<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM 8-K/A
Amendment No. 2
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 March 31, 1996 (unaudited)
a-3 Statement of Operations for the years ended September
30, 1993, 1994 and 1995 and for the six months ended
March 31, 1995 (unaudited) and 1996 (unaudited)
a-4 Statements of Stockholders' Equity for the years ended
September 30, 1993, 1994 and 1995 and for the six
months ended March 31, 1996 (unaudited)
a-5 Statements of Cash Flows for the years ended September
30, 1993, 1994 and 1995 and for the six months ended
March 31, 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 three
months ended March 31, 1996
23.1 Consent of Independent Auditors
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment No. 2 to 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/ Tim S. Ledwick
------------------------------
Name: Tim S. Ledwick
Title: Chief Financial Officer
(as chief accounting officer
and on behalf of the registrant)
Dated: January 30, 1997
<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 March 31, 1996 (unaudited)
a-3 Statement of Operations for the years ended September
30, 1993, 1994 and 1995 and for the six months ended
March 31, 1995 (unaudited) and 1996 (unaudited)
a-4 Statements of Stockholders' Equity for the years ended
September 30, 1993, 1994 and 1995 and for the six
months ended March 31, 1996 (unaudited)
a-5 Statements of Cash Flows for the years ended September
30, 1993, 1994 and 1995 and for the six months ended
March 31, 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 three months
ended March 31, 1996
23.1 Consent of Independent Auditors
</TABLE>
<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 United States 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,
-------------------------- MARCH 31,
NOTE 1994 1995 1996
---- ------------ ----------- -----------
(AUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Cash at bank and in hand......................... $ 3,778,941 $ 1,401,175 $ 7,343
Mortgage loans held for investment, net.......... 5 48,950,652 46,657,205 48,839,093
Fixed assets net of accumulated depreciation..... 4 177,563 332,414 318,613
Other assets..................................... 72,047 106,870 108,421
------------ ----------- -----------
Total assets........................... $ 52,979,203 $48,497,664 $49,273,470
============ =========== ===========
LIABILITIES
Bank loans and overdrafts........................ $ 12,300,600 $12,345,060 $ 5,461,951
Other creditors and accrued expenses............. 649,224 781,243 809,547
Deferred taxation................................ -- -- 2,808,873
Income taxes..................................... -- -- 619,915
Obligations under hire purchase agreements....... 15,398 100,047 167,761
Bank loan........................................ 8 51,358,135 43,804,708 27,477,000
------------ ----------- -----------
Total liabilities...................... 64,323,357 57,031,058 $37,345,047
------------ ----------- -----------
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) 11,118,060
Cumulative translation adjustment................ 923,232 869,434 808,867
------------ ----------- -----------
Total stockholders' equity.................. (11,344,154) (8,533,394) 11,928,423
------------ ----------- -----------
Total liabilities and stockholders'
equity............................... $ 52,979,203 $48,497,664 $49,273,470
============ =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 1
Exhibit A-3
J & J SECURITIES LIMITED
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
FOR THE YEAR ENDED SEPTEMBER 30, -------------------------
--------------------------------------- MARCH 31, MARCH 31,
NOTE 1993 1994 1995 1995 1996
---- ----------- ----------- ----------- ----------- -----------
(AUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
INTEREST
Interest income.................... $12,505,268 $13,695,765 $13,022,053 $ 6,395,581 $ 5,568,832
Interest expense................... (5,603,931) (4,851,944) (4,641,334) (2,383,791) (1,029,034)
----------- ----------- ----------- ----------- -----------
Net interest income................ 6,901,337 8,843,821 8,380,719 4,011,790 4,539,798
Provision for loan losses.......... 3,140,497 1,766,313 1,046,700 624,468 27,226
----------- ----------- ----------- ----------- -----------
Net interest income after provision
for loan losses.................. 3,760,840 7,077,508 7,334,019 3,387,322 4,512,572
Other income....................... 490,958 235,846 336,597 318,030 215,586
----------- ----------- ----------- ----------- -----------
4,251,798 7,313,354 7,670,616 3,705,352 4,728,158
----------- ----------- ----------- ----------- -----------
OTHER EXPENSES
Salaries and employees benefits.... 927,531 876,916 941,969 462,183 493,835
Directors' emoluments.............. 449,649 643,539 759,940 383,318 565,546
Other operating expenses........... 2,374,377 2,605,759 3,104,149 1,496,893 1,897,445
----------- ----------- ----------- ----------- -----------
