,675,000

The accompanying notes are an integral part of the financial statements.

F-2

<PAGE>

Cypress Capital, Inc.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
For the initial period from inception (November 3, 1999) to December 1, 1999

Deficit
accumulated
Common stock Additional during the Total
Number of Paid-in Stock-holders'
development
shares Amount Capital stage Equity
<S> <C> <C> <C> <C> <C>
Common stock issued for
cash and services,
November 1999
at $0.0001 per share 3,675,000 $ 368 $ 675 $ - $ 1,043

Common stock issued for
cash and services,
November 1999
at $0.0001 per share 15,000,000 1,500 2,000 - 3,500

Net loss for the year ended
December 1, 1999 - - - (2,543) (2,543)
---------- ------------ ------------ ------- -----------

Balance, December 1, 1999 18,675,000 $ 1,868 $ 2,675 $ (2,543) $ 2,000
=========== ========= ======== ========= =======

</TABLE>

The accompanying notes are an integral part of the financial statements.

F-3

<PAGE>

Cypress Capital, Inc.
(A Development Stage Company)
STATEMENT OF CASH FLOWS

For the period
from inception
(November 3, 1999)
to December 1, 1999
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (2,543)
Adjustments to reconcile
net loss to net cash used
by operating activities:
Stock issued for services and reimbursed expenses 2,543
--------------

Net cash flows from operating activities -

CASH FLOWS FROM INVESTING ACTIVITIES -

CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 100

Net cash flows from financing activities 100
--------------

NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 100

CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD -

CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 100
==============

</TABLE>

The accompanying notes are an integral part of the financial Statements

F-4

<PAGE>

CYPRESS CAPITAL, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 1, 1999

1. Summary of Significant Accounting Policies
Development Stage Company
Cypress Capital, Inc. (a development stage company) (the "Company") was
incorporated under the laws of the State of Nevada on November 3, 1999.
The principal office of the corporation is 234 Columbine, Suite 300B,
Denver, Colorado 80206.

The Company was formed as a holding company for mortgage broker
subsidiaries, which it plans to acquire in the future. The Company has no
operations of mortgage broker businesses as of the date of the financial
statements. The Company's current business plan is to seek, investigate,
and, if warranted, acquire one or more mortgage broker businesses, and to
pursue other related activities intended to enhance shareholder value. The
acquisition of a business opportunity may be made by purchase, merger,
exchange of stock, or otherwise, and may encompass assets or a business
entity, such as a corporation, joint venture, or partnership. The Company
has limited capital, and it is unlikely that the Company will be able to
take advantage of possible purchases which require cash. The Company
intends to seek opportunities demonstrating the potential of profitable
long term revenues.

Accounting Method
The Company records income and expenses on the accrual method.

Fiscal Year
The board of directors shall establish the fiscal year of the corporation.

Loss per Share
Loss per share was computed using the weighted average number of shares
outstanding during the period. Shares issued to insiders in anticipation of
a public offering have been accounted for as outstanding since inception.

Financial Instruments
Unless otherwise indicated, the fair value of all reported assets and
liabilities that represent financial instruments (none of which are held
for trading purposes) approximate the carrying values of such amount.

Organization Costs
Costs to incorporate the Company were expensed as incurred.

Statement of Cash Flows
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.

Use of Estimates
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires the Company's management
to make estimates and assumptions that effect the amounts reported in

F-5

<PAGE>

CYPRESS CAPITAL, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 1, 1999

Use of Estimates (continued)

these financial statements and accompanying notes. Actual results could
differ from those estimates.

Consideration of Other Comprehensive Income Items
SFAF 130 - Reporting Comprehensive Income, requires companies to present
comprehensive income (consisting primarily of net income plus other direct
equity changes and credits) and its components as part of the basic
financial statements. For the initial period ended December 1, 1999, the
Company's financial statements do not contain any changes in equity that
are required to be reported separately in comprehensive income.

Stock Basis
Shares of common stock issued for other than cash have been assigned
amounts equivalent to the fair value of the service or assets received in
exchange.

