<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 23, 1996
-------------
CITYSCAPE FINANCIAL CORP.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
DELAWARE 0-27314 11-2994671
-------- ------- ----------
<S> <C> <C>
State or Other Jurisdiction Commission (IRS Employer
of Incorporation File Number Identification No.)
</TABLE>
<TABLE>
<S> <C>
565 Taxter Road, Elmsford, New York 10523-5200
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) Zip Code
</TABLE>
Registrant's telephone number, including area code: (914) 592-6677
--------------
------------------------------
Former name or former address,
if changed since last report
<PAGE> 2
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits
a-1 Report of Independent Auditors
a-2* Statements of Financial Condition at September 30, 1994
and 1995 and June 30, 1996 (unaudited)
a-3* Statement of Operations for the years ended September
30, 1993, 1994 and 1995 and for the nine months ended
June 30, 1995 (unaudited) and 1996 (unaudited)
a.4* Statements of Stockholders' Equity for the years ended
September 30, 1993, 1994 and 1995 and for the nine
months ended June 30, 1996 (unaudited)
a-5* Statements of Cash Flows for the years ended September
30, 1993, 1994 and 1995 and for the nine months ended
June 30, 1995 (unaudited) and 1996 (unaudited)
a-6* Notes to Financial Statements
b-1* Unaudited Pro Forma Consolidated Statement of Operations
for the year ended December 31, 1995 and the six months
ended June 30, 1996
23.1 Consent of Independent Auditors
* Amends exhibit filed previously in Form 8-K on May 2, 1996
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Current Report on Form 8-K/A to be signed on
its behalf by the undersigned hereunto duly authorized.
CITYSCAPE FINANCIAL CORP.
(Registrant)
By: /s/ Robert Grosser
------------------
Name: Robert Grosser
Title: President
Dated: September 27, 1996
<PAGE> 4
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibits Description Page
- -------- ----------- ----
<S> <C> <C>
a-1 Report of Independent Auditors
a-2* Statements of Financial Condition at September 30, 1994
and 1995 and June 30, 1996 (unaudited)
a-3* Statement of Operations for the years ended September
30, 1993, 1994 and 1995 and for the nine months ended
June 30, 1995 (unaudited) and 1996 (unaudited)
a.4* Statements of Stockholders' Equity for the years ended
September 30, 1993, 1994 and 1995 and for the nine
months ended June 30, 1996 (unaudited)
a-5* Statements of Cash Flows for the years ended September
30, 1993, 1994 and 1995 and for the nine months ended
June 30, 1995 (unaudited) and 1996 (unaudited)
a-6* Notes to Financial Statements
b-1* Unaudited Pro Forma Consolidated Statement of Operations
for the year ended December 31, 1995 and the six months
ended June 30, 1996
23.1 Consent of Independent Auditors
</TABLE>
* Amends exhibit filed previously in Form 8-K on May 2, 1996
<PAGE> 1
EXHIBIT A-1
J & J SECURITIES LIMITED
REPORT OF THE AUDITORS
To the shareholders of J & J Securities Limited:
We have audited the accompanying statements of financial condition of J & J
Securities Limited as of September 30, 1994 and 1995, and the related statements
of operations, stockholders' equity and cash flows for each of the years in the
three year period ended September 30, 1995. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United Kingdom, which do not differ in any material respect
from auditing standards generally accepted in the United States of America.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. 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 audits provide 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 J & J Securities Limited as
of September 30, 1994 and September 30, 1995 and the results of its operations
and its cash flows for each of the three years ended September 30, 1995 in
conformity with generally accepted accounting principles.
