<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549



                                   FORM 10-QSB



(Mark One)
/X/        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934
           For the quarterly period ended September 30, 1999
                                       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: 0-22271

                                CFI MORTGAGE INC.
        (Exact Name of Small Business Issuer as specified in its charter)


               Delaware
               --------                                  52-2023491
    (State or Other jurisdiction of                      ----------
    incorporation or organization)          (I.R.S. Employer Identification No.)

         631 U.S. Highway #1 Suite 309
         -----------------------------
           North Palm Beach, Florida                          33408
           -------------------------                          -----
    (Address of principal executive office)                (Zip Code)

   Registrant's telephone number, including
                   area code                            561-842-0678
                                                        ------------




                                 Not Applicable
              (Former name, former address and former fiscal year,
                         if changed since last report)


Indicate by check mark whether Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the pre-ceding 12 months (or for such shorter period that Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes  X   No
                                       ---     ---


             3,826,412 shares, $01 par value, as of October 1, 1999

       (Indicate the number of shares outstanding of each of the issuer's
          classes of common stock, as of the latest practicable date)



<PAGE>



                        CFI MORTGAGE INC. AND SUBSIDIARY

                               SEPTEMBER 30, 1999
                                   (Unaudited)






                                    I N D E X
                                    ---------



<TABLE>
<CAPTION>


                                                                                                                Page No.
                                                                                                                --------


Part I -        Financial Information:


<S>             <C>                                                                                             <C>
                Item 1.      Consolidated Financial Statements (Unaudited):

                             Balance Sheets
                             At September 30, 1999 and December 31, 1998 ................................             F-3

                             Statements of Operations
                             For the Nine Months and Three Months Ended
                             September 30, 1999 and 1998 ................................................             F-4

                             Statements of Cash Flows
                             For the Nine Months Ended
                             September 30, 1999 and 1998 ................................................          F-5 - F-6

                             Notes to Consolidated Financial Statements .................................          F-7 - F-13


                Item 2.      Management's Discussion and Analysis of
                             Financial Condition and Results of Operations ..............................          F-?? - F-??



Part II -       Other Information:


                Item 3 Through Item 9 - Not Applicable ................................................F-13

                Signatures   ..........................................................................F-14
</TABLE>


                                       F-2

<PAGE>



                        CFI MORTGAGE INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)
                                   A S S E T S
                                   -----------


<TABLE>
<CAPTION>

                                                                                            September 30,     December 31,
                                                                                                1999             1998
                                                                                            -------------     -----------

Current assets:
<S>                                                                                         <C>            <C>
  Cash                                                                                         $ 55,981       $  2,371
  State tax refund receivable                                                                      --           76,621
  Prepaid expenses                                                                               11,532         53,658
  Due from related parties                                                                       86,037         86,037
                                                                                            -------------     -----------
        Total current assets                                                                    153,550        218,687

Property and equipment, at cost, less accumulated
  depreciation of $92,522 and $87,902, respectively                                              56,955         61,575
                                                                                            -------------     -----------

                                                                                               $210,505       $ 280,262
                                                                                            =============     ===========

<CAPTION>


                  LIABILITIES AND STOCKHOLDERS' CAPITAL DEFICIENCY

Liabilities not subject to compromise:
<S>                                                                                        <C>             <C>
  Current liabilities:
    Accounts payable of subsidiary                                                         $  1,539,341    $  1,539,341
    Loan payable - affiliated company                                                           130,000            --
    Accrued expenses and other current liabilities                                              181,141            --
                                                                                           ------------    ------------
                                                                                              1,850,482       1,539,341
                                                                                           ------------    ------------

Liabilities subject to compromise:
  Current liabilities:
    Unsecured liabilities                                                                         3,567          12,900
                                                                                           ------------    ------------

Unsecured non-priority liabilities:
  Accounts payable                                                                              948,933         948,933
  Due to banks                                                                                6,686,000       6,686,000
  Accrued expenses and other current liabilities                                                963,789         964,321
                                                                                           ------------    ------------
        Total unsecured non-priority liabilities                                              8,598,722       8,599,254
                                                                                           ------------    ------------

15% Demand convertible debentures and accrued interest                                          256,037            --
                                                                                           ------------    ------------

        Total liabilities                                                                    10,708,808      10,151,495
                                                                                           ------------    ------------

Stockholders' capital deficiency:
  Common stock, $.01 par value
    Authorized 20,000,000 shares
    Issued and outstanding - 3,826,412
    and 3,301,391, respectively                                                                  38,264          33,014
  Preferred stock, $.01 par value
    Authorized 10,000,000 shares
    Issued and outstanding - 2,375
    and 2,450, respectively                                                                          24              25
  Additional paid-in capital                                                                 10,156,240      10,154,246
  Accumulated deficit                                                                       (20,692,831)    (20,058,518)
                                                                                            ------------     ----------
        Total stockholders' capital deficiency                                              (10,498,303)     (9,871,233)
                                                                                            ------------     ----------

                                                                                           $    210,505      $  280,262
                                                                                           ============     ===========

</TABLE>





                 See accompanying notes to financial statements.


                                       F-3

<PAGE>



                        CFI MORTGAGE INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)


<TABLE>
                                                                  For the Nine                            For the Three
                                                                   Months Ended                            Months Ended
                                                                   September 30,                          September 30,
                                                           --------------------------------         -------------------------------
                                                              1999                 1998                 1999                1998
                                                           -----------         ------------         -----------         -----------

Revenues:
<S>                                                        <C>                 <C>                  <C>                 <C>
  Commissions and fees                                     $     1,358         $  9,612,493         $      --           $ 1,831,814
  Interest                                                        --              2,969,632                --               847,915
                                                           -----------         ------------         -----------         -----------
Total revenues                                                   1,358           12,582,125                --             2,679,729
                                                           -----------         ------------         -----------         -----------

Expenses:
  Selling                                                       11,742            6,326,156              11,742           1,851,967
  General and administrative                                   465,468           11,189,888             274,529           3,553,885
  Interest                                                      15,120            3,013,499               9,657             937,949
                                                           -----------         ------------         -----------         -----------
Total expenses                                                 492,330           20,529,543             295,928           6,343,801
                                                           -----------         ------------         -----------         -----------

Loss from continuing operations                               (490,972)          (7,947,418)           (295,928)         (3,664,072)

Gain on sale of subsidiary                                        --                536,664                --               536,664
                                                           -----------         ------------         -----------         -----------

Net loss                                                   ($  490,972)        ($ 7,410,754)        ($  295,928)        ($3,127,408)
                                                           ===========         ============         ===========         ===========


Basic earnings per common share:
  Net loss                                                 ($  490,972)        ($ 7,410,754)        ($  295,928)        ($3,127,408)
  Less:  Preferred stock
           dividends                                          (136,100)            (136,630)            (56,460)            (66,630)
         Preferred stock
           discount                                               --               (300,000)               --              (150,000)
                                                           -----------         ------------         -----------         -----------

Net loss available to
  common stockholders                                      ($  627,072)        ($ 7,847,384)        ($  352,388)        ($3,344,038)
                                                           ===========         ============         ===========         ===========


Weighted average shares                                      3,748,164            2,353,206           3,826,412           2,519,057
                                                           ===========         ============         ===========         ===========


Earnings per share - basic:
  Net loss                                                 ($      .17)        ($      3.33)        ($      .09)        ($     1.33)
                                                           ===========         ============         ===========         ===========
</TABLE>




                 See accompanying notes to financial statements.

