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United States
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-KSB

|      |  |                                                                                         
|----- |  | ----------------------------------------------------------------------------------------
|[X]   |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|      |  |                                                                                         
|      |  | For the fiscal year ended December 31, 2002 or                                          
|      |  |                                                                                         
|[   ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|      |  |                                                                                         
|      |  | For the transition period from ___________ to ___________.                              

Commission File Number: 0-28325

TMSF HOLDINGS, INC.

(Exact name of registrant as specified in its charter)


|                                                                        |  |                                                
|----------------------------------------------------------------------- |  | -----------------------------------------------
|Delaware
(State or other jurisdiction of
incorporation or organization) |  | 87-0642252
(I.R.S. Employer
Identification No.)

727 West Seventh Street Suite 850 Los Angeles CA 90017
(Address of principal executive offices)

(213) 234-2400
(Registrants telephone number, including area code)

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

Title of class
Common Stock, $0.001 par value

Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.

Yes [x] No [   ]

Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained in this form, to the best of registrants knowledge, in definitive
proxy or information statements incorporated by reference in Part III of the
Form 10-KSB or any amendment to this
Form 10-KSB.  [   ]

State the Registrants revenues for its most recent fiscal year.
$13,659,459

On March 27, 2003 the aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $4 million, based on the
closing sales price of common stock on the Nasdaq Bulletin Board. There were
14,836,365 shares of Common Stock outstanding as of March 27, 2003.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrants Definitive Proxy Statement issued in
connection with the 2003 Annual Meeting of Stockholders of the registrant are
incorporated by reference into Part III.



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TABLE OF CONTENTS



|               |                                                                                              |  |  |  |  |  |  | 
|-------------- | -------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I        
|               | ITEM 1. BUSINESS                                                                            
|               | ITEM 2. PROPERTIES                                                                          
|               | ITEM 3. LEGAL PROCEEDINGS                                                                   
|               | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                 
|PART II       
|               | ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS               
|               | ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS
|               | ITEM 7. FINANCIAL STATEMENTS                                                                
|               | ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|PART III      
|               | ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                  
|               | ITEM 10. EXECUTIVE COMPENSATION                                                             
|               | ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                     
|               | ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                     
|               | ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K                                             
|               | ITEM 14. CONTROLS AND PROCEDURES                                                            
|               | ITEM 15. PRINCIPAL ACCOUNTANT FEES AND SERVICES                                             
|SIGNATURES    
|CERTIFICATION 
|EXHIBIT 4.1   
|EXHIBIT 4.2   
|EXHIBIT 4.2(A)
|EXHIBIT 4.3   
|EXHIBIT 10.1  
|EXHIBIT 10.2  
|EXHIBIT 10.3  
|EXHIBIT 21.1  
|EXHIBIT 99    



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TMSF HOLDINGS, INC.

2002 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS


|                                  |  |                                                                                       |  |   
|--------------------------------- |  | ------------------------------------------------------------------------------------- |  | --
|PART I                           
|ITEM 1.                           |  | BUSINESS                                                                              |  | 3 
|ITEM 2.                           |  | PROPERTIES                                                                            |  | 22
|ITEM 3.                           |  | LEGAL PROCEEDINGS                                                                     |  | 22
|ITEM 4.                           |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                   |  | 22
|PART II                          
|ITEM 5.                           |  | MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS                 |  | 23
|ITEM 6.                           |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS |  | 23
|ITEM 7.                           |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                           |  | 33
|ITEM 8.                           |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE  |  | 33
|PART III                         
|ITEM 9.                           |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                    |  | 34
|ITEM 10.                          |  | EXECUTIVE COMPENSATION                                                                |  | 34
|ITEM 11.                          |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                        |  | 34
|ITEM 12.                          |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                        |  | 34
|ITEM 13.                          |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K                       |  | 34
|ITEM 14.                          |  | CONTROLS AND PROCEDURES                                                               |  | 36
|ITEM 15.                          |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                |  | 36
|SIGNATURES                        |  | 37                                                                                   
|CERTIFICATIONS                    |  | 38                                                                                   
|CONSOLIDATED FINANCIAL STATEMENTS |  | F-1                                                                                  

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PART I




ITEM 1. BUSINESS

Forward-Looking Statements

This annual report on Form 10-KSB contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward-looking
statements, some of which are based on various assumptions and events that are
beyond our control may be identified by reference to a future period or periods
or by the use of forward-looking terminology, such as may, will, believe,
expect, anticipate, continue, or similar terms or variations on those
terms or the negative of those terms. Actual results could differ materially
from those set forth in forward-looking statements, including, among other
things, failure to achieve projected earning levels, the timely and successful
implementation of strategic initiatives, the ability to generate sufficient
liquidity, interest rate fluctuations, changes in assumptions regarding
estimated loan losses or interest rates, the availability of financing and, if
available, the terms of any financing, changes in estimations of origination
and resale pricing of mortgages, changes in markets which we serve, including
the market for Alt-A and fixed rate mortgages, the inability to originate
sub-prime mortgages, changes in general market and economic conditions and
other factors described in this annual report. For a discussion of the risks
and uncertainties that could cause actual results to differ from those
contained in the forward-looking statements see Risk Factors and Item 6.
Managements Discussion and Analysis of Financial Condition and Results of
Operations in this annual report. We do not undertake, and specifically
disclaim any obligation, to publicly release the results of any revisions that
may be made to any forward-looking statements to reflect the occurrence of
anticipated or unanticipated events or circumstances after the date of such
statements.

General

Unless the context otherwise requires, the terms Company, we, us,
and our refer to TMSF Holdings, Inc., a Delaware corporation incorporated in
October 2002, and its wholly owned subsidiary, The Mortgage Store Financial,
Inc. a California corporation incorporated in 1992 (The
Mortgage Store). We file our annual report on Form 10-KSB, quarterly reports on Form 10-QSB, current reports on Form 8-K and any amendments to those reports filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 with the Securities and Exchange Commission (the SEC). You can learn more about us by reviewing such filings and other information that we may file or furnish to the SEC at the SEC's website at www.sec.gov.

We are a financial holding company previously operating as Little Creek,
Inc. In November 2002, we acquired The Mortgage Store  a
nationwide mortgage lender  and changed our name to TMSF Holdings, Inc. Prior
to the acquisition of The Mortgage Store, Little Creek Inc. did not have any
significant operational activity. The following discussion pertains to those
of The Mortgage Store, our wholly owned subsidiary. We are a nationwide
mortgage banker that originates, finances, and sells conforming and
non-conforming mortgage loans secured by single-family residences. Upon
origination we sell our loans, on a whole loan basis, for cash to investors who
either retain these mortgages for their own portfolio or pool them into
mortgage backed securities offered in the financial markets. Since 1996, we
have been engaged in origination of specialty products commonly known as Alt-A
mortgages for residential borrowers. Recently, we expanded our loan programs
to include Type-A loans as well as sub-prime mortgages for borrowers with lower
credit ratings.

We have a wholesale division that solicits business from mortgage brokers
and a retail division that markets directly to general public. There are
currently over 500 approved brokers who conduct business with us. For the year
ended December 31, 2001, we originated approximately $161 million of mortgage
loans, of which approximately $137 million were generated through third party
brokers.

Loan applications are processed and underwritten by us in accordance with
established guidelines acceptable to its investors, and are funded directly
through our own credit facility (warehouse line). We do not maintain any loan
portfolio for our own account, nor do we service the funded loans. We strive
to sell the entire bulk of our funding within 30-60 days to investors for a
cash premium price. The premium reflects the risk-adjusted value of the loan
and is directly related to interest rates and borrowers credit rating.

Products

We offer both fixed-rate and adjustable-rate loans, as well as loans with
an interest rate that is initially fixed for a period of time and subsequently
converts to an adjustable rate. We offer a wide variety of interest rates in
combination with points paid, so borrowers can elect to pay higher points at
closing to secure a lower rate over the life of loan, or pay a higher interest
rate and reduce or eliminate points payable at closing.

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We have traditionally engaged in alternative documentation lending, which
in comparison with conventional types of mortgages allow borrowers with better
credit ratings to obtain loans based on their good credit history instead of
narrower underwriting criteria of full documentation loans. These Alt-A
products currently constitute a substantial portion of our loan programs.

We originate mortgage loans, which are secured by a primary deed of trust
of the property up to a maximum of 100% of the value. We do not originate
stand-alone second trust deed loans or loans with over 100% loan-to-value
(LTV) ratio. However, we may break a high LTV loan into a primary first
trust deed and a concurrent second trust deed.

Recently, we have begun to offer a wider range of loan programs in order
to insulate the risk of over dependence on any product type and to increase the
volume of production through existing broker relations. These programs include
conventional and jumbo full-documentation loans, and sub-prime loans for
borrowers with category B and C credit ratings in addition to Federal
Housing Administrative (FHA) and Veterans Administration Insured (VA)
loans.

We believe that through such varied product mix, we can create a sustained
growth through different phases of economic cycles, which affect one category
of loans more than others. We further believe that such a strategy would also
enhance our relationship with existing brokers who would benefit from one-stop
shopping for all of their clients.

Marketing

In the competitive environment of mortgage banking, efficiency in pricing
and quality of service are important elements for continued success and growth.
Our stated mission is to provide the highest quality of care to every customer
and to assist brokers in offering the best programs and speed of closing to
their clients. Our marketing strategy is to develop both our wholesale and
retail divisions, and to expand the geographic coverage of our activities.

Currently, we have a team of in-house account representatives who
introduce our programs to an increasing numbers of brokers. We intend to
expand our wholesale division as new geographic areas are canvassed and added
to our operational territories. Furthermore, we have a group of wholesale
field representatives whom we rely on to establish personal relationships with
mortgage brokers in their respective territories.

In order to create a strong retail division, we have introduced an
aggressive commission structure for those loan officers who have established a
strong track record of successful origination to maximize their income through
association with us as a direct lender. Under this program, we have recruited
over 100 loan officers that operate from home-offices throughout California.
We intend to develop similar networks in other states where we are licensed as
a mortgage broker.

Additionally, we have established an exclusive arrangement with a mortgage
franchisor in Southern California. Through this arrangement, we fund
substantially all loans originated by each franchisee in the franchisors
territory.

Operations

In order to provide the highest quality of service, which entails
efficient communication and responsiveness to the needs of customer as well as
fast processing and closing of the files, while maintaining prudent
underwriting and quality control procedures, we have made substantial
investment in technological resources and in our professional staffing.

By bringing together all aspects of mortgage lending within one
organization and nurturing a culture of open access and exchange we believe
that we have successfully created an environment in which every employee shares
and benefits from the success of the entire company and is motivated to provide
care and service to customers.

Generally mortgage brokers submit a loan application to more than one
lender at the same time in order to compare rates and terms for the best offer.
Our policy is to provide a decision of approval or denial of a loan within 24
hours after submission of the loan application. Upon receipt of a loan
package, the borrowers information and loan data is entered into the
mortgage-banking database. Once the loan application is registered, it is
reviewed by an

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underwriting staff to determine that loan parameters conform to program
guidelines. The broker is then informed of denial or conditional approval of
their loan. The broker at this stage submits the whole application file
including required conditions for full review and pricing of the loan. Once
the rate and terms of the loan are accepted, the package including pre-funding
conditions is submitted for underwriting, quality control, and funding.

It is possible for the broker to follow the progress of the loan
application throughout this process by accessing the same loan data residing at
our network via the Internet. A loan liaison will also be in continued contact
with the broker to update him with the progress of the application package and
any additional condition that may become necessary due to full review and
quality control examinations of the loan application.

Underwriting

We originate loans for resale to various investors. Therefore, our
underwriting guidelines are based on those acceptable to our investors. We use
FHA and VA guidelines for loans to be insured by these organizations
respectively. All type-A loans are underwritten according to Federal National
Mortgage Association (Fannie Mae) guidelines. We use established
underwriting guidelines for other Alt-A and B or C programs that are
approved by our purchasers.

The guidelines for each program establish the requirements under which
lenders will approve the loan. These guidelines define the maximum
loan-to-value ratio, the maximum amount of loan, required credit scores and
borrowers income and assets to qualify for the loan.

The underwriting guidelines include three levels of applicant
documentation requirements, referred to as the Full Documentation, Stated
Income Documentation and No Documentation programs. Under Full
Documentation and Stated Documentation programs, we review the applicants
source of income, calculate the amount of income from sources indicated on the
loan application or similar documentation, review the credit history of the
applicant, calculate the debt service-to-income ratio to determine applicants
ability to repay the loan, review the type and use of the property being
financed, and review the property. In determining the ability of the
applicant to repay the loan, our underwriters use a qualifying rate that is
equal to (i) the stated interest on fixed rate loans, (ii) the initial interest
rate on loans which provide for two to five years of fixed rate before the
initial rate adjustment, or (iii) one percent above the initial interest rate
on other adjustable-rate loans.

The underwriting guidelines require that mortgage loans be underwritten in
standardized procedure which complies with applicable federal and state laws
and regulations and requires our underwriters to be satisfied with the value of
the property being financed, as indicated by appraisal and appraisal review.
In general the maximum loan amount for mortgage loans originated under our
programs is $650,000; however, larger loans may be approved on a case-by-case
basis.

The underwriting guidelines for Full Documentation and Stated Income
Documentation programs permit one-to-four unit family residential property
loans to have loan-to-value ratios at origination of up to 100% for a maximum
loan amount of $400,000 depending on, among other things, the borrowers credit
score, purpose of mortgage loan, repayment ability and debt service-to-income
ratio, income documentation, as well as the type and use of the property.

Under full documentation programs, applicants are generally required to
submit two written forms of verification of stable income for at least 24
months. Under the Stated Income Documentation program an applicant may be
qualified based upon monthly income as stated on the mortgage loan application
if the applicant meets certain criteria. All the foregoing programs require
that with respect to salaried employees there be a telephone verification of
the applicants employment. Verification of the source of funds required for
deposit into escrow in the case of a purchase money loan is generally required
for all Full Documentation loans and Stated Income Documentation loans, where
the loan-to-value ratio is greater than 80%.

Our categories and criteria for grading the credit history of potential
borrowers are set forth in the table below. Generally, borrowers in lower
credit grades are less likely to satisfy the repayment of obligations of a
mortgage loan, and therefore, are subjected to lower loan-to-value ratios and
are charged higher interest rates and loan origination fee. Loans made to lower
credit grade borrowers, including credit impaired borrowers, entail a higher
risk of delinquency, hence, borrowers are required to maintain a higher equity
and pay higher rates to mitigate these risks.

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We evaluate our underwriting guidelines on an ongoing basis and
periodically modify the guidelines to reflect The Mortgage Stores current
assessment of various issues related to an underwriting analysis. In addition,
we adopt underwriting guidelines appropriate to new loan products that we may
offer. The following table summarizes our underwriting guidelines for
sub-prime loans:

|                                   |  |                                                               |  |                                                                |  |                                                                      |  |                                                                       |  |                                                                     |  |                                     
|---------------------------------- |  | ------------------------------------------------------------- |  | -------------------------------------------------------------- |  | -------------------------------------------------------------------- |  | --------------------------------------------------------------------- |  | ------------------------------------------------------------------- |  | ------------------------------------
|                                   |  | A Risk                                                        |  | A- Risk                                                        |  | B Risk                                                               |  | B- Risk                                                               |  | C Risk                                                              |  | C- Risk                             
|                                   |  |                                                               |  |                                                                |  |                                                                      |  |                                                                       |  |                                                                     |  |                                     
|Max. LTV/CLTV                      |  |                                                               |  |                                                                |  |                                                                      |  |                                                                       |  |                                                                     |  |                                     
|Full Doc                           |  | 100%/100%                                                     |  | 100%/100%                                                      |  | 90%/90%                                                              |  | 85%/85%
First Trust Deed
only                                         |  | 75%-1st
First Trust Deed
only                                       |  | 70%-1st                             
|Stated Income
FICO>=680            |  | 100%                                                          |  | 95%                                                            |  | 85%                                                                  |  | 80%                                                                   |  | N/A                                                                 |  | N/A                                 
|Stated Income
FICO>=640            |  | 90%                                                           |  | 90%                                                            |  | 80%                                                                  |  | 75%                                                                   |  | N/A                                                                 |  | N/A                                 
|Stated Income
FICO<640             |  | 80%                                                           |  | 75%                                                            |  | 70%                                                                  |  | 65%                                                                   |  | N/A                                                                 |  | N/A                                 
|Mortgage Late
Payments
(12 months) |  | No late payments                                              |  | One 30-day late payment in 12
months                           |  | Maximum of two
30-day late payment
in 12 months                      |  | Maximum three
30-day or one
60-day late payment
in 12 months          |  | Maximum two 60-day
late payment in 12
months                        |  | No 90-day late
payments in 12
months
|Credit Score                       |  | 650 FICO                                                      |  | 650 FICO                                                       |  | 615 FICO                                                             |  | 585 FICO                                                              |  | 570 FICO                                                            |  | 500 FICO                            
|Other Consumer
Credits             |  | No major 30-day
late payment, some
minor 30-day late
payments |  | Maximum two major
30-day late
payments, some
minor 30 day late |  | Maximum five 30-day
late, or two 60-day
late, some minor
60-day late |  | Maximum three
60-day late, or one
90-day late, some
minor 90-day late |  | Maximum two major
90-day late, or
some minor 120-day
late payments. |  |                                     
|Maximum Loan Amount
(1st Lien)     |  | $400,000                                                      |  | $400,000                                                       |  | $350,000                                                             |  | $350,000                                                              |  | $350,000                                                            |  | $300,000                            

As described above, we use the foregoing categories and characteristics as
underwriting guidelines only. Our underwriters may determine that the
prospective borrower warrants a risk category upgrade, a debt service-to-income
ratio exception, a pricing exception, a loan-to-value exception or an exception
from certain requirements of a particular category (collectively called an
upgrade or an exception). An upgrade or exception may generally be allowed
if the application reflects certain compensating factors, including among
others: low LTV ratio, stable employment, and length of residence in subject
property. Accordingly, we may classify certain mortgage loan applications in a
more favorable risk category than other mortgage loan applications that, in the
absence of such compensating factors, would only satisfy the criteria of a less
favorable risk category.

We have implemented a loan quality control process designed to ensure
sound lending practices and compliance with our policies and procedures. Prior
to funding of a loan, we perform a pre-funding quality control audit which
consists of the verification of borrowers credit and employment, utilizing
automated services and verbal verification.

Properties underlying the potential mortgage loans are appraised by an
appraiser selected by the submitting broker. We assign all original appraisals
for review to an independent appraisal review company, which will perform an
enhanced desk or a field review of the subject property to confirm the adequacy
of the property as collateral prior to funding.

All loan applications are also subjected to an automated data integrity
scoring system (DISSCO), which identifies discrepancies in information
provided by the borrower on their loan application and those retained by
national credit reporting agencies. This system also provides an automated
valuation of the property and searches recorded sales transactions on the
subject property for the possibility of pricing manipulation through repeated sales
in short periods of time, which is referred to as flipping of properties.

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Subsequent to funding, our quality control department makes a random audit
of 10% of closed loans. The department performs a review of documentation for
compliance with established underwriting guidelines and lending procedures
along with a physical inspection of property and verification of occupancy.
All funding documents are reviewed for accuracy, completeness and adherence to
corporate, state, and federal requirements. As part of this audit process,
deficiencies are reported to our senior management to determine trends and the
need for additional training of our personnel.

Funding and Sales of Mortgage Loans

Warehouse Facilities

From 1996 to December 2000, we funded our production primarily through a
warehouse credit facility established with Imperial Warehouse Lending, which
was subsequently renamed IMPAC Warehouse Lending Group, under which monies to
originate loans were financed. In December 2000, we acquired additional
facilities with Imperial Warehouse Finance, Inc. and subsequently discontinued
our facility with IMPAC Warehouse Lending Group in January 2001.

The total credit line provided by Imperial Warehouse Finance as of
December 31, 2002 was $20 million. We have reestablished an additional line in
the amount of $50 million with IMPAC Warehouse Lending Group. The interest
rate on these lines currently is prime plus 1% subject to increase based on the
length of time loans are held on the warehouse line.

We have been informed that Imperial Warehouse Finance will discontinue its
operations as of April 1, 2003. As of March 21, 2003 we have repurchased all
outstanding loans under this line. We are currently negotiating with other
warehouse lenders to secure a larger credit facility to facilitate increases in
our loan production, which will be at interest rates and terms that are
consistent with managements objectives.

Loan Sales

We follow a strategy of selling for cash substantially all of our loan
origination through loan sales in which we disposes of our entire economic
interest in the loans for a cash price that represents a premium over the
principal balance of the loans sold. We sold $290 million of loans for 2002 as
compared to $146 million of loans for 2001 and $54 million for 2000. Loan
sales are typically made monthly. We did not sell any loans directly through
securitization during these periods.

We have been selling our loans to various investors including DLJ Mortgage
Capital, Lehman Brothers Bank, Greenpoint Mortgage, Household Finance, IndyMac
Bank, IMPAC Funding, UBS Warburg and Bear Stern/Epic Mortgage.

Cash gain on sale of mortgage loans represented 83% of our total revenue
for 2002, as compared to 84.9% of our total revenue for 2001 and 89.5% for
2000. We maximize our cash gain on sale of mortgage loan revenue by closely
monitoring institutional purchasers requirements and grouping loan types that
meet each investors purchase criteria for highest pricing.