BDO STOY HAYWARD
Chartered Accountants
and Registered Auditors
London
November 30, 1995
<PAGE> 1
EXHIBIT A-2
J & J SECURITIES LIMITED
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------- JUNE 30,
NOTE 1994 1995 1996
---- ------------ ----------- -----------
(AUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Cash at bank and in hand......................... $ 3,778,941 $ 1,401,175 $ 174,026
Mortgage loans net of provisions................. 4 48,950,652 46,657,205 --
Receivable from City Mortgage Corporation
Limited........................................ -- -- 16,258,963
Fixed assets net of accumulated depreciation..... 3 177,563 332,414 298,330
Other assets..................................... 72,047 106,870 48,168
------------ ----------- -----------
Total assets........................... $ 52,979,203 $48,497,664 $16,779,487
============ =========== ===========
LIABILITIES
Bank loans and overdrafts........................ $ 12,300,600 $12,345,060 $ --
Other creditors and accrued expenses............. 649,224 781,243 1,406,189
Deferred taxation................................ -- -- 2,796,840
Income taxes..................................... -- -- 579,567
Obligations under hire purchase agreements....... 15,398 100,047 164,703
Bank loan........................................ 7 51,358,135 43,804,708 --
------------ ----------- -----------
Total liabilities...................... 64,323,357 57,031,058 4,947,299
------------ ----------- -----------
Commitments and contingencies....................
STOCKHOLDERS' EQUITY
Common stock: 1,000 shares issued and
outstanding, $1.50 par value per share......... 1,496 1,496 1,496
Retained earnings/(deficit)...................... (12,268,882) (9,404,324) 10,811,247
Cumulative translation adjustment................ 923,232 869,434 1,019,445
------------ ----------- -----------
Total stockholders' equity.................. (11,344,154) (8,533,394) 11,832,188
------------ ----------- -----------
Total liabilities and stockholders'
equity............................... $ 52,979,203 $48,497,664 $16,779,487
============ =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 1
EXHIBIT A-3
J & J SECURITIES LIMITED
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
FOR THE YEAR ENDED SEPTEMBER 30, ENDED JUNE 30,
----------------------------------------- -------------------------
NOTE 1993 1994 1995 1995 1996
---- ------------- ----------- ----------- ----------- -----------
(AUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
INTEREST
Interest income......... $ 13,858,521 $14,627,545 $13,792,453 $10,107,017 $ 7,260,518
Interest expense........ (5,603,931) (4,851,944) (4,641,334) (3,528,549) (1,197,630)
------------ ----------- ----------- ----------- -----------
Net interest income..... 8,254,590 9,775,601 9,151,119 6,578,468 6,062,888
Provision for loan
losses............... 3,140,497 1,766,313 1,046,700 648,893 16,720
------------ ----------- ----------- ----------- -----------
Net interest income
after provision for
loan losses.......... 5,114,093 8,009,288 8,104,419 5,929,575 6,046,168
Other income............ 490,958 235,846 336,597 301,445 255,159
------------ ----------- ----------- ----------- -----------
5,605,051 8,245,134 8,441,016 6,231,020 6,301,327
------------ ----------- ----------- ----------- -----------
OTHER EXPENSES
Salaries and employees
benefits............. 927,531 876,916 941,969 681,016 709,833
Directors' emoluments... 449,649 643,539 759,940 584,988 709,092
Other operating
expenses............. 3,727,630 3,537,539 3,874,549 2,946,648 3,486,078
------------ ----------- ----------- ----------- -----------
Total other expenses.... 5,104,810 5,057,994 5,576,458 4,212,652 4,905,003
------------ ----------- ----------- ----------- -----------
Earnings before income
taxes and
extraordinary item... 500,241 3,187,140 2,864,558 2,018,368 1,396,324
(Provision)/credit for
income taxes......... 5 -- 140,948 -- -- (556,430)
------------ ----------- ----------- ----------- -----------
Earnings before
extraordinary item... 500,241 3,328,088 2,864,558 2,018,368 839,894
Extraordinary gain from
extinguishment of
debt, net of taxes... 6 -- -- -- -- 19,375,677
----------- ----------- ----------- ----------- -----------
NET EARNINGS.............. $ 500,241 $ 3,328,088 $ 2,864,558 $ 2,018,368 $20,215,571
------------ ----------- ----------- ----------- -----------
------------ ----------- ----------- ----------- -----------
Earnings per share
before extraordinary
item................. $ 500.24 $ 3,328.09 $ 2,864.56 $ 2,018.37 $ 839.89
Extraordinary item...... -- -- -- -- 19,375.68
----------- ----------- ----------- ----------- -----------