                                       F-4

<PAGE>

                        CFI MORTGAGE INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)


<TABLE>
<CAPTION>

                                                                                                          For the Nine
                                                                                                          Months Ended
                                                                                                          September 30,
                                                                                                -----------------------------------
                                                                                                   1999                    1998
                                                                                                ---------              ------------

<S>                                                                                             <C>                    <C>
Cash flows from operating activities:
  Net loss from continuing operations                                                           ($490,972)             ($ 7,410,754)
                                                                                                ---------              ------------
  Adjustments to reconcile net loss to net
      cash used in operating activities:
    Depreciation and amortization                                                                   4,620                   223,686
    Interest accrued on stockholders loans and debentures                                          15,120                      --
    Provision for doubtful accounts and loan losses                                                  --                   1,114,034
    (Increase) decrease in asset and liabilities:
      State tax refund receivable                                                                  76,621                      --
      Interest receivable                                                                            --                     212,783
      Mortgage loans held for sale                                                                   --                 (10,180,189)
      Other current assets                                                                           --                     175,975
      Miscellaneous receivables                                                                      --                      38,555
      Prepaid expenses                                                                             42,126                    (1,636)
      Deposits                                                                                       --                     (14,341)
      Accounts payable, accrued expenses
        and other current liabilities                                                              30,675                 2,335,402
                                                                                                ---------              ------------
  Total adjustments                                                                               169,162                (6,095,731)
                                                                                                ---------              ------------

Net cash used in operating activities                                                            (321,810)              (13,506,485)
                                                                                                ---------              ------------

Cash flows from investing activities:
  Expenditures for property and equipment                                                            --                    (275,871)
  Payments of related party receivable                                                              1,087
  Disposal of subsidiary, net of cash received                                                       --                    (388,200)
                                                                                                ---------              ------------
Net cash used in investing activities                                                                --                    (662,984)
                                                                                                ---------              ------------

Cash flows from financing activities:
  Proceeds from 15% demand convertible debentures                                                 245,420                      --
  Conversion of debt into preferred stock                                                            --                    (163,625)
  Proceeds from issuance of preferred stock                                                          --                   1,000,000
  Proceeds from related party payable                                                                --                      80,479
  Loan payable - affiliated company                                                               130,000                      --
  Warehouse borrowings                                                                               --                  10,387,292
  Cash overdraft                                                                                     --                    (264,409)
  Proceeds from long-term debt                                                                       --                   1,961,156
  Payments of long-term debt                                                                         --                    (403,590)
                                                                                                ---------              ------------
Net cash provided by financing activities                                                         375,420                12,597,303
                                                                                                ---------              ------------

Net increase (decrease) in cash and cash equivalents                                               53,610                (1,572,166)

Cash and cash equivalents at beginning of period                                                    2,371                 1,705,216
                                                                                                ---------              ------------

Cash and cash equivalents at end of period                                                      $  55,981              $    133,050
                                                                                                =========              ============
</TABLE>






                 See accompanying notes to financial statements.

                                       F-5

<PAGE>



                        CFI MORTGAGE INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)



<TABLE>
<CAPTION>

                                                                                                             For the Nine
                                                                                                             Months Ended
                                                                                                             September 30,
                                                                                                   ---------------------------------
                                                                                                     1999                    1998
                                                                                                   --------               ----------

<S>                                                                                                <C>                    <C>
Supplemental Disclosures of Cash Flow Information:

  Cash paid during the period:

    Income taxes                                                                                   $   --                 $     --
                                                                                                   ========               ==========

    Interest                                                                                       $   --                 $3,420,978
                                                                                                   ========               ==========


Supplemental Schedules of Noncash Investing
    and Financing Activities:

  Accrued dividends on preferred stock                                                             $136,100               $  136,630
                                                                                                   ========               ==========

  Capital asset and lease obligation additions                                                     $   --                 $  330,064
                                                                                                   ========               ==========
</TABLE>





                 See accompanying notes to financial statements.


                                       F-6

<PAGE>



                         CFI MORTGAGE INC. AND SUBSDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               SEPTEMBER 30, 1999
                                   (Unaudited)



NOTE 1 - PETITION FOR RELIEF UNDER CHAPTER 11.

                  On March 10, 1999, CFI Mortgage Inc. ("CFI") commenced a
         voluntary petition for relief under Chapter 11 of Title 11 of the
         United States Code in the Southern District of Florida. On June 11,
         1999, the bankruptcy court confirmed a plan of reorganization pur-suant
         to which CFI was discharged from any debt that arose before the date of
         confirmation. As a result of the confirmation of the Plan, CFI is no
         longer threatened by any litigation, claims, and assessments which may
         have existed as of December 31, 1998.

                  The Plan provides for an infusion of $800,000 by a lender
         which is secured by CFI's assets. The lender has the option of
         con-verting the loan to common stock of CFI at a rate to be determined
         after the effective date of the Plan.

                  Each general creditor shall receive one share of common stock
         for each dollar of debt in the reorganized CFI.

                  The preferred stockholder of Series "A" and "B" convertible
         preferred stock shall receive 2 million shares of common stock in
         exchange for the preferred stock in the reorganized CFI.

                  The Company's subsidiary, Direct Mortgage Partners, Inc. (DMP)
         was not a party to the petition for relief under Chapter 11. Only debts
         that were guaranteed by CFI and two other creditors shall be satisfied
         by issuance of common stock for each dollar of debt in the reorganized
         CFI. The aforementioned debts are included in the total unsecured
         non-priority liabilities. As at September 30, 1999 and December 31,
         1998 liabilities of DMP that are not guaranteed by CFI amounted to
         $1,539,341, respectively.

                  On June 28, 1999, the Company's Amended Plan of Reorganization
         was approved and subsequently confirmed on August 2, 1999. On September
         15, 1999, the Company petitioned the court to extend the time necessary
         to consummate the Plan of Reorganization. This request for an extension
         was granted by the court until November 1, 1999.



NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES.

         (a)   Going Concern:

                  The accompanying financial statements have been prepared
         assuming that the Company will continue as a going concern. The
         Company's ability to return to normal operations is totally dependent
         on the success of its voluntary plan of reorganization and subsequent
         additional capital infusion. If this plan is not successful or the
         additional capital is not forthcoming or is insufficient, management
         intends to move the Company into a Chapter 7 bankruptcy liquidation.

                  Such conditions raise substantial doubt about the Company's
         ability to continue as a going concern. The consolidated financial
         statements do not include any adjustments that might result from the
         outcome of this uncertainty.


                                       F-7

<PAGE>



NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES.  (Continued)

         (b)   Basis of Presentation:

                  The accompanying unauditing financial statements have been
         prepared in accordance with generally accepted accounting principles
         for interim financial information and with the instructions for Form
         10-QSB and Article 10 and Regulation S-B. Accordingly, they do not
         include all of the information and footnotes required by generally
         accepted accounting principles for complete financial statements. In
         the opinion of management, the statements contain all adjustments
         (consisting only of normal recurring accruals) necessary to present
         fairly the financial position as of September 30, 1999 and the results
         of operations for the nine and three months ended September 30, 1999
         and 1998 and cash flows for the nine months ended September 30, 1999
         and 1998. The results of operations for the nine and three months ended
         September 30, 1999 and 1998 are not necessarily indicative of the
         results to be expected for the full year.