Total other expenses............... 3,751,557 4,126,214 4,806,058 2,342,394 2,956,826
----------- ----------- ----------- ----------- -----------
Earnings before income taxes and
extraordinary item............... 500,241 3,187,140 2,864,558 1,362,958 1,771,332
(Provision)/credit for income
taxes............................ 6 -- 140,948 -- -- (624,625)
----------- ----------- ----------- ----------- -----------
Earnings before extraordinary
item............................. 500,241 3,328,088 2,864,558 1,362,958 1,146,707
Extraordinary gain from
extinguishment of debt, net of
taxes............................ 7 -- -- -- -- 19,375,677
----------- ----------- ----------- ----------- -----------
NET EARNINGS......................... $ 500,241 $ 3,328,088 $ 2,864,558 $ 1,362,958 $20,522,384
=========== =========== =========== =========== ===========
Earnings per share before
extraordinary item............... $ 500.24 $ 3,328.09 $ 2,864.56 $ 1,362.96 $ 1,146.70
Extraordinary item................. -- -- -- -- 19,375.68
----------- ----------- ----------- ----------- -----------
Earnings per share................. $ 500.24 $ 3,328.09 $ 2,864.56 $ 1,362.96 $ 20,522.38
=========== =========== =========== =========== ===========
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........ -- -- (60,567) -- (60,567)
Net earnings.................. -- -- -- 20,522,384 20,522,384
----- ------ ----------- ------------ ------------
Balance at March 31, 1996..... 1,000 $1,496 $ 808,867 $ 11,118,060 $ 11,928,423
===== ====== =========== ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 1
Exhibit A-5
J & J SECURITIES LIMITED
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
FOR THE YEAR ENDED SEPTEMBER 30, ENDED MARCH 31,
----------------------------------------- ---------------------------
NOTE 1993 1994 1995 1995 1996
---- ----------- ------------ ------------ ------------ ------------
(AUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net earnings................... $ 500,241 $ 3,328,088 $ 2,864,558 $ 1,362,958 $ 20,522,384
ADJUSTMENTS TO RECONCILE NET
EARNINGS TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
Depreciation charges........... 156,106 114,109 172,441 76,060 70,130
Income taxes payable........... 128,728 402,666 -- -- 624,625
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) (763,966) (2,937,829)
NET CHANGES IN OPERATING ASSETS
AND LIABILITIES:
Increase in accrued interest
payable...................... 1,339,379 4,848,573 4,626,663 2,383,791 1,003,278
Decrease/(increase) in
receivables.................. (20,034) (35,719) (34,718) (43,697) (5,386)
Other, net..................... 52,933 61,105 215,227 (78,108) 128,279
----------- ------------ ------------ ------------ ------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES..................... 2,355,942 5,498,404 6,191,878 2,937,038 29,804
----------- ------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Mortgage originations.......... (13,732,146) (9,358,388) (11,900,423) (5,294,700) (9,167,751)
Mortgage repayments............ 12,618,654 17,539,489 15,967,974 8,166,294 8,241,281
Net purchase of equipment...... (60,408) (101,608) (269,520) (172,942) (67,859)
----------- ------------ ------------ ------------ ------------
NET CASH PROVIDED BY/(USED IN)
INVESTING ACTIVITIES........... (1,173,900) 8,079,493 3,798,031 2,698,652 (994,329)
----------- ------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Bank loan repayments........... 217,075 (11,792,820) (12,400,440) (6,211,920) (386,003)
----------- ------------ ------------ ------------ ------------
NET CASH PROVIDED BY/(USED IN)
FINANCING ACTIVITIES........... 217,075 (11,792,820) (12,400,440) (6,211,920) (386,003)
----------- ------------ ------------ ------------ ------------
Net (decrease)/increase in cash
and cash equivalents........... 1,399,117 1,785,077 (2,410,531) (576,230) (1,350,528)
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 80,267 (43,304)
----------- ------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD...................... $ 1,987,280 $ 3,778,941 $ 1,401,175 $ 3,282,978 $ 7,343
=========== ============ ============ ============ ============
SUPPLEMENTED DISCLOSURE OF CASH
FLOW INFORMATION:
Interest paid during the
period....................... -- -- -- -- 158,900
=========== ============ ============ ============ ============
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 MARCH 31, 1995 (UNAUDITED) AND 1996 (UNAUDITED)
1. ORGANIZATION
J & J Securities Limited ("J&J") is a UK based company, incorporated in
England in 1977, that originates and services mortgage loans for investment
purposes secured by 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. UNAUDITED INFORMATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and do not include all
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments consisting of normal recurring accruals, considered necessary for a
fair presentation of the results for the interim period have been included.