Earnings per share...... $ 500.24 $ 3,328.09 $ 2,864.56 $ 2,018.37 $ 20,215.57
------------ ----------- ----------- ----------- -----------
------------ ----------- ----------- ----------- -----------
Weighted average number
of shares
outstanding.......... 1,000 1,000 1,000 1,000 1,000
------------ ----------- ----------- ----------- -----------
------------ ----------- ----------- ----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE> 1
EXHIBIT A-4
J & J SECURITIES LIMITED
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
----------------- TRANSLATION RETAINED
SHARES AMOUNT ADJUSTMENT EARNINGS/(DEFICIT) TOTAL
------ ------ ----------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
AUDITED
Balance at October 1, 1992.... 1,000 $1,496 $(1,208,847) $(16,097,211) $(17,304,562)
Translation adjustment...... -- -- 2,749,753 -- 2,749,753
Net earnings................ -- -- -- 500,241 500,241
------ ------ ----------- ------------------ ------------
Balance at September 30,
1993........................ 1,000 1,496 1,540,906 (15,596,970) (14,054,568)
Translation adjustment...... -- -- (617,674) -- (617,674)
Net earnings................ -- -- -- 3,328,088 3,328,088
------ ------ ----------- ------------------ ------------
Balance at September 30,
1994........................ 1,000 1,496 923,232 (12,268,882) (11,344,154)
Translation adjustment...... -- -- (53,798) -- (53,798)
Net earnings................ -- -- -- 2,864,558 2,864,558
------ ------ ----------- ------------------ ------------
Balance at September 30,
1995........................ 1,000 1,496 869,434 (9,404,324) (8,533,394)
UNAUDITED
Translation adjustment...... -- -- 150,011 -- 150,011
Net earnings................ -- -- -- 20,215,571 20,215,571
------ ------ ----------- ------------------ ------------
Balance at June 30, 1996.... 1,000 $1,496 $ 1,019,445 $ 10,811,247 $ 11,832,188
===== ====== ========== ============= ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 1
EXHIBIT A-5
J & J SECURITIES LIMITED
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
FOR THE YEAR ENDED SEPTEMBER 30, ENDED JUNE 30,
------------------------------------------ --------------------------
NOTE 1993 1994 1995 1995 1996
---- ------------ ------------ ------------ ----------- ------------
(AUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net earnings................... $ 500,241 $ 3,328,088 $ 2,864,558 $ 2,018,368 $ 20,215,571
ADJUSTMENTS TO RECONCILE NET
EARNINGS TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
Depreciation charges........... 156,106 114,109 172,441 63,262 85,556
Income taxes payable........... 128,728 402,666 -- -- 556,430
Gain on extinguishment of
debt......................... -- -- -- -- (19,375,677)
Loss/(Profit) on sale of
tangible fixed assets........ 21,404 (7,410) (57,228) -- --
Provisions for losses.......... 177,185 (3,213,008) (1,595,065) (1,032,334) (2,935,537)
NET CHANGES IN OPERATING ASSETS
AND LIABILITIES:
Increase in accrued interest
payable...................... 1,339,379 4,848,573 4,626,663 3,528,549 1,038,851
Decrease/(increase) in
receivables.................. (20,034) (35,719) (34,718) 12,753 279,338
Other, net..................... 52,933 61,105 215,227 77,566 698,019
------------ ------------ ------------ ----------- ------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES..................... 2,355,942 5,498,404 6,191,878 4,668,164 562,551
------------ ------------ ------------ ----------- ------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Net mortgage repayment less
advances in year............. (1,113,492) 8,181,101 4,067,551 3,380,888 (934,105)
Net purchase of equipment...... (60,408) (101,608) (269,520) (212,941) (58,164)
------------ ------------ ------------ ----------- ------------
NET CASH PROVIDED BY/(USED IN)
INVESTING ACTIVITIES........... (1,173,900) 8,079,493 3,798,031 3,167,947 (992,269)
------------ ------------ ------------ ----------- ------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Bank loan repayments........... 217,075 (11,792,820) (12,400,440) (9,324,315) (764,202)
------------ ------------ ------------ ----------- ------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES..................... 217,075 (11,792,820) (12,400,440) (9,324,315) (764,202)
------------ ------------ ------------ ----------- ------------
Net (decrease)/increase in cash
and cash equivalents........... 1,399,117 1,785,077 (2,410,531) (1,488,204) (1,193,920)
Cash and cash equivalents at
beginning of period.......... 714,204 1,987,280 3,778,941 3,778,941 1,401,175
Effects of foreign exchange
rate charges................. (126,041) 6,584 32,765 39,088 (33,229)