                  The December 31, 1998 balance sheet has been derived from the
         audited financial statements at that date included in the Company's
         annual report on Form 10-KSB. These unaudited financial statements
         should be read in conjunction with the financial statements and notes
         thereto included in the Company's annual report on Form 10-KSB.


         (c)   Organization:

                  Creative Industries, Inc. was incorporated in the State of
         Florida in April 1989, and operates as a licensed mortgage lender. In
         October 1990, the Corporation's name was changed to Creative Financing,
         Inc. and on May 24, 1995 the Corporation's name was changed to CFI
         Mortgage Corporation ("CFI Mortgage"). CFI Mortgage Inc. was
         incorpo-rated in Delaware on March 18, 1997. Immediately prior to the
         initial public offering, the existing stockholders of CFI Mortgage
         contributed all of their shares of CFI Mortgage common stock to CFI in
         exchange for 1,200,000 shares of common stock of CFI. Through its two
         wholly-owned subsidiaries, Bankers Direct Mortgage Corporation
         ("BDMC"), which was sold on September 11, 1998, and Direct Mortgage
         Partners Inc., which ceased operations in the 4th Quarter of 1998, CFI
         has been engaged in originating, purchasing and selling loans secured
         primarily by first mortgages on one-to-four-residential properties as
         well as purchasing and selling servicing rights associated with such
         loans. The loans were both conventional conforming loans (originated
         and sold through BDMC) and nonconforming loans (originated and sold
         through DMP). Significant intercompany accounts and transactions have
         been eliminated in consolidation.


         (d)   Geographic Concentration:

                  Prior to the sale, BDMC was approved by the U.S. Department of
         Housing and Urban Development/Federal Housing Administration ("FHA") as
         a nonsupervised mortgagee. Both BDMC and DMP were licensed and
         registered in approximately 22 states, primarily in the southern United
         States, as mortgage lenders with approximately 9 branch offices.


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES.  (Continued)

         (e)   Use of Estimates:

                  The preparation of financial statements in conformity with
         generally accepted accounting principles requires management to make
         estimates and assumptions in determining the reported amounts of assets
         and liabilities and disclosures of contingent assets and lia-bilities
         at the date of the financial statements, and the reported amounts of
         revenues and expenses during the reporting period. Actual results could
         differ from those estimates.

                                       F-8

<PAGE>

         (f)   Income Taxes:

                  The Company complies with Statement of Financial Accounting
         Standards No. ("SFAS 109"), "Accounting for Income Taxes," which
         requires an asset and liability approach to financial accounting and
         reporting for income taxes. Deferred income tax assets are computed for
         differences between financial statement and tax basis of assets and
         liabilities that will result in future taxable or deductible amounts,
         based on the enacted tax laws and rates to the periods in which
         differences are expected to affect taxable income. Valuation allowances
         are established, when necessary, to reduce deferred tax assets to the
         amount to be realized.


         (g)   Earnings (Loss) Per Common Share:

                  Earnings (loss) per common share are based on the weighted
         average number of common shares outstanding. In March 1997, the
         Financial Accounting Standards Board issued Statement No. 128 ("SFAS
         128") "Earning Per Share" which requires dual presentation of basic and
         diluted earnings per share on the face of the statements of operations.
         Basic earnings (loss) per share excludes dilution and is computed by
         dividing income available to common stockholders by the
         weighted-average common shares outstanding for the period. Diluted
         earnings (loss) per share reflect the potential dilution that could
         occur if preferred stock conversions, options and warrants were to be
         exercised or converted or otherwise resulted in the issuance of common
         stock that then shared in the earnings of the entity. The Company
         adopted SFAS 128 for the year ended December 31, 1997.

                  Since the effect of outstanding options, warrants and
         preferred stock conversions are antidilutive in all periods presented,
         it has been excluded from the computation of earnings (loss) per common
         share.



NOTE 3 -   INTEREST RECEIVABLE.

                  Interest earned on mortgages held for sale from origination to
         date of sale is recognized as earned.


                                       F-9


<PAGE>



NOTE 4 -  RELATED PARTY TRANSACTIONS.

                  On July 15, 1998, Mr. Vincent C. Castoro, Chairman of the
         Board of Directors, loaned CFI Mortgage Inc. $100,000 and in return
         holds a promissory note with an interest rate of 6% with a due date of
         August 15, 1998. No payments were made on this note until September 1,
         1999 when a principal payment of $5,000 was made. The balances of
         $102,218 and $102,750 which includes accrued interest have been
         included in accrued expenses and other current liabilities, as at
         September 30, 1999 and December 31, 1998, respectively.

                  In addition on September 10, 1999 an affiliated company loaned
         CFI Mortgage, Inc. $130,000. The note bears interest at 9% and is
         payable upon demand.

                  The Company has made advances to three officers aggregating
         approximately $86,000 as of September 30, 1999 and December 31, 1998,
         respectively. The advances are noninterest-bearing and are due on
         demand and are included in due from the related parties.



NOTE 5 -  ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES.

                  Accrued expenses and other current liabilities are comprised
         of the following and are presented under the following captions in the
         financial statement.


<TABLE>
<CAPTION>

                                                                         September 30,        December 31,
                                                                             1999                1998

<S>                                                                      <C>                  <C>
Liabilities not subject to compromise:
  Dividends on preferred stock                                            $136,100              $   --
  Accrued general and
    administrative expenses                                                 45,041                  --
                                                                          --------              --------

                                                                          $181,141              $   --
                                                                          ========              ========

Unsecured non-priority liabilities:
  Professional fees                                                       $152,000              $152,000
  Dividends on preferred stock                                             137,781               137,781
  Accrued interest                                                          44,713                44,713
  Accrued payroll                                                          377,077               377,077
  Deposit payable                                                          150,000               150,000
  Loans payable - officer                                                  102,218               102,750
                                                                          --------              --------

                                                                          $963,789              $964,321
                                                                          ========              ========
</TABLE>




                  Each general creditor shall receive one share of common stock
         for each dollar of debt in the reorganized CFI.



                                      F-10

<PAGE>



NOTE 6 - COMMITMENTS.

         (a)     Leases:

                  Effective April 1, 1999, CFI rents its corporate head-
         quarters, and office facilities from a stockholder on a month to month
         basis at $1,890 per month including certain escalation costs for real
         estate taxes, operating expenses, usage and common area charges. Rent
         expense for real property leases charged to operations for the nine
         months ended September 30, 1999 was $11,340.


         (b)      Employment Contracts:

                  The Company had entered into several employment contracts with
         certain officers and employees which expire between 1998 and 2002 which
         have been disavowed under the Chapter 11 Plan.



NOTE 7 -   INCOME TAXES.