2. Stockholders' Equity
As of December 1, 1999, 25,000,000 shares of the Company's $0.0001 par
value preferred stock had been authorized, of which no shares were issued
and outstanding.

As of December 1, 1999, 75,000,000 shares of the Company's $0.0001 par
value common stock had been authorized, of which 18,675,000 were issued and
outstanding. The shares were issued for cash of $0.00013 and $0.00018 per
share and services provided which have been valued at a total of $1,868.

As of December 6, 1999, stock subscriptions receivable of $1,900 had been
collected.

3. Related Party Transactions
As of the date hereof, the President is the owner of 15,000,000 shares of
the Company's issued and outstanding common stock, constituting
approximately 80.3% of the Company's issued and outstanding common stock.
The shares were issued for cash of $0.00013 per share and services provided
which have been valued at $1,500.

Officers and directors are reimbursed for all out-of-pocket expenses.

4. Income Taxes
The Company may have a Federal net operating loss carryforward of
approximately $2,543 relating to the initial period December 1, 1999. The
tax benefit of this net operating loss is approximately $500 and has been
offset by a full allowance for realization. This carryforward may be
limited upon the consummation of a business combination under IRC Section
381.

F-6

EXHIBIT 3.1

ARTICLES OF INCORPORATION

<PAGE>

ARTICLES OF INCORPORATION

CYPRESS CAPITAL, INC.

ARTICLE ONE

The name of the corporation is: CYPRESS CAPITAL, INC.

ARTICLE TWO

Its principal office in the State of Nevada is located at 50 W. Liberty
Street, Suite 880, Reno, Nevada 89501. The name and address of its resident
agent Nevada Agency & Trust Company at the above address.

ARTICLE THREE

The nature of the business or objects or purposes proposed may be
organized under the General Corporation Law of the State of Nevada.

To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Nevada and the
United States of America.

ARTICLE FOUR

The Total authorized capital stock of the corporation is 75,000,000
shares of Common Stock with a par value of $.001 and 25,000,000 shares of
Preferred Stock $.001 par value, the classes, rights, and privileges of which
may be set by the Board of Directors from time to time.

ARTICLE FIVE

The governing board of this corporation shall be known as directors,
and the number of directors may from time to time be increased or decreased in
such manner as shall be provided in the by-laws of the corporation, provided
that the number of directors shall not be reduced to less than one.

The name and post office address of the first board of directors, which
shall be one in number, is as follows:

NAME POST OFFICE ADDRESS

Bernard Pracko 234 Columbine, Suite 300B, Denver, CO
80206

<PAGE>

ARTICLE SIX

The capital stock, after the amount of the subscription price, or par
value, has been paid in, shall not be subject to assessment to pay the debts of
the corporation.

ARTICLE SEVEN

The name and post office address of the incorporator signing the
articles of incorporation is as follows:

NAME POST OFFICE ADDRESS

M.A. Littman 10200 W. 44th Avenue, Suite 400
Wheat Ridge, CO 80033

ARTICLE EIGHT

The corporation is to have perpetual existence.

ARTICLE NINE

In furtherance of and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized, subject to the by-laws,
if any, adopted by the shareholders, to make, alter or amend the by-laws of the
corporation.

ARTICLE TEN

Meetings of stockholders may be held outside the State of Nevada at
such place or places as may be designated from time to time by the board of
directors or in the by-laws of the corporation.

ARTICLE ELEVEN

This corporation reserves the right to amend, alter, change, or repeal
any provision contained in the articles of incorporation, in the manner now or
hereafter prescribed, and all rights conferred upon stockholders herein are
granted subject to this reservation.

ARTICLE TWELVE

The Corporation hereby waives and precludes the application of the
anti-takeover provisions of Nevada Revised Statutes 78.378 to 78.3793.