------------ ------------ ------------ ----------- ------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD...................... $ 1,987,280 $ 3,778,941 $ 1,401,175 $ 2,329,825 $ 174,026
------------ ------------ ------------ ----------- ------------
------------ ------------ ------------ ----------- ------------
SUPPLEMENTED DISCLOSURE OF CASH
FLOW INFORMATION:
Interest paid during the
period....................... -- -- -- -- $ 158,300
------------ ------------ ------------ ----------- ------------
------------ ------------ ------------ ----------- ------------
Income taxes (received)/paid
during the period............ $ (127,500) $ 402,666 -- -- --
------------ ------------ ------------ ----------- ------------
------------ ------------ ------------ ----------- ------------
</TABLE>
<PAGE> 1
EXHIBIT A-6
J & J SECURITIES LIMITED
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1993, 1994 AND 1995
AND JUNE 30, 1995 (UNAUDITED) AND 1996 (UNAUDITED)
1. ORGANIZATION
J & J Securities Limited ("J&J") is a UK based company, registered in
England, providing mortgage loans secured on residential properties. J&J
conducts all its business in the UK and lends on the basis of first and second
mortgages on residential properties.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared under and are in accordance
with generally accepted accounting procedures in the US. The following principal
accounting policies have been applied:
Mortgage loans
Mortgage loans are stated at cost plus accrued interest income less any
provision for permanent diminution in value. Specific provisions for permanent
diminution in value are made by reference to doubtful loans which fail to meet
certain criteria. This includes management's estimate of the value of the
underlying collateral. Recovery of the carrying value of such loans is dependent
to a great extent on economic, operating and other conditions that may be beyond
J&J's control. In addition a general provision is made in respect of losses
which, although not specifically identified, are likely to exist in any
portfolio of loans of this type.
Loans are placed on nonaccrual status on the occurrence of the criteria
referred to above. Loans may be reinstated to accrual status when, in the
opinion of management, the criteria are no longer applicable.
SFAS No. 114 "Accounting by Creditors for Impairment of a Loan" as amended
by SFAS No. 118 "Accounting by Creditors for Impairment of a Loan -- Income
Recognition and Disclosures" is effective for accounting periods beginning after
December 15, 1994. SFAS No. 114 addresses accounting by creditors for impairment
of a loan by specifying how allowances for credit losses for certain loans
should be determined. A loan is impaired when it is probable that the creditor
will be unable to collect all amounts in accordance with the contractual terms
of the loan agreement. As an expedient, impairment is measured based on the fair
value of the loan's collateral.
Revenue recognition
Mortgage loan interest accrues and is credited to the profit and loss
account on a monthly basis. Other interest, chargeable expenses and sundry
income are included on an accrual basis. All income derives from activities
within the United Kingdom.
Loan origination fees and certain direct loan origination costs are
recognized as an adjustment to the profit and loss accounts as incurred.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and money market funds.
Such funds are deemed to be cash equivalents for purposes of the statements of
cash flows.
Equipment and vehicles, net
Equipment and vehicles are stated at original cost less accumulated
depreciation. Depreciation is computed by using the straight-line method based
on the estimated lives of the depreciable assets.
<PAGE> 2
J & J SECURITIES LIMITED
NOTES FORMING PART OF THE FINANCIAL STATEMENTS -- (CONTINUED)
Expenditures for maintenance and repairs are charged directly to the
appropriate operating account at the time the expense is incurred. Expenditures
determined to represent additions are capitalized. Cost of assets sold or
retired and the related amounts of accumulated depreciation are eliminated from
the accounts in the year of sale or retirement. Any resulting profit or loss is
reflected in the statement of earnings.
Income taxes
J&J accounted for income taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes." Under the asset and liability method of SFAS No. 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement and tax
reporting bases of existing assets and liabilities. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply in the year
in which those temporary differences are expected to be recovered or settled.