We are required to provide certain representations and warranties to
investors who purchase the loans. We may be required to repurchase or
substitute a loan if certain representations or warranties are breached.
Additionally, we may be required to repurchase or substitute a loan if a
payment default occurs within a certain period ranging from one to three months
after sales of these loans. We are also required in some cases to repurchase
or substitute a loan if the loan documentation is alleged to contain fraudulent
misrepresentations made by the borrower. Any claim asserted against us in the
future by our loan purchasers may result in liabilities or legal expenses that
could have material adverse effect on our results of operations and financial
condition.

During 2002, we were required to repurchase two mortgage loans with
aggregate principal loan value of $848,000 due to early payment defaults by the
borrowers. These mortgage loans have been disposed of and a loss has been
recognized.

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Securitization Capability

While we had not sold loans directly through securitizations, part of our
loan sale strategy may include the future sale of loans directly through
securitizations in the future if management determines that such sales are more
beneficial.

Typically in securitization, the issuer aggregates mortgages into a real
estate mortgage investment conduit trust. The regular interest or the senior
tranches of the trust are investment grade. While the issuer generally retains
the residual interest in the trust, it immediately sells the regular interests
and generally uses the proceeds to repay borrowings that were used to fund or
purchase the loans in the securitized pool. The holders of the interest are
entitled to receive scheduled principal collected on the pool of securitized
loans and interest at the pass-through interest rate on the certificate balance
for such interests. The residual interest represents the subordinated right to
receive cash flows from the pool of securitized loans after payment of the
required amounts to the holders of regular interests and the cost associated
with the securitization.

Sub-Servicing

While we currently sell substantially all of the mortgage loans we
originate servicing released (meaning we do not retain the servicing rights to
such loans), we are required to service the loans from the date of funding
through the date of sale. Since we strive to conduct whole loan sales monthly,
we currently do not have a substantial servicing portfolio.

To the extent that we decide to retain servicing rights in the future or
conduct securitizations, we may contract the sub-servicing of such mortgage
loans, which would expose us to more substantial risks associated with
contracted sub-servicing. In such event, it is expected that many of our
borrowers will require notices and reminders to keep their mortgage loans
current and to prevent delinquencies and foreclosures. A substantial increase
in our delinquency rate or foreclosure rate could adversely affect our ability
to access profitably the capital market for our financing needs, including any
future securitizations.

Interest Rate Management

Our profits depend, in part, on the difference, or spread, between the
effective rate of interest received by us on the loans we originate and the
interest rates payable by us under our warehouse facilities ( or for securities
issued in any future securitizations ). The spread can be adversely affected
because of interest rate increases during the period from the date the loans
are originated until the closing of the sale ( or securitization ) of such
loans.

Since we historically have retained loans for a short period of time
pending their sales, we have not engaged in hedging activities to date.
However, in the future we may hedge our variable-rate mortgage loans ( and any
interest only and residual certificates retained in connection with any future
securitizations ) with hedging transactions, which may include forward sales of
mortgage loans or mortgage-backed securities, interest rate caps and floors and
buying and selling of futures and options on futures. The nature and quantity
of hedging transactions will be determined by our management based on various
factors, including market conditions and the expected volume of mortgage loan
originations and purchases. No assurance can be given that any such hedging
transactions will offset the risks of changes in the interest rates, and it is
possible that there will be periods during which we may incur losses after
accounting for our hedging activities.

Competition

We face intense competition in the business of originating and selling
conforming and non-conforming mortgage loans. Our competitors in the industry
include other consumer finance companies, mortgage banking companies,
commercial banks, credit unions, thrift institutions, credit card issuers and
insurance finance companies. Many of these entities are substantially larger
and have considerably greater financial, technical and marketing resources than
us. With respect to other mortgage banking and specially finance companies,
there are many larger companies that focus on the same types of mortgage loans
with which we directly compete for product. From time to time, one or more of
these companies may be dominant in the origination and sale of mortgage loans.
In addition, many financial services organizations that are much larger than us
have formed national loan origination networks offering loan products that are
substantially similar to our loan programs. Competition among industry
participants can take many forms, including convenience in obtaining a loan,
customer service, marketing and distribution channels, amount and term of the
loan, loan origination fees and interest rates. In addition, the current level
of gains realized by us and our competitors on the sale of non-conforming loans
could attract additional competitors into this market. Additional competition
may lower the rates we can charge borrowers, thereby potentially lowering gain
on future loan sales and future securitizations. We may in the future also
face competition from, among others, government-sponsored entities which may
enter the non-conforming mortgage market. Existing or new loan

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purchase programs may be expanded by the Federal National Mortgage
Association (FNMA), the Federal Home Loan Mortgage Corporation (FHLMC), or
the Government National Mortgage Association (GNMA) to include non-conforming
mortgages, particularly those in the A- category, which constitutes a
significant portion of our loan production. To the extent any sales
competitors significantly expand their activities into our market, we could be
materially and adversely affected. Fluctuations in interest rates and general
economic conditions may also affect our competition. During periods of rising
rates, competitors that have locked in low costs may have a competitive
advantage. During periods of declining rates, competitors may solicit our
customers to refinance their loans.

Regulation

The consumer financing industry is a highly regulated industry. Our
business is subject to extensive and complex rules and regulations of, and
examinations by, various federal, state and local government authorities.
These rules impose obligations and restrictions on our loan origination, credit
activities and secured transactions. In addition, these rules limit the
interest rates, finance charges and other fees that we may assess, mandate
extensive disclosure to our customers, prohibit discrimination, and impose
multiple qualification and licensing obligations on us. Failure to comply with
these requirements may result in, among other things, loss of approved status,
class action lawsuits, administrative enforcement actions and civil and
criminal liability. We believe that we are in compliance with these rules and
regulations in all material respects.

Our loan origination activities are subject to the laws and regulations in
each of the states in which those activities are conducted. For example, state
usury laws limit the interest rates that we can charge on our loans. Our
lending activities are also subject to various federal laws, including the
Truth in Lending Act, Homeownership and Equity Protection Act of 1994, the
Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Real Estate
Settlement Procedure Act and the Home Mortgage Disclosure Act.

We are subject to certain disclosure requirements under the
Truth-in-Lending Act (TILA) and Regulation Z promulgated under TILA. TILA is
designed to provide consumers with uniform, understandable information with
respect to the terms and conditions of loan and credit transactions. TILA also
guarantees consumers a three-day right to cancel certain credit transactions,
including loans of the type originated by us. In addition, TILA gives
consumers, among other things, a right to rescind loan transactions in certain
circumstances if the lender fails to provide the requisite disclosure to the
consumer.

We are also subject to the Homeownership and Equity Protection Act of 1994
(the High Cost Mortgage Act), which makes certain amendments to TILA. The
High Cost Mortgage Act generally applies to consumer credit transactions
secured by the consumers principal residence, other than residential mortgage
transactions, reverse mortgage transactions or transactions under an open end
credit plan, in which the loan has either (i) total points and fees upon
origination in excess of the greater of eight percent of the loan amount or
$400 or (ii) an annual percentage rate of more than ten percent points higher
than United States Treasury securities of comparable maturity (Covered
Loans). The High Cost Mortgage Act imposes additional disclosure requirements
on lenders originating Covered Loans. In addition, it prohibits lenders from,
among other things, originating Covered Loans that are underwritten solely on
the basis of the borrowers home equity without regard to the borrowers
ability to repay the loan and including prepayment fee clauses in Covered Loans
to borrowers with a debt-to-income ratio in excess of 50% or Covered Loans used
to refinance existing loans originated by the same lender. The High Cost
Mortgage Act also restricts, among other things, certain balloon payments and
negative amortization features.

We are also required to comply with the Equal Credit Opportunity Act of
1974, as amended (ECOA), and Regulation B promulgated thereunder, the Fair
Credit Reporting Act, as amended, the Real Estate Settlement Procedures Act of
1975, as amended, and the Home Mortgage Disclosure Act of 1975, as amended.
ECOA prohibits creditors from discriminating against applicants on the basis of
race, color, sex, age, religion, national origin or marital status. Regulation
B restricts creditors from requesting certain types of information from loan
applicants. The Fair Credit Reporting Act, as amended, requires lenders, among
other things, to supply an applicant with certain information if the lender
denied the applicant credit. RESPA mandates certain disclosure concerning
settlement fees and charges and mortgage servicing transfer practices. It also
prohibits the payment or receipt of kickbacks or referral fees in connection
with the performance of settlement services. In addition, beginning with loans
originated in 1977, we must file an annual report with the U.S. Department of
Housing and Urban Development (HUD) pursuant to the Home Mortgage Disclosure
Act, which requires the collection and reporting of statistical data concerning
loan transactions.

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In the course of our business, we may acquire properties securing loans
that are in default. There is a risk that hazardous or toxic waste could be
found on such properties. In such event, we could be held responsible for the
cost of cleaning up or removing such waste, and such cost could exceed the
value of the underlying properties.

Because our business is highly regulated, the laws, rules and regulations
applicable to us are subject to regular modification and change. There are
currently proposed various laws, rules and regulations, which, if adopted,
could impact us. There can be no assurance that these proposed laws, rules and
regulations, or other such laws, rules or regulations, will not be adopted in
the future which could make compliance much more difficult or expensive,
restrict our ability to originate, broker, purchase or sell loans, further
limit or restrict the amount of commissions, interest and other charges earned
on loans originated, brokered, purchased or sold by us, or otherwise adversely
affect our business prospects.

Employees

At December 31, 2002 we had 87 full-time employees. We believe that
relations with our employees are good. We are not a party to any collective
bargaining agreement.

RISK FACTORS

In addition to the other information in this Form 10-KSB, the following facts
should be considered in evaluating us and our business.

Risks Related to Our Business

We finance borrowers with lower credit ratings. The subprime loans we
originate generally have higher delinquency and default rates than prime
mortgage loans, which could result in losses on loans that we are required to
repurchase.

We are in the business of originating and selling conforming and non-conforming
mortgage loans, which include subprime mortgage loans. Non-conforming mortgage
loans generally have higher delinquency and default rates than prime mortgage
loans. Delinquency interrupts the flow of projected interest income from a
mortgage loan, and default can ultimately lead to a loss if the net realizable
value of the real property securing the mortgage loan is insufficient to cover
the principal and interest due on the mortgage loan. Also, our cost of
financing a delinquent or defaulted mortgage loan is generally higher than for
a performing mortgage loan. We bear the risk of delinquency and default on
mortgage loans beginning when we originate them and continuing even after we
sell loans. We also reacquire the risks of delinquency and default for
mortgage loans that we are obligated to repurchase. Repurchase obligations are
typically triggered in loan sale transactions if a loan becomes more than 30
days delinquent on the loan for the first 90 days after transfer date, or in
any sale (or securitization if we engage in securitizations in the future) if
the loan materially violates our representations or warranties. At December 31,
2001, mortgage loans held for sale included approximately $750,000 of loans to
be repurchased. At December 31, 2001, our provision of loss for loans to be
repurchased was $195,000; it was $0 at December 31, 2002.

We attempt to manage these risks with risk-based mortgage loan pricing and
appropriate underwriting policies and loan collection methods. However, if
such policies and methods are insufficient to control our delinquency and
default risks and do not result in appropriate loan pricing, our business,
financial condition, liquidity and results of operations could be significantly
harmed.

Any substantial economic slowdown could increase delinquencies, defaults and
foreclosures and reduce our ability to originate loans.

Periods of economic slowdown or recession may be accompanied by decreased
demand for consumer credit, decreased real estate values, and an increased rate
of delinquencies, defaults and foreclosures. Any material decline in real
estate values would increase the loan-to-value ratios (LTVs) on mortgage
loans that we hold pending sale, weaken our collateral coverage and increase
the possibility of a loss if a borrower defaults. Many of the mortgage loans
that we originate are to borrowers who make little or no down payment,
resulting in higher LTVs. A lack of equity in the home may reduce the
incentive a borrower has to meet his payment obligations

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during periods of financial hardship, which might result in higher
delinquencies, defaults and foreclosures. These factors would reduce our
ability to originate mortgage loans. In addition, mortgage loans that we
originate during an economic slowdown may not be as valuable to us because
potential purchasers of our mortgage loans might reduce the premiums they pay
for the loans to compensate for any increased risks arising during such
periods. Any sustained increase in delinquencies, defaults or foreclosures are
likely to significantly harm the pricing of our future mortgage loan sales and
also our ability to finance our mortgage loan originations.

Terrorist attacks or military actions may adversely affect our financial
results.

The effects that terrorist attacks in the United States or other incidents
and related military action, or the result of the military actions by the U.S.
and Coalition forces in Iraq or other regions, may have on our ability to
originate mortgages on the values of the mortgaged properties can not be
determined at this time. As a result of terrorist activity and military
action, there may be a reduction in the new mortgages, which will adversely
affect our ability to expand our mortgage originations. These potential
consequences of terrorist attacks or military action will have an adverse
affect on our financial results. Federal agencies and non-governmental lenders
have, and may continue to, defer, reduce or forgive payments and delay
foreclosure proceedings in respect of loans to borrowers affected in some way
be recent and possible future events. In addition, activation of a substantial
number of U.S. military reservists or members of the National Guard may
significantly increase the proposition of mortgage loans whose mortgage rates
are reduced by the application of the Soldiers and Sailors Civil Relief Act
of 1940 or similar state laws, and neither the master service nor the services
will be required to advance for any interest shortfall caused by any such
reduction.

Our business may be significantly harmed by a slowdown in the economy of
California, where we conduct a significant amount of business.

Since inception, a significant portion of the mortgage loans we have
originated have been secured by property in California. For the year ended
December 31, 2001 and December 31, 2002 approximately 94% and 91%,
respectively, of the loans we originated were collaterized by property located
in Californian. An overall decline in the economy or the residential real
estate market, or the occurrence of a natural disaster that is not covered by
standard homeowners insurance policies, such as an earthquake, in California
could decrease the value of mortgaged properties in California. This, in turn,
would increase the risk of delinquency, default or foreclosure on mortgage
loans in our portfolio or that we have sold to others. This could restrict our
ability to originate or sell mortgage loans, and significantly harm our
business, financial condition, liquidity and results of operations.

We face intense competition that could adversely impact our market share and
our revenues.

We face intense competition from finance and mortgage banking companies,
Internet-based lending companies where entry barriers are relatively low, and,
to a growing extent, from traditional bank and thrift lenders that have entered
the non-conforming and subprime mortgage industry. As we seek to expand our
business further, we will face a significant number of additional competitors,
many of whom will be well established in the markets we seek to penetrate.
Some of our competitors are much larger than we are, have better name
recognition than we do, and have far greater financial and other resources.

The government-sponsored entities Fannie Mae and Freddie Mac are also
expanding their participation in the mortgage industry. These
government-sponsored entities have a size and cost-of-funds advantage that
allows them to purchase mortgage loans with lower rates or fees than we are
willing to offer. While the government-sponsored entities presently do not
have the legal authority to originate mortgage loans, including subprime
mortgage loans, they do have the authority to buy mortgage loans. A material
expansion of their involvement in the market to purchase non-conforming and
subprime mortgage loans could change the dynamics of the industry by virtue of
their sheer size, pricing power and the inherent advantages of a government
charter. In addition, if as a result of their purchasing practices, these
government-sponsored entities experience significantly higher-than-expected
losses, such experience could adversely affect the overall investor perception
of the subprime mortgage industry.

The intense competition in the non-conforming and subprime mortgage
industries has also led to rapid technological developments, evolving industry
standards and frequent releases of new products and enhancements. As mortgage
products are offered more widely through alternative distribution channels,
such as the Internet, we may be required to make significant changes to our
current retail and wholesale structure and information systems to compete
effectively. Our inability to continue enhancing our current Internet
capabilities, or to adapt to other technological changes in the industry, could
significantly harm our business, financial condition, liquidity and results of
operations.

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Competition in the industry can take many forms, including interest rates
and costs of a mortgage loan, less stringent underwriting standards,
convenience in obtaining a mortgage loan, customer service, amount and term of
a mortgage loan and marketing and distribution channels. The need to maintain
mortgage loan volume in this competitive environment creates a risk of price
competition in the non-conforming and subprime mortgage industries. Price
competition could cause us to lower the interest rates that we charge
borrowers, which could lower the value of our mortgage loans. If our
competitors adopt less stringent underwriting standards we will be pressured to
do so as well, which would result in greater loan risk without compensating
pricing. If we do not relax underwriting standards in response to our
competitors, we may lose market share. Any increase in these pricing and
underwriting pressures could reduce the volume of our mortgage loan
originations and sales and significantly harm our business, financial
condition, liquidity and results of operations.

An increase in interest rates could result in a reduction in our mortgage loan
origination volumes, an increase in delinquency, default and foreclosure rates
and a reduction in the value of and income from our loans.

The following are some of the risks we face related to an increase in
interest rates:



| |  |  | A substantial and sustained increase in interest rates could
harm our ability to originate mortgage loans because refinancing an
existing mortgage loan would be less attractive and qualifying for a
purchase mortgage loan may be more difficult.                                                                                                                                                                                                                                                                                                                                                          
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Existing borrowers with adjustable-rate mortgages may incur
higher monthly payments as the interest rate increases, which may
lead to higher delinquency and default rates.                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  |  | If prevailing interest rates increase after we fund a
mortgage loan, the value that we receive upon the sale or any
securitization of the mortgage loan decreases.                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  |  | The cost of financing our mortgage loans prior to sale is
based primarily upon the Prime Rate. The interest rates we charge
on our mortgage loans are based, in part, upon prevailing interest
rates at the time of origination, and the interest rates on all of
our mortgage loans are fixed for at least the first two or three
years. If Prime Rate increases after the time of loan origination,
our net interest incomewhich represents the difference between the
interest rates we receive on our mortgage loans pending sale and our
Prime rate-based cost of financing such loanswill be reduced.

Accordingly, our business, financial condition, liquidity and results of
operations may be significantly harmed as a result of increased interest rates.

Our business requires a significant amount of cash and if it is not available
our business will be significantly harmed.

Our primary sources of cash are our warehouse credit facilities and the
proceeds from the sales of our mortgage loans. We require substantial cash to
fund our mortgage loan originations, to pay our mortgage loan origination
expenses and to hold our mortgage loans pending sale. Our warehouse credit
facilities also require us to observe certain financial covenants, including
the maintenance of certain levels of cash and general liquidity in our company.

As of December 31, 2002, we financed substantially all of our existing
loans through two separate warehouse credit facilities. Each of these
facilities is cancelable by the lender for cause at any time and at least one
is cancelable at any time without cause. These facilities generally have a
renewable, one-year term. Because these are short-term commitments of capital,
the lenders may respond to market conditions, which may favor an alternative
investment strategy for them, making it more difficult for us to secure
continued financing. If we are not able to renew any of these warehouse credit
facilities or arrange for new financing on terms acceptable to us, or if we
default on our covenants or are otherwise unable to access funds under any of
these facilities, we will have to curtail our mortgage loan origination
activities. This would result in decreased revenues and profits from mortgage
loan sales.

In addition, during the years ended December 31, 2000, 2001, and 2002, we
had negative operating cash flow of approximately $11 million, $3 million, and
$67 million, respectively, which resulted from the use of approximately $54
million, $161 million, and $358 million, respectively, of cash for new loan
originations offset by

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cash proceeds from the sale of loans of $43 million, $158 million, and
$290 million, respectively. The timing of our mortgage loan dispositions
(which are periodic) is not always matched to the timing of our expenses (which
are continuous). This requires us to maintain significant levels of cash to
maintain acceptable levels of liquidity. Any decrease in demand in the whole
mortgage loan market such that we are unable to timely and profitably sell our
mortgage loans would inhibit our ability to meet our liquidity demands.

Our warehouse credit facilities contain covenants that restrict our operations
and may inhibit our ability to grow our business and increase revenues.

Our warehouse credit facilities contain extensive restrictions and
covenants that, among other things, require us to satisfy specified financial,
asset quality and loan performance tests. If we fail to meet or satisfy any of
these covenants, we would be in default under these agreements and our lenders
could elect to declare all amounts outstanding under the agreements to be
immediately due and payable, enforce their interests against collateral pledged
under such agreements and restrict our ability to make additional borrowings.
These agreements also contain cross-default provisions, so that if a default
occurs under any one agreement, the lenders under our other agreements could
also declare a default.

The covenants and restrictions in our warehouse credit facilities may
restrict our ability to, among other things:



| |  |  | incur additional debt;                                       
| | - |  | -------------------------------------------------------------
|
| |  |  | make certain investments or acquisitions;                    
|
| |  |  | repurchase or redeem capital stock;                          
|
| |  |  | engage in mergers or consolidations;                         
|
| |  |  | finance mortgage loans with certain attributes;              
|
| |  |  | reduce liquidity below certain levels; and                   
|
| |  |  | hold mortgage loans for longer than established time periods.

These restrictions may interfere with our ability to obtain financing or
to engage in other business activities, which may significantly harm our
business, financial condition, liquidity and results of operations.

If we do not manage our growth effectively, our financial performance could be
harmed.