ARTICLE THIRTEEN

No contract or other transaction between the corporation and any other
corporation, whether or not a majority of the shares of the capital stock of
such other corporation is owned by this corporation, and no act of this

<PAGE>

corporation shall in any way be affected or invalidated by the fact that any of
the directors of this corporation are pecuniarily or otherwise interested in, or
are directors or officers of such other corporation. Any director of this
corporation, individually, or any firm of which such director may be a member,
may be a party to, or may be pecuniarily or otherwise interested in any contract
or transaction of the corporation; provided, however, that the fact that he or
such firm is so interested shall be disclosed or shall have been known to the
Board of Directors of this corporation, or a majority thereof; and of any
director of this corporation who is also a director or officer of such other
corporation, or who is so interested, may be counted in determining the
existence of a quorum at any meeting of the Board of Directors of this
corporation that shall authorize such contract or transaction, any may vote
thereat to authorize such contract or transaction, with like force and effect as
if he were not such director or officer of such other corporation or not so
interested.

ARTICLE FOURTEEN

No director or officer shall have any personal liability to the
corporation or its stockholders for damages for breach of fiduciary duty as a
director or officer, except that this Article Fourteen shall not eliminate or
limit the liability of a director or officer for (i) acts or omissions which
involve intentional misconduct, fraud, or a knowing violation of law, or (ii)
the payment of dividends in violation of the Nevada Revised Statutes.

ARTICLE FIFTEEN

The corporation shall fully indemnify its officers and directors
pursuant to the provisions of Nevada Revised Statutes as such may be amended
from time to time.

I, THE UNDERSIGNED, being the sole incorporator herein before named for
the purpose of forming a corporation pursuant to the General Corporation Law of
the State of Nevada, do make and file these articles of incorporation, hereby
declaring and certifying that the facts herein stated are true, and accordingly
have hereunto set my hand this 29th day of October A.D. 1999.

M. A. Littman, Incorporator ------------------------------------

STATE OF COLORADO )
) SS.
COUNTY OF JEFFERSON )

On this 29th day of October A.D., 1999 before me a Notary Public,
personally appeared, M.A. Littman who severally acknowledged that he executed
the above instrument for the purposes therein mentioned.

-----------------------------------
Notary Public

My Commission expires: 6/16/03

EXHIBIT 3.1/A

ARTICLES OF AMENDMENT

<PAGE>

CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
CYPRESS CAPITAL, INC.

The undersigned Incorporator of Cypress Capital, Inc., a Nevada
corporation (the "Corporation") do hereby certify that:

1) No shares of the Corporation were issued and outstanding and
entitled to vote on an amendment to the Articles of Incorporation at the date of
adoption.

2) The Company was incorporated in Nevada on November 3, 1999.

3) ARTICLE FOUR of the Corporation's Articles of Incorporation is
amended to read as follows:

"The total authorized capital stock of the corporation is
75,000,000 shares of common stock with a par value of $.0001 and
25,000,000 shares of preferred stock $.001 par value, the classes,
rights, and privileges of which may be set by the Board of Directors
from time to time."

The undersigned constitute at least two-thirds of the original
incorporator.

Dated: November 19th, 1999

INCORPORATOR

---------------------------
M. A. Littman

EXHIBIT 3.2

BYLAWS

<PAGE>

BYLAWS

CYPRESS CAPITAL, INC.

(a Nevada corporation)

ARTICLE I

STOCKHOLDERS

1. CERTIFICATES REPRESENTING STOCK. Every holder of stock in the
corporation shall be entitled to have a certificate signed by, or in the name
of, the corporation by the Chairman or Vice-Chairman of the Board of Directors,
if any, or by the President or a Vice-President and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the
corporation or by agents designated by the Board of Directors, certifying the
number of shares owned by him in the corporation and setting forth any
additional statements that may be required by the General Corporation Law of the
State of Nevada (General Corporation Law). If any such certificate is
countersigned or otherwise authenticated by a transfer agent or Transfer clerk,
and by a registrar, a facsimile of the signature of the officers, the transfer
agent or the transfer clerk or the registrar of the corporation may be printed
or lithographed upon the certificate in lieu of the actual signatures. If any
officer or officers who shall have signed, or whose facsimile signature or
signatures shall have been used on any certificate or certificates shall cease
to be such officer or officers of the corporation before such certificate or
certificates shall have been delivered by the corporation, the certificate or
certificates may nevertheless be adopted by the corporation and be issued and
delivered as though the person or persons who signed such certificate or
certificates, or whose facsimile signature or signatures shall have been used
thereon, had not ceased to be such officer or officers of the corporation.