                  The Company and its subsidiaries file a consolidated federal
         income tax return. As of December 31, 1998, the Company and its
         subsidiaries have a net operating loss carryforward of approximately,
         $19,000,000 available to reduce future taxable income which expires in
         the year 2014. The deferred tax asset resulting from the operating loss
         carryforward of approximately $7,125,000 in management's estimate
         requires a valuation allowance in the same amount based upon
         management's assessment that there is not assurance the tax asset will
         be realized. The Company's ability to utilize its NOL carryforward
         could be limited following a change in ownership in excess of fifty
         percentage points effectuated by the common stock issued in connection
         with the bankruptcy.



NOTE 8 -        STOCKHOLDERS' EQUITY.

                  On May 30, 1997, CFI completed the initial public offering of
         1,000,000 shares of its common stock at $5 per share. The net pro-ceeds
         from the offering, after deducting underwriting discounts and
         commissions and offering expenses, aggregated $3,800,525. In
         con-nection with the offering, CFI granted the underwriter warrants to
         purchase 100,000 shares of common stock at an exercise priced of $6 per
         share. The warrants are exercisable for a period of four years
         commencing May 1998.

                  On December 3, 1997, CFI issued and sold 2,060 shares of
         Series "A" 8% convertible preferred stock $.01 par value, at $1,000 per
         share in a private placement. The net proceeds from the sale, after
         deducting selling and other related expenses, aggregated $1,821,753.
         The preferred stock is convertible for two years into common shares at
         a price equal to 85% of the five-day average bid prices immediately
         prior to the conversion date. The discount on the conversion price is
         accounted for as a charge against retained earnings and is amortized
         over the nonconvertible period. Included in the statement of changes in
         stockholders' equity for the year ended December 31, 1997 is a charge
         of $150,000 pursuant to the conversion discount. On March 3, 1998, 500
         shares of the preferred stock, plus accrued interest of approximately
         $10,000 were converted into 105,467 of common shares.


                                      F-11

<PAGE>





NOTE 8 -  STOCKHOLDERS' EQUITY.  (Continued)

                  In connection with the preferred stock transaction, the
         Company granted warrants to purchase 240,000 shares of common stock at
         an exercise price of $8.50 per share. The warrants are exercisable
         until September 17, 2001. In addition, the Company issued 60 shares of
         preferred stock with identical terms as payment for fees for the
         private placement. The cost will be included in the net proceeds from
         the transaction and will be amortized over the non-conversion term.

                  On May 18, 1998, the Company issued $1,700,000 principal
         amount of the convertible debentures to a single investor.

                  On August 19, 1998, the entire convertible debenture was
         retired in exchange for the issuance of 1,700 shares of Series "C", 10%
         convertible preferred stock, $0.01 par value in a private placement on
         terms substantially identical to the original debenture. In connection
         with this issuance of Series "C" preferred stock, warrants to purchase
         50,000 shares of the Company's common stock at a price of $8.75 a
         shares held by the debenture holder were surrendered in favor of new
         warrants to purchase 50,000 shares of the Company's common stock at a
         price of $2.6563 per share which was the closing market bid price on
         the effective date of the exchange. On March 1999, Series "C" preferred
         stock was converted into 2,500,000 shares of the Company's common
         stock.

                  On June 30, 1998, CFI issued and sold 1,000 shares of Series
         B, 8% convertible preferred stock, $0.01 par value, at $1,000 per share
         in a private placement. The proceeds from the sale amounted to
         $1,000,000. The preferred stock is convertible for two years into
         common shares at a price equal to 85% of the five-day average bid
         prices immediately prior to the per common share. The discount on the
         conversion price, which was $150,000, is accounted for as a charge
         against retained earnings and is amortized over the non-con-vertible
         period.

                  During the nine months ending September 30, 1999, 75 shares of
         preferred stock were converted into 525,021 shares of common stock and
         accordingly additional paid-in capital increased by $1,994 and
         accumulated deficit increased by $7,242.



NOTE 9 -   15% DEMAND CONVERTIBLE DEBENTURES.

                  During the nine months ending September 30, 1999, the Company
         received $245,420 net of expenses of $27,825 from the sale of 15%
         demand convertible debentures through a Private Securities Subscription
         Agreement. The debentures are collateralized by all assets of the
         Company not pledged in the bankruptcy proceedings and 956,000 shares of
         the Company's common stock owned by two stockholders. Interest accrues
         at 15% per annum and at the Company's option be paid in shares of the
         Company's common stock. The outstanding debentures plus accrued
         interest may be converted into the common stock of the Company at 2% of
         the Company's common stock for each $80,000 of principal. In addition,
         160,000 and 124,000 warrants at $.08 per share and $.15 per share,
         respectively have been issued.


NOTE 10 -  OTC - BULLETIN BOARD MARKET.

                  The common stock of CFI moved to the OTC - Bulletin Board
         Market as the Company did not meet the required minimum standards for
         continued inclusion in the NASDAQ Small Cap Market, effective with the
         close of business on November 17, 1998.



                                      F-12
<PAGE>


NOTE 11 -  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS.

                  The Financial Accounting Standards Board periodically issues
         new accounting standards in a continuing effort to improve the quality
         of financial information and to promote uniformity in its presentation.
         Management has reviewed all such pronouncements made in the last fiscal
         year and concluded that none have a material impact on the Company's
         presentation of its financial position, results of operations and cash
         flows.



NOTE 12 - YEAR 2000.

                  The Company recognizes the need to ensure its operation will
         not be adversely affected by Year 2000 software failures. The Company
         is communicating with suppliers, customers and other with which it does
         business to coordinate Year 2000 conversion. The cost of achieving
         compliance is estimated to be a minor increase over the cost of normal
         software upgrades and replacements.



                                      F-13


ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RUSULTS
        OF OPERATIONS.

FORWARD LOOKING STATEMENTS

Certain  of  the  matters   discussed   in  this  Form  10-QSB  may   constitute
forward-looking   statements  within  the  meaning  of  the  Private  Securities
Litigation  Reform Act of 1995. As such,  these  forward-looking  statements may
involve  known and unknown  risks and  uncertainties  and other factors that may
cause the actual  results,  performance  or  achievements  of the  Company to be
materially  different  from any future  results,  performance,  or  achievements
expressed or implied by such forward-looking statements.

GENERAL BUSINESS

CFI Mortgage Inc. (the "Company") is a diversified  financial  services  company
headquartered in North Palm Beach,  Florida.  The Company provides mortgages and
mortgage-related services to individuals indirectly through mortgage brokers and
mortgage  lenders.  The Company  originates,  processes,  underwrites  and funds
residential mortgage loans that are sold on an individual basis to institutional
and  private  investors.  The  Company  originates  loans that do not conform to
agency guidelines (non-conforming loans). Non-conforming loans typically fail to
meet agency guidelines due to credit impairment, higher loan-to-value ratios and
debt-to-income  ratios,  and are priced to compensate for the additional  credit
risk.

During the quarter ended September 30, 1999 the Company  continued to administer
the bankruptcy  reorganization  process  resulting in the bankruptcy  plan being
confirmed on August 2, 1999. The Company hired production and production support
personnel  during  the  quarter,  which  resulted  in a  pipeline  in  excess of
$3,000,000.  Management  anticipates revenues from the funding and sale of these
mortgages to occur in the fourth quarter.

