<PAGE>
EXHIBIT 2
Unaudited balance sheet of AMRES as of March 31, 2000 and the statements of
operations, stockholder's equity and cash flows for the nine months ended March
31, 2000 and 1999
<PAGE>
AMERICAN RESIDENTIAL FUNDING, INC.
BALANCE SHEET
AS OF MARCH 31, 2000
(UNAUDITED)
ASSETS
Current assets:
Cash $ 50,374
Receivables 191,281
Marketable securities 600,000
Other current assets 59,349
Notes receivable from related party 54,000
-------------
Total current assets 955,004
Property and equipment, net 105,385
Other assets 40,117
-------------
$ 1,100,506
=============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 65,224
Accrued liabilities 134,346
Notes payable 374,956
-------------
Total liabilities 574,526
Shareholders' deficit:
Preferred stock 600,000
Common stock 105,000
Accumulated deficit (179,020)
-------------
Total shareholders' deficit 525,980
-------------
$ 1,100,506
=============
See accompanying notes to financial statements
<PAGE>
AMERICAN RESIDENTIAL FUNDING, INC.
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
2000 1999
------------- -------------
Revenues $ 4,045,935 $ 2,349,920
Cost of revenues 2,945,611 1,508,685
------------- -------------
Gross profit 1,100,324 841,235
General and administrative expenses 1,272,613 818,614
------------- -------------
(Income) loss before income taxes (172,289) 22,621
Provision for income taxes 2,506 800
------------- -------------
Net income (loss) $ (174,795) $ 21,821
============= =============
See accompanying notes to financial statements
<PAGE>
AMERICAN RESIDENTIAL FUNDING, INC.
STATEMENTS OF CASHFLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (174,795) $ 21,821
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization 5,236 3,923
Changes in operating assets and liabilities:
Receivables (62,956) (139,580)
Other current assets (50,824) (18,557)
Accounts payable (69,773) 92,950
Accrued liabilities 87,555 12,606
-------------- ---------------
Net cash used in operating activities (265,557) (26,837)
-------------- ----------------
Cash flows from investing activities:
Purchases of property and equipment (60,797) (46,053)
Other assets 455 (40,087)
-------------- ---------------
Net cash used in investing activities (60,342) (86,140)
-------------- ---------------
Cash flows from financing activities:
Repayment of capital contribution - (27,285)
Proceeds from notes payable 224,956 145,000
Proceeds from (repayments of) related party borrowings 46,000 (80,000)
-------------- ---------------
Net cash provided by financing activities 270,956 37,715
-------------- ---------------
Net decrease in cash (54,943) (75,262)
Cash at beginning of period 105,317 130,000
-------------- ---------------
Cash at end of period $ 50,374 $ 54,738
============== ===============
</TABLE>
See accompanying notes to financial statements
<PAGE>
NOTE 1 - BASIS OF PRESENTATION
UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying financial statements are unaudited and are prepared in
accordance with rules and regulations of the Securities and Exchange Commission
for interim quarterly reporting. Accordingly, these financial statements do not
include all disclosures required under generally accepted accounting principles.
In the opinion of management, the accompanying financial statements contain all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position of American Residential Funding, Inc. as
of March 31, 2000, and the results of their operations and their cash flows for
the nine months ended March 31, 2000. Results for the nine months ended March
31, 2000, are not necessarily indicative of the operations which may occur
during the year ending June 30, 2000.
NOTE 2 - SUBSEQUENT EVENT
Subsequent to March 31, 2000, AMRES' former parent sold a subsidiary to an
unrelated party. AMRES had outstanding debt due to this unrelated party. In
connection with the agreement to sell the subsidiary, all outstanding debt of
AMRES due to the unrelated party was forgiven. As a result of this forgiveness
of debt, AMRES recorded an extraordinary gain of $346,856.