Whenever the corporation shall be authorized to issue more than one
class of stock or more than one series of any class of stock, the certificates
representing stock of any such class or series shall set forth thereon the
statements prescribed by the General Corporation Law. Any restrictions on the
transfer or registration of transfer of any shares of stock of any class or
series shall be noted conspicuously on the certificate representing such shares.

The corporation may issue a new certificate of stock in place of any
certificate theretofore issued by it, alleged to have been lost, stolen, or
destroyed, and the Board of Directors may require the owner of any lost, stolen,
or destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify the corporation against any claim that may be made
against it on account of the alleged loss, theft, or destruction of any such
certificate or the issuance of any such new certificate.

2. FRACTIONAL SHARE INTERESTS. The corporation is not obliged to but
may execute and deliver a certificate for or including a fraction of a share. In
lieu of executing and delivering a certificate for a fraction of a share, the
corporation may proceed in the manner prescribed by the provisions of Section
78.205 of the General Corporation Law.

<PAGE>

3. STOCK TRANSFERS. Upon compliance with provisions restricting the
transfer or registration of transfer of shares of stock, if any, transfers or
registration of transfers of shares of stock of the corporation shall be made
only on the stock ledger of the corporation by the registered holder thereof, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the corporation or with a transfer agent or a
registrar, if any, and on surrender of the certificate or certificates for such
shares of stock properly endorsed and the payment of all taxes, if any, due
thereon.

4. RECORD DATE FOR STOCKHOLDERS. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or the allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion, or exchange of stock or for the purpose of
any other lawful action, the directors may fix, in advance, a record date, which
shall not be more than sixty days nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action. If no record date
is fixed, the record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held, the record date for determining stockholders entitled to express consent
to corporate action in writing without a meeting, when no prior action by the
Board of Directors is necessary, shall be the day on which the first written
consent is expressed, and the record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at any meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.

5. MEANING OF CERTAIN TERMS. As used in these Bylaws in respect of the
right to notice of a meeting of stockholders or a waiver thereof or to
participate or vote thereat or to consent or dissent in writing in lieu of a
meeting, as the case may be, the term "share" or shares" or "share of stock" or
"shares of stock" or "stockholder" or "stockholders" refers to an outstanding
share or shares of stock and to a holder or holders of record of outstanding
shares of stock when the corporation is authorized to issue only one class of
shares of stock, and said reference is also intended to 'include any outstanding
share or shares of stock and any holder or holders of record of outstanding
shares of stock of any class upon which or upon whom the Articles of
Incorporation confers such rights where there are two or more classes or series
of shares of stock or upon which or upon whom the General Corporation Law
confers such rights notwithstanding that the articles of incorporation may
provide for more than one class or series of shares of stock, one or more of
which are limited or denied such rights thereunder, provided, however, that no
such right shall vest in the event of an 'increase or a decrease in the
authorized number of shares of stock of any class or series which is otherwise
denied voting rights under the provisions of the Articles of Incorporation.

<PAGE>

6. STOCKHOLDER MEETINGS.

- TIME. The annual meeting shall be held on the date and at the time
fixed, from time to time, by the directors, provided, that the first annual
meeting shall be held on a date within thirteen months after the organization of
the corporation, and each successive annual meeting shall be held on a date
within thirteen months after the date of the preceding annual meeting. A special
meeting shall be held on the date and at the time fixed by the directors.

- PLACE. Annual meetings and special meetings shall be held at such
place, within or without the State of Nevada, as the directors may, from time to
time, fix.