The Company had negotiated "Net Branch Agreements" with several Mortgage Banking
Companies. The agreements allow the Company to market their services to mortgage
brokers in multiple  states.  The agreement calls for the Company to pay between
1/2% and 1% of the loan  amounts  originated  under the  arrangement.  These Net
Branch  Agreements  allowed the company to restructure its operating  procedures
and to commence operations late in the third quarter.  Currently,  the Company's
operating  division is doing business in several states through these net branch
agreements.  Historically,  the  Company had focused  primarily  on  originating
conventional conforming and government-insured  loans. Sub-prime lending has the
ability to generate gross profit margins up to twice the level of the Conforming
lending.  The Company sells substantially all of the mortgages it originates and
purchases,   including  the  right  to  service  such  loans,  to  institutional
purchasers, including national and regional commercial banks and mortgage banks.
These institutional  purchasers  thereafter portfolio or resell the mortgages as
mortgage-backed securities.

Business Strategy

The Company's business strategy is to increase profitably the volume of its loan
purchases  and the size of its  broker  network  by (i)  continuing  to  provide
quality service to its network of brokers  /correspondents;  (ii) broadening its
sub-prime product offerings;  (iii) selling its mortgage loans in bulk for cash;
(iv)  continuing  its  investment in "mortgage loan  origination  systems";  (v)
maintaining  its  underwriting  standards;  (vi)  expanding onto the Internet to
offer  mortgage  related  services  to  the  companies  broker  network  through
E-Commerce.




Continuing to Provide Quality Service

The Company provides a high level of service to its brokers and  correspondents.
These services include  preliminary  approval of most brokered loans and certain
correspondent loans within one day,  consistent  application of its underwriting
guidelines and funding or purchase of loans  generally  within three to ten days
of  preliminary  approval.  In addition,  the Company  services  each broker and
correspondent with a team of professionals that includes a business  development
representative,  experienced  underwriters  and, in the case of brokered  loans,
loan officers working primarily on a commission basis with processors  assisting
them to handle applications  submitted by each broker. The Company believes that
this commitment to service provides a competitive  advantage in establishing and
maintaining productive broker and correspondent relationships.

Broadening Product Offerings

       The Company  frequently reviews its pricing and loan products relative to
its  competitors  and introduces new loan products in order to meet the needs of
its correspondents and brokers. For example, the non-conforming home equity loan
market is a logical extension of the Company's end product offering. The Company
is beginning to enter this market through its wholesale  division,  specifically
by lending to individuals who generally have impaired or limited credit profiles
or higher debt to income ratios and typically  has  substantial  equity in their
homes.

Whole Sale Lending Platform

Management believes that lending through  correspondents can he an efficient and
cost efficient  method of producing  loans because of the low fixed expenses and
capital investment required.  Correspondents are paid for the loans purchased by
the Company based on a percentage of the loan balance purchased. Such percentage
is  determined  based upon a daily rate sheet that  reflects  market  demand for
particular loans on that day. If efficiently utilized, correspondent lending can
allow the  Company  to match its costs  more  directly  with the volume of loans
purchased so that a portion of the Company's cost is variable rather than fixed.
The correspondent  origination  approach also allows the Company the flexibility
to adjust to varying market conditions by quickly entering or exiting geographic
markets as economic conditions dictate.

The Company attracts and maintains relationships with correspondents by offering
a variety of services that provide  incentives  for the  correspondents  to sell
mortgage  loans to the  Company.  The  Company's  strategy  with  respect to its
correspondents  has been to  provide  a high  level  of  service  together  with
competitive pricing.  Services provided include timely underwriting and approval
or  rejection  of a loan  (within 24 hours  after  receipt of a  completed  loan
application),  timely  purchase of loans (within five to ten days after they are
approved for  acquisition),  information  sessions and updates regarding current
underwriting  practices  and new  products.  In addition,  the Company  provides
correspondents with a variety of products and multiple methods of funding loans.

As the Company moves forward with its Internet delivery strategy,  correspondent
relationships  will provide a potential  customer  base for the sale of Internet
mortgage loan leads in geographic  markets where the Company lacks the licensing
or physical  presence to originate  loans  directly.  Management  believes  that
correspondent  lending can be  structured  to manage risks and maintain  quality
control. The Company will approve correspondents only after a thorough review of
the reputation  and mortgage  lending  expertise of such  entities,  including a
review of references and financial statements.

The Company  requires that a full appraisal of the  collateral  property for any
loan  that it  acquires  or  originates  be  performed  in  connection  with the
origination of the loan. All appraisals are performed by third party,  fee-based
appraisers  and  generally  conform  to current  FNMA,  FHLMC  secondary  market
requirements for residential property appraisals.  Each such appraisal generally
includes,  among other things, an inspection of the exterior and interior of the
subject property and, where  available,  data from sales within the preceding 12
months of similar  properties  within that same general  location of the subject
property.

A credit report by an independent, nationally recognized credit reporting agency
reflecting the applicant's complete credit history is also required.  The credit
report typically contains information reflecting  delinquencies,  repossessions,
judgments,  foreclosures,  bankruptcies and similar  instances of adverse credit
that can be  discovered by a search of public  records.  An  applicant's  recent
credit performance weighs heavily in the evaluation of risk by the Company.  The
credit report is used to evaluate the  borrower's  record and must he current at
the time of application.  A lack of credit history will not necessarily preclude
a loan if the borrower has sufficient  equity in the property.  Slow payments on
the borrower's  credit report must be  satisfactorily  explained and will impact
the amount of the loan for which the applicant can be approved.

The Company  requires title insurance  coverage issued by an approved ALTA title
insurance  company on the  collateral  property for all loans it  originates  or
purchases.  The  Company  and its  assignees  will be the named  insured  on the
policy. Title insurance policies indicate the lien position of the mortgage loan
and  protect the Company  against  loss if the title or lien  position is not as
indicated.  The  applicant is also  required to secure  hazard and, if required,
flood insurance in an amount  sufficient to cover the lesser of (i) the new loan
balance or (ii) an amount sufficient to cover replacement costs of the Mortgaged
property.

The Company has implemented a quality control program to monitor compliance with
the Company's established lending and servicing policies and procedures, as well
as with applicable laws and regulatory guidelines. The Company believes that the
implementation  and enforcement of its comprehensive  underwriting  criteria and
its quality control program are a significant  element in the Company's  efforts
to originate and purchase high quality  mortgage  loans.  The Company's  quality
control's all loans in order to evaluate compliance with underwriting criteria

Sale of Loan

The sale of mortgage loans may generate a gain or loss to the Company.  Gains or
losses result primarily from two factors. First, the Company may purchase a loan
at a price (i.e., interest rate, and discount) which may be higher or lower than
the  Company  would  receive if it  immediately  sold the loan in the  secondary
market.  These pricing  differences occur principally as a result of competitive
pricing  conditions in the primary loan  origination  market.  Second,  gains or
losses  upon the sale of loan may result from  changes in  interest  rates which
result in changes in the market value of the loans,  or commitments to originate
or to purchase loans,  from the time the price commitment is given to the broker
until the time that the loan is sold by the Company to the investor. In order to
reduce the effect of interest  rate  changes on the gain and loss on loan sales,
the Company  generally commits to sell all its warehouse loans.  (i.e.  mortgage
loans that have closed) and its pipeline  loans (i.e.,  mortgage loans which are
not yet  closed  but for  which  the  interest  rate  has been  established)  to
institutional  investors  for delivery at a future time for a stated  price.  In
general the Company  will not  establish  an interest  rate for a mortgage  loan
until it has obtained a commitment  from an  institutional  investor to purchase
the loan. These commitments are on a "best efforts" basis and the Company has no
obligation to sell a loan to an investor unless and until the loan closes.