In recent years, we have experienced rapid growth that has placed, and
will continue to place, certain pressures on our management, administrative,
operational and financial infrastructure. As of December 31, 2000 we had 18
employees, and by December 31, 2002 we had more than 84 employees. Many of our
current employees have very limited experience with us and a limited
understanding of our systems and controls. The increase in the size of our
operations may make it more difficult for us to ensure that we originate
quality mortgage loans and that we service them effectively. We will need to
attract and hire additional sales and management personnel in an intensely
competitive hiring environment in order to preserve and increase our market
share. At the same time, we will need to continue to upgrade and expand our
financial, operational and managerial systems and controls. We also intend to
continue to grow our business in the future, which could require capital,
systems development and human resources beyond what we currently have. We
cannot assure you that we will be able to:



| |  |  | meet our capital needs;                             
| | - |  | ----------------------------------------------------
|
| |  |  | expand our systems effectively;                     
|
| |  |  | allocate our human resources optimally;             
|
| |  |  | identify and hire qualified employees;              
|
| |  |  | satisfactorily perform our servicing obligations; or

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| |  |  | incorporate effectively the components of any businesses that
we may acquire in our effort to achieve growth.
| | - |  | -------------------------------------------------------------------------------------------------------------

The failure to manage growth effectively would significantly harm our
business, financial condition, liquidity and results of operations.

The inability to attract and retain qualified employees could significantly
harm our business.

We depend upon our wholesale account executives and retail mortgage loan
officers to attract borrowers by, among other things, developing relationships
with financial institutions, other mortgage companies and brokers, real estate
agents, borrowers and others. We believe that these relationships lead to
repeat and referral business. The market for skilled executive officers,
account executives and loan officers is highly competitive and historically has
experienced a high rate of turnover. In addition, if a manager leaves our
company there is an increased likelihood that other members of his or her team
will follow. Competition for qualified account executives and loan officers
may lead to increased hiring and retention costs. If we are unable to attract
or retain a sufficient number of skilled account executives at manageable
costs, we will be unable to continue to originate quality mortgage loans that
we are able to sell for a profit, which will reduce our revenues.

An interruption in or breach of our information systems may result in lost
business.

We rely heavily upon communications and information systems to conduct our
business. As we implement our growth strategy and increase our volume of
mortgage loan production, that reliance will increase. Any failure or
interruption or breach in security of our information systems or the
third-party information systems on which we rely could cause underwriting or
other delays and could result in fewer mortgage loan applications being
received and slower processing of applications. We cannot assure you that such
failures or interruptions will not occur or if they do occur that they will be
adequately addressed by us or the third parties on which we rely. The
occurrence of any failures or interruptions could significantly harm our
business.

The success and growth of our business will depend upon our ability to adapt to
and implement technological changes.

Our mortgage loan origination business is currently dependent upon our
ability to effectively interface with our brokers, borrowers and other third
parties and to efficiently process loan applications and closings. The
origination process is becoming more dependent upon technological advancement,
such as the ability to process applications over the Internet, accept
electronic signatures, provide process status updates instantly and other
customer-expected conveniences that are cost-efficient to our process.
Implementing this new technology and becoming proficient with it may also
require significant capital expenditures. As these requirements increase in
the future, we will have to fully develop these technological capabilities to
remain competitive or our business will be significantly harmed.

If we are unable to maintain and expand our network of independent brokers, our
loan origination business will decrease.

A significant majority of our originations of mortgage loans comes from
independent brokers. In 2001, 79% of our loan originations were originated
through approximately 100 brokers. In 2002, 80% of our loan originations were
originated through approximately 150 brokers. Our brokers are not
contractually obligated to do business with us. Further, our competitors also
have relationships with our brokers and actively compete with us in our efforts
to expand our broker networks. Accordingly, we cannot assure you that we will
be successful in maintaining our existing relationships or expanding our broker
networks, the failure of which could significantly harm our business, financial
condition, liquidity and results of operations.

Our financial results fluctuate as a result of seasonality and other timing
factors, which makes it difficult to predict our future performance and may
affect the price of our common stock.

Our business is generally subject to seasonal trends. These trends
reflect the general pattern of housing sales, which typically peak during the
spring and summer seasons. Our quarterly operating results have fluctuated in
the past and are expected to fluctuate in the future, reflecting the
seasonality of the industry. Further, if the closing of a sale of mortgage
loans is postponed, the recognition of gain from the sale is also postponed.
If such a delay causes us to recognize income in the next quarter, our results
of operations for the previous quarter could be significantly depressed. If
our results of operations do not meet the expectations of our stockholders and
securities analysts, then the price of our common stock may decrease.

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We are subject to losses due to fraudulent and negligent acts on the part of
loan applicants, mortgage brokers, other vendors and our employees.

When we originate mortgage loans, we rely heavily upon information
supplied by third parties including the information contained in the mortgage
loan application, property appraisal, title information and employment and
income documentation. If any of this information is intentionally or
negligently misrepresented and such misrepresentation is not detected prior to
mortgage loan funding, the value of the mortgage loan may be significantly
lower than expected. Whether a misrepresentation is made by the loan
applicant, the mortgage broker, another third party or one of our own
employees, we generally bear the risk of loss associated with the
misrepresentation. A mortgage loan subject to a material misrepresentation is
typically unsaleable or subject to repurchase if it is sold prior to detection
of the misrepresentation. Even though we may have rights against persons and
entities who made or knew about the misrepresentation, such persons and
entities are often difficult to locate and it is often difficult to collect any
monetary losses that we have suffered from them.

We have controls and processes designed to help us identify misrepresented
information in our loan origination operations. We cannot assure you, however,
that we have detected or will detect all misrepresented information in our loan
originations.

We are subject to losses due to fraudulent and negligent acts in other
parts of our operations. If we experience a significant number of such
fraudulent or negligent acts, our business, financial condition, liquidity and
results of operations would be significantly harmed.

Defective mortgage loans may harm our business.

In connection with the sale of our mortgage loans, we are required to make
a variety of customary representations and warranties regarding our company and
the mortgage loans. We are subject to these representations and warranties for
the life of the mortgage loan and they relate to, among other things:



| |  |  | compliance with laws;                                                                 
| | - |  | --------------------------------------------------------------------------------------
|
| |  |  | regulations and underwriting standards;                                               
|
| |  |  | the accuracy of information in the mortgage loan documents and mortgage loan file; and
|
| |  |  | the characteristics and enforceability of the mortgage loan.                          

A mortgage loan that does not comply with these representations and
warranties may be unsaleable or saleable only at a discount, and, if such a
mortgage loan is sold before we detect a non-compliance, we may be obligated to
repurchase the mortgage loan and bear any associated loss directly, or we may
be obligated to indemnify the purchaser against any such losses. We believe
that we have qualified personnel at all levels and have established controls to
ensure that all mortgage loans are originated to the markets requirements, but
we cannot assure you that we will not make mistakes, or that certain employees
will not deliberately violate our lending policies. We seek to minimize losses
from defective mortgage loans by correcting flaws if possible and selling or
re-selling such mortgage loans. We also create allowances to provide for
defective mortgage loans in our financial statements. We cannot assure you,
however, that losses associated with defective mortgage loans will not harm our
results of operations or financial condition.

If the prepayment rates for our mortgage loans are higher than expected, our
results of operations may be significantly harmed.

When a borrower pays off a mortgage loan prior to the loans scheduled
maturity, the impact on us depends upon when such payoff or prepayment
occurs. Our prepayment losses generally occur after we sell (or securitize in
the future) our mortgage loans and the extent of our losses depends on when the
prepayment occurs. If the prepayment occurs within 12 to 18 months following a
whole mortgage loan sale, we may have to reimburse the purchaser for all or a
portion of the premium paid by the purchaser for the mortgage loan, again
resulting in a loss of our profit on the mortgage loan.

Prepayment rates on mortgage loans vary from time to time and tend to
increase during periods of declining interest rates. We seek to minimize our
prepayment risk through a variety of means, including originating a significant
portion of mortgage loans with prepayment penalties with terms of two to five
years. No strategy,

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however, can completely insulate us from prepayment risks, whether arising
from the effects of interest rate changes or otherwise. See  Statutory and
Regulatory Risks  below for a discussion of statutes related to prepayment
penalties.

Risks of unknown liabilities as a result of reverse merger

We became a publicly traded company through a reverse merger with an
unrelated company, which had prior operations in an unrelated business. There
may be potential liabilities incurred by the prior business, which are unknown
to us for which we may be held liable. We have no insurance for liabilities
incurred as a result of business conducted prior to the reverse merger.

Control by officer, director and majority stockholder

We are controlled by Raymond Eshaghian, who beneficially owns 64.0% of our
outstanding common stock as of March 14, 2003. Mr. Eshaghian serves as our
Chief Executive Officer and a member of our Board of Directors. As a result,
Mr. Eshaghian is able to (i) elect a majority of our Board of Directors, (ii)
approve the sale of our assets, mergers and other business combination
transactions and (iii) direct and control our operations, policies, and
business decisions.

The registration of additional shares of common stock under the Securities Act
of 1933 will cause further losses.

In November 2002, we entered into two investor rights agreements: one
granting Raymond Eshaghian certain registration rights with respect to
9,500,000 shares of common stock and the other granting four stockholders
including Massoud Yashouafar, one of our directors, certain registration rights
with respect to 5,000,000 shares of common stock. We expect that the legal,
accounting, and other costs associated with the registration of those shares
will be substantial.

Statutory and Regulatory Risks

The nationwide scope of our operations exposes us to risks of noncompliance
with an increasing and inconsistent body of complex laws and regulations at the
federal, state and local levels.

Because we originate mortgage loans on a national basis, we must comply
with a multitude of extensive federal and state laws and regulations, as well
as judicial and administrative decisions of all jurisdictions. The volume of
new or modified laws and regulations has increased in recent years, and, in
addition, individual cities and counties have begun to enact laws that restrict
subprime mortgage loan origination activities in those cities and counties.
The laws and regulations of each of these jurisdictions are different, complex
and, in some cases, in direct conflict with each other. As our operations
continue to grow, it may be more difficult to comprehensively identify, to
accurately interpret and to properly program our technology systems and
effectively train our personnel with respect to all of these laws and
regulations, thereby potentially increasing our exposure to the risks of
noncompliance with these laws and regulations. At the federal level, these
laws and regulations include:



| |  |  | the Equal Credit Opportunity Act;                 
| | - |  | --------------------------------------------------
|
| |  |  | the Federal Truth in Lending Act and Regulation Z;
|
| |  |  | the Home Ownership and Equity Protection Act;     
|
| |  |  | the Real Estate Settlement Procedures Act;        
|
| |  |  | the Fair Credit Reporting Act;                    
|
| |  |  | the Fair Debt Collection Practices Act;           
|
| |  |  | the Home Mortgage Disclosure Act;                 
|
| |  |  | the Fair Housing Act; and                         
|
| |  |  | the Gramm-Leach-Bliley Act.                       

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These laws and regulations among other things:



| |  |  | impose licensing obligations and financial requirements on us;                                                           
| | - |  | -------------------------------------------------------------------------------------------------------------------------
|
| |  |  | limit the interest rates, finance charges, and other fees that we may charge;                                            
|
| |  |  | prohibit discrimination;                                                                                                 
|
| |  |  | impose underwriting requirements;                                                                                        
|
| |  |  | mandate disclosures and notices to consumers; and                                                                        
|
| |  |  | in some cases, impose assignee liability on the
entities that purchase our mortgage loans or on us for loans we
purchase.

Our failure to comply with these laws can lead to:



| |  |  | civil and criminal liability;                                                
| | - |  | -----------------------------------------------------------------------------
|
| |  |  | loss of approved status;                                                     
|
| |  |  | demands for indemnification or loan repurchases from purchasers of our loans;
|
| |  |  | class action lawsuits; and                                                   
|
| |  |  | administrative enforcement actions.                                          

New Areas of Regulation

Regulatory and legal requirements are subject to change, making our compliance
more difficult or expensive, or otherwise restricting our ability to conduct
our business as it is now conducted. In particular, federal, state and local
governments have become more active in the consumer protection area in recent
years. For example, the federal Gramm-Leach-Bliley financial reform legislation
imposes additional privacy obligations on us with respect to our applicants and
borrowers. Several states are also considering adopting privacy legislation. In
addition, several federal, state and local laws, rules and regulations have
been adopted, or are under consideration, that are intended to eliminate
so-called predatory lending practices. The federal Home Ownership and Equity
Protection Act (HOEPA) identifies a category of mortgage loans and subjects
such loans to restrictions not applicable to other mortgage loans. Loans
subject to HOEPA consist of loans on which certain points and fees or the
annual percentage rate (APR) exceed specified levels. Liability for
violations of applicable law with regard to loans subject to HOEPA would extend
not only to us, but to the purchasers of our loans as well. We generally do not
make loans that are subject to HOEPA because the purchasers of our loans and/or
the lenders that provide financing for our loan origination operations do not
want to purchase or finance such loans. On October 1, 2002, the APR and points
and fees thresholds for determining loans subject to HOEPA were lowered,
thereby expanding the scope of loans subject to HOEPA. We anticipate that we
will continue to avoid making loans subject to HOEPA, and the lowering of the
thresholds beyond which loans become subject to HOEPA may prevent us from
making certain loans and may cause us to reduce the APR or the points and fees
on loans that we do make. If we decide to relax our restrictions on loans
subject to HOEPA because the purchasers of our loans and/or the lenders that
provide financing for our loan origination operations relax their restrictions,
we will be subject to greater risks for actual or perceived non-compliance with
HOEPA and other applicable laws, including demands for indemnification or loan
repurchases from our lenders and loan purchasers, class action lawsuits and
administrative enforcement actions.

Laws, rules and regulations have been adopted, or are under consideration, at
the state and local levels that are similar to HOEPA in that they impose
certain restrictions on loans on which certain points and fees or the APR
exceeds specified thresholds. The restrictions include prohibitions on
steering borrowers into loans with high interest rates and away from more
affordable products, selling unnecessary insurance to borrowers, flipping or
repeatedly refinancing loans and making loans without a reasonable expectation
that the borrowers will be able to

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repay the loans. Compliance with some of these restrictions requires lenders to
make subjective judgments, such as whether a loan will provide a net tangible
benefit to the borrower. These restrictions expose a lender to risks of
litigation and regulatory sanction no matter how carefully a loan is
underwritten. In addition, an increasing number of these laws, rules and
regulations seek to impose liability for violations on purchasers of loans,
regardless of whether a purchaser knew of or participated in the violation.

Although it is against our policy to engage in such practices, we have
generally avoided originating loans that exceed the APR or points and fees
thresholds of these laws, rules and regulations, because the companies that buy
our loans and/or provide financing for our loan origination operations
generally do not want to buy or finance such loans. To the extent we do have
financing and purchasers for such loans, we have, on a limited basis, begun to
make loans which
exceed the APR or points and fees thresholds of these laws, rules and
regulations. The continued enactment of these laws, rules and regulations may
prevent us from making certain loans and may cause us to reduce the APR or the
points and fees on loans that we do make. In addition, the difficulty of
managing the risks presented by these laws, rules and regulations may decrease
the availability of warehouse financing and the overall demand for subprime
loans, making
it difficult to fund, sell or securitize any of our loans. If we decide to
further relax our restrictions on loans subject to these laws, rules and
regulations, we will be subject to greater risks for actual or perceived
non-compliance with such laws, rules and regulations, including demands for
indemnification or loan repurchases from our lenders and loan purchasers, class
action lawsuits, increased defenses to foreclosure of individual loans in
default, individual claims for
significant monetary damages and administrative enforcement actions. If nothing
else, the growing number of these laws, rules and regulations will increase our
cost of doing business as we are required to develop systems and procedures to
ensure that we do not violate any aspect of these new requirements.

On July 1, 2002, predatory lending legislation of the type described above
became effective in California. As with other predatory lending laws, the
California legislation imposes restrictions on loans which exceed points and
fees or APR thresholds defined in the law. As of the date of this prospectus,
this law had not had, and in the future we do not expect it to have, a
significant impact on the value or volume of our loan production in California.

Yield Spread Premiums

A substantial portion of our mortgage loans are originated through independent
mortgage brokers. Mortgage brokers provide valuable services in the loan
origination process and are compensated for their services by receiving fees on
loans. Brokers may be paid by the borrower, the lender or both. If a borrower
cannot or does not want to pay the mortgage brokers fees directly, the loan
can be structured so that the mortgage brokers fees are paid from the proceeds
of the loan, or the loan can provide for a higher interest rate or higher fees
to the lender. The increased value of a loan with a higher interest rate
enables the lender to pay all or a portion of the brokers compensation. This
form of compensation is often referred to as a yield spread premium.
Regardless of its label or method of calculation, the payment is intended to
compensate the broker for the services actually performed and the facilities
actually provided. Competitive forces currently demand that we pay mortgage
brokers yield spread premiums on many of the loans we originate. The federal
Real Estate Settlement Procedures Act (RESPA) prohibits the payment of fees
for the mere referral of real estate settlement service business. This law does
permit the payment of reasonable value for services actually performed and
facilities actually provided unrelated to the referral. On September 18, 2002,
the Eleventh Circuit Court of Appeals issued a decision in Heimmermann v. First
Union Mortgage Corp.which reversed the courts earlier decision in Culpepper
v. Irwin Mortgage Corp.in which the court found the yield spread premium
payments received by a mortgage broker to be unlawful per se under RESPA.
Subsequent appellate court decisions have held similarly. The Department of
Housing and Urban development (HUD) had responded to the Culpepperdecision
by issuing a policy statement (2001-1) taking the position that lender payments
to mortgage brokers, including yield spread premiums, are not per se illegal.
The Heimmermanndecision eliminated a conflict that had arisen between the
Eleventh Circuit and the Eighth and Ninth Circuit Courts of Appeals, with the
result that all federal circuit courts which have considered the issue have
aligned with the HUD policy statement and found that yield spread premiums are
not prohibited per se. If other circuit courts that have not yet reviewed this
issue disagree with the Heimmermanndecision, there could be a substantial
increase in litigation regarding lender payments to brokers and in the
potential costs of defending these types of claims and in paying any judgments
that might result.

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Stockholder refusal to comply with regulatory requirements may interfere with
our ability to do business in certain states.

Some states in which we operate may impose regulatory requirements on our
officers and directors and persons holding certain amounts, usually 10% or
more, of our common stock. If any person holding such an amount of our stock
fails to meet or refuses to comply with a states applicable regulatory
requirements for mortgage lending, we could lose our authority to conduct
business in that state.

We may be subject to fines or other penalties based upon the conduct of our
independent brokers.

The mortgage brokers from which we obtain loans have parallel and separate
legal obligations to which they are subject. While these laws may not
explicitly hold the originating lenders responsible for the legal violations of
mortgage brokers, increasingly federal and state agencies have sought to impose
such assignee liability. Recently, for example, the United States Federal
Trade Commission (FTC) entered into a settlement agreement with a mortgage
lender where the FTC characterized a broker that had placed all of its mortgage
loan production with a single lender as the agent of the lender; the FTC
imposed a fine on the lender in part because, as principal, the lender was
legally responsible for the mortgage brokers unfair and deceptive acts and
practices. The United States Justice Department in the past has sought to hold
a subprime mortgage lender responsible for the pricing practices of its
mortgage brokers, alleging that the mortgage lender was directly responsible
for the total fees and charges paid by the borrower under the Fair Housing Act
even if the lender neither dictated what the mortgage broker could charge nor
kept the money for its own account. Accordingly, we may be subject to fines or
other penalties based upon the conduct of our independent mortgage brokers.

When we are no longer able to rely on the Alternative Mortgage Transactions
Parity Act to preempt certain state law restrictions on prepayment penalties,
we may be unable to compete effectively with financial institutions that are
exempt from such restrictions.

The value of a mortgage loan depends, in part, upon the expected period of
time that the mortgage loan will be outstanding. If a borrower pays off a
mortgage loan in advance of this expected period, the holder of the mortgage
loan does not realize the full value expected to be received from the loan. A
prepayment penalty payable by a borrower who repays a loan earlier than
expected helps offset the reduction in value resulting from the early payoff.
Consequently, the value of a mortgage loan is enhanced to the extent the loan
includes a prepayment penalty, and a mortgage lender can offer a lower interest
rate and/or lower loan fees on a loan which has a prepayment penalty.
Prepayment penalties are an important feature to obtain value on certain of the
mortgage loans we originate.

Certain state laws restrict or prohibit prepayment penalties on mortgage loans,
and we have relied on the federal Alternative Mortgage Transactions Parity Act
(the Parity Act) and related rules issued in the past by the Office of Thrift
Supervision (the OTS) to preempt state limitations on prepayment penalties.
The
Parity Act was enacted to extend to financial institutions, other than
federally chartered depository institutions, the federal preemption which
federally chartered depository institutions enjoy. The elimination of this
federal preemption could significantly harm our ability to compete effectively
in the origination of mortgage loans with financial institutions that will
continue to enjoy federal preemption of state restrictions on prepayment
penalties. The effective date of the new rule, originally January 1, 2003, was
subsequently extended by the OTS until July 1, 2003 in response to concerns
from interested parties about the burdens associated with compliance. The
elimination of this federal preemption will require us to comply with state
restrictions on prepayment penalties. This may place us at a competitive
disadvantage relative to financial institutions that will continue to enjoy
federal preemption of such state restrictions because such institutions will be
able to charge prepayment penalties without regard to state restrictions and
thereby may be able to offer loans with interest rate and loan fee structures
that are more attractive than we are able to offer.