- CALL. Annual meetings and special meetings may be called by the
directors or by any officer instructed by the directors to call the meeting.

- NOTICE OR WAIVER OF NOTICE. Notice of all meetings shall be in
writing and signed by the President or a Vice-President, or the Secretary, or an
Assistant Secretary, or by such other person or persons as the directors must
designate. The notice must state the purpose or purposes for which the meeting
is called and the time when, and the place, where it is to be held. A copy of
the notice must be either delivered personally or mailed postage prepaid to each
stockholder not less than ten nor more than sixty days before the meeting. If
mailed, it must be directed to the stockholder at his address as it appears upon
the records of the corporation. Any stockholder may waive notice of any meeting
by a writing signed by him, or his duly authorized attorney, either before or
after the meeting; and whenever notice of any kind is required to be given under
the provisions of the General Corporation Law, a waiver thereof in writing and
duly signed whether before or after the time stated therein, shall be deemed
equivalent thereto.

- CONDUCT OF MEETING. Meetings of the stockholders shall be presided
over by one of the following officers 'in the order of seniority and if present
and acting - the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, the President, a Vice-President, or, if none of the foregoing is in
office and present and acting, by a chairman to be chosen by the stockholders.
The Secretary of the corporation, or in his absence, an Assistant Secretary,
shall act as secretary of every meeting, but if neither the Secretary nor an
Assistant Secretary is present the Chairman of the meeting shall appoint a
secretary of the meeting.

- PROXY REPRESENTATION. At any meeting of stockholders, any stockholder
may designate another person or persons to act for him by proxy in any manner
described in, or otherwise authorized by, the provisions of Section 78.355 of
the General Corporation Law.

- INSPECTORS. The directors, in advance of any meeting, may, but need
not, appoint one or more inspectors of election to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not appointed, the person
presiding at the meeting may, but need not, appoint one or more inspectors. In
case any person who may be appointed as an inspector fails to appear or act, the
vacancy may be filled by appointment made by the directors in advance of the
meeting or at the meeting by the person presiding thereat. Each inspector, if
any, before entering upon the discharge of his duties, shall take and sign an
oath faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspectors, if any,

<PAGE>

shall determine the number of shares of stock outstanding and the voting power
of each, the shares of stock represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to all stockholders. On request of the person presiding at
the meeting, the inspector or inspectors, if any, shall make a report in writing
of any challenge, question or matter determined by him or them and execute a
certificate of any fact found by him or them.

- QUORUM. Stockholders holding at least a majority of the voting power
are necessary to constitute a quorum at a meeting of stockholders for the
transaction of business unless the action to be taken at the meeting shall
require a greater proportion. The stockholders present may adjourn the meeting
despite the absence of a quorum.

- VOTING. Each share of stock shall entitle the holder thereof to one
vote. In the election of directors plurality of the votes cast shall elect. Any
other action is approved if the number of votes cast in favor of the action
exceeds the number of votes cast in opposition to the action, except where the
General Corporation Law, the Articles of Incorporation, or these Bylaws
prescribe a different percentage of votes and/or a different exercise of voting
power. In the election of directors, voting need not be by ballot and, except as
otherwise may be provided by the General Corporation Law, voting by ballot shall
not be required for any other action.

Stockholders may participate in a meeting of stockholders by means of a
conference telephone or similar method of communication by which all persons
participating in the meeting can hear each other.

7. STOCKHOLDER ACTION WITHOUT MEETINGS. Except as may otherwise be
provided by the General Corporation Law, any action required or permitted to be
taken at a meeting of the stockholders may be taken without a meeting if a
written consent thereto is signed by stockholders holding at least a majority of
the voting power, provided that if a different proportion of voting power is
required for such an action at a meeting, then that proportion of written
consents is required. In no 'instance where action is authorized by written
consent need a meeting of stockholders be called or noticed.