Financing of Mortgage Banking Operations

The  Company's  primary cash flow  requirement  involves the funding of its loan
production.  The Company finances its mortgage loan purchases  through warehouse
lines of credit or loan purchase  agreements it accesses  through its Net branch
affiliation  that they have entered into with  several  unaffiliated  commercial
banks  or   financial   services   companies.   These  credit   facilities   are
collateralized  by the underlying  loans are provide for either a short term (60
to 90 days)  borrowing  or an interim  purchase of the loan by the funding  bank
while awaiting final purchase by the end investor.


BANKRUPTCY PROCEEDING:

On March 10, 1999, CFI Mortgage Inc. ("CFI") commenced a voluntary  petition for
relief under Chapter 11 of Title 11 of the United States Code. The Plan provides
for an infusion of $800,000 by a lender,  which is secured by CFI's assets.  The
lender has the option of converting the loan to common stock of CFI at a rate of
2% of the company per $80,000 funded to the Company. Each general creditor shall
receive  one share of common  stock for each  dollar of debt in the  reorganized
CFI. The Plan was  confirmed on August 2, 1999 CFI will no longer be  threatened
by any  litigation,  claims,  and  assessments  on a cash basis,  which may have
existed as of December  31,  1998.  The only  liabilities  the company can incur
would be an additional common stock  distribution to a creditor whom the company
has objected to their claim and the court might award an additional distribution
over the amount the company had scheduled in its Bankruptcy filings. The company
believes in the validity of the amount due creditors in its Bankruptcy  Filings.
In the event that the Company  losses some or all of the claims  objections  the
existing  shareholders  would be further diluted to the degree that the award to
the creditor exceeds the amount scheduled on the companies  Bankruptcy  filings.
The overage to the creditors would be paid in the Company's Common Stock.

PLAN OF REORGANIZATION:

See Company's annual 10K filing for the amended plan of reorganization (Exhibit
1) and amended disclosure statement (Exhibit 2) as filed with the Securities and
Exchange Commission.

EVENTS LEADING TO THE CHAPTER 11 PETITION:

Beginning in September 1998, as a result of a number of factors,  cash prices in
the  sub-prime  mortgage  market  significantly  deteriorated  and in some cases
investor  yield  requirements  increased  some 200  basis  points.  This in turn
significantly  devalued  the  Company's  loans  held  for  sale  and  subsequent
revenues.

The Company previously had a warehouse line of $15 million with Bank One, Texas,
NA.,  which was  discontinued  as of September  30, 1998.  The  Company's  other
warehouse  line,  which  was  with  Nikko  Financial  Services,  was  terminated
effective  November 30,  1998.  As of  September  30,  1998,  the Company was in
violation of the net worth covenant of this agreement.  In addition, the Company
previously  had a  purchase  facility  agreement  with  Fidelity  Bank and Trust
aggregating  $25 million.  As of September 30, 1998 the use of that facility was
terminated.  Upon termination of the warehouse line with Nikko, further advances
for new loan funding could only be under a repurchase  agreement  which provided
Nikko with the  ability to  evaluate  whether or not it would enter into any new
transactions with the Company.  The Company no longer had a committed  warehouse
facility.  Given that Nikko could  decline the  Company's  request to fund loans
after  November  30,  1998,  the  Company  was not  able  to  make  loan-funding
commitments beyond November 30, 1998.

As of March 31,1998 and again as of June  30,1998,  the Company did not meet the
required  minimum  standards  for  continued  inclusion in the NASDAQ  Small-Cap
Market in that its net tangible  assets had fallen below  $2,000,000  and so the
Company received a formal notice of de-listing from NASDAQ. On July 31, 1998 the
Company appealed the notice of de-listing at an oral hearing and awaited a final
decision from NASDAQ. On November 17, 1998 NASDAQ informed the Company by letter
that a determination had been made to de-list the Company's  securities from The
NASDAQ Stock Market effective with the close of business on November 17, 1998.

The Company attempted a non-bankruptcy  workout with its creditors.  The Company
received a commitment from an investor to  re-capitalize  the Company with up to
$2 million if the  Company  could  restructure  its  then-existing  liabilities.
Accordingly,   the  Company  presented  a  voluntary,   non-bankruptcy  plan  of
reorganization to all its creditors (and those of its subsidiaries)  wherein all
creditors  were  offered 1 share of the  Company's  common stock for each dollar
owed.

The success of that  reorganization plan was dependent on full acceptance by all
of the  Company's  creditors  and the consent of its  underwriters  to issue the
related common shares.  All creditors did not accept the Company's common shares
in lieu of payment,  and the underwriters did not consent to the issuance of the
underlying shares,  which resulted in the investor not agreeing to re-capitalize
the Company.

The Company  disclosed in a letter to the  creditors  that in the event that the
voluntary plan was not successful by December 11, 1998,  management  intended to
seek  liquidation  of the  Company  though the filing of a Chapter 7  bankruptcy
action on December 14,  1998." Prior to a Chapter 7  bankruptcy  petition  being
filed, the Company consulted with its bankruptcy counsel,  Kevin C. Gleason, and
was advised that a plan similar to the attempted  workout could be  accomplished
through a petition under Chapter 11 of the bankruptcy code, without the need for
the  unanimous  consent  of the  creditors.  With  its only  alternatives  being
liquidation  under  Chapter  7,  or an  reorganization  under  Chapter  11,  the
Directors elected to seek a course of action under reorganization.

The  substantial  decrease in the  Company's  net worth from  November  24, 1998
through March 10, 1999 was overwhelmingly due to the devaluation of the mortgage
portfolios of the Company's subsidiary, DMP.

COMPARISON OF QUARTERS ENDED SEPTEMBER 30, 1999 AND 1998

The Company did not have any revenues for the current  period.  With the loss of
the Company's credit facilities the Company was unable fund loans after November
30, 1998, and subsequently  discontinued  its  mortgage-banking  operations.  On
March 10, 1999,  CFI Mortgage Inc.  ("CFI")  commenced a voluntary  petition for
relief  under  Chapter 11 of Title 11 of the United  States Code.  As such,  the
Company  did not have any  operating  subsidiary  in the  current  quarter  when
compared to last year when the Company had two operating subsidiaries.

EXPENSES

The Company recorded total operating  expenses of $295,928 for the quarter ended
September 30, 1999.  This  reflected  increased  payroll and operating  expenses
associated  in  the  building  of an  infrastructure  to  support  the  mortgage
operations and administrative  expenses primarily associated with the filing and
subsequent  approval  of the  bankruptcy  reorganization  petition.  General and
administrative expenses accounted for $274,529 and interest $9,657, of the total
expenses.  Selling expenses were $11,742,  and accrued preferred stock dividends
of $56,460.  The  Company  generated  in excess of a  $3,000,000  mortgage  loan
pipeline.  Funding  and sales of these  loans will  contribute  revenues  in the
fourth quarter.