The increasing number of federal, state and local anti-predatory lending laws
may restrict our ability to originate or increase our risk of liability with
respect to certain mortgage loans and could increase our cost of doing
business.

In recent years, several federal, state and local laws, rules and
regulations have been adopted, or are under consideration, that are intended to
eliminate so-called predatory lending practices. These laws, rules and
regulations impose certain restrictions on loans on which certain points and
fees or the annual percentage rate (APR) exceeds specified thresholds. Some
of these restrictions expose a lender to risks of litigation and regulatory
sanction no matter how carefully a loan is underwritten. In addition, an
increasing number of these laws, rules and regulations seek to impose liability
for violations on purchasers of mortgage loans, regardless of whether a
purchaser knew of or participated in the violation.

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Although it is against our policy to engage in predatory lending
practices, we have generally avoided originating loans that exceed the APR or
points and fees thresholds of these laws, rules and regulations, because the
companies that buy our mortgage loans and/or provide financing for our mortgage
loan origination operations generally do not want to buy or finance such loans.
To the extent we do have financing and purchasers for such mortgage loans, we
have, on a limited basis, begun to make mortgage loans which exceed the APR or
points and fees thresholds of these laws, rules and regulations. The
continued enactment of these laws, rules and regulations may prevent us from
making certain mortgage loans and may cause us to reduce the APR or the points
and fees on mortgage loans that we do make. In addition, the difficulty of
managing the risks presented by these laws, rules and regulations may decrease
the availability of warehouse financing and the overall demand for subprime
mortgage loans, making it difficult to fund, sell (or securitize in the future)
any of our mortgage loans. If we decide to relax further our restrictions on
mortgage loans subject to these laws, rules and regulations, we will be subject
to greater risks for actual or perceived non-compliance with such laws, rules
and regulations, including demands for indemnification or mortgage loan
repurchases from our lenders and mortgage loan purchasers, class action
lawsuits, increased defenses to foreclosure of individual mortgage loans in
default, individual claims for significant monetary damages, and administrative
enforcement actions. If nothing else, the growing number of these laws, rules
and regulations will increase our cost of doing business, as we are required to
develop systems and procedures to ensure that we do not violate any aspect of
these new requirements. Any of the foregoing could significantly harm our
business, financial condition, liquidity and results of operations.

Licensing

As of the date of this prospectus, we were licensed (or exempt from licensing
requirements) by the relevant governmental agencies in about 33 states and in
the District of Columbia to originate first and second priority mortgages.

Risks Related to Our Capital Structure

There is no assurance of an established public trading market.

Although our common stock trades on the Nasdaq Bulletin Board, a regular
trading market for the securities may not be sustained in the future. Nasdaq
has enacted recent changes that limit quotations on the Nasdaq Bulletin Board
to securities of issuers that are current in their reports filed with the
Securities and Exchange Commission. The effect on the Nasdaq Bulletin Board of
these rule changes and other proposed changes can not be determined at this
time. The Nasdaq Bulletin Board is an inter-dealer, over-the-counter market
that provides significantly less liquidity than the Nasdaqs automated
quotation system (the Nasdaq Stock Market). Quotes for stocks included on
the Nasdaq Bulletin Board are not listed in the financial sections of
newspapers, as are those for the Nasdaq Stock Market. Therefore, prices for
securities traded solely on the Nasdaq Bulletin Board may be difficult to
obtain and holders of common stock may be unable to resell their securities at
or near their original offering price or at any price.

Market prices for our common stock will be influenced by a number of factors, including:



| |  |  | the issuance of new equity securities pursuant to a future, offering;                                                                                                                                        
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | changes in interest rates;                                                                                                                                                                                   
|
| |  |  | competitive developments, including announcements by us or
our competitors of new products or services or significant
contracts, acquisitions, strategic partnerships, joint ventures or
capital commitments;
|
| |  |  | variations in quarterly operating results;                                                                                                                                                                   
|
| |  |  | change in financial estimates by securities analysts;                                                                                                                                                        
|
| |  |  | the depth and liquidity of the market for our common stock;                                                                                                                                                  
|
| |  |  | investor perceptions of our company and the non-conforming
and subprime mortgage industries generally; and                                                                                                   
|
| |  |  | general economic and other national conditions.                                                                                                                                                              

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Sales of additional common stock may adversely affect our market price.

The sale or the proposed sale of substantial amounts of our common stock
in the public market could materially adversely affect the market price of our
common stock or other outstanding securities. As of the date of this report,
Raymond Eshaghian, our Chief Executive Officer, beneficially owns 9,500,000
shares of our common stock and four other stockholders, including Massoud
Yashouafar, one of our directors, beneficially own 5,000,000 shares of our
common stock, and these five stockholders have the right to require us to
register their respective shares. The sale of a large amount of shares by one
or more of the five stockholders, or the perception that such sales may occur,
could adversely affect the market price for our common stock.

Our common stock is considered a"penny stock."

Our common stock is considered to be a penny stock because it meets one
or more of the definitions in Rules 15g-2 through 15g-6 promulgated under
Section 15(g) of the Securities Exchange Act of 1934, as amended. These
include but are not limited to the following: (i) the stock trades at a price
less than five dollars ($5.00) per share; (ii) it is NOT traded on a
recognized national exchange; (iii) it is NOT quoted on the NASDAQ Stock
Market, or even if so, has a price less than five dollars (5.00) per share; or
(iv) is issued by a company with net tangible assets less than $2,000,000, if
in business more than a continuous three years, or with average revenues of
less than $6,000,000 for the past three years. The principal result or effect
of being designated a penny stock is that securities broker-dealers cannot
recommend the stock but must trade in it on an unsolicited basis.

Broker-dealer requirements may affect trading and liquidity.

Section 15(g) of the Securities Exchange Act of 1934, as amended, and Rule
15g-2 promulgated thereunder by the SEC require broker-dealers dealing in penny
stocks to provide potential investors with a document disclosing the risks of
penny stocks and to obtain a manually signed and dated written receipt of the
document before effecting any transaction in a penny stock for the investors
account.

Potential investors in our common stock are urged to obtain and read such
disclosure carefully before purchasing any shares that are deemed to be penny
stock. Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve
the account of any investor for transactions in such stocks before selling any
penny stock to that investor. This procedure requires the broker-dealer to (i)
obtain from the investor information concerning his or her financial situation,
investment experience and investment objectives; (ii) reasonably determine,
based on that information, that transactions in penny stocks are suitable for
the investor and that the investor has sufficient knowledge and experience as
to be reasonably capable of evaluating the risks of penny stock transactions;
(iii) provide the investor with a written statement setting forth the basis on
which the broker-dealer made the determination in (ii) above; and (iv) receive
a signed and dated copy of such statement from the investor, confirming that it
accurately reflects the investors financial situation, investment experience
and investment objectives. Compliance with these requirements may make it more
difficult for investors in our common stock to resell their shares to third
parties or to otherwise dispose of them in the market or otherwise.

The shares of our common stock will be subordinate to the rights of our wholly
owned operating subsidiarys existing and future creditors.

We are a holding company and our only assets are the shares of capital
stock of our wholly owned operating subsidiary, The Mortgage Store. As a
holding company without independent means of generating operating revenues, we
depend upon dividends and other payments from The Mortgage Store to fund our
obligations and meet our cash needs. Our expenses may include the salaries of
our executive officers, insurance and professional fees. Financial covenants
under the existing or future loan agreements of The Mortgage Store, or
provisions of the California Corporations Code, may limit The Mortgage Stores
ability to make sufficient dividend or other payments to us to permit us to
fund our obligations or meet our cash needs, in whole or in part. By virtue of
this holding-company structure, the shares of our common stock purchased in
this offering will be structurally junior in right of payment to all existing
and future liabilities of The Mortgage Store.

Some provisions of our certificate of incorporation and bylaws may deter
takeover attempts, which may limit the opportunity of our stockholders to sell
their shares at a favorable price.

Some of the provisions of our certificate of incorporation and bylaws
could make it more difficult for a third party to acquire us, even if doing so
might be beneficial to our stockholders by providing them with the opportunity
to sell their shares possibly at a premium over the then market price.

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For example, our certificate of incorporation authorizes the board of
directors to issue up to 10,000,000 shares of preferred stock. The preferred
stock may be issued in one or more series, the terms of which may be determined
at the time of issuance by our board of directors without further action by the
stockholders. These terms may include voting rights including the right to
vote as a series on particular matters, preferences as to dividends and
liquidation, conversion rights, redemption rights and sinking fund provisions.
No shares of preferred stock will be outstanding upon the closing of this
offering and we have no present plans for the issuance of any preferred stock.
The issuance of any preferred stock, however, could diminish the rights of
holders of our common stock, and therefore could reduce the value of our common
stock. In addition, specific rights granted to future holders of preferred
stock could be used to restrict our ability to merge with, or sell assets to, a
third party. The ability of our board of directors to issue preferred stock
could make it more difficult, delay, discourage, prevent or make it more costly
to acquire or effect a change in control, thereby preserving the current
stockholders control.

In addition, we are also subject to Section 203 of the Delaware General
Corporation Law that, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that the stockholder
became an interested stockholder. The preceding provisions of our certificate
of incorporation and bylaws, as well as Section 203 of the Delaware General
Corporation Law, could discourage potential acquisition proposals, delay or
prevent a change of control and prevent changes in our management, even if such
things would be in the best interests of our stockholders.




ITEM 2. PROPERTIES

Our primary executive and administrative offices are located in Los
Angeles, California. We have a three-year lease expiring August 31, 2005 (with
an option to renew for an additional five years) to use approximately 13,350
square feet of office space. We believe that these facilities will adequately
provide for the future growth needs of the long-term brokering and lending
operations.




ITEM 3. LEGAL PROCEEDINGS

We are a party to litigation and claims, which are normal in the course of
its operations. While the results of such litigation and claims cannot be
predicted with certainty, we believe the final outcome of such matters will not
have a material adverse effect on us.




ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On October 28, 2002, Little Creek, Inc., a Utah corporation (Little Creek)
held its annual meeting of stockholders. Of 1,631,483 shares eligible to vote,
895,618 shares were voted, or 54.9%, formulating a quorum, and at the
stockholders meeting, the following proposals were adopted.

Proposal No. 1  To change Little Creeks domicile from the State of Utah to
the State of Delaware, by merging Little Creek into its wholly-owned
subsidiary, Little Creek, Inc., a Delaware corporation (Reorganized Little
Creek).

Proposal No. 2  To acquire The Mortgage Store Financial, Inc., a California
corporation (the Mortgage Store), and pursuant to a plan of reorganization
and stock exchange agreement dated April 5, 2002, the Mortgage Store would
become a wholly-owned subsidiary of Reorganized Little Creek and the sole
stockholder of the Mortgage Store would exchange his shares of the Mortgage
Stores common stock for 9,5000,000 of Reorganized Little Creeks common stock.

Proposal No. 3  To change Reorganized Little Creeks name to TMSF Holdings,
Inc. (TMSF Holdings).

Proposal No. 4  To elect the members of the board of directors of the Mortgage
Store to serve as the directors of TMSF Holdings subsequent to the closing of
the reorganization.

Each of the proposals was approved. 895,618 shares were voted for each of the
proposals, no shares were voted against any of the proposals and no shares
abstained from voting with respect to any of the proposals.

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PART II




ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our Common Stock is currently quoted on the Nasdaq Bulletin Board under
the symbol TMFZ. Although shares of our Common Stock have
been quoted on the Nasdaq Bulletin Board since April 24, 2001,
there has not been any public market activity prior to the quarter
ending December 31, 2002. No assurance can be given that any
public market activity for our Common Stock will continue to develop
or be maintained. During the quarter ending December 31, 2002, the high and low bid price of our Common Stock was $0.40 and $0.15, respectively. Such
quotations reflect inter-dealer prices, without retail mark-ups, mark-downs or
commissions and may not necessarily represent actual transactions in an
established trading market.

As of March 27, 2003, there were 98 holders of record of our Common Stock
(including holders who are nominees for an undetermined number of beneficial
owners). These figures do not include beneficial owners who hold shares in
nominee name.

We have not declared or
paid any cash dividends on our Common Stock and do not anticipate paying any
cash dividends in the foreseeable future. Our current policy is to retain all
of our earnings to finance the growth and development of our business.

EQUITY COMPENSATION PLAN INFORMATION

Our equity compensation plan information is provided as set forth in Part III,
Item 11 herein.




ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS

You should read the following discussion in conjunction with our consolidated
financial statements and the related notes and other financial information
appearing elsewhere in this filing. In addition to historical information, the
following discussion and other parts of this document contain forward-looking
information that involves risks and uncertainties. Our actual results could
differ materially from those anticipated by such forward-looking information
due to factors discussed under the sections entitled Item 1. Business -
General and - Risk Factors, and elsewhere in this document.

General

We are a financial holding company previously operating as Little Creek, Inc.
In November 2002, we acquired The Mortgage Store a nationwide mortgage
lender and changed our name to TMSF Holdings, Inc. Prior to the acquisition of
The Mortgage Store, Little Creek, Inc. did not have any significant operational
activity. The following discussion pertains to those of The Mortgage Store, our
wholly owned subsidiary.

We are a nationwide mortgage banker that originates, finances, and sells
conforming and non-conforming mortgage loans secured by single-family
residences.

We originate our loans primarily through independent mortgage brokers across
the United States and, to a lesser extent, through our direct sales force in
our retail offices. We primarily sell our loans in whole loan transactions and
currently do not retain any interest in the servicing of the loans. We may
retain servicing of the loans and securitize our loans in the future.

The following table sets forth our results of operations for the periods
indicated. All figures except number of shares and per share data are in $000.

|                                          |                            |  |            |        |      |  |        |       |  |  |        |       | 
|----------------------------------------- | -------------------------- |  | ---------- | ------ | ---- |  | ------ | ----- |  |  | ------ | ----- | 
|                                          |                            |  | 2002       |        | 2001 |  | 2000  
|                                          |                            |  |            |        |      |  |       
|Revenue                                   |                            |  |            |        |      |  |        |       |  |  |        |      
|                                          | Commission Income          |  |            | 66     |      |  |        | 47    |  |  |        | 24    | 
|                                          | Income from Sales of Loans |  |            | 11,338 |      |  |        | 5,944 |  |  |        | 1,886 | 
|                                          | Mortgage Interest Income   |  |            | 2,255  |      |  |        | 1,007 |  |  |        | 197   | 
|                                          |                            |  |            |        |      |  |        |       |  |  |        |      
|Total Income Income                       |                            |  | 13,659     |        |      |  | 6,998  |       |  |  | 2,107  |      
|Cost of Sale                              |                            |  |            |        |      |  |        |       |  |  |        |      
|                                          | Commission Expense         |  |            | 5,129  |      |  |        | 2,884 |  |  |        | 911   | 
|                                          | Warehouse Interest Expense |  |            | 1,749  |      |  |        | 969   |  |  |        | 210   | 
|                                          | Other Closing Expenses     |  |            | 709    |      |  |        | 386   |  |  |        | 137   | 
|                                          |                            |  |            |        |      |  |        |       |  |  |        |      
|Total Cost of Sales                       |                            |  | 7,587      |        |      |  | 4,239  |       |  |  | 1,258  |      
|                                          |                            |  |            |        |      |  |        |       |  |  |        |      
|Gross Profit                              |                            |  | 6,072      |        |      |  | 2,759  |       |  |  | 849    |      
|                                          |                            |  |            |        |      |  |        |       |  |  |        |      
|Operating Expenses                        |                            |  |            |        |      |  |        |       |  |  |        |      
|                                          | Salaries and Wages         |  |            | 2,875  |      |  |        | 999   |  |  |        | 322   | 
|                                          | Occupancy                  |  |            | 206    |      |  |        | 143   |  |  |        | 53    | 
|                                          | General & Administration   |  |            | 1,753  |      |  |        | 1,263 |  |  |        | 307   | 
|                                          | Loss from REO              |  |            | 218    |      |  |        | 222   |  |  |        | 0     | 
|                                          |                            |  |            |        |      |  |        |       |  |  |        |      
|Total Expenses                            |                            |  | 5,052      |        |      |  | 2,627  |       |  |  | 682    |      
|                                          |                            |  |            |        |      |  |        |       |  |  |        |      
|Income from Operation                     |                            |  | 1,020      |        |      |  | 132    |       |  |  | 167    |      
|Other Income (Losses)                     |                            |  | -9         |        |      |  | -31    |       |  |  | 11     |      
|                                          |                            |  |            |        |      |  |        |       |  |  |        |      
|Income Before Tax                         |                            |  | 1,011      |        |      |  | 101    |       |  |  | 178    |      
|                                          |                            |  |            |        |      |  |        |       |  |  |        |      
|Provision for Income Tax                  |                            |  | 424        |        |      |  | 40     |       |  |  | 44     |      
|                                          |                            |  |            |        |      |  |        |       |  |  |        |      
|Net Income                                |                            |  | 587        |        |      |  | 61     |       |  |  | 134    |      
|                                          |                            |  |            |        |      |  |        |       |  |  |        |      
|Balance Sheet Data:                       |                            |  |            |        |      |  |        |       |  |  |        |      
|Cash and Cash Equivalent                  |                            |  | 732        |        |      |  | 1,249  |       |  |  | 111    |      
|Restricted Cash                           |                            |  | 1,521      |        |      |  | 158    |       |  |  | 118    |      
|Loans Held for sale                       |                            |  | 83,082     |        |      |  | 14,917 |       |  |  | 11,433 |      
|Total Assets                              |                            |  | 86,305     |        |      |  | 16,598 |       |  |  | 12,131 |      
|Total Liabilities                         |                            |  | 82,848     |        |      |  | 14,909 |       |  |  | 11,531 |      
|Preferred Stock                           |                            |  | 0          |        |      |  | 1,493  |       |  |  | 330    |      
|Total Stockholders Equity                |                            |  | 3,457      |        |      |  | 1,690  |       |  |  | 600    |      
|issued and outstanding shares as of 12/31 |                            |  | 14,836,365 |        |      |  | 7,500  |       |  |  | 15,000 |      
|Earning Per Share                         |                            |  | 0.04       |        |      |  | 8.13   |       |  |  | 8.93   |      

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Revenue Model

Our operations generate revenues in three ways:



| |  |  | Income from sales of loans.We generate income from sales of loans
by selling the loans we originate for a premium. This accounts for a
substantial percentage of our revenues.                                                                                    
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Mortgage interest income.We generate mortgage interest income on
loans held for sale from the time we originate the loan until the time
we sell the loan. This mortgage interest income is partially offset by
our borrowing costs under our warehouse facilities.
|
| |  |  | Commission fee income.To a lesser extent we generate commission
fee income from our retail origination and lending activities.                                                                                                                                    

Financial Highlights

Our operations consist primarily of originating loans that we pool and sell in
the secondary markets. We analyze and group our loans together to maximize our
profit from the sale of each class of mortgages. All of our loan sales are
structured as whole loan sales where we dispose of our entire interest in the
loans and produce immediate cash gains. However, in the future we may determine
that other strategies such as securitization or retaining servicing rights may
be more profitable and we may begin to engage in those activities.

Our recent financial highlights include:

     Loan originations. We have increased our loan originations every year since
1999. For 2001 we funded $167.8 million of loans compared to $357.7 million for
2002. Our wholesale channel, which originates loans through independent
mortgage brokers, originated $127.3 million of loans in 2001 and $285.7 million
in 2002.

     Whole loan sales  cash income from sale.To date almost all of the loans
sold by us have generated cash premiums, and only a very small percentage were
sold at a discount. While almost all of the loans originated in 2001 were
non-conforming loans, we originated approximately $164.3 million of conforming
loans in 2002, which accounted for 45% of our originations. The premium pricing
on conforming loans are generally lower than non-conforming loans. The weighted
average premium collected from sales of loans in 2001 was 2.6% compared to 2.4%
in 2002.

Accounting for Our Loan Sales

When we sell our mortgage loans in whole loan sale transactions, we dispose of
our entire interest in the loans. We recognize revenue at the time of the sale
of loans. The revenue consists of pricing premiums from sales less cost of
financing origination of loans. The lender and retail origination fees are also
recognized at the time we sell the loans. Lender fees and origination fees that
are payable to third party brokers and which are paid by borrowers on mortgage
loans held for sale are deferred as a balance sheet item and are recognized as
revenue in the statements of operations when the related loans are sold.

We separately record mortgage interest income on loans we hold from the date of
origination up to the date of sale.

Critical Accounting Policies

The preparation of our financial statements requires us to make estimates and
assumptions. These estimates and assumptions 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. Although we base
our estimates and assumptions on historical experience and on various other
factors that we believe to be reasonable under the circumstances, our
management exercises significant judgment in the final determination of our
estimates. Actual results may differ from these estimates.

Pursuant to our critical accounting policies the following reflect significant
judgments by management:



| |  | Income from sale of loans                  
|- |  | -------------------------------------------
| 
| |  | Provision for losses                       
| 
| |  | Interest rate risk, derivatives and hedging

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Income from Sales of Loans

To date our income from sales of loans has consisted primarily of cash gain
that resulted from whole loan sales. To date, we have sold all of our loans on
a servicing released basis. Currently, we do not retain servicing rights.
However, in the future we may decide to retain the right to service any of the
loans that we have sold, in which case we may also record non-cash sales
related to the value of those servicing rights.