ARTICLE II

DIRECTORS

1. FUNCTIONS AND DEFINITION. The business and affairs of the
corporation shall be managed by the Board of Directors of the corporation. The
Board of Directors shall have authority to fix the compensation of the members
thereof for services in any capacity. The use of the phrase "whole Board" herein
refers to the total number of directors which the corporation would have if
there were no vacancies.

2. QUALIFICATIONS AND NUMBER. Each director must be at least 18 years
of age. A director need not be a stockholder or a resident of the State of
Nevada. The initial Board of Directors shall consist of persons. Thereafter the
number of directors constituting the whole board shall be at least one. Subject
to the foregoing limitation and except for the first Board of Directors, such

<PAGE>

number may be fixed from time to time by action of the stockholders or of the
directors, or, if the number is not fixed, the number shall be . The number of
directors may be increased or decreased by action of the stockholders or of the
directors.

3. ELECTION AND TERM. Directors may be elected in the manner prescribed
by the provisions of Sections 78.320 through 78.335 of the General Corporation
Law of Nevada. The first Board of Directors shall hold office until the first
election of directors by stockholders and until their successors are elected and
qualified or until their earlier resignation or removal. Any director may resign
at any time upon written notice to the corporation. Thereafter, directors who
are elected at an election of directors by stockholders, and directors who are
elected in the interim to fill vacancies and newly created directorships, shall
hold office until the next election of directors by stockholders and until their
successors are elected and qualified or until their earlier resignation or
removal. In the interim between elections of directors by stockholders, newly
created directorships and any vacancies in the Board of Directors, including any
vacancies resulting from the removal of directors for cause or without cause by
the stockholders and not filled by said stockholders, may be filled by the vote
of a majority of the remaining directors then office, although less than a
quorum, or by the sole remaining director.

4. MEETINGS.

- TIME. Meetings shall be held at such time as the Board shall fix,
except that the first meeting of a newly elected Board shall be held as soon
after its election as the directors may conveniently assemble.

- PLACE. Meetings shall be held at such place within or without the
State of Nevada as shall be fixed by the Board.

- CALL. No call shall be required for regular meetings for which the
time and place have been fixed-Special meetings may be called by or at the
direction of the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, of the President, or of a majority of the directors in office.

- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required
for regular meetings for which the time and place have been fixed. Written,
oral, or any other mode of notice of the time and place shall be given for
special meetings in sufficient time for the convenient assembly of the directors
thereat. Notice if any need not be given to a director or to any member of a
committee of directors who submits a written waiver of notice signed by him
before or after the time stated therein.

- QUORUM AND AMON. A majority of the directors then in office, at a
meeting duly assembled, shall constitute a quorum. A majority of the directors
present, whether or not a quorum is present, may adjourn a meeting to another
time and place. Except as the Articles of Incorporation or these Bylaws may
otherwise provide, and except as other-wise provided by the General Corporation
Law, the act of the directors holding a majority of the voting power of the
directors, present at a meeting at which a quorum is present, is the act of the
Board. The quorum and voting provisions herein stated shall not be construed as
conflicting with any provisions of the General Corporation Law and these Bylaws
which govern a meeting of directors held to fill vacancies and newly created
directorships in the Board or action of disinterested directors.

<PAGE>

Members of the Board or of any committee which may be designated by the
Board may participate in a meeting of the Board or of any such committee, as the
case may be, by means of a telephone conference or similar method of
communication by which all persons participating in the meeting hear each other.
Participation in a meeting by said means constitutes presence in person at the
meeting.

- CHAIRMAN OF THE MEETING. The Chairman of the Board if any and if
present and acting, shall preside at all meetings. Otherwise, the Vice-Chairman
of the Board, if any and if present and acting, or the President, if present and
acting, or any other director chosen by the Board, shall preside.

5. REMOVAL OF DIRECTORS. Any or all of the directors may be removed for
cause or without cause in accordance with the provisions of the General
Corporation Law.