Operating results for the six months ended March 31, 1996 are not necessarily
indicative of the results that may be expected for the fiscal year ended
September 30, 1996.
3. 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 held for investment, net
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. The adoption of these standards had no material
impact on the financial statements.
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.
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.
<PAGE> 2
J & J SECURITIES LIMITED
NOTES FORMING PART OF THE FINANCIAL STATEMENTS -- (CONTINUED)
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.
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 laws. Deferred tax liabilities and
assets are adjusted for the effect of a change in tax laws or rates.
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.
4. FIXED ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------------
1994 1995
------------ -----------
<S> <C> <C>
Cost
Office equipment.......................... $ 293,404 $ 376,080
Motor vehicles............................ 342,668 365,522
----------- -----------
636,072 741,602
Less:
Accumulated depreciation............... 458,509 409,188
----------- -----------
Balance at end of period............... $ 177,563 $ 332,414
=========== ===========
</TABLE>
5. MORTGAGE LOANS HELD FOR INVESTMENT, NET
The mortgage loan balance is summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------------
1994 1995
------------ -----------
<S> <C> <C>
Mortgage loans held for investment, net..... $ 59,304,209 $55,460,242
Provisions for losses..................... (10,353,557) (8,803,037)
------------ -----------
Balance, end of year...................... $ 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>
6. 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>
7. EXTRAORDINARY GAIN
On November 20, 1995, J&J entered into an agreement with its bankers to
extinguish the long-term loan (see Note 8). 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).
8. 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 11), 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 7). 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.
9. 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 $47,698,
$138,922 and $136,209 for the years ended September 30, 1993, 1994 and 1995,
respectively.
10. 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.
11. 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
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma consolidated financial data set forth below for the
Registrant (the "Company") for the year ended December 31, 1995 illustrate 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 such
acquisition had occurred on 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 L15.3 million ($23.3 million) and 548,000 shares of the
Company's Common Stock valued at $9.8 million (the "J&J Acquisition") (including
the sale of $47.5 million of loans acquired as a result of such acquisition and
the corresponding reduction of debt of $32.4 million from the proceeds of such
sale) as if such acquisition 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 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. The historical financial data set forth below for the
Company for the year ended December 31, 1995 have been derived from the audited
consolidated financial statements of the Company. The historical financial data
set forth below for J&J for the 12 months ended December 31, 1995 have been
derived from the unaudited financial statements of J&J and have been prepared on
the same basis as J&J's audited financial statements and include all
adjustments, consisting of normal recurring accruals, that the Company considers
necessary for a fair presentation of the results of operations for such period.
<TABLE>
<CAPTION>
HISTORICAL
--------------------------
ACQUISITION
COMPANY ----------- PRO FORMA
AS REPORTED J&J(1) ADJUSTMENTS 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 13,344 (11,155)(2) 8,895
Servicing income....................... 777 -- -- 777
Earnings from partnership.............. 482 -- -- 482
Other.................................. 385 279 -- 664
------- ------- -------- -------
Total revenues.................. 49,511 13,623 (11,155) 51,979
------- ------- -------- -------
EXPENSES
Salaries and employee benefits......... 12,165 1,801 -- 13,966
Interest expense....................... 4,610 3,790 (2,754)(3) 5,646
Selling expenses....................... 2,895 -- -- 2,895
Other operating expenses............... 6,581 4,678 -- 11,259
Amortization of goodwill............... 494 -- 1,340(4) 1,834
------- ------- -------- -------
Total expenses.................. 26,745 10,269 (1,414) 35,600
------- ------- -------- -------
Earnings before minority interest,
income taxes and extraordinary
item................................. 22,766 3,354 (9,741) 16,379
Minority interest...................... 2,379 -- (2,379)(5) --
------- ------- -------- -------
Earnings before income taxes and
extraordinary item................... 20,387 3,354 (7,362) 16,379
Provision for income taxes............. 8,515 454 (3,055)(6) 5,914
------- ------- -------- -------
Earnings before extraordinary item..... 11,872 2,900 (4,307) 10,465