Gain on Sale

Gains or losses resulting from our loan sales are recorded at the time of sale.
At the closing of a sale we remove the mortgage loans held for sale and related
warehouse debt from our books and record the net gain or loss to our income
statement.

Accordingly, our financial results are significantly impacted by the timing of
our loan sales. If we hold a significant pool of loans at the end of a
reporting period, those loans will remain on our balance sheet, along with the
related debt used to fund the loans. The revenue that we generate from those
loans will not be recorded until the subsequent reporting period when we sell
the loans.

A number of factors influence the timing of our loan sales and our targeted
disposition strategy, including the current market demand for our loans,
liquidity needs, and our strategic objectives. We have, from time to time,
delayed the sale of loans to a later period, and may do so again in the future.

Provisions for Losses

We may make market valuation adjustments on certain non-performing loans, other
loans we hold for sale and real estate owned. These adjustments are based upon
our estimate of expected losses and are based upon the value that we could
reasonably expect to obtain from a sale. An allowance for losses on loans held
for sale is recorded in an amount sufficient to maintain adequate coverage for
probable losses on such loans. However, we do not record a reserve for
liabilities associated with loans sold which we may be requested to repurchase
due to breaches of representations and warranties and early payment defaults.
Our estimate of expected losses could increase or decrease if our actual loss
experience or repurchase activity is different than originally estimated, or if
economic factors change the value we could reasonably expect to obtain from a
sale. In particular, if actual losses increase or if values reasonably expected
to be obtained from a sale decrease, the provision for losses would increase.
Any increase in the provision for losses could adversely affect our results of
operations.

Interest Rate Risk, Derivatives and Hedging

We face two primary types of interest rate risk: during the period from
approval of a loan application through loan funding, and on our loans held for
sale from the time of funding to the date of sale. Interest rate risk exists
during the period from approval of a loan application through loan funding and
from the time of funding to the date of sale because the premium earned on the
sale of these loans is partially contingent upon the then-current market rate
of interest for loans as compared to the contractual interest rate of the
loans. In the past we have attempted to minimize such risk through forward
commitments and other such strategies.

As part of our interest rate management process, we intend to use derivative
financial instruments such as options and futures. The use of derivatives is
intended to mitigate volatility of earnings associated with fluctuations in the
gain on sale of loans due to changes in the current market rate of interest. We
do not intend to use derivatives to speculate on interest rates. For derivative
financial instruments designated as hedge instruments, we will evaluate the
effectiveness of these hedges against the mortgage loans being hedged to ensure
that there remains a highly effective correlation in the hedge relationship. To
hedge the adverse effect of interest rate changes on the fair value of mortgage
loans held for sale we will use derivatives as fair value hedges under SFAS No.
133. Once the hedge relationship is established, the realized and unrealized
changes in fair value of both the hedge instrument and mortgage loans will be
recognized in the period in which the changes occur. The net amount recorded in
our consolidated statements of operations will be referred to as hedge
ineffectiveness. Any change in the fair value of mortgage loans recognized as a
result of hedge accounting will be reversed at the time we sell the mortgage
loans. This will result in a correspondingly higher or lower gain on sale
revenue at such time. For derivative financial instruments not designated as
hedge instruments, realized and unrealized changes in fair value will be
recognized in the period in which the changes occur or when such instruments
are settled.

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The following table sets forth our results of operations as a percentage of
total revenue for the years ended December 31:

|                      |                            |  |        |       |      |  |        |       |   |  |        |       |  
|--------------------- | -------------------------- |  | ------ | ----- | ---- |  | ------ | ----- | - |  | ------ | ----- | -
|                      |                            |  | 2002   |       | 2001 |  | 2000  
|Revenue               |                            |  |        |       |      |  |        |       |   |  |        |      
|                      | Commission Income          |  |        | 0.48  | %    |  |        | 0.67  | % |  |        | 1.14  | %
|                      | Income from Sales of Loans |  |        | 83.01 | %    |  |        | 84.94 | % |  |        | 89.51 | %
|                      | Mortgage Interest Income   |  |        | 16.51 | %    |  |        | 14.39 | % |  |        | 9.35  | %
|                      |                            |  |        |       |      |  |        |       |   |  |        |      
|Total Income Income   |                            |  | 100.00 | %     |      |  | 100.00 | %     |   |  | 100.00 | %    
|Cost of Sale          |                            |  |        |       |      |  |        |       |   |  |        |      
|                      | Commission Expense         |  |        | 37.55 | %    |  |        | 41.21 | % |  |        | 43.24 | %
|                      | Warehouse Interest Expense |  |        | 12.80 | %    |  |        | 13.85 | % |  |        | 9.97  | %
|                      | Other Closing Expenses     |  |        | 5.19  | %    |  |        | 5.52  | % |  |        | 6.50  | %
|                      |                            |  |        |       |      |  |        |       |   |  |        |      
|Total Cost of Sales   |                            |  | 55.55  | %     |      |  | 60.57  | %     |   |  | 59.71  | %    
|                      |                            |  |        |       |      |  |        |       |   |  |        |      
|Gross Profit          |                            |  | 44.45  | %     |      |  | 39.43  | %     |   |  | 40.29  | %    
|                      |                            |  |        |       |      |  |        |       |   |  |        |      
|Operating Expenses    |                            |  |        |       |      |  |        |       |   |  |        |      
|                      | Salaries and Wages         |  |        | 21.05 | %    |  |        | 14.28 | % |  |        | 15.28 | %
|                      | Occupancy                  |  |        | 1.51  | %    |  |        | 2.04  | % |  |        | 2.52  | %
|                      | General & Administration   |  |        | 12.83 | %    |  |        | 18.05 | % |  |        | 14.57 | %
|                      | Loss from REO              |  |        | 1.60  | %    |  |        | 3.17  | % |  |        | 0.00  | %
|Total Expenses        |                            |  | 36.99  | %     |      |  | 37.54  | %     |   |  | 32.37  | %    
|                      |                            |  |        |       |      |  |        |       |   |  |        |      
|Income from Operation |                            |  | 7.47   | %     |      |  | 1.89   | %     |   |  | 7.93   | %    
|Other Income (Losses) |                            |  | -0.07  | %     |      |  | -0.44  | %     |   |  | 0.52   | %    
|                      |                            |  |        |       |      |  |        |       |   |  |        |      
|Income Before Tax     |                            |  | 7.40   | %     |      |  | 1.44   | %     |   |  | 8.45   | %    
|                      |                            |  |        |       |      |  |        |       |   |  |        |      

Results of operations for 2002 compared to 2001

Revenue

Total Revenue.Total revenue increased 95% from $7.0 million for 2001 to
$13.7 million for 2002. This increase was due to increases in income from sales
of loans of $5.4 million and mortgage interest income of $1.2 million.

Income from Sales of Loans.Income from sales of loans increased 91% from $5.9
million for 2001 to $11.3 million for 2002 due to higher whole loan sales
volume in 2002 as compared to 2001. Total whole loan sales increased 84.7% from
$157.6 million for 2001 to $289.9 million for 2002. This increase was due to
increased loan originations, as well as our decision to retain loans from the
prior period, which we sold in the first quarter of 2002. The weighted average
premium for whole loan sales was 2.6% for 2001 and 2.4% for 2002. This change
is due to increase in origination and sale of conforming mortgages as a
percentage of our total origination. Premiums on conforming loans are generally
lower than those of non-conforming and expanded criteria loans.

Interest Income on Loans Held for Sale. Mortgage interest income increased 125%
from $1 million for 2001 to $2.25 million for 2002. The increase in interest
income was due to an increase in the average inventory of loans held for sale
in 2002. Our average inventory of mortgage loans increased as we increased loan
production volume and intentionally extended the holding period to create
larger pools in order to sell each pool at the best time to maximize the premium we
collect.

Commission Fee Income. To a lesser extent we earn commission fees on loans that
we broker out to other lenders. Commission income for 2002 increased 40% to
$66,000 from $47,000 for 2001.

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Cost of Sales

Commission Expense.Commission expenses for loans sold in 2002 increased 78% to
$5.1 million from $2.9 million in 2001. This increase was due to an increased
volume of origination and sales of loans. Commission expense is recognized at
the time of sale to correspond with the recognition of income for the same
loan. The commission paid for loans which are held for sale are included in the value of Loans Held for
Sale on our balance sheet. As of December 31, 2002 we had paid $1.1 million
commissions for loans held for sale compared to $216,000 as of December 31,
2001. The increase was due to higher volume of loans funded and held for sale
as of the respective dates.

Warehouse Interest Expense.Warehouse interest expense represents the interest
incurred on all financing associated with use of our warehouse credit
facilities for loan origination. Interest expense increased 80% to $1.7 million
for 2002 from $969,000 for 2001. The increase in interest expense was due to
the increase in our volume of borrowing partially offset by lower interest
rates. Our average warehouse borrowing increased from $12.6 million for 2001 to
$31 million for 2002 consistent with the increase in the average inventory of
loans held for sale. We calculate our average borrowing as the sum of warehouse
financing for each loan multiplied by number of days the loan was held, divided
by number of days in the period under consideration. The interest rate for our
warehouse financing is a variable rate equal to prime rate plus 1%. From
January to December 2002, the prime rate remained constant at 4.75% and was
reduced to 4.25% in December 2002. In 2001 the prime rate was progressively
lowered from 9.50% in January to 5.0% in December.

Other Closing Expenses.Other closing expenses related to closing of loans,
including credit check expenses, appraisal and appraisal review fees and
closing expenses, increased 84% to $709,000 for 2002 from $386,000 for 2001.

Operating Expenses

Total Operating Expenses. Total operating expenses increased 92% from $2.7
million for 2001 to $5.1 million for 2002. The increase was the result of
higher salaries, wages, and benefits expense, and increases in other variable
operating expenses associated with growth in loan volume and in the number of
employees.

Salaries and Wages. Salaries and wages increased 190% from $1 million for 2001
to $2.9 million for 2002. The increase was due to growth in the number of
employees, as well as higher commission and bonus expenses related to loan
production. The total number of employees increased by 355% from 18 at December
31, 2001 to 82 at December 31, 2002.

Occupancy.Occupancy expense increased 44% from $143,000 for 2001 to $206,000
for 2002. The increase resulted from an expansion in leased office space. In
September 2002, we moved our offices to a new location to accommodate our
growth and future expansion at a lower cost per square foot.

General and Administrative. General and administrative expenses increased 38%
from $1.3 million for 2001 to $1.8 million for 2002. This increase was due to
an increase in loan origination volume and an increase in the number of
employees.

Loss from Real Estate Owned.In 2002 we completed foreclosure sales of two
repurchased loans. Total losses from these two loans amounted to $311,000 of
which $195,000 was recognized in 2001 and the balance was recorded as losses in
2002. In addition, in 2002 we recorded $102,000 in losses arising from other
obligations to repurchase defaulted loans.

To date, we have sold all of our loans for a cash price with servicing rights
released. Under terms of our agreements with various purchasers, we make
certain representations and warranties to the purchaser. For example we agree
to repurchase loans where borrowers default in their payments within 90 days
from date of transfer of servicing.

As of December 31, 2002 we had not made any additional provision for losses.
However, we may be required to repurchase loans in the future and will make
additional provisions when we are able to effectively assess future losses.

Provision for Income Tax.Provision for income tax increased from $40,000 for
2001 to $424,000 for 2002. This increase was a result of our increase in income
before taxes from $101,000 for 2001 to $1 million for 2002.

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Results of operations for 2001 compared to 2000

Revenue

Total Revenue.Total revenue increased from $2.1 million for 2000 to $7.0
million for 2001. This increase was due to increases in income from sales of
loans and mortgage interest income.

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Income from Sales of Loans.Income from sales of loans increased from $1.9
million for 2000 to $5.9 million for 2001 due to higher whole loan sales
volume. Prior to January 2001 we were funding and selling loans on a flow
basis, which means that we would originate loans only after we had received a
commitment from an investor to purchase these loans, and would sell them to the
investor within a short period of time. With a larger warehouse facility that
we had secured in December 2000, we were able to fund loans and pool them
together that would be sold at a higher pricing premium. This change in our
loan sales resulted in significant change in our income from
sales of whole loans in 2001. The increased warehouse credit facility also
contributed to our increased volume of origination and sales. Total whole loan
sales increased 365% from $42.9 million for 2000 to $157.6 million for 2001.

Mortgage Interest Income. Mortgage interest income increased from $197,000 for
2000 to $1 million for 2001. The increase was due to an increase in the average
inventory of loans held for sale in 2001.

Commission Fee Income. Commission fee income during the twelve months ending
December 31, 2001 increased 196% to $47,000 from 24,000 for the comparable in
2000.

Cost of Sales

Commission Expense.Commission expenses for loans sold in 2001 increased to
$2.9 million from $911,000 in 2000. This increase was due to increased volume
of origination and sales of loans.

Warehouse Interest Expense.Warehouse interest expense increased to $969,000
for 2001 from $210,000 for 2000. The increase was due to the increase in our
volume of borrowing and was partly offset by lower borrowing cost in 2001. Our
average warehouse borrowing increased from $2.8 million in 2000 to $12.6
million in 2001. While the prime rate was progressively increased from 8.50% in
January 2000 to 9.50% in December, it was lowered from 9.50% in January 2001 to
5.0% in December.

Other Closing Expenses. Other closing expenses, including credit check
expenses, appraisal and appraisal review fees and closing expenses, increased
to $386,000 for 2001 from $137,000 for 2000.

Operating Expenses

Total Operating Expenses. Total operating expenses increased from $682,000 for
the 2000 to $2.6 million for 2001. The increase was the result of higher
salaries, wages, and benefits expense, and increases in other variable
operating expenses associated with growth in loan volume and in the number of
employees.

Salaries and Wages. Salaries and wages increased from $322,000 for 2000 to
$999,000 for 2001. The increase was due to growth in the number of employees,
as well as higher commission and bonus expenses related to loan production
volume and profits.

Occupancy.Occupancy expenses increased from $53,000 for 2000 to $143,000 for
2001. The increase resulted from an expansion in leased office space.

General and Administrative. General and administrative expenses increased from
$307,000 for 2000 to $1.3 million for 2001. This increase resulted from costs
associated with increase in loan origination volume and an increase in the
number of employees, plus additional consulting fees in connection with our
reverse merger transaction.

Loss from Real Estate Owned. For the period ending December 31, 2001 we posted
a loss of $222,663 for Real Estate Owned including $195,000 provision for
losses against two loans we were required to repurchase. We had not recorded
any loss from sales of Real Estate Owned in 2000.

Provision for Income Tax.Provision for income taxes decreased from $44,000 for
2000 to $40,000 for 2001. This decrease was due to lower taxable income in
2001.

Liquidity and capital resources

As a mortgage banking company, our primary cash requirements include the
funding of (1) mortgage loan originations, including principal, as well as
origination costs such as commissions and broker premiums, (2) interest expense
on and repayment of principal on warehouse credit facilities, (3) operational
expenses, and (4) tax

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payments. We fund these cash requirements with cash
received from (1) loan sales, (2) borrowings under warehouse credit facilities
(3) mortgage interest collections on loans held for sale, (4) points and fees
collected from the origination of loans, and (5) private sales of equity and
debt securities.

We use warehouse borrowing to finance a significant portion of our loan
originations. It is our intention to utilize maximum allowable leverage ratio,
defined as our total liabilities divided by our stockholders equity, for our
warehouse financing.

Our liquidity strategy is to maintain sufficient and diversified warehouse
credit facilities to finance our mortgage loan originations, to maintain strong
relationships with a diverse group of whole loan purchasers, and to establish
the ability to execute our own securitizations. This provides us with the
ability to finance our growing origination operations and to maximize our
realization of the value of loans we originate.

During 2002, we financed our operations through increased warehouse borrowing,
additional capitalization, and cash income generated from our operations. In
the future, realization of our expansion plans will depend on our ability to
secure sufficient credit facilities to fund larger volumes of loans. The extent
of this borrowing in turn depends on our net worth and requires certain
restricted cash deposits to be maintained with the lender. In addition to cash
earnings generated from our operations, we intend to increase our cash and net
worth through common stock offerings of our equity or debt.

We maintain an unsecured bank line of credit without a stated expiration date.
We may borrow up to $50,000. Borrowings bear interest at the banks prime rate
(4.75% at both December 31, 2001 and June 30, 2002), plus 2.5% annum. The bank
line of credit was unused at December 31, 2002 and 2001.

In 2001 we issued 1000 shares of preferred stock Series A, 100 shares of
preferred stock Series B, and 1000 shares of preferred stock Series C for total
cash proceeds of $1,495,000. During first half of 2002 we issued an additional
750 shares of our preferred stock Series A and 1000 shares of preferred stock
Series C for cash proceeds of $1,206,250. In third quarter of 2002 we redeemed
all outstanding shares of our Series A, B and C Preferred Stock for $701,250
cash and $2.0 million promissory notes.

In November 2002, we sold 5,000,000 shares of our Common Stock in a private
offering at a price per share of $0.60 to four stockholders, including
2,000,000 shares to one of our directors. Of the 5,000,000 shares we sold,
3,333,333 were issued in exchange for $2.0 million principal amount of notes
that were previously issued in consideration for the redemption of The Mortgage
Stores preferred stock and 1,666,667 were issued for a cash payment of $1.0
million.

As of December 31, 2002, we had two warehouse credit facilities to finance the
funding of our loan originations. After funding the loans, we sell our mortgage
loans within two or three months of origination and pay down the warehouse
credit facilities with the proceeds. Both of these warehouse facilities were
structured as repurchase agreements, where the warehouse will provide the funds
for origination of loans and will hold the collateral until we repurchase the
loans to sell them to the investors. Under terms of such an agreement, the
investor would send the purchase proceeds directly to the warehouse lender,
where the principal borrowing plus accrued interest and fees are deducted
before the balance is forwarded to us.

One of our warehouse lenders is ceasing its operation as of April 1, 2003. We
are negotiating new facilities with separate lenders with total credit line
availability exceeding that of the terminating line. We believe that these new
lines will become available in the second quarter of 2003. One of these lines
will be a committed line, which means that the lender is obligated to fund up
to the committed amount subject to our meeting various financial and other loan
covenants. In the future, one or more of the warehouse facilities we use may be
uncommitted, which means that the lender may fund the uncommitted amount at its
discretion. The warehouse credit facilities contain a sub-limit for various
categories of loans such as wet funding (loans for which the collateral
custodian has not yet received the related loan documents) or sub-prime and
Alt-A loans. Our warehouse facilities generally have a one-year term.

Our current warehouse credit facilities accrue interest at a rate based upon
prime rate plus a specified spread currently 1%. As of December 31, 2002 we
were not in compliance with the minimum net worth requirement with one of our
warehouse lenders. Subsequent to year end, we increased our net worth and are
now in compliance with all requirements of our lenders. We have received a
waiver of the non compliance condition at December 31, 2002.

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The following table lists terms and material information about each of our
warehouse facilities as of December 31, 2002.

|                            |  |                     |            |             |  |  |            | 
|--------------------------- |  | ------------------- | ---------- | ----------- |  |  | ---------- | 
|Warehouse Lender            |  | IWF                 |            | IWLG       
|                            |  |                     |            |            
|Total Facility Amount       |  |                     | 20,000,000 |             |  |  | 50,000,000 | 
|Permissible Temporary Bulge |  |                     | 0          |             |  |  | 20,000,000 | 
|Expiration Date             |  | Upon 45 days notice |            | Upon notice

Imperial Warehouse Finance (IWF).Our relationship with IWF began in December
2000. At December 31, 2002, the outstanding balance under this facility was
$15.8 million. IWF will discontinue its operation as of April 1, 2003.
Sunsequent to year end we have settled all of our outstanding loans on this
warehouse line.

IMPAC Warehouse Lending Group (IWLG).Our relationship with IMPAC Warehouse
Lending Group began in 1996. The financing for mortgage loans under this
facility includes allowance for additional funding for amounts of loans
committed to sale to IMPAC Funding Corporation a sister company of IWLG. As of
December 31, 2002 our outstanding balance under this facility was $65 million.

Our warehouse and other credit facilities contain customary covenants including
minimum liquidity, profitability and net worth requirements, and limitations on
other indebtedness. If we fail to comply with any of these covenants or
otherwise default under a facility, the lender has the right to terminate the
facility and require immediate repayment that may require sale of the
collateral at less than optimal terms.

Subject to the various uncertainties described above, and assuming that we will
be able to successfully execute our liquidity strategy, we anticipate that our
liquidity, credit facilities and capital resources will be sufficient to fund
our operations for the foreseeable future.