6. COMMITTEES. Whenever its number consists of two or more, the Board
of Directors may designate one or more committees which have such powers and
duties as the Board shall determine. Any such committee, to the extent provided
in the resolution or resolutions of the Board, shall have and may exercise the
powers and authority of the Board of Directors 'in the management of the
business and affairs of the corporation and may authorize the seal or stamp of
the corporation to be affixed to all papers on which the corporation desires to
place a seal or stamp. Each committee must include at least one director. The
Board of Directors may appoint natural persons who are not directors to serve on
committees.

7. WRITTEN ACTION. Any action required or permitted to be taken at a
meeting of the Board of Directors or of any committee thereof may be taken
without a meeting if, before or after the action, a written consent thereto is
signed by all the members of the Board or of the committee, as the case may be.

ARTICLE III

OFFICERS

1. The corporation must have a President, a Secretary, and a Treasurer,
and, if deemed necessary, expedient, or desirable by the Board of Directors, a
Chairman of the Board, a Vice-Chairman of the Board, an Executive
Vice-President, one or more other Vice-Presidents, one or more Assistant
Secretaries, one or more Assistant Treasurers, and such other officers and
agents with such titles as the resolution choosing them shall designate. Each of
any such officers must be natural persons and must be chosen by the Board of
Directors or chosen in the manner determined by the Board of Directors.

2. QUALIFICATIONS. Except as may otherwise be provided in the
resolution choosing him, no officer other than the Chairman of the Board, if
any, and the Vice-Chairman of the Board, if any, need be a director.

Any person may hold two or more offices, as the directors may
determine.

3. TERM OF OFFICE. Unless otherwise provided in the resolution choosing
him, each officer shall be chosen for a term which shall continue until the

<PAGE>

meeting of the Board of Directors following the next annual meeting of
stockholders and until his successor shall have been chosen or until his
resignation or removal before the expiration of his term.

Any officer may be removed, with or without cause, by the Board of
Directors or in the manner determined by the Board.

Any vacancy in any office may be filled by the Board of Directors or in
the manner determined by the Board.

4. DUTIES AND AUTHORITY. All officers of the corporation shall have
such authority and perform such duties in the management and operation of the
corporation as shall be prescribed in the resolution designating and choosing
such officers and prescribing their authority and dudes, and shall have such
additional authority and duties as are incident to their office except to the
extent that such resolutions or instruments may be inconsistent therewith.

ARTICLE IV

REGISTERED OFFICE

The location of the initial registered office of the corporation in the
State of Nevada is the address of the initial resident agent of the corporation,
as set forth in the original Articles of Incorporation.

The corporation shall maintain at said registered office a copy,
certified by the Secretary of State of the State of Nevada, of its Articles of
Incorporation, and all amendments thereto, and a copy, certified by the
Secretary of the corporation, of these Bylaws, and all amendments thereto. The
corporation shall also keep at said registered office a stock ledger or a
duplicate stock ledger, revised annually, containing the names, alphabetically
arranged, of all persons who are stockholders of the corporation, showing their
places of residence, if known, and the number of shares held by them
respectively or a statement setting out the name of the custodian of the stock
ledger or duplicate stock ledger, and the present and complete post office
address, including street and number, if any, where such stock ledger or
duplicate stock ledger is kept.

ARTICLE V

CORPORATE SEAL OR STAMP

The corporate seal or stamp shall be in such form as the Board of
Directors may prescribe.

ARTICLE VI

FISCAL YEAR

The fiscal year of the corporation shall be fixed, and shall be subject
to change, by the Board of Directors.

<PAGE>

ARTICLE VII

CONTROL OVER BYLAWS

The power to amend, alter, and repeal these Bylaws and to make new
Bylaws shall be vested in the Board of Directors subject to the Bylaws, if any,
adopted by the stockholders.

I HEREBY CERTIFY that the foregoing is a full, true, and correct
copy of the Bylaws of CYPRESS CAPITAL CORP. a Nevada corporation, as in effect
on the date hereof.

WITNESS my hand and the seal or stamp of the corporation.

DATED: _______________________

-----------------------------------------
Secretary

<ARTICLE> 5

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