Extraordinary item..................... (296) -- -- (296)
------- ------- -------- -------
NET EARNINGS............................. $11,576 $ 2,900 $ (4,307) $10,169
======= ======= ======== =======
Earnings per share before extraordinary
item................................. $ 0.50 N/A N/A $ 0.40
Extraordinary item..................... (0.01) N/A N/A (0.01)
------- ------- -------- -------
Primary earnings per share............... $ 0.49 N/A N/A $ 0.39
======= ======= ======== =======
Weighted average shares outstanding...... 23,838 N/A 2,048(7) 25,886
======= ======= ======== =======
Supplemental earnings per share(8)....... $ 0.39
=======
Supplemental weighted average shares
outstanding(9)......................... 27,297
=======
</TABLE>
<PAGE> 2
Notes to Unaudited Pro Forma Financial Statements for the year ended December
31, 1995
(1) Reflects J&J historical operating results for the 12 months ended December
31, 1995 excluding a $19.4 million extraordinary gain related to the early
extinguishment of debt in November 1995. In April 1996, the Company
acquired all of the outstanding stock of J&J in exchange for L15.3 million
($23.3 million based on the Noon Buying Rate on the date of such
acquisition) in cash and 548,000 shares of the Company's Common Stock
valued at $9.8 million based on the closing price of the Common Stock on
the date of such acquisition less a discount for restriction on the resale
of such stock. The J&J Acquisition was accounted for as a purchase
transaction. The Company acquired assets with a fair value of $52.6 million
consisting primarily of mortgage loans held for sale of $51.9 million and
assumed liabilities with a fair value of $46.5 million. Additional fair
market value of $21.8 million, representing the value of the mortgage
servicing receivables, was assigned to the net assets acquired. The J&J
Acquisition resulted in the recognition of $5.2 million of goodwill which
is being amortized using the straight-line method over a life of ten years.
(2) Represents the reduction of interest income resulting from the sale of
mortgage loans held for sale of $47.5 million for J&J on January 1, 1995
as follows:
<TABLE>
<CAPTION>
HISTORICAL ACCRETED
INTEREST DISCOUNT ADJUSTMENT
---------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
J&J.......................................... $ 13,344 $2,189 $(11,155)
</TABLE>
"Accreted Discount" represents the increase in value for the period of the
mortgage servicing receivables which were recorded as a result of such
acquisitions at a discounted present value.
(3) Represents the reduction of interest expense resulting from the application
of the cash proceeds from the sale of mortgage loans held for sale of $47.5
million for J&J to pay down existing debt on January 1, 1995 as follows:
<TABLE>
<CAPTION>
J&J
-------
(IN THOUSANDS)
<S> <C>
Debt paid down........................................ $32,400
Weighted average interest rate........................ 8.5%
-------
Interest reduction.................................... $ 2,754
=======
</TABLE>
<PAGE> 3
(4) Reflects increased goodwill amortization related to the J&J Acquisition as
if such acquisition had occurred on January 1, 1995 and the UK Acquisition
as if such acquisition had occurred on May 2, 1995. The increased goodwill
amortization for each acquisition is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
CSC-UK......................................... $ 820
J&J............................................ 520
------
Total................................ $1,340
======
</TABLE>
(5) Reflects the elimination of the 50% equity earnings from CSC-UK for the
period prior to the UK Acquisition (May 2, 1995 to September 29, 1995).
(6) Reflects the tax impact recorded at a 41.5% effective tax rate.
(7) Reflects the 3.6 million shares of Common Stock issued in the UK
Acquisition as if such shares were issued and outstanding for the entire
period from May 2, 1995 through December 31, 1995, and the 548,000 shares
of Common Stock issued in connection with the J&J Acquisition as if such
shares were issued and outstanding for the entire year ended December 31,
1995.
(8) 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.
(9) 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 8 above.
<PAGE> 4
The unaudited pro forma consolidated financial data set forth below for the
three months ended March 31, 1996 illustrate the estimated effects of the J&J
Acquisition (including the sale of $47.5 million of loans acquired as a result
of such acquisition and the corresponding reduction of debt of $32.4 million
from the proceeds of such sale) as if such acquisition 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 the 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. The historical financial data set forth
below for the Company for the three months ended March 31, 1996 and for J&J for
the period beginning January 1, 1996 through the date of the acquisition by the
Company have been derived from the unaudited consolidated financial statements
of the Company and J&J and have been prepared on the same basis as the audited
consolidated financial statements and include all adjustments, consisting of
normal recurring accruals, that the Company considers necessary for a fair
presentation of the results of operations for such period.