J&J has potential net operating losses (NOL's) carried forward against
which a valuation reserve has been fully provided at each balance sheet date as
future income tax benefit in respect of these NOL's is only available as a
consequence of future income sufficient to enable the benefit to be realized.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Foreign currency translation
J&J reflects the result of its operations in accordance with SFAS No. 52,
"Foreign Currency Translation." To the extent there are foreign currency
translation gains or losses, such gains or losses are considered unrealized and
are recorded as a separate component of stockholders' equity.
3. FIXED ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------------------------
1993 1994 1995
------------ ------------ -----------
<S> <C> <C> <C>
Cost
Office equipment.......................... $ 251,044 $ 293,404 $ 376,080
Motor vehicles............................ 277,689 342,668 365,522
------------ ----------- -----------
528,733 636,072 741,602
Less:
Accumulated depreciation............... 353,131 458,509 409,188
------------ ----------- -----------
Balance at end of period............... $ 175,602 $ 177,563 $ 332,414
============ =========== ===========
</TABLE>
4. MORTGAGE LOANS
The mortgage loan balance is summaried as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------------------------
1993 1994 1995
------------ ------------ -----------
<S> <C> <C> <C>
Mortgage loans.............................. $ 64,182,346 $ 59,304,209 $55,460,242
Provisions for losses..................... (13,000,982) (10,353,557) (8,803,037)
----------- ----------- ----------
Balance, end of year...................... $ 51,181,364 $ 48,950,652 $46,657,205
=========== =========== ==========
</TABLE>
<PAGE> 3
J & J SECURITIES LIMITED
NOTES FORMING PART OF THE FINANCIAL STATEMENTS -- (CONTINUED)
The activity in the reserve for mortgage loans is summarized as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
-------------------------------------------
1993 1994 1995
------------ ------------ -----------
<S> <C> <C> <C>
Balance, beginning of year.................. $ 12,824,868 $ 13,000,982 $10,353,557
Provision for losses...................... 3,140,497 1,766,313 1,046,700
Charge-offs............................... (2,963,312) (4,979,321) (2,641,765)
Effects of foreign exchange............... (1,071) 565,583 44,545
----------- ----------- ----------
Balance, end of year................... $ 13,000,982 $ 10,353,557 $ 8,803,037
=========== =========== ==========
</TABLE>
5. INCOME TAXES
The net provision for income taxes as presented in the statements of
operations for the years ended September 30, 1994 and 1995 is as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SEPTEMBER 30,
--------------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Current (provision)/credit........................... -- $140,948 --
======== ======== ========
</TABLE>
6. EXTRAORDINARY GAIN
On November 20, 1995, J&J entered into an agreement with its bankers to
extinguish the long-term loan (see Note 7). This resulted in an extraordinary
gain of $19,375,677 net of taxes ($22,165,677 less applicable deferred income
taxes of $2,790,000).
7. LONG-TERM LOAN
J&J has a term loan with a bank secured by its mortgage portfolio. The
interest rate is 21 1/2% above the bank's prime rate. The aggregate amount of
the bank debt maturing at September 30 in each of the next five years and
thereafter is as follows:
<TABLE>
<CAPTION>
YEAR ENDING SEPTEMBER 30, AMOUNT
---------------------------------------------------------------- -----------
<S> <C>
1996............................................................ $12,345,060
1997............................................................ 12,345,060
1998............................................................ 12,345,060
1999............................................................ 6,769,528
2000............................................................ --
-----------
$43,804,708
===========
</TABLE>
Subsequent to the year end, on November 20, 1995 (see note 10), J&J entered
into an agreement with its bankers to discharge the liability at that time which
resulted in an extraordinary gain arising from the extinguishment of part of
this debt (see note 6). The new loan facilities included a three year term loan
of $28.5 million and a $7.9 million demand note. Interest on each of the new
facilities bears interest at a variable rate of 2.5% over the lender's prime
rate.
8. DIRECTORS' INTEREST IN TRANSACTIONS
A J&J director is a partner in a legal practice which provided legal and
management services to J&J for fees of $604,392, $386,296 and $516,825 for the
years ended September 30, 1993, 1994 and 1995, respectively.