NET INCOME (LOSS)

The Company  generated a net loss of $352,388,  after  accrued  preferred  stock
dividends of $56,460,  in the quarter ended  September 30, 1999,  which included
$295,928  in  operating  expenses,  primarily  associated  with the  filing  and
subsequent approval of the bankruptcy  reorganization  petition and the staffing
of production  and  production  support  personnel for the mortgage  operations.
Accrued preferred stock dividends were $56,460 in accrued dividends.

COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998

The Company  recorded $1,358 in revenues for the nine months ended September 30,
1999.  With the loss of the Company's  credit  facilities the Company was unable
fund  loans  after  November  30,  1998,  and   subsequently   discontinued  its
mortgage-banking  operations.  On March 10,  1999,  CFI  Mortgage  Inc.  ("CFI")
commenced a voluntary  petition for relief  under  Chapter 11 of Title 11 of the
United States Code. As such, the Company did not have any operating subsidiaries
in the  current  period  when  compared  to last year when the  Company  had two
operating subsidiaries.

The Company  recorded total  operating  expenses of $492,330 for the nine months
ended  September 30, 1999.  This  reflected  the increase  payroll and operating
expenses associated with building an infrastructure for the mortgage operations,
and administrative  expenses primarily associated with the filing and subsequent
approval of the bankruptcy  reorganization petition.  General and administrative
expenses  accounted for $465,468,  interest  $15,120 and selling  $11,742 of the
total expenses.

The Company generated net loss of $627,072, after accrued preferred stock
dividends of $136,100, for the nine months ended September 30, 1999.


LIQUIDITY AND CAPITAL RESOURCES

The  Company's is dependent on stock sales or third party  borrowings to sustain
operations.  During the quarter ending  September 30, 1999, the Company received
$144,000  net of  expense of  $16,000  from the sale of 15%  demand  convertible
debentures  through a Private  Securities  Subscription  Agreement  (The  "Ronco
Agreement").  The debentures are collateralized by all the assets of the Company
not pledged in the  Bankruptcy  proceedings  and 956,000 shares of the Company's
common stock owned by two  stockholders.  In addition,  on September 10, 1999 an
affiliated Company loaned $130,000 to CFI Mortgage, Inc. The note bears interest
at 9% and is payable upon demand.

Management  believes that the planned fourth quarter capital infusion,  combined
with  acquisitions  as  outlined  in the  amended  plan of  Reorganization,  and
revenues  from  the  sale of  mortgage  loans  will be  sufficient  to fund  the
Company's  expansion  through the  remainder of 1999.  There can be no assurance
that the Company will be able to obtain an  additional  capital  infusion in the
fourth quarter or that the planned acquisitions will be consummated.


RISK FACTORS

SEASONALITY

The  mortgage  banking  industry is subject to  seasonal  trends.  These  trends
reflect the general  pattern of re-sales of homes,  which sales  typically  peak
during the spring and summer seasons and decline from January  through March. In
addition, the primary home market in Florida tends to increase during the fourth
quarter,  while the second home market  increases  from October  through  April.
Refinancing  tend to be less  seasonal  and more  closely  related to changes in
interest  rates.  The mortgage  servicing  business is generally  not subject to
seasonal  trends,  except to the  extent  that  growth  of a  mortgage-servicing
portfolio is generally higher in periods of greater mortgage loan originations.

COMPETITION

The mortgage banking industry is highly  competitive.  The Company competes with
financial institutions,  mainly mortgage companies, commercial banks and savings
and loan  associations  and, to a certain  extent,  credit  unions and insurance
companies, depending upon the type of mortgage loan product offered. The Company
competes principally by purchasing or originating a variety of types of mortgage
loans,  emphasizing  the  quality  of its  service  and  pricing  the  loans  at
competitive  rates. Many of the Company's  competitors have financial  resources
substantially  greater  than that of the Company.  Many of the nation's  largest
mortgage  companies and  commercial  banks have a  significant  number of branch
offices in areas in which the Company's  correspondents and wholesale and retail
branches operate.  Increased  competition for mortgage loans from larger lenders
may result in a decrease in the volume of loans  originated and purchased by the
Company,  thereby  possibly  reducing  the  Company's  revenues.  The  top  five
competitors  in the market are a) the  Associates,  b) Household  Financial,  c)
ContiMortgage Corp., d) Green Tree Financial and e) the Money Store.

REGULATION

The operations of the Company are subject to extensive regulation by federal and
state governmental  authorities and are subject to various laws and judicial and
administrative  decisions that, among other things,  regulate credit activities,
require  disclosures  to customers,  govern secured  transactions  and establish
collection,   repossession  and  claims  handling  procedures  and  other  trade
practices.  The Company is subject to the rules and  regulations  of the Federal
Housing Administration  ("FHA"), FNMA and the Department of Veteran Affairs (the
"VA") and state regulatory authorities with respect to originating,  processing,
underwriting, selling, securitizing and servicing mortgage loans.

In addition, there are other federal and state statutes and regulations, as well
as judicial  decisions,  affecting  the  Company's  operations.  Those rules and
regulations,  among other things,  impose licensing  obligations on the Company,
establish eligibility criteria for mortgage loans,  prohibit  discrimination and
establish  underwriting  guidelines which include provisions for inspections and
appraisals, require credit reports on prospective borrowers and fix maximum loan
amounts, and with respect to the VA loans, fix maximum interest rates. Moreover,
lenders such as the Company are required to submit annually to the FHA, FNMA and
VA  audited  financial  statements,  and  each  regulatory  entity  has  its own
financial requirements. The Company's affairs also are subject to examination by
the FHA,  FNMA and VA at all  times to  assure  compliance  with all  applicable
regulations,  policies  and  procedures.  Mortgage  origination  activities  are
subject to, among other regulatory  requirements,  the Equal Credit  Opportunity
Act, the Federal  Truth-in-Lending  Act, the Home  Mortgage  Disclosure  Act and
RESPA and the regulations  promulgated thereunder which prohibit  discrimination
and require the disclosure of certain basic information to mortgagors concerning
credit  terms  and  settlement  costs.  Many  of the  aforementioned  regulatory
requirements  are designed to protect the interests of  consumers,  while others
protect the owners or insurers of mortgage  loans.  Failure to comply with these
requirements  can lead to loss of  approved  status,  termination  of  servicing
contracts without  compensation to the servicer,  demands for indemnification or
loan repurchases, class action lawsuits and administrative enforcement actions.

There are various state and local laws and  regulations  affecting the Company's
operations.  The Company is in possession of all licenses  required by the State
of  Florida to  conduct  its  business  operations  and for the  states  were it
transacts  business.  Conventional  mortgage  operations  also may be subject to
state usury  statutes.  FHA and VA mortgage  loans are exempt from the effect of
such statutes.

ENVIRONMENTAL MATTERS

To date,  the Company has not been  required  to perform  any  investigation  or
re-mediation  activities,  nor has it been subject to any environmental  claims.
There  can be no  assurance,  however,  that this  will  remain  the case in the
future.  In the ordinary  course of its business,  the Company from time to time
forecloses on the  properties  securing  loans.  Although the Company  primarily
lends to  owners of  residential  properties,  there is a risk that the  Company
could be required to investigate  and clean up hazardous or toxic  substances or
chemical releases at such properties after  acquisition by the Company,  and may
be held liable to a governmental entity or to third parties for property damage,
personal injury and investigation and clean up costs incurred by such parties in
connection with the contamination.  In addition, the owner or former owners of a
contaminated  site may be subject to common law claims by third parties based on
damages and costs resulting from environmental contamination emanating from such
property.


PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

As a result of the confirmation of the bankruptcy plan, the Company is no longer
threatened with any litigation,  claims and assessments which may have exited as
of year end December 31, 1998.

The Company is aware of an additional suit pending against  Christopher  Castoro
and Don L.  Lashbrook by Thomson,  Kernaghan & Co. The Company is not a party to
the suit.

The Company was served on August 17,  1999 with a lawsuit  from the  "Unofficial
Creditors  Committee" seeking $10,000,000 in damages. All of the former officers
and  directors of the Company  were named as well Gulf  Insurance  Company,  the
Company's Officer & Directors insurance carrier.  The Company, its Directors and
former  Directors and former  Officers  believe the suit to be without merit and
intend to vigorously defend the action.

In the event an objection to a claim is made,  such objection shall preclude the
consideration of such claim as "allowed" for purposes of timely  distribution in
accordance with the Plan. The Disbursing Agent shall escrow sufficient shares of
common stock to cover all  potential  distributions  with respect to claims that
have  objections  filed  against them.  The Company has filed  objections to the
substantial  claims.  See Exhibit 3 of the Company's  annual 10K report as filed
with the  Securities  & Exchange  Commission  for all  disputed  claims  that if
adjudicated  against the Company in  bankruptcy  court will result in payment of
one share of common stock being issued for every one dollar ($1.00) owed. Claims
objections are being done post-confirmation.


ITEM 2. CHANGES IN SECURITIES

On March 10, 1999, CFI Mortgage Inc. ("CFI") commenced a voluntary  petition for
relief under Chapter 11 of Title 11 of the United States Code. The Plan provided
for an  infusion  of  $800,000  by a lender  (Ronco),  which is secured by CFI's
assets.  The Ronco  Funding  subscription  represents  Class 1 of CFI  Mortgages
Inc.'s  Creditor  class in regards to the  Companies  Bankruptcy  Reorganization
plan.. Ronco, or its assigns, shall have the option to convert the amount of the
loan to common  stock of the Company  pro rata,  at the rate of 2 percent of the
outstanding   common   shares  of  the  Company   for  each   $80,000  of  gross
disbursements.  Such shares to be determined  after the Effective  Date,  and to
represent  two percent  (2%) of the  Company's  outstanding  common  stock after
distributions  to  claimants  in Classes 2 and 3. A warrant for one share of the
stock of the Company  will also be issued to Lender,  or its  assigns,  for each
share of  common  stock  issued  to Ronco  pursuant  to the  Agreement  with the
Company.

During the quarter ended September 30, 1999, the Company  received  $144,000 net
of expense of $16,000 from the sale of 15% demand convertible debentures through
the Private  Securities  Subscription  Agreement with Ronco.  The debentures are
collateralized  by all  assets of the  Company  not  pledged  in the  Bankruptcy
Proceedings and 956,000 of the Company's common stock owned by two stockholders.
Interest  accrues at 15% per annum and at the Company's option be paid in shares
of the Company's  common stock.  In addition,  80,000 warrants at $.15 per share
and 80,000 warrants at $.24 per share were issued.

The  following  table  sets forth the range of high and low  closing  prices per
share of the Common stock during the period since December 31, 1998.

---------------------------------------------------------------------------
    1999                                              High             Low
---------------------------------------------------------------------------
First Quarter                                    $    0.34            $   0.07
Second Quarter                               $    0.34            $   0.06
Third Quarter                                    $   0.42            $  0.17

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable

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

Not Applicable

ITEM 5. OTHER INFORMATION - SUBSEQUENT EVENTS

 On March 10, 1999, CFI Mortgage Inc. ("CFI") commenced a voluntary petition for
relief under Chapter 11 of Title 11 of the United States Code. The Plan provided
for an  infusion  of  $800,000  by a lender  (Ronco),  which is secured by CFI's
assets.  The Ronco  Funding  subscription  represents  Class 1 of CFI  Mortgages
Inc.'s  Creditor  class in regards to the  Companies  Bankruptcy  Reorganization
plan. Ronco, or its assigns,  shall have the option to convert the amount of the
loan to common  stock of the Company  pro rata,  at the rate of 2 percent of the
outstanding   common   shares  of  the  Company   for  each   $80,000  of  gross
disbursements.  Such shares to be determined  after the Effective  Date,  and to
represent  two percent  (2%) of the  Company's  outstanding  common  stock after
distributions  to  claimants  in Classes 2 and 3. A warrant for one share of the
stock of the Company  will also be issued to Lender,  or its  assigns,  for each
share of  common  stock  issued  to Ronco  pursuant  to the  Agreement  with the
Company.

Subsequently,  as of September  30, 1999 Ronco  Funding,  Inc. has  subscribed a
gross amount of  $284,000.  The Company was funded  $256,000  which was less the
$28,000 in funding commissions due to the agent of Ronco Funding. The Funding to
date  represents  (when  converted)  an  approximate  seven  percent (7%) equity
interest.  The Company was granted an  extension  on  September  15, 1999 by the
bankruptcy court extending the time Ronco Funding,  Inc and or its assigns,  has
to fulfill the $800,000 subscription until October 1, 1999.

On June 28, 1999 the Company's Amended Plan of Reorganization  was approved.  On
August 2, 1999 the Company's bankruptcy reorganization was confirmed.

Subsequent  to the March 10, 1999  petition for relief  filing under Chapter 11,
the following material agreements were made through the bankruptcy  proceedings.
An agreement was reached to conduct an  assignment  for the benefit of creditors
for the Company's  subsidiary  Direct  Mortgage  Partners for the benefit of its
creditors.  In addition,  by request of the major  creditors  of the Company,  a
mechanism was included in an amendment to the plan and the order  confirming the
plan,  which  preserves  any and all  causes  of action  held by the  unofficial
creditors committee,  before or after commencement of the case, to be prosecuted
post-confirmation, at the unofficial creditors committee's expense.

On  October  11,  1999 the  Company  executed  a Letter of  Intent to  acquire a
majority interest in a leading developer of special purpose software,  Inventek,
Inc.  Inventek  has been an IBM  business  partner  since 1996 and is one of the
leading  producers of software  product  solutions to the ground  transportation
industry.  Inventek  began  operations in 1994 with the  development of TranWare
software,  which  maximizes  client  scheduling,   cashiering,   accounting  and
insurance  administration.  The Company is currently  performing  due  diligence
which is anticipated to continue through November.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Not applicable









 SIGNATURE

In accordance  with the  requirements  of the  Securities  and Exchange Act, the
Registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.




CFI MORTGAGE INC.
                                (Registrant)


Date: November 11, 1999           /s/      Christopher C. Castoro
                                ------------------------------------------------
                                Christopher  C. Castoro
                                (Executive Vice President)


Date: November 11, 1999            /s/      Rodger W. Stubbs
                                ------------------------------------------------
                                Rodger W. Stubbs
                                (Principal Administrative Officer)