<TABLE>
<CAPTION>
HISTORICAL
----------------------
COMPANY ACQUISITION
AS ----------- PRO FORMA
REPORTED J&J(1) ADJUSTMENTS PRO FORMA
---------- -------- ----------- ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
REVENUES
Gain on sale of loans........... $ 24,093 $ -- $ -- $ 24,093
Mortgage origination income..... 836 -- -- 836
Interest ....................... 3,017 2,556 (2,016) (2) 3,557
Servicing income................ 561 -- -- 561
Earnings from partnership....... 150 -- -- 150
Other........................... 122 108 -- 230
-------- -------- -------- --------
Total revenues.......... 28,779 2,664 (2,016) 29,427
-------- -------- -------- --------
EXPENSES
Salaries and employee
benefits..................... 5,382 516 -- 5,898
Interest expense................ 1,698 698 (679) (3) 1,717
Selling expenses................ 1,363 -- -- 1,363
Other operating expenses........ 4,044 759 -- 4,803
Amortization of goodwill........ 494 -- 128 (4) 622
-------- -------- -------- --------
Total expenses.......... 12,981 1,973 (551) 14,403
-------- -------- -------- --------
Earnings before income taxes.... 15,798 691 (1,465) 15,024
Provision for income taxes...... 6,524 171 (608) (5) 6,087
-------- -------- -------- --------
NET EARNINGS...................... $ 9,274 $ 520 $ (857) $ 8,937
======== ======== ======== ========
PRIMARY EARNINGS PER SHARE........ $ 0.31 N/A N/A $ 0.29
======== ======== ======== ========
WEIGHTED AVERAGE SHARES
OUTSTANDING .................... 29,806 N/A 548 (6) 30,354
======== ======== ======== ========
</TABLE>
<PAGE> 5
Notes to Unaudited Pro Forma Financial Statements for the three months ended
March 31, 1996
(1) Reflects J&J historical operating results for the period ended April 23,
1996. In April 1996, the Company acquired all of the outstanding stock of
J&J in exchange for L15.3 million ($23.3 million based on the Noon Buying
Rate on the date of such acquisition) in cash and 548,000 shares of the
Company's Common Stock valued at $9.8 million based on the closing price of
the Common Stock on the date of such acquisition less a discount for
restrictions on the resale of such stock. The J&J Acquisition was accounted
for as a purchase transaction. The Company acquired assets with a fair value
of $52.6 million, consisting primarily of mortgage loans held for sale of
$51.9 million, and assumed liabilities with a fair value of $46.5 million.
Additional fair market value of $21.8 million, representing the value of the
mortgage servicing receivables, was assigned to the net assets acquired. The
J&J Acquisition resulted in the recognition of $5.2 million of goodwill
which is being amortized using the straight-line method over a life of ten
years.
(2) Represents the reduction of interest income resulting from the sale of
mortgage loans held for sale of $47.5 million for J&J on January 1, 1995
as follows:
<TABLE>
<CAPTION>
HISTORICAL ACCRETED
INTEREST DISCOUNT ADJUSTMENTS
---------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
J&J................................ $ 2,556 $ 540 $ (2,016)
</TABLE>
"Accreted Discount" represents the increase in value for the period of the
mortgage servicing receivables which were recorded as a result of such
acquisitions at a discounted present value.
(3) Represents the reduction of interest expense resulting from the application
of the cash proceeds from the sale of mortgage loans held for sale of $47.5
million for J&J to pay down existing debt on January 1, 1995 as follows:
<TABLE>
<CAPTION>
J&J
-------
(IN THOUSANDS)
<S> <C>
Debt paid down.............................................. $32,400
Weighted average interest................................... 8.5%
Number of days.............................................. 90
-------
Interest reduction.......................................... $ 679
=======
</TABLE>
(4) Reflects increased goodwill amortization related to the J&J Acquisition as
if such acquisition had occurred on January 1, 1995 as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
J&J............................................ $ 128
</TABLE>
(5) Reflects the tax impact of the pro forma adjustments recorded at a 41.5%
effective tax rate.
(6) Reflects the pro forma impact of the 548,000 shares of Common Stock issued
in connection with the J&J Acquisition as if such shares were issued and
outstanding for the entire period ended March 31, 1996.
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statement on
Form S-8 and in the Registration Statement on Form S-3 each relating to
Cityscape Financial Corp. and its subsidiaries (the "Company") of our report,
dated November 30, 1995, which report appears in the Current Report on Form
8-K/A relating to the Company.
BDO STOY HAYWARD
London, England
January 29, 1997