Operating Leases

At December 31, 2001 and December 31, 2002, the minimum future lease payments
under non-cancelable operating leases were as follows:

|                     |  |                   |      |                        |  |  |           | 
|-------------------- |  | ----------------- | ---- | ---------------------- |  |  | --------- | 
|Payments Due by Year |  | December 31, 2002 |      |                        |  | 
|                     |  |                   |      | (dollars in thousands)
|                     |  |                   | 2003 |                        |  |  | 273,587   | 
|                     |  |                   | 2004 |                        |  |  | 271,032   | 
|                     |  |                   | 2005 |                        |  |  | 254,259   | 
|                     |  |                   | 2006 |                        |  |  | 240,300   | 
|                     |  |                   | 2007 |                        |  |  | 160,200   | 
|                     |  |                   |      |                        |  |  |           | 
|Total                |  |                   |      |                        |  |  | 1,199,378 | 

Quantitative And Qualitative Market Risk Disclosure

Market risks generally represent the risk of loss that may result from the
potential change in the value of a financial instrument due to fluctuations in
interest and foreign exchange rates and in equity and commodity prices. Our
market risk relates primarily to interest rate fluctuations. We may be directly
affected by the level of and fluctuations in interest rates, which affects the
spread between the rate of interest received on our mortgage loans and the
related financing rate. Our profitability could be adversely affected during
any period of unexpected or rapid changes in interest rates, by impacting the
value of loans held for sale and loans sold with retained interests.

The objective of interest rate risk management is to control the effects that
interest rate fluctuations have on the value of our assets and liabilities. Our
management of interest rate risk is intended to mitigate the volatility of
earnings associated with fluctuations in the unrealized gain (loss) on the
mortgage-related securities and the market value of loans held for sale due to
changes in the current market rate of interest.

We use several tools and risk management strategies to monitor and address
interest rate risk. Such tools allow us to monitor and evaluate our exposure to
these risks and to manage the risk profile to our loan portfolio in response to
changes in the market. We cannot assure you, however, that we will adequately
offset all risks associated with our loan portfolio.

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As part of our interest rate management process, we may in the future use
derivative financial instruments such as financial futures and options,
interest rate swaps and financial forwards. We will designate certain
derivative financial instruments used to hedge our mortgage loans held for sale
as hedge instruments under SFAS No. 133. At trade date these instruments and
their hedge relationship will be identified, designated and documented. For
derivative financial instruments designated as hedge instruments, we will
evaluate the effectiveness of these hedges
against the mortgage loans being hedged to ensure that there remains a highly
effective correlation in the hedge relationship. Since our concern with
interest rates is the potential change in fair market value of the loans, we
will treat these as fair value hedges under SFAS No. 133. Once the hedge
relationship is established, the realized and unrealized changes in fair value
of both the hedge instruments and mortgage loans will be recognized in the
consolidated statements of operations in the period in which the changes occur.
Any net amount recorded in the consolidated statements of operations will be
referred to as hedge ineffectiveness.

For derivative financial instruments not designated as hedge instruments,
realized and unrealized changes in fair value are recognized in the
consolidated statements of operations in the period in which the changes occur
or when such instruments are settled.

Interest Rate Simulation Sensitivity Analysis

Changes in market interest rates affect our gain (loss) from sales of mortgage
loans held for sale and the fair value of our mortgage-related securities and
related derivatives when we engage in such securitization strategy.

As of December 31, 2002 most of our loans held for sale were forward committed
to investors. Increases in interest rate would have adversely affected less
than $10 million of loans held. Likewise, any decrease in interest rates would
have had a positive impact on our gain from sales of the same amount of
uncommitted loans.

The following table summarizes impact of  100 basis points (bps), -50 bps, 50
bps and 100 bps change in the prevailing market rates on the pricing premiums
we would collect from sales of these loans, compared to no change in prevailing
rates. Since we do not recognize the revenue until loans are sold, the impact
of interest rate change will be on our future income from uncommitted loans.

|                                                        |  |  |      |  |  |  |     |  |  |  |   |  |  |  |      |  |  |  |      | 
|------------------------------------------------------- |  |  | ---- |  |  |  | --- |  |  |  | - |  |  |  | ---- |  |  |  | ---- | 
|Change in Interest Rate (bps)                           |  |  | -100 |  |  |  | -50 |  |  |  | 0 |  |  |  | 50   |  |  |  | 100  | 
|Change in Revenue from sale
of Uncommitted Loans ($000) |  |  | 250  |  |  |  | 125 |  |  |  | 0 |  |  |  | -125 |  |  |  | -250 | 

Inflation

Inflation affects us most significantly in the area of loan originations by
affecting interest rates. Interest rates normally increase during periods of
high inflation (or in periods when the Federal Reserve Bank attempts to prevent
inflation) and decrease during periods of low inflation.

Newly Issued Accounting Pronouncements

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.
SFAS No. 145 updates, clarifies, and simplifies existing accounting
pronouncements. This statement rescinds SFAS No. 4, which required all gains
and losses from extinguishment of debt to be aggregated and, if material,
classified as an extraordinary item, net of related income tax effect. As a
result, the criteria in APB No. 30 will now be used to classify those gains and
losses. SFAS No. 64 amended SFAS No. 4 and is no longer necessary as SFAS No.
4 has been rescinded. SFAS No. 44 has been rescinded as it is no longer
necessary. SFAS No. 145 amends SFAS No. 13 to require that certain lease
modifications that have economic effects similar to sale-leaseback transactions
be accounted for in the same manner as sale-lease transactions. This statement
also makes technical corrections to existing pronouncements. While those
corrections are not substantive in nature, in some instances, they may change
accounting practice. We do not expect adoption of SFAS No. 145 to have a
material impact, if any, on our financial position or results of operations.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. This statement addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (including Certain Costs Incurred in a Restructuring).

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This
statement requires that a liability for a cost associated with an exit or
disposal activity be recognized when the liability is incurred. Under EITF
Issue 94-3, a liability for an exit cost, as defined, was recognized at the
date of an entitys commitment to an exit plan. The provisions of this
statement are effective for exit or disposal activities that are initiated
after December 31, 2002 with earlier application encouraged. This statement is
not applicable to us.

In October 2002, the FASB issued SFAS No. 147, Acquisitions of Certain
Financial Institutions. SFAS No. 147 removes the requirement in SFAS No. 72
and Interpretation 9 thereto, to recognize and amortize any excess of the fair
value of liabilities assumed over the fair value of tangible and identifiable
intangible assets acquired as an unidentifiable intangible asset. This
statement requires that those transactions be accounted for in accordance with
SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other
Intangible Assets. In addition, this statement amends SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, to include
certain financial institution-related intangible assets. This statement is not
applicable to us.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure, an amendment of SFAS No. 123. SFAS
No. 148 provides alternative methods of transition for a voluntary change to
the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends the disclosure requirements of
SFAS No. 123 to require more prominent and more frequent disclosures in
financial statements about the effects of stock-based compensation. This
statement is effective for financial statements for fiscal years ending after
December 15, 2002. SFAS No. 148 will not have any impact on our financial
statements as we do not have any intention to change to the fair value method.




ITEM 7. FINANCIAL STATEMENTS

The information required by this Item 7 is incorporated by reference to
TMSF Holdings, Inc.s Consolidated Financial Statements and Independent
Auditors Report beginning at page F-1 of this Form 10-K.




ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

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PART III




ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this Item 9 is hereby incorporated by
reference to the Registrants definitive proxy statement, to be filed
pursuant to Regulation 14A within 120 days after the end of the Registrants 2002 fiscal year.




ITEM 10. EXECUTIVE COMPENSATION

The information required by this Item 10 is hereby incorporated by
reference to the Registrants definitive proxy statement, to be filed
pursuant to Regulation 14A within 120 days after the end of the Registrants 2002 fiscal year.




ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this Item 11 is hereby incorporated by
reference to the Registrants definitive proxy statement, to be filed
pursuant to Regulation 14A within 120 days after the end of the Registrants 2002 fiscal year.




ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item 12 is hereby incorporated by
reference to the Registrants definitive proxy statement, to be filed
pursuant to Regulation 14A within 120 days after the end of the Registrants 2002 fiscal year.




ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K

(a) Exhibits

|               |  |                                                                                                                                                                                                                                             
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Exhibit                                                                                                                                                                                                                      
|               |  |                                                                                                                                                                                                                                             
|2              |  | Plan of Reorganization and Stock Exchange Agreement (incorporated by
reference to Exhibit 2 of the Registrants Current Report on Form 8-K filed with the Securities and
Exchange Commission on November 20, 2002).                         
|               |  |                                                                                                                                                                                                                                             
|3.1            |  | Certificate of Incorporation of the Registrant (incorporated by reference
to Exhibit 3.1 of the Registrants Current Report on Form 8-K filed
with the Securities and Exchange Commission on November 20, 2002).                            
|               |  |                                                                                                                                                                                                                                             
|3.2            |  | Certificate of Amendment of Certificate of Incorporation of the
Registrant (incorporated by reference to Exhibit 3.3 of the Registrants
Current Report on Form 8-K filed with the Securities and Exchange
Commission on November 20, 2002).
|               |  |                                                                                                                                                                                                                                             
|3.3            |  | Bylaws of the Registrant (incorporated by reference to Exhibit 3.4 of the Registrants Current Report
on Form 8-K/A filed with the Securities and Exchange Commission on December 6, 2002).                                                 
|               |  |                                                                                                                                                                                                                                             
|4.1            |  | Specimen Common Stock Certificate.                                                                                                                                                                                                          
|               |  |                                                                                                                                                                                                                                             
|4.2            |  | Registration Rights Agreement dated November 29, 2002 among the Registrant and certain shareholders.                                                                                                                                        

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|               |  |                                                                                                                                                                              
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Exhibit                                                                                                                                                       
|               |  |                                                                                                                                                                              
|4.2(a)         |  | List of Registrants shareholders who entered into Registration Rights
Agreement referenced in Exhibit 4.2 with the Registrant.                                              
|               |  |                                                                                                                                                                              
|4.3            |  | Registration Rights Agreement dated December 6, 2002 between the Registrant
and Raymond Eshaghian.                                                                           
|               |  |                                                                                                                                                                              
|10.1           |  | 2003 Stock Option, Deferred Stock and Restricted Stock Option Plan.                                                                                                          
|               |  |                                                                                                                                                                              
|10.2           |  | Lease Agreement dated August 31, 2002 between The Mortgage Store, a
subsidiary of the Registrant, and
Roosevelt Building.                                                    
|               |  |                                                                                                                                                                              
|10.3           |  | Consulting Services Agreement dated October 23, 2001 between The Mortgage
Store, a subsidiary of the
Registrant, and H. Wayne Snavely.                                       
|               |  |                                                                                                                                                                              
|21.1           |  | Subsidiaries of Registrant                                                                                                                                                   
|               |  |                                                                                                                                                                              
|24.1           |  | Power of Attorney (included on signature page)                                                                                                                               
|               |  |                                                                                                                                                                              
|99             |  | Certification by Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b)  Reports on Form 8-K

During the three-month period ending December 31, 2002, the Registrant filed
four current reports on Form 8-K.

On October 15, 2001 under Items 7 and 9  Filing of press release as an exhibit
announcing the filing with the Securities and Exchange Commission on October 4,
2002 of a Definitive Information Statement regarding (i) the Registrants
change of domicile from the State of Utah to the State of Delaware, (ii) the
acquisition of The Mortgage Store Financial, Inc., a California corporation
(Mortgage Store), pursuant to the terms of a Plan of Reorganization and Stock
Exchange Agreement dated April 5, 2002, (iii) the election of the current
members of the Board of Directors of the Mortgage Store to serve as the
directors of the Registrant following the closing of the reorganization and
(iv) the change of the name of the Registrant following the closing of the
reorganization to TMSF Holdings, Inc.

On November 20, 2002 under Item 1  Changes in Control of the Registrant.
Regarding the completion of the Plan of Reorganization and Stock Exchange
Agreement effective as of November 6, 2002, which had previously been entered
into as of April 5, 2002, pursuant to which (i) the Registrants domicile
changed from the State of Utah to the State of Delaware, (ii) the Mortgage
Store became a wholly-owned subsidiary of the Registrant and (iii) the
Registrants name changed from Little Creek, Inc. to TMSF Holdings, Inc. and
(iv) the sole stockholder of the Mortgage Store exchanged his shares of the
Mortgage Stores common stock for 9,500,000 shares of the Registrants common
stock, which then represented approximately 96.6% of the Registrants
outstanding common stock. Further, under Item 2  Acquisition or Disposition
of Assets. Regarding a description of the Registrants planned business and
new management. Further, under Item 5  Other Events. Regarding the filing of
a Certificate of Incorporation on October 30, 2002 and the subsequent filing of
a Certificate of Ownership and Merger with the State of Delaware that
effectuated the Registrants change of domicile, and the filing of a
Certificate of Amendment of Certificate of Incorporation that effectuated the
Registrants change of name, effective as of November 2, 2002. Further, under
Item 6  Resignation of Registrants Directors. Regarding the resignation of
Messrs. Jenson, Howells and Doolin, who comprised all of the Registrants
directors and executive officers prior to the closing of the reorganization,
and the appointment of the Registrants current directors and executive
officers, Raymond Eshaghian, H. Wayne Snavely and Massoud Yashouafar, effective
as of November 6, 2002. Further, under Item 7  Financial Statements and
Exhibits. Reference to financial statements and pro forma financial statements
of the Registrant and the Mortgage Store and filing of the Plan of
Reorganization and Stock Exchange Agreement, the Certificate of Incorporation,
the Certificate of Ownership and Merger and the Certificate of Amendment of
Certificate of Incorporation discussed herein as exhibits.

On December 6, 2002 under Items 1, 2, 5, 6 and 7. Amending the current report on
Form 8-K filed on November 20, 2002 to (i) correctly state the effective date
of the Plan of Reorganization and Stock Exchange Agreement as of

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November 4, 2002, (ii) include the age of H. Wayne Snavely, who was appointed
as a director of the Registrant pursuant to the reorganization and (iii) file
the Registrants bylaws as an exhibit.

On December 17, 2002 under Item 5  Other Events. Regarding the sale and
issuance on November 29, 2002 of an aggregate of 5,000,000 shares of the
Registrants common stock at a price of $0.60 per share in a private offering
to four accredited investors pursuant to Regulation D of the Securities Act of
1933 in exchange for $2,000,000 principal amount of notes that was previously
issued by the Mortgage Store, a wholly-owned subsidiary of the Registrant, to
affiliates of the investors and a cash payment of $1,000,000 that to be used
for general corporate purposes including working capital. Further, under Item
8  Change in Fiscal Year. Regarding the election by the Registrants Board of
Directors on December 6, 2002 to change the Registrants fiscal year-end from
July 31 to December 31, beginning on December 21, 2002.




ITEM 14. CONTROLS AND PROCEDURES



| | (a) |  | Evaluation of disclosure controls and procedures
| | --- |  | ------------------------------------------------

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The term disclosures controls and procedures refers to the controls and
procedures of a company that are designed to ensure that information required
to be disclosed by a company in the reports that it files under Rules 13a 
14 of the Securities and Exchange Act of 1934 (the Exchange Act) is
recorded, processed, summarized and reported within the required time
periods. Within 90 days prior to the date of filing this report (the
Evaluation Date), we carried out an evaluation under the supervision and
with participation of our Chief Executive Officer and Chief Financial Officer
of the effectiveness of our disclosure controls and procedures. Based on
that evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that, as of the Evaluation Date, such controls and procedures were
effective in ensuring that required information will be disclosed on a timely
basis in our periodic reports filed under the Exchange Act.



| | (b) |  | Changes in internal control
| | --- |  | ---------------------------

| |                                                                                              
| | ---------------------------------------------------------------------------------------------
| | There were no significant changes to our internal controls subsequent to the
Evaluation Date.




ITEM 15. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item 15 is hereby incorporated by
reference to the Registrants definitive proxy statement, to be filed
pursuant to Regulation 14A within 120 days after the end of the Registrants 2002 fiscal year.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Los
Angeles, State of California, on the 31st day of March, 2003.

| |  |                    |  |                                       
| |  | ------------------ |  | --------------------------------------
| |  | TMSF HOLDINGS, INC
|
| |  |                    |  |                                       
| |  | by                 |  | /S/ RAYMOND ESHAGHIAN                 
| |  |                    |  |                                       
| |  |                    |  | Raymond EshaghianChairman of the Board

POWER OF ATTORNEY

We, the undersigned directors and officers of TMSF Holdings, Inc., do
hereby constitute and appoint Raymond Eshaghian and Masoud Najand, or either of
them, our true and lawful attorneys and agents, to do any and all acts and
things in our name and behalf in our capacities as directors and officers and
to execute any and all instruments for us and in our names in the capacities
indicated below, which said attorneys and agents, or either of them, may deem
necessary or advisable to enable said corporation to comply with the Securities
Exchange Act of 1934, as amended, and any rules, regulations, and requirements
of the Securities and Exchange Commission, in connections with this report,
including specifically, but without limitation, power and authority to sign for
us or any of us in our names and in the capacities indicated below, any and all
amendments to this report, and we do hereby ratify and confirm all that the
said attorneys and agents, or either of them, shall do or cause to be done by
virtue hereof.

Pursuant to the requirements of the Securities Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.

|                                           |  |                                                                        |  |               
|------------------------------------------ |  | ---------------------------------------------------------------------- |  | --------------
|Signature                                  |  | Title                                                                  |  | Date          
|                                           |  |                                                                        |  |               
|/S/ RAYMOND ESHAGHIAN

Raymond Eshaghian   |  | Chairman of the Board, Chief
Executive Officer, Secretary
and Director |  | March 31, 2003
|                                           |  |                                                                        |  |               
|/S/ MASOUD NAJAND

Masoud Najand           |  | Chief Financial Officer                                                |  | March 31, 2003
|                                           |  |                                                                        |  |               
|/S/ MASSOUD YASHOUAFAR

Massoud Yashouafar |  | Director                                                               |  | March 31, 2003
|                                           |  |                                                                        |  |               
|H. Wayne Snavely                           |  | Director                                                               |  |               

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CERTIFICATION

I, Raymond Eshaghian, certify that:

1. I have reviewed this annual report on Form 10-KSB for the year ended
December 31, 2002 of TMSF Holdings, Inc.

2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the
period covered by this annual report.

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
annual report.

4. The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:



| | a. |  | designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this annual report is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this annual report (the Evaluation
Date); and                                                                                                  
|
| | c. |  | presented in this annual report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date.                                                                                                                        

5. The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and the
audit committee of registrants board of directors (or persons performing
the equivalent function):



| | a. |  | all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrants ability to record, process, summarize and report
financial data and have identified for the registrants auditors
any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls.                                                                                                                                            

6. The registrants other certifying officers and I have indicated in
this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.

/s/ Raymond Eshaghian
Raymond Eshaghian
Chief Executive Officer
March 31, 2003

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CERTIFICATION

I, Masoud Najand, certify that:

1. I have reviewed this annual report on Form 10-KSB for the year ended
December 31, 2002 of TMSF Holdings, Inc.

2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the
period covered by this annual report.

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
annual report.

4. The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:



| | a. |  | designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this annual report is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this annual report (the Evaluation
Date); and                                                                                                  
|
| | c. |  | presented in this annual report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date.                                                                                                                        

5. The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and the
audit committee of registrants board of directors (or persons performing
the equivalent function):



| | a. |  | all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrants ability to record, process, summarize and report
financial data and have identified for the registrants auditors
any material weaknesses in internal controls.
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                    

6. The registrants other certifying officers and I have indicated in
this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.

/s/ Masoud Najand
Masoud Najand
Chief Financial Officer
March 31, 2003

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##### Table of Contents



TMSF HOLDINGS, INC. AND SUBSIDIARYINDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                  |                                                 |  |      |     | 
|--------------------------------- | ----------------------------------------------- |  | ---- | --- | 
|                                  |                                                 |  | Page
|                                  |                                                 |  |     
|INDEPENDENT AUDITORS REPORT      |                                                 |  | F-2  |    
|CONSOLIDATED FINANCIAL STATEMENTS |                                                 |  |      |    
|                                  | Consolidated Balance Sheet                      |  |      | F-3 | 
|                                  | Consolidated Statements of Earnings             |  |      | F-4 | 
|                                  | Consolidated Statements of Stockholders Equity |  |      | F-5 | 
|                                  | Consolidated Statements of Cash Flows           |  |      | F-6 | 
|                                  | Notes to Consolidated Financial Statements      |  |      | F-7 | 

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INDEPENDENT AUDITORS REPORT

To the Board of Directors
TMSF Holdings, Inc. and subsidiary

We have audited the accompanying consolidated balance sheet of TMSF Holdings,
Inc. and subsidiary as of December 31, 2002, and the related consolidated
statements of income, shareholders equity, and cash flows for each of the two
years in the period ended December 31, 2002. These consolidated financial
statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with 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 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
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of TMSF
Holdings, Inc. and subsidiary as of December 31, 2002, and the consolidated
results of their operations and their cash flows for each of the two years in
the period ended December 31, 2002 in conformity with accounting principles
generally accepted in the United States of America.