<PAGE> 4
J & J SECURITIES LIMITED
NOTES FORMING PART OF THE FINANCIAL STATEMENTS -- (CONTINUED)
A J&J director is a beneficial shareholder in Latchglen Limited trading as
London Trust Securities which received introductory commissions of $136,209,
$138,922 and $47,698 for the years ended September 30, 1995, 1994 and 1993,
respectively.
9. COMMITMENTS UNDER OPERATING LEASES
J&J leases premises under operating leases with various expiration dates.
Minimum annual rental payments at September 30, 1995 are as follows:
<TABLE>
<S> <C>
1996.............................................................. $105,860
1997.............................................................. 105,860
1998.............................................................. 105,860
1999.............................................................. 31,600
2000.............................................................. 31,600
Thereafter........................................................ 31,600
--------
$412,380
========
</TABLE>
Rent expenses for office space amounted to $54,525, $47,519 and $72,456 for
the years ended September 30, 1993, 1994 and 1995, respectively.
10. POST BALANCE SHEET EVENTS
On November 20, 1995, J&J's indebtedness to its previous principal bankers,
The National Mortgage Bank Plc, was repaid in full after agreement for the
forgiveness of a certain amount of the debt outstanding.
On April 23, 1996 J&J was acquired by City Mortgage Corporation Limited.
From that date J&J ceased its lending operations while continuing to incur
certain incidental expenditures. It is anticipated that as of September 30,
1996, J&J will be wholly-dormant.
<PAGE> 1
Exhibit b-1
J & J SECURITIES LIMITED
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following tables set forth unaudited pro forma consolidated financial
data for the Registrant (the "Company") for the year ended December 31, 1995
illustrating the estimated effects of (i) the Company's purchase on September
30, 1995 of the 50% of the capital stock of City Mortgage Corporation Limited
("CSC-UK") which was not previously owned by the Company (the "UK Acquisition")
as if it had occurred as of May 2, 1995, the date CSC-UK commenced operations
and (ii) CSC-UK's acquisition of all of the outstanding stock of J&J Securities
Limited ("J&J") for pound sterling 15.0 million ($22.7 million) and 548,000
shares of the Company's Common Stock valued at $9.8 million (the "J&J
Acquisition") as if it had occurred as of January 1, 1995. The unaudited pro
forma consolidated financial data have been prepared using the purchase method
of accounting, whereby the total costs of the UK Acquisition and the J&J
Acquisition will be allocated to the tangible and intangible assets acquired
and liabilities assumed based upon their respective fair values at the
effective date of the UK Acquisition and the J&J Acquisition, respectively. The
unaudited pro forma consolidated financial data do not purport to represent
what the results of operations or financial position of the Company would have
actually been if the UK Acquisition and the J&J Acquisition had in fact
occurred on such dates or to project the results of operations or financial
position of the Company for any future date or period.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1995
--------------------------------------------------
PRO FORMA
ADJUSTMENTS
--------------------
HISTORICAL CSC-UK J&J PRO FORMA
---------- ------- ------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
REVENUES
Gain on sale of loans....................... $ 38,198 $ -- $ -- $38,198
Mortgage origination income................. 2,963 -- -- 2,963
Interest income............................. 6,706 -- 1,435(1) 8,141
Servicing income............................ 777 -- -- 777
Earnings from partnership interest.......... 482 -- -- 482
Other....................................... 385 -- 279(2) 664
------- ------- ------- -------
Total revenues...................... 49,511 -- 1,714 51,225
------- ------- ------- -------
EXPENSES
Salaries and employee benefits.............. 12,165 39(3) 1,801(2) 14,005
Interest expense............................ 4,610 -- 1,182(4) 5,792
Selling expenses............................ 2,895 -- 1,491(2) 4,386
Other operating expenses.................... 6,582 -- 4,810(5) 11,392
Amortization of goodwill.................... 494 819(6) -- 1,313
------- ------- ------- -------
Total expenses...................... 26,746 858 9,284 36,888
------- ------- ------- -------
Earnings before minority interest, income
taxes and extraordinary item............. 22,765 (858) (7,570) 14,337
Minority interest........................... 2,379 (2,379)(7) -- --
------- ------- ------- -------
Earnings before income taxes and
extraordinary item....................... 20,386 1,521 (7,570) 14,337
Provision for income taxes.................. 8,515 631(8) (3,142)(8) 6,004
------- ------- ------- -------
Earnings before extraordinary item.......... 11,871 890 (4,428) 8,333
Extraordinary item.......................... (296) -- -- (296)
------- ------- ------- -------
Net earnings.................................. $ 11,575 $ 890 $(4,428) $ 8,037
======= ======= ======= =======
Earnings per share before extraordinary
item........................................ $ 0.50 N/A N/A $ 0.32
Extraordinary item (per share)................ (0.01) N/A N/A (0.01)
------- ------- ------- -------
Primary earnings per share.................... $ 0.49 N/A N/A $ 0.31
======= ======= ======= =======
Weighted average shares outstanding........... 23,838 1,500(9) 548(10) 25,886
======= ======= ======= =======
Supplemental earnings per share(11)........... $ 0.31
Supplemental weighted average shares
outstanding(12)............................. 27,297
=======
</TABLE>
<PAGE> 2
J & J SECURITIES LIMITED
Notes to Unaudited Pro Forma Financial Statements for the year ended December
31, 1995
(1) Reflects the accretion of interest related to the mortgage servicing
receivables associated with the sale of loans acquired as a result of the
J&J Acquisition.