SINGER LEWAK GREENBAUM & GOLDSTEIN LLP

Los Angeles, California
March 12, 2003

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TMSF HOLDINGS, INC. AND SUBSIDIARYCONSOLIDATED BALANCE SHEET
December 31, 2002

|                                     |                                                                                                       |                           |                            |                                            |            |           |            | 
|------------------------------------ | ----------------------------------------------------------------------------------------------------- | ------------------------- | -------------------------- | ------------------------------------------ | ---------- | --------- | ---------- | 
|ASSETS                              
|Current assets                       |                                                                                                       |                           |                            |                                           
|                                     | Cash and cash equivalents                                                                             |                           | $                          | 732,482                                    |           
|                                     | Mortgage loans held for sale                                                                          |                           |                            | 83,081,540                                 |           
|                                     | Prepaid expenses                                                                                      |                           |                            | 209,061                                    |           
|                                     | Income tax receivable                                                                                 |                           |                            | 159,000                                    |           
|                                     | Employee advances                                                                                     |                           |                            | 98,786                                     |           
|                                     |                                                                                                       |                           |                            |                                           
|                                     |                                                                                                       | Total current assets      |                            |                                            | 84,280,869 |          
|Restricted cash                      |                                                                                                       |                           | 1,520,741                  |                                           
|Property and equipment, net          |                                                                                                       |                           | 265,504                    |                                           
|Deposits and other assets            |                                                                                                       |                           | 238,011                    |                                           
|                                     |                                                                                                       |                           |                            |                                           
|                                     |                                                                                                       |                           |                            | Total assets                               |            | $         | 86,305,125 | 
|                                     |                                                                                                       |                           |                            |                                           
|LIABILITIES AND SHAREHOLDERS EQUITY
|Current liabilities                  |                                                                                                       |                           |                            |                                           
|                                     | Warehouse lines of credit                                                                             |                           | $                          | 81,261,337                                 |           
|                                     | Accounts and other payables                                                                           |                           |                            | 566,371                                    |           
|                                     | Escrow funds payable                                                                                  |                           |                            | 466,070                                    |           
|                                     | Accrued expenses                                                                                      |                           |                            | 53,882                                     |           
|                                     | Deferred tax liability                                                                                |                           |                            | 500,000                                    |           
|                                     |                                                                                                       |                           |                            |                                           
|                                     |                                                                                                       | Total current liabilities |                            |                                            | 82,847,660 |          
|                                     |                                                                                                       |                           |                            |                                           
|Commitments
Shareholders equity     |                                                                                                       |                           |                            |                                           
|                                     | Preferred stock, $0.001 par value
10,000,000 shares authorized
no shares issued and outstanding       |                           |                            |                                           |           
|                                     | Common stock, $0.001 par value
100,000,000 shares authorized 14,836,365 shares issued and outstanding |                           |                            | 14,836                                     |           
|                                     | Additional paid-in capital                                                                            |                           |                            | 3,035,164                                  |           
|                                     | Retained earnings                                                                                     |                           |                            | 407,465                                    |           
|                                     |                                                                                                       |                           |                            |                                           
|                                     |                                                                                                       |                           | Total shareholders equity |                                            |            | 3,457,465 |           
|                                     |                                                                                                       |                           |                            |                                           
|                                     |                                                                                                       |                           |                            | Total liabilities and shareholders equity |            | $         | 86,305,125 | 
|                                     |                                                                                                       |                           |                            |                                           

See accompanying notes to consolidated financial statements.

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TMSF HOLDINGS, INC. AND SUBSIDIARYCONSOLIDATED STATEMENTS OF EARNINGS
Years Ended December 31, 2001 and 2002

|                                                                   |                                            |                                                       |           |            |            |      |            |           |           |  
|------------------------------------------------------------------ | ------------------------------------------ | ----------------------------------------------------- | --------- | ---------- | ---------- | ---- | ---------- | --------- | --------- | -
|                                                                   |                                            |                                                       |           | 2002       |            | 2001
|                                                                   |                                            |                                                       |           |            |            |     
|Loan income                                                        |                                            |                                                       |           |            |            |      |            |          
|                                                                   | Sale of mortgages                          |                                                       | $         | 11,337,711 |            |      | $          | 5,944,201 |          
|                                                                   | Interest on loans                          |                                                       |           | 2,255,307  |            |      |            | 1,007,120 |          
|                                                                   | Loan origination fees                      |                                                       |           | 66,441     |            |      |            | 47,355    |          
|                                                                   |                                            |                                                       |           |            |            |      |            |          
|                                                                   |                                            | Total loan income                                     |           |            | 13,659,459 |      |            |           | 6,998,676 |  
|                                                                   |                                            |                                                       |           |            |            |      |            |          
|Costs of loan origination and sale of mortgages                    |                                            |                                                       |           |            |            |      |            |          
|                                                                   | Appraisals                                 |                                                       |           | 340,362    |            |      |            | 174,843   |          
|                                                                   | Commissions                                |                                                       |           | 5,128,928  |            |      |            | 2,883,932 |          
|                                                                   | Credit reports                             |                                                       |           | 75,968     |            |      |            | 29,001    |          
|                                                                   | Other costs                                |                                                       |           | 176,894    |            |      |            | 138,809   |          
|                                                                   | Signing service                            |                                                       |           | 370        |            |      |            | 100       |          
|                                                                   | Warehouse fees                             |                                                       |           | 116,119    |            |      |            | 43,514    |          
|                                                                   | Warehouse Interest expense                 |                                                       |           | 1,748,775  |            |      |            | 968,817   |          
|                                                                   |                                            |                                                       |           |            |            |      |            |          
|                                                                   |                                            | Total costs of loan origination and sale of mortgages |           |            | 7,587,416  |      |            |           | 4,239,016 |  
|                                                                   |                                            |                                                       |           |            |            |      |            |          
|Gross profit                                                       |                                            |                                                       | 6,072,043 |            |            |      | 2,759,660  |          
|Operating expenses                                                 |                                            |                                                       | 5,051,694 |            |            |      | 2,627,232  |          
|                                                                   |                                            |                                                       |           |            |            |      |            |          
|Income from operations                                             |                                            |                                                       | 1,020,349 |            |            |      | 132,428    |          
|                                                                   |                                            |                                                       |           |            |            |      |            |          
|Other income (expense)
Interest income                             |                                            |                                                       | 12,302    |            |            |      | 18,406     |          
|                                                                   | Loss on disposal of property and equipment |                                                       |           | (21,096    | )          |      |            | (49,656   | )        
|                                                                   |                                            |                                                       |           |            |            |      |            |          
|                                                                   |                                            | Total other income (expense)                          |           |            | (8,794     | )    |            |           | (31,250   | )
|                                                                   |                                            |                                                       |           |            |            |      |            |          
|Income before provision for income taxes                           |                                            |                                                       | 1,011,555 |            |            |      | 101,178    |          
|Provision for income taxes                                         |                                            |                                                       | 423,800   |            |            |      | 40,000     |          
|                                                                   |                                            |                                                       |           |            |            |      |            |          
|Net income                                                         |                                            | $                                                     | 587,755   |            |            | $    | 61,178     |          
|Less preferred stock dividends                                     |                                            |                                                       | 194,873   |            |            |      | 20,000     |          
|                                                                   |                                            |                                                       |           |            |            |      |            |          
|Net income available to common shareholders                        |                                            | $                                                     | 392,882   |            |            | $    | 41,178     |          
|                                                                   |                                            |                                                       |           |            |            |      |            |          
|Basic and fully diluted earnings per share                         |                                            | $                                                     | 0.04      |            |            | $    | 0.00       |          
|                                                                   |                                            |                                                       |           |            |            |      |            |          
|Basic and fully diluted weighted-average
common shares outstanding |                                            |                                                       | 9,569,913 |            |            |      | 14,210,959 |          
|                                                                   |                                            |                                                       |           |            |            |      |            |          

See accompanying notes to consolidated financial statements.

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TMSF HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
Years Ended December 31, 2001 and 2002



|                                                |  |                 |        |         |  |         |          |        |  |        |     |        |  |   |          |   |  |  |        |   |  |   |            |  
|----------------------------------------------- |  | --------------- | ------ | ------- |  | ------- | -------- | ------ |  | ------ | --- | ------ |  | - | -------- | - |  |  | ------ | - |  | - | ---------- | -
|                                                |  | Preferred Stock
|                                                |  |                
|                                                |  | Class A         |        | Class B |  | Class C
|                                                |  |                 |        |         |  |        
|                                                |  | Shares          |        | Amount  |  | Shares  |          | Amount |  | Shares |     | Amount
|                                                |  |                 |        |         |  |         |          |        |  |        |     |       
|Balance, December 31, 2000                      |  |                 | 1,200  |         |  | $       | 330,000  |        |  |        |    |        |  | $ |         |   |  |  |       |   |  | $ |           |  
|Redemption of
preferred stock                   |  |                 | (1,200 | )       |  |         | (330,000 | )      |  |        |     |        |  |   |          |   |  |  |        |   |  |   |            |  
|Issuance of
preferred stock                     |  |                 | 1,000  |         |  |         | 275,000  |        |  |        | 100 |        |  |   | 217,800  |   |  |  | 1,000  |   |  |   | 1,000,000  |  
|Redemption of
common stock                      |  |                 |        |         |  |         |          |        |  |        |     |        |  |   |          |   |  |  |        |   |  |   |            |  
|Dividend
distributions                          |  |                 |        |         |  |         |          |        |  |        |     |        |  |   |          |   |  |  |        |   |  |   |            |  
|Net income                                      |  |                 |        |         |  |         |          |        |  |        |     |        |  |   |          |   |  |  |        |   |  |   |            |  
|                                                |  |                 |        |         |  |         |          |        |  |        |     |        |  |   |          |   |  |  |        |   |  |   |            |  
|Balance, December 31, 2001                      |  |                 | 1,000  |         |  |         | 275,000  |        |  |        | 100 |        |  |   | 217,800  |   |  |  | 1,000  |   |  |   | 1,000,000  |  
|Issuance of
preferred stock                     |  |                 |        |         |  |         |          |        |  |        |     |        |  |   |          |   |  |  | 1,000  |   |  |   | 1,000,000  |  
|Redemption of
preferred stock                   |  |                 |        |         |  |         |          |        |  |        | (50 | )      |  |   | (110,200 | ) |  |  |        |   |  |   |            |  
|Redemption of
preferred stock in
share exchange |  |                 | (1,000 | )       |  |         | (275,000 | )      |  |        | (50 | )      |  |   | (107,600 | ) |  |  | (2,000 | ) |  |   | (2,000,000 | )
|Changes due to
recapitalization                 |  |                 |        |         |  |         |          |        |  |        |     |        |  |   |          |   |  |  |        |   |  |   |            |  
|Common stock
from private
placement             |  |                 |        |         |  |         |          |        |  |        |     |        |  |   |          |   |  |  |        |   |  |   |            |  
|Dividend
distributions                          |  |                 |        |         |  |         |          |        |  |        |     |        |  |   |          |   |  |  |        |   |  |   |            |  
|Net income                                      |  |                 |        |         |  |         |          |        |  |        |     |        |  |   |          |   |  |  |        |   |  |   |            |  
|                                                |  |                 |        |         |  |         |          |        |  |        |     |        |  |   |          |   |  |  |        |   |  |   |            |  
|Balance, December 31, 2002                      |  |                 |       |         |  | $       |         |        |  |        |    |        |  | $ |         |   |  |  |       |   |  | $ |           |  
|                                                |  |                 |        |         |  |         |          |        |  |        |     |        |  |   |          |   |  |  |        |   |  |   |            |  

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                |  |              |            |            |  |          |        |          |  |       |           |   |  |   |          |   |  |   |            |  
|----------------------------------------------- |  | ------------ | ---------- | ---------- |  | -------- | ------ | -------- |  | ----- | --------- | - |  | - | -------- | - |  | - | ---------- | -
|                                                |  | Common Stock |            | Additional |  |          |        |          |  |       |           |  
|                                                |  |              |            | Paid-In    |  | Retained |        |          |  |      
|                                                |  | Shares       |            | Amount     |  | Capital  |        | Earnings |  | Total
|                                                |  |              |            |            |  |          |        |          |  |      
|Balance, December 31, 2000                      |  |              | 19,000,000 |            |  | $        | 19,000 |          |  | $     | 251,000   |   |  | $ | (26,595  | ) |  | $ | 573,405    |  
|Redemption of
preferred stock                   |  |              |            |            |  |          |        |          |  |       |           |   |  |   |          |   |  |   | (330,000   | )
|Issuance of
preferred stock                     |  |              |            |            |  |          |        |          |  |       |           |   |  |   |          |   |  |   | 1,492,800  |  
|Redemption of
common stock                      |  |              | (9,500,000 | )          |  |          | (9,500 | )        |  |       | (210,500  | ) |  |   |          |   |  |   | (220,000   | )
|Dividend
distributions                          |  |              |            |            |  |          |        |          |  |       |           |   |  |   | (20,000  | ) |  |   | (20,000    | )
|Net income                                      |  |              |            |            |  |          |        |          |  |       |           |   |  |   | 61,178   |   |  |   | 61,178     |  
|                                                |  |              |            |            |  |          |        |          |  |       |           |   |  |   |          |   |  |   |            |  
|Balance, December 31, 2001                      |  |              | 9,500,000  |            |  |          | 9,500  |          |  |       | 40,500    |   |  |   | 14,583   |   |  |   | 1,557,383  |  
|Issuance of
preferred stock                     |  |              |            |            |  |          |        |          |  |       |           |   |  |   |          |   |  |   | 1,000,000  |  
|Redemption of
preferred stock                   |  |              |            |            |  |          |        |          |  |       |           |   |  |   |          |   |  |   | (110,200   | )
|Redemption of
preferred stock in
share exchange |  |              |            |            |  |          |        |          |  |       |           |   |  |   |          |   |  |   | (2,382,600 | )
|Changes due to
recapitalization                 |  |              | 336,365    |            |  |          | 336    |          |  |       | (336      | ) |  |   |          |   |  |   |           |  
|Common stock
from private
placement             |  |              | 5,000,000  |            |  |          | 5,000  |          |  |       | 2,995,000 |   |  |   |          |   |  |   | 3,000,000  |  
|Dividend
distributions                          |  |              |            |            |  |          |        |          |  |       |           |   |  |   | (194,873 | ) |  |   | (194,873   | )
|Net income                                      |  |              |            |            |  |          |        |          |  |       |           |   |  |   | 587,755  |   |  |   | 587,755    |  
|                                                |  |              |            |            |  |          |        |          |  |       |           |   |  |   |          |   |  |   |            |  
|Balance, December 31, 2002                      |  |              | 14,836,365 |            |  | $        | 14,836 |          |  | $     | 3,035,164 |   |  | $ | 407,465  |   |  | $ | 3,457,465  |  
|                                                |  |              |            |            |  |          |        |          |  |       |           |   |  |   |          |   |  |   |            |  

See accompanying notes to consolidated financial statements.

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TMSF HOLDINGS, INC. AND SUBSIDIARYCONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2001 and 2002

|                                                  |                                                                              |                                                    |                           |                                                      |             |          |             |           |            |          |            |  
|------------------------------------------------- | ---------------------------------------------------------------------------- | -------------------------------------------------- | ------------------------- | ---------------------------------------------------- | ----------- | -------- | ----------- | --------- | ---------- | -------- | ---------- | -
|                                                  |                                                                              |                                                    |                           |                                                      |             | 2002     |             | 2001     
|                                                  |                                                                              |                                                    |                           |                                                      |             |          |             |          
|Cash flows from operating activities              |                                                                              |                                                    |                           |                                                      |             |          |             |          
|                                                  | Net income                                                                   |                                                    | $                         | 587,755                                              |             |          | $           | 61,178    |           
|                                                  | Adjustments to reconcile net income to net cash
used in operating activities |                                                    |                           |                                                      |             |          |             |           |           
|                                                  |                                                                              | Depreciation and amortization                      |                           |                                                      | 44,002      |          |             |           | 17,375     |         
|                                                  |                                                                              | Loss on disposal of property and equipment         |                           |                                                      | 21,096      |          |             |           | 49,656     |         
|                                                  |                                                                              | Deferred income taxes                              |                           |                                                      |            |          |             |           | (68,000    | )       
|                                                  |                                                                              | (Increase) decrease in
Mortgage loans receivables  |                           |                                                      | (68,359,714 | )        |             |           | (3,288,812 | )       
|                                                  |                                                                              |                                                    | Prepaid expenses          |                                                      |             | (206,696 | )           |           |            |         |           
|                                                  |                                                                              |                                                    | Income tax receivable     |                                                      |             | (159,000 | )           |           |            |         |           
|                                                  |                                                                              |                                                    | Employee advances         |                                                      |             | (93,986  | )           |           |            | (4,800   | )         
|                                                  |                                                                              |                                                    | Deposits and other assets |                                                      |             | (81,457  | )           |           |            | (121,636 | )         
|                                                  |                                                                              | Increase (decrease) in
Accounts and other payables |                           |                                                      | 876,465     |          |             |           | 28,622     |         
|                                                  |                                                                              |                                                    | Accrued expenses          |                                                      |             | 53,882   |             |           |            |         |           
|                                                  |                                                                              |                                                    | Income tax payable        |                                                      |             | (61,747  | )           |           |            | 64,582   |           
|                                                  |                                                                              |                                                    | Deferred tax liability    |                                                      |             | 498,000  |             |           |            |         |           
|                                                  |                                                                              |                                                    |                           |                                                      |             |          |             |          
|                                                  |                                                                              |                                                    |                           | Net cash used in operating activities                |             |          | (66,881,400 | )         |            |          | (3,261,835 | )
|                                                  |                                                                              |                                                    |                           |                                                      |             |          |             |          
|Cash flows from investing activities              |                                                                              |                                                    |                           |                                                      |             |          |             |          
|                                                  | Issuance of notes receivable  shareholder                                   |                                                    |                           |                                                     |             |          |             | (80,000   | )         
|                                                  | Sale of investments                                                          |                                                    |                           |                                                     |             |          |             | 100,000   |           
|                                                  | Increase in restricted cash                                                  |                                                    |                           | (1,362,476                                           | )           |          |             | (39,972   | )         
|                                                  | Purchase of property and equipment                                           |                                                    |                           | (219,957                                             | )           |          |             | (96,278   | )         
|                                                  |                                                                              |                                                    |                           |                                                      |             |          |             |          
|                                                  |                                                                              |                                                    |                           | Net cash used in investing activities                |             |          | (1,582,433  | )         |            |          | (116,250   | )
|                                                  |                                                                              |                                                    |                           |                                                      |             |          |             |          
|Cash flows from financing activities              |                                                                              |                                                    |                           |                                                      |             |          |             |          
|                                                  | Book overdraft                                                               |                                                    |                           |                                                     |             |          |             | (61,023   | )         
|                                                  | Warehouse lines of credit                                                    |                                                    |                           | 66,635,185                                           |             |          |             | 3,324,130 |           
|                                                  | Issuance of preferred stock                                                  |                                                    |                           | 1,000,000                                            |             |          |             | 1,492,800 |           
|                                                  | Redemption of preferred stock                                                |                                                    |                           | (492,800                                             | )           |          |             |          |           
|                                                  | Dividends paid to preferred shareholder                                      |                                                    |                           | (194,873                                             | )           |          |             | (20,000   | )         
|                                                  | Issuance of common stock                                                     |                                                    |                           | 1,000,000                                            |             |          |             |          |           
|                                                  | Redemption of common stock                                                   |                                                    |                           |                                                     |             |          |             | (220,000  | )         
|                                                  |                                                                              |                                                    |                           |                                                      |             |          |             |          
|                                                  |                                                                              |                                                    |                           | Net cash provided by financing activities            |             |          | 67,947,512  |           |            |          | 4,515,907  |  
|                                                  |                                                                              |                                                    |                           |                                                      |             |          |             |          
|                                                  |                                                                              |                                                    |                           | Net increase
(decrease) in cash
and cash equivalents |             | $        | (516,321    | )         |            | $        | 1,137,822  |  
|Cash and cash equivalents, beginning of year      |                                                                              |                                                    | 1,248,803                 |                                                      |             |          | 110,981     |          
|                                                  |                                                                              |                                                    |                           |                                                      |             |          |             |          
|Cash and cash equivalents, end of year            |                                                                              | $                                                  | 732,482                   |                                                      |             | $        | 1,248,803   |          
|                                                  |                                                                              |                                                    |                           |                                                      |             |          |             |          
|Supplemental disclosures of cash flow information |                                                                              |                                                    |                           |                                                      |             |          |             |          
|                                                  | Interest paid                                                                |                                                    | $                         |                                                     |             |          | $           |          |           
|                                                  |                                                                              |                                                    |                           |                                                      |             |          |             |          
|                                                  | Income taxes paid                                                            |                                                    | $                         | 82,410                                               |             |          | $           | 43,418    |           
|                                                  |                                                                              |                                                    |                           |                                                      |             |          |             |          

Supplemental schedule of non-cash investing and financing activities.

During the year ended December 31, 2002, the Company issued $2,000,000 of common
stock in exchange for a note payable for the same amount.

During the year ended December 31, 2002, the Company redeemed $2,000,000 of
preferred stock from its sole shareholder by issuing a note payable for the same amount.

During the year ended December 31, 2001, the Company redeemed $330,000 of preferred
stock from a shareholder by eliminating a note payable for the same amount.

See accompanying notes to consolidated financial statements.

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##### Table of Contents



TMSF HOLDINGS, INC. AND SUBSIDIARYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002

NOTE 1  ORGANIZATION AND LINE OF BUSINESS



| |  |  | General                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The Mortgage Store Financial, Inc. was incorporated on August 25, 1992.
The Company (as defined in Note 2) is licensed by the California
Department of Real Estate and is principally engaged in the origination
and purchase of residential mortgage loans. Generally, such loans are
subsequently sold to financial institutions or to other entities that
sell such loans to investors as a part of secured investment packages.
The Company has obtained approval from the Department of Housing and
Urban Development to act as a non-supervised mortgagee.                                                                                                                                                   
|
| |  |  | Share Exchange, Consulting Agreements, and Redemption of Preferred Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  |  | On November 4, 2002, the Company and its sole shareholder entered into a
share exchange agreement with Little Creek, Inc. (Little Creek), a
publicly trading company listed on the NASDAQ Bulletin Board, in which
the sole shareholder received 9,500,000 shares, or approximately 97% of
the stock of Little Creek, in exchange for 100% of the stock of the
Company. Under the terms of the exchange agreement, 1,295,118 shares of
Little Creek were canceled prior to the transaction, and 336,365 shares
remaining issued and outstanding. Subsequently, Little Creeks name was
changed to TMSF Holdings, Inc., and its incorporated domicile was changed
from the state of Utah to the state of Delaware.
|
| |  |  | The transaction was accounted as a reverse acquisition. The accompanying
financial statements reflect the consolidated statements of TMSF
Holdings, Inc. and its wholly owned subsidiary, The Mortgage Store
Financial, Inc. Pro forma information of the combined businesses are not
furnished as Little Creek had insignificant assets, liabilities, and
operations.                                                                                                                                                                                                                                                                                                                                             
|
| |  |  | In addition, on the closing, TMSF Holdings, Inc. entered into a one-year
consulting agreement under which it will pay the consultant $265,000 and
issue a five-year warrant to purchase 163,635 shares of common stock of
TMSF Holdings, Inc. at a per share exercise price of $0.05.                                                                                                                                                                                                                                                                                                                                                                                                                              

NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



| |  |  | Principles of Consolidation                                                                                                                                                                                                                                                  
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The consolidated financial statements include the accounts of TMSF
Holdings, Inc. and its wholly owned subsidiary, The Mortgage Store
Financial, Inc. (collectively, the Company). All significant
inter-company accounts and transactions are eliminated in consolidation.
|
| |  |  | Revenue Recognition                                                                                                                                                                                                                                                          
|
| |  |  | Loan origination fees and other fees earned on loans brokered are
recorded as income when the related loan is sold.                                                                                                                                                          

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TMSF HOLDINGS, INC. AND SUBSIDIARYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002

NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



| |  |  | Comprehensive Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The Company utilizes Statement of Financial Accounting Standards (SFAS)
No. 130, Reporting Comprehensive Income. This statement establishes
standards for reporting comprehensive income and its components in a
financial statement. Comprehensive income as defined includes all
changes in equity (net assets) during a period from non-owner sources.
Examples of items to be included in comprehensive income, which are
excluded from net income, include foreign currency translation
adjustments and unrealized gains and losses on available-for-sale
securities. Comprehensive income is not presented in the Companys
financial statements since the Company did not have any of the items of
comprehensive income in the period presented.
|
| |  |  | Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  |  | For purposes of the statements of cash flows, the Company considers all
highly liquid investments purchased with original maturity of three
months or less to be cash equivalents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  |  | Mortgage Loans Receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  |  | Mortgage loans receivable are held for sale and are recorded at the
aggregate lower of cost or market, less an estimated allowance for losses
on repurchased loans. All mortgage loans are collateralized by
residential property.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  |  | Revenues associated with closing fees received by the Company and costs
associated with obtaining mortgage loans are deferred and recognized upon
sale of the related mortgage loans. Mortgage loans receivable are
reported net of such deferred revenues and costs in the accompanying
balance sheet.                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  |  | Property and Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  |  | Property and equipment are stated at cost. Depreciation and amortization
are provided using the straight-line method over estimated useful lives
of five to seven years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   



| |  |  | Fair Value of Financial Instruments                                                                                                                                                                                                                                                                                                        
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The Company measures its financial assets and liabilities in accordance
with generally accepted accounting principles. For certain of the
Companys financial instruments, including cash and cash equivalents,
mortgage loans receivable, and accounts payable, the carrying amounts
approximate fair value due to their short maturities.
|
| |  |  | Advertising Costs                                                                                                                                                                                                                                                                                                                          
|
| |  |  | The Company expenses advertising costs as incurred. Advertising costs
for the years ended December 31, 2002 and 2001 $70,964 and $35,850,
respectively.                                                                                                                                                                                    

F-8



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TMSF HOLDINGS, INC. AND SUBSIDIARYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002

NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



| |  |  | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax basis of assets and liabilities and
their financial report amounts at each period end, based on enacted tax
laws and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income. At December 31, 2002
and September 30, 2002, the net deferred tax liability is a result of the
use of differing depreciation methods between financial and tax reporting
purposes, and the use of the accrual method of accounting for financial
reporting purposes and the cash basis for tax reporting purposes.
Valuation allowances are established, when necessary, to reduce deferred
tax assets to the amount expected to be realized. The provision for
income taxes represents the tax payable for the period, if any, and the
change during the period in deferred tax assets and liabilities.
|
| |  |  | Earnings Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  |  | The Company utilizes SFAS No. 128, Earnings per Share. Basic earnings
per share is computed by dividing income available to common shareholders
by the weighted-average number of common shares outstanding. Diluted
earnings per share is computed similar to basic earnings per share except
that the denominator is increased to include the number of additional
common shares that would have been outstanding if the potential common
shares had been issued and if the additional common shares were dilutive.
Common equivalent shares are excluded from the computation if their
effect is anti-dilutive.                                                                                                                                                                                                                                                                                                                                    
|
| |  |  | Reclassifications                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  |  | Certain amounts included in the prior year financial statements have been
reclassified to conform with the current year presentation. Such
reclassifications did not have any effect on reported net income.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  |  | Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  |  | The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from
those estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  |  | Concentrations of Credit Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  |  | At December 31, 2002, the Company maintained cash balances with banks
totaling $3,488,270 in excess of federally insured amounts of $100,000
per bank.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  |  | During the year ended
December 31, 2002, the Company sold 33%, 27%, 22%, and 12% of its
mortgage loans to four institutional investors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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##### Table of Contents



TMSF HOLDINGS, INC. AND SUBSIDIARYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002

NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



| |  |  | Market Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The Company is involved in the real estate loans market. Changes in
interest rates or other market conditions within the real estate loan
market may have a significant effect on the volume and profitability of
the business of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  |  | Recently Issued Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  |  | In April 2002, the FASB issued SFAS No. 145, Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections. SFAS No. 145 updates, clarifies, and simplifies
existing accounting pronouncements. This statement rescinds SFAS No. 4,
which required all gains and losses from extinguishment of debt to be
aggregated and, if material, classified as an extraordinary item, net of
related income tax effect. As a result, the criteria in APB No. 30 will
now be used to classify those gains and losses. SFAS No. 64 amended SFAS
No. 4 and is no longer necessary as SFAS No. 4 has been rescinded. SFAS
No. 44 has been rescinded as it is no longer necessary. SFAS No. 145
amends SFAS No. 13 to require that certain lease modifications that have
economic effects similar to sale-leaseback transactions be accounted for
in the same manner as sale-lease transactions. This statement also makes
technical corrections to existing pronouncements. While those
corrections are not substantive in nature, in some instances, they may
change accounting practice. The Company does not expect adoption of SFAS
No. 145 to have a material impact, if any, on its financial position or
results of operations.
|
| |  |  | In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. This statement addresses
financial accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force (EITF)
Issue No. 94-3, Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs
Incurred in a Restructuring). This statement requires that a liability
for a cost associated with an exit or disposal activity be recognized
when the liability is incurred. Under EITF Issue 94-3, a liability for
an exit cost, as defined, was recognized at the date of an entitys
commitment to an exit plan. The provisions of this statement are
effective for exit or disposal activities that are initiated after
December 31, 2002 with earlier application encouraged. This statement is
not applicable to the Company.                                                                                                                                                                                                                                                                                                     

F-10



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##### Table of Contents



TMSF HOLDINGS, INC. AND SUBSIDIARYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002

NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



| |  |  | Recently Issued Accounting Pronouncements (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | In October 2002, the FASB issued SFAS No. 147, Acquisitions of Certain
Financial Institutions. SFAS No. 147 removes the requirement in SFAS
No. 72 and Interpretation 9 thereto, to recognize and amortize any excess
of the fair value of liabilities assumed over the fair value of tangible
and identifiable intangible assets acquired as an unidentifiable
intangible asset. This statement requires that those transactions be
accounted for in accordance with SFAS No. 141, Business Combinations,
and SFAS No. 142, Goodwill and Other Intangible Assets. In addition,
this statement amends SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, to include certain financial
institution-related intangible assets. This statement is not applicable
to the Company.
|
| |  |  | In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure, an amendment of
SFAS No. 123. SFAS No. 148 provides alternative methods of transition
for a voluntary change to the fair value based method of accounting for
stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure requirements of SFAS No. 123 to require more prominent and
more frequent disclosures in financial statements about the effects of
stock-based compensation. This statement is effective for financial
statements for fiscal years ending after December 15, 2002. SFAS No. 148
will not have any impact on the Companys financial statements as
management does not have any intention to change to the fair value
method.             

NOTE 3  RESTRICTED CASH



| |  |  | The Company maintains restricted cash deposits in financial institutions.
These restrictions relate to the warehouse lines of credit, whereby the
Company must maintain a certain percentage, usually 1% of the outstanding
balance, on reserve. The Company does not have access to these funds.
Such cash balances at December 31, 2002 aggregated to $1,054,421.
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The Company also maintains an escrow account in a financial institution
for funds that are to be reimbursed to borrowers when the escrow closes.
Cash balances in the escrow account were $466,320.                                                                                                                                                                

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##### Table of Contents



TMSF HOLDINGS, INC. AND SUBSIDIARYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002

NOTE 4  PROPERTY AND EQUIPMENT



| |  |  | Property and equipment at December 31, 2002 consisted of the following:
| |  |  | -----------------------------------------------------------------------

|                                               |       |   |         |         | 
|---------------------------------------------- | ----- | - | ------- | ------- | 
|Furniture and fixtures                         |       | $ | 54,739  |        
|Office equipment                               |       |   | 108,318 |        
|Computer equipment                             |       |   | 151,496 |        
|Leasehold improvements                         |       |   | 20,000  |        
|                                               |       |   |         |        
|                                               |       |   | 334,553 |        
|Less accumulated depreciation and amortization |       |   | 69,049  |        
|                                               |       |   |         |        
|                                               | Total |   | $       | 265,504 | 
|                                               |       |   |         |        



| |  |  | Depreciation and amortization expense was $44,002 and $17,375 for the
years ended December 31, 2002 and 2001, respectively.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------

NOTE 5  WAREHOUSE LINES OF CREDIT



| |  |  | The Company maintains a warehouse line of credit with a financial
institution, which is subject to renewal on an annual basis. Advances
are received by the Company up to a maximum of $20,000,000 based upon a
specified percentage of mortgage loans, which are pledged as collateral,
and interest accrues at prime (4.25% at December 31, 2002), plus 1% per
annum. The line of credit contains a financial covenant concerning a
minimum net worth of $641,260. As of December 31, 2002, the Company
was in compliance with the covenant.                                                                                                                                                                                                                                                                                            
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | During the year ended December 31, 2002 the Company secured a second
warehouse line of credit with the same credit terms. The Company may
borrow up to $50,000,000, in addition the financial institution may allow
at its discretion additional borrowings up to $20,000,000 as an
over-advance facility. As of December 31, 2002 the Company
borrowed $15,257,436 under this facility. Advances are due upon the earlier of the sale of the mortgage loans that
are pledged as collateral or a specified period of time from the date on
which the advance was received. The warehouse line of credit is
guaranteed by the Companys shareholder and contains a financial covenant
concerning a minimum net worth of $3,635,170. At December 31, 2002, the
Company was in violation of such covenant, which has been waived by the
bank.

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##### Table of Contents



TMSF HOLDINGS, INC. AND SUBSIDIARYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002

NOTE 5  WAREHOUSE LINES OF CREDIT (Continued)



| |  |  | In addition, the Company must maintain a balance in a separate restricted
cash account as a pledge for amounts funded by the warehouse lender in
excess of a specified percentage of the loan amount agreed upon by the
warehouse lenders. At December 31, 2002, the pledged amounts aggregated
to $1,054,421. The outstanding balance on the warehouse lines of credit at
December 31, 2002 was $81,261,337.
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 6  BANK LINE OF CREDIT



| |  |  | The Company maintains an unsecured bank line of credit without a stated
expiration date. The Company may borrow up to $50,000. Borrowings bear
interest at the banks prime rate (4.25% at December 31, 2002), plus 2.5%
per annum. The bank line of credit was unused at December 31, 2002.
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 7  COMMITMENTS



| |  |  | Leases                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The Company leases its office facilities from one of its shareholders,
which expires in August 2007. In addition, the Company leases a copier
and vehicles under non-cancelable operating leases with a third party,
which expire through October 2005. The Company is required to pay for
taxes, insurance, and maintenance. Future minimum lease payments under
these non-cancelable operating leases as of December 31, 2002 were as
follows:

|             |       |         |         |           |  |       |        |        |  |   |         |           | 
|------------ | ----- | ------- | ------- | --------- |  | ----- | ------ | ------ |  | - | ------- | --------- | 
|Year Ending  |       | Related |         |           |  |       |        |        |  |  
|December 31, |       | Party   |         | Other     |  | Total
|             |       |         |         |           |  |      
|2003         |       | $       | 240,300 |           |  | $     | 33,287 |        |  | $ | 273,587 |          
|2004         |       |         | 240,300 |           |  |       | 30,732 |        |  |   | 271,032 |          
|2005         |       |         | 240,300 |           |  |       | 13,959 |        |  |   | 254,259 |          
|2006         |       |         | 240,300 |           |  |       |       |        |  |   | 240,300 |          
|2007         |       |         | 160,200 |           |  |       |       |        |  |   | 160,200 |          
|             |       |         |         |           |  |       |        |        |  |   |         |          
|             | Total |         | $       | 1,121,400 |  |       | $      | 77,978 |  |   | $       | 1,199,378 | 
|             |       |         |         |           |  |       |        |        |  |   |         |          



| |  |  | Rent expense was $203,848 and $93,799 for the years ended December 31,
2002 and 2001, respectively. Rent paid to the shareholder for the year
ended December 31, 2002 amounted to $48,529.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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##### Table of Contents



TMSF HOLDINGS, INC. AND SUBSIDIARYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002

NOTE 7  COMMITMENTS (Continued)



| |  |  | Consulting Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Upon the closing of the share exchange agreement with Little Creek, the
combined company entered into a one-year consulting agreement under which
it will pay the consultants $265,000 and issue five-year warrants to
purchase 163,635 shares of common stock of the combined company at a per
share exercise price of $0.05. The fair value of the warrants was
insignificant. All warrants were exercised subsequent to December 31,
2002. The consulting fee is being amortized over one year.                                                                  
|
| |  |  | Mortgage Loan Purchase Agreements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  |  | The Company maintains mortgage loan purchase agreements with various
mortgage bankers. The Company is obligated to perform certain procedures
in accordance with these agreements. The agreements provide for
conditions, whereby the Company may be required to repurchase mortgage
loans for various reasons, among which are either (a) a mortgage loan is
originated in violation of the mortgage bankers requirements, (b) the
Company breaches any term of the agreements, and (c) an early payment
default occurs from a mortgage originated by the Company.
|
| |  |  | During the year ended December 31, 2002, the Company repurchased two
loans with an aggregate balance of $848,203.                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  |  | The Company took title to one property in March 2002 and the other in May
2002 and recorded these properties as real estate owned. At December 31,
2002, both of the properties related to the purchased loans were sold,
and a loss of $115,913 was recognized on the sale.                                                                                                                                                                                                                                                                                        
|
| |  |  | During the years ended December 31, 2002 and 2001, the Company recorded
losses of $217,740 and $222,663, respectively, with regard to repurchased
loans and the real estate owned, which are included in operating expenses
on the accompanying statements of income.                                                                                                                                                                                                                                                                                               

NOTE 8  SHAREHOLDERS EQUITY



| |  |  | Preferred Stock (OLD)                                                                                                                                                                                                                                                                                                                              
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The Company issued 1,000 shares of Class C preferred stock for
$1,000,000.                                                                                                                                                                                                                                                                         
|
| |  |  | During the year ended December 31, 2002, the Company redeemed 1,000
shares of Class A preferred stock for $275,000 in cash, 100 shares of
Class B preferred stock for $217,800 in cash, and 2,000 shares of Class C
preferred stock for $2,000,000 in notes payable. At December 31, 2002,
all Class A, B, and C preferred stock had been redeemed.

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TMSF HOLDINGS, INC. AND SUBSIDIARYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002

NOTE 8  SHAREHOLDERS EQUITY (Continued)



| |  |  | Preferred Stock (RECAPITALIZED)                                                                                                                                                                                                    
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The Company has 10,000,000, $0.001 par value, shares of preferred stock
authorized for issuance. The preferred stock carries voting rights on
all matters requiring shareholder approval.                                          
|
| |  |  | Common Stock                                                                                                                                                                                                                       
|
| |  |  | In November 2002, the Company sold 5,000,000 shares of common stock in
connection with a private placement. The Company collected $1,000,000 in
cash and exchanged $2,000,000 in notes payable in connection with this
transaction.
|
| |  |  | Private Placement Offering of Common Stock                                                                                                                                                                                         
|
| |  |  | During December 2002, the Companys Board of Directors approved to raise
additional equity capital through a private placement offering for the
issuance and sale of up to 2,000,000 shares of common stock at $1.50 per
share.    

NOTE 9  INCOME TAXES



| |  |  | The following table presents the current and deferred income tax
provision for (benefit from) federal and state income taxes for the years
ended December 31, 2002 and 2001:
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|         |         |                                           |         |         |         |      |         |         |        | 
|-------- | ------- | ----------------------------------------- | ------- | ------- | ------- | ---- | ------- | ------- | ------ | 
|         |         |                                           |         | 2002    |         | 2001
|         |         |                                           |         |         |         |     
|Current  |         |                                           |         |         |         |      |         |        
|         | Federal |                                           | $       | (77,000 | )       |      | $       | 88,000  |       
|         | State   |                                           |         | 800     |         |      |         | 21,000  |       
|         |         |                                           |         |         |         |      |         |        
|         |         |                                           | (76,200 | )       |         |      | 109,000 |        
|         |         |                                           |         |         |         |      |         |        
|Deferred |         |                                           |         |         |         |      |         |        
|         | Federal |                                           |         | 402,000 |         |      |         | (57,000 | )     
|         | State   |                                           |         | 98,000  |         |      |         | (12,000 | )     
|         |         |                                           |         |         |         |      |         |        
|         |         |                                           | 500,000 |         |         |      | (69,000 | )      
|         |         |                                           |         |         |         |      |         |        
|         |         | Provision for (benefit from) income
taxes |         | $       | 423,800 |      |         | $       | 40,000 | 
|         |         |                                           |         |         |         |      |         |        

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##### Table of Contents



TMSF HOLDINGS, INC. AND SUBSIDIARYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002

NOTE 9  INCOME TAXES (Continued)



| |  |  | At December 31, 2002, components of net deferred tax assets (liabilities)
in the accompanying balance sheet includes the following amounts of
deferred tax liabilities:
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                               |         |                                                  |                                    |   |          |          |  
|------------------------------ | ------- | ------------------------------------------------ | ---------------------------------- | - | -------- | -------- | -
|Deferred tax asset (liability) |         |                                                  |                                    |  
|                               | Current |                                                  |                                    |   |         
|                               |         | Expenses                                         |                                    | $ | (600,000 | )       
|                               |         | Accounts and other payables and accrued expenses |                                    |   | 37,000   |         
|                               |         | Contribution carryover                           |                                    |   | 19,000   |         
|                               |         | State taxes                                      |                                    |   | 34,000   |         
|                               |         | Net operating losses                             |                                    |   | 10,000   |         
|                               |         |                                                  |                                    |  
|                               |         |                                                  | Net deferred tax asset (liability) |   | $        | (500,000 | )
|                               |         |                                                  |                                    |  



| |  |  | Income tax expense differs from the amounts computed by applying the
United States federal income tax rate of 34% to income taxes as a result
of the following for the years ended December 31, 2002 and 2001:
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                |       |   |         |         |      |   |        |        | 
|----------------------------------------------- | ----- | - | ------- | ------- | ---- | - | ------ | ------ | 
|                                                |       |   | 2002    |         | 2001
|                                                |       |   |         |         |     
|Federal tax on pretax income at statutory rates |       | $ | 344,000 |         |      | $ | 34,000 |       
|State tax, net of federal benefit               |       |   | 64,000  |         |      |   | 6,000  |       
|Net operating loss carryback                    |       |   | 15,000  |         |      |   |       |       
|Other                                           |       |   | 800     |         |      |   |       |       
|                                                |       |   |         |         |      |   |        |       
|                                                | Total |   | $       | 423,800 |      |   | $      | 40,000 | 
|                                                |       |   |         |         |      |   |        |       

NOTE 10  RELATED PARTY TRANSACTIONS



| |  |  | During the years ended December 31, 2002 and 2001, the Company paid
$30,000 and $50,000, respectively, for consulting expense to a company
owned by a relative of the principal shareholder and $130,000 and
$62,000, respectively, for marketing expenses to a company owned by a
relative of the principal shareholder. In addition, during the year
ended December 31, 2002, the Company paid consulting expenses of $35,000
to a director and $66,250 to a shareholder. The Company also leases its
office facilities from a shareholder (see Note 7).
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-16