(2) Reflects the 1995 historical operating results for J&J.
(3) Reflects additional bonus expense resulting from the increased pre-tax
profits related to the pro forma effect of the UK Acquisition on May 2,
1995.
(4) Reflects interest expense on the remaining average debt balance after the
application of the proceeds of the assumed sale of loans on January 1, 1995
to pay down warehouse debt.
(5) Reflects historical J&J expense and $2.5 million of restructuring charges
recorded in connection with the J&J Acquisition, offset by $222,000 of
amortization of negative goodwill recorded in connection with the J&J
Acquisition. Pursuant to the J&J Acquisition, the Company is amortizing
$2.2 million of negative goodwill using the straight-line method over a
10-year period. CSC-UK acquired all the outstanding shares of J&J for
pound sterling 15.0 million ($22.7 million based on the Noon Buying Rate
on the date of such acquisition) and 548,000 shares of the Company's
Common Stock valued at $9.8 million. The Company acquired assets of $53.8
million, consisting primarily of mortgage loans held for sale of $52.0
million, and assumed liabilities of $38.8 million. Additional fair
market value of $21.8 million, representing the value of the mortgage
servicing receivables, was assigned to the net assets acquired in the
J&J Acquisition.
(6) Reflects the amortization of the $19.7 million of goodwill for the period
May 2, 1995 through September 30, 1995 recognized as a result of the UK
Acquisition using the straight-line method over a 10-year period. The
Company acquired the 50% interest in CSC-UK not then owned by the Company
through the issuance to the three other shareholders of an aggregate of 3.6
million shares of the Company's Common Stock valued at $21.6 million. In
addition to the goodwill, the Company acquired assets of $9.0 million,
consisting primarily of mortgage servicing receivables, and assumed
liabilities of $4.1 million.
(7) Reflects adjustment related to elimination of the 50% equity earnings for
the period prior to the UK Acquisition.
(8) Reflects tax impact of the pro forma adjustments recorded at a 41.5%
effective rate.
(9) Reflects the adjustment (for the partial year from May 2, 1995 through
September 30, 1995) of the 3.6 million shares of Common Stock issued in the
UK Acquisition as if those shares were issued and outstanding for the
entire period from May 2, 1995 through December 31, 1995.
(10) Reflects the impact of the 548,000 shares of Common Stock issued in the J&J
Acquisition remaining outstanding for the entire year ended December 31,
1995.
<PAGE> 3
J & J SECURITIES LIMITED
(11) Gives effect to the application of a portion of the net proceeds of the
December 1995 public offering to repay outstanding debt at the time of such
offering as if such application occurred on January 1, 1995, resulting in a
net increase of $464,000 in net earnings due to a reduction in interest
expense.
(12) Gives effect to the inclusion of 1,411,200 shares of Common Stock at $8.37
per share net to the Company to repay the outstanding debt as discussed in
Note 11 above.
<PAGE> 4
J & J SECURITIES LIMITED
The following tables set forth unaudited pro forma consolidated financial
data for the Company for the six months ended June 30, 1996 illustrating the
estimated effects of the J&J Acquisition as if it had occurred as of January 1,
1995. The results of operations of J&J are included in the Company's historical
results from April 23, 1996, the date of acquisition. The unaudited pro forma
consolidated financial data have been prepared using the purchase method of
accounting, whereby the total costs of the J&J Acquisition will be allocated to
the tangible and intangible assets acquired and liabilities assumed based upon
their respective fair values at the effective date of the J&J Acquisition. The
unaudited pro forma consolidated financial data do not purport to represent what
the results of operations or financial position of the Company would have
actually been if the J&J Acquisition had in fact occurred on such date or to
project the results of operations or financial position of the Company for any
future date or period.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1996
----------------------------------------
HISTORICAL J&J PRO FORMA
---------- ------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
REVENUES
Gain on sale of loans..................... $ 53,310 $ -- $ 53,310
Mortgage origination income............... 2,192 -- 2,192
Interest income........................... 9,478 (376)(1) 9,102
Servicing income.......................... 1,356 -- 1,356
Earnings from partnership interest........ 260 -- 260
Other..................................... 636 134(2) 770
-------- -------- --------
Total revenues.................... 67,232 (242) 66,990
EXPENSES -------- -------- --------
Salaries and employee benefits............ 14,552 726(2) 15,278
Interest expense.......................... 6,382 400(3) 6,782
Selling expenses.......................... 4,375 753(2) 5,128
Other operating expenses.................. 10,972 965(4) 11,937
Amortization of goodwill.................. 1,032 -- 1,032
-------- -------- --------
Total expenses.................... 37,313 2,844 40,157
-------- -------- --------
Earnings before income taxes.............. 29,919 (3,086) 26,833
Provision for income taxes................ 12,314 (1,281)(5) 11,033
-------- -------- --------
Net earnings................................ $ 17,605 $(1,805) $ 15,800
======== ======== ========
Earnings per share:
Primary................................... $ 0.58 N/A $ 0.51
======== ======== ========
Fully diluted............................. $ 0.58 N/A $ 0.51
======== ======== ========
Weighted average shares outstanding:
Primary................................... 30,152 548(6) 30,700
======== ======== ========
Fully diluted............................. 31,941 548(6) 32,489
======== ======== ========
</TABLE>
<PAGE> 5
J & J SECURITIES LIMITED
Notes to Unaudited Pro Forma Financial Statements for the six months ended June
30, 1996
(1) Reflects reduced interest accreted as a result of lower mortgage servicing
receivables recorded under a previous credit facility with Greenwich
International, Ltd. (the "Old Greenwich Facility") for J&J loans that, for
pro forma purposes, are shown as sold in fiscal 1995.
(2) Reflects historical results for the period January 1, 1996 to April 23,
1996 for J&J.
(3) Reflects interest expense on the average debt balance on warehouse debt
plus advances under the Old Greenwich Facility related to the J&J loans.
(4) Reflects historical J&J expenses, offset by $111,000 of amortization of the
negative goodwill recorded in connection with the J&J Acquisition. Pursuant
to the J&J Acquisition, the Company is amortizing $2.2 million of negative
goodwill using the straight-line method over a 10-year period. CSC-UK
acquired all the outstanding shares of J&J for pound sterling 15.0 million
($22.7 million based on the Noon Buying Rate on the date of such
acquisition) and 548,000 shares of the Company's Common Stock valued at
$9.8 million. The Company acquired assets of $53.8 million, consisting
primarily of mortgage loans held for sale of $52.0 million, and assumed
liabilities of $38.8 million. Additional fair market value of $21.8
million, representing the value of the mortgage servicing receivables,
was assigned to the net assets acquired in the J&J Acquisition.
(5) Reflects tax impact of the pro forma adjustments recorded at a 41.5%
effective rate.
(6) Reflects the impact of the 548,000 shares of Common Stock issued in the J&J
Acquisition remaining outstanding for the six month period ended June 30,
1996.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the inclusion in the Current Report on Form 8-K/A of our report,
dated November 30, 1995 for the three years ended September 30, 1995 relating to
J & J Securities Limited.
/s/ BDO STOY HAYWARD
BDO STOY HAYWARD
London, England
September 26, 1996
