<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



                                   FORM 10-QSB


                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the Quarterly Period Ended June 30, 2000

                                       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 registrant as specified in its charter)


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

  601 Cleveland Street, Suite 500
        Clearwater Florida                                       33755
(Address of principal executive office)                        (zip code)


               Registrant's telephone number, including area code:
                                  727-674-1010

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

Indicate by check mark whether the 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 preceding 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


             21,783,971 shares, $.01 par value, as of July 27, 2000

(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 SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                                  JUNE 30, 2000
                                   (Unaudited)


                                    I N D E X

<TABLE>
<CAPTION>
                                                                                                                 Page No.
                                                                                                                 --------

Part I  - Financial Information:
<S>                         <C>                                                                                  <C>
               Item 1.      Consolidated Financial Statements:

                            Consolidated Balance Sheets
                            As at June 30, 2000 and December 31, 1999 ..................................         F-3 - F-4

                            Consolidated Statements of Operations
                            For the Six and Three Months Ended
                            June 30, 2000 and 1999 .....................................................            F-5

                            Consolidated Statement Stockholders' Equity
                            For the Six Months Ended
                            June 30, 2000 ..............................................................            F-6

                            Consolidated Statements of Cash Flows
                            For the Six Months Ended
                            June 30, 2000 and 1999 .....................................................         F-7 - F-8

                            Notes to Consolidated Financial Statements .................................        F-9 - F-18

               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-??

                            Signatures .................................................................           F-??

</TABLE>


                                      F-2

<PAGE>


                       CFI MORTGAGE INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)


                      A S S E T S

                                                  June 30,   December 31,
                                                    2000         1999
                                                 ----------   ----------

Current assets:
  Cash                                           $  223,351   $    7,574
  Accounts receivable                               108,740         --
  Due from related parties                           90,726       90,726
  Prepaid expenses and other current assets          67,100         --
                                                 ----------   ----------
        Total current assets                        489,917       98,300
                                                 ----------   ----------

Property, plant and equipment, at cost, less
  accumulated depreciation of $121,471
  and $94,059, respectively                       2,677,347       55,418
                                                 ----------   ----------

Other assets:

  Investment                                        120,000         --
  Capitalized software development costs, less
    accumulated amortization of $182,448            197,174         --
  Goodwill, less accumulated amortization
    of $53,621                                    1,213,816         --
  Notes receivable                                     --         25,000
  Security deposits                                  12,005         --
                                                 ----------   ----------

        Total other assets                        1,542,995       25,000
                                                 ----------   ----------

                                                 $4,710,259   $  178,718
                                                 ==========   ==========



                See accompanying notes to financial statements.

                                      F-3

<PAGE>


                       CFI MORTGAGE INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)



            LIABILITIES AND STOCKHOLDERS' CAPITAL EQUITY (DEFICIENCY)


<TABLE>
<CAPTION>


                                                             June 30,     December 31,
                                                              2000            1999
                                                          ------------    ------------
<S>                                                       <C>             <C>
Current liabilities:
  Accounts payable                                        $     39,889    $       --
  Due to affiliated company                                    143,887         139,735
  Current portion of mortgage payable                           66,584            --
  Accrued expenses and other current liabilities             1,915,108       2,401,423
                                                          ------------    ------------
        Total current liabilities                            2,165,468       2,541,158

Liabilities not subject to compromise:
  Accounts payable of subsidiary                                  --         1,237,552

Liabilities under plan of reorganization:
  Due to banks and sundry creditors                             63,182       4,083,328

Mortgage payable - long-term portion                         1,456,890            --
                                                          ------------    ------------

        Total liabilities                                    3,685,540       7,862,038
                                                          ------------    ------------

Commitments and contingencies                                     --              --

Stockholders' capital equity (deficiency):
  Common stock, $.01 par value
    Authorized 35,000,000 shares
    Issued and outstanding - 21,772,746 and
      15,676,451 shares, respectively                          217,727         156,764
  Preferred stock, $1,721,596 no value
    Authorized 10,000,000 shares
    Issued and outstanding - 2 shares                        1,721,596            --
  Additional paid-in capital                                16,462,251      12,434,602
  Accumulated deficit                                      (17,376,855)    (20,274,686)
                                                          ------------    ------------

        Total stockholders' capital equity (deficiency)      1,024,719      (7,683,320)
                                                          ------------    ------------

                                                          $  4,710,259    $    178,718
                                                          ============    ============
</TABLE>

                See accompanying notes to financial statements.

                                      F-4

<PAGE>


                       CFI MORTGAGE INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                  For the Six                         For the Three
                                                                  Months Ended                         Months Ended
                                                                    June 30,                             June 30,
                                                         -----------------------------         ----------------------------
                                                             2000              1999               2000              1999
                                                         ------------       ----------         ----------        ----------
<S>                                                      <C>                <C>                <C>               <C>
Revenues:
  Rental income                                          $     7,470        $      -           $    7,470        $      -
  Sales                                                      255,854               -              131,705               -
  Commissions and fees                                       172,681            1,358             172,681            1,358
                                                         ------------       ----------         ----------        ----------

Total revenues                                               436,005            1,358             311,856            1,358
                                                         ------------       ----------         ----------        ----------

Expenses:
  Direct costs                                                70,454               -               70,454               -
  Selling                                                    109,322               -               81,139               -
  General and administrative                               1,303,528          190,939           1,007,385          148,329
  Interest                                                    16,389            5,463               8,328            3,963
                                                         ------------       ----------         ----------        ----------

Total expenses                                             1,499,693          196,402           1,167,306          152,292
                                                         ------------       ----------         ----------        ----------

Loss from operations                                     ( 1,063,688)       ( 195,044)         ( 855,450)        ( 150,934)
                                                         ------------       ----------         ----------        ----------

Other income (expenses):
  Financial costs                                         ( 405,460)               -           ( 405,460)               -
  Settlement fee from
    cancelled acquisition                                    100,000               -                   -                -
  Writedown of investment                                 ( 105,000)               -           ( 105,000)               -
                                                         ------------       ----------         ----------        ----------

Total other income (expenses)                             ( 410,460)               -           ( 510,460)               -
                                                         ------------       ----------         ----------        ----------

Loss before extraordinary gain                           ( 1,474,148)       ( 195,044)        ( 1,365,910)       ( 150,934)
Extraordinary gain -
  forgiveness of debt                                      4,371,979               -            4,301,439               -
                                                         ------------       ----------         ----------        ----------

Net income (loss)                                        $ 2,897,831        ($195,044)         $2,935,529        ($150,934)
                                                         ============       ==========         ==========        ==========

Basic earnings per common share:
  Loss before extraordinary gain                         ($1,474,148)       ($195,044)        ($1,365,910)       ($150,934)
  Less:  Preferred stock dividends                               -           ( 79,640)                -           ( 55,847)
                                                         ------------       ----------         ----------        ----------

  Loss available for common
    shareholders                                         ( 1,474,148)       ( 274,684)        ( 1,365,910)       ( 206,781)
  Extraordinary gain                                       4,371,979               -            4,301,439               -
                                                         ------------       ----------         ----------        ----------

Net income (loss) available for
  common stockholders                                    $ 2,897,831        ($274,684)         $2,935,529        ($206,781)
                                                         ============       ==========         ===========       ==========

Weighted average shares - basic                           14,482,512         3,708,391         14,058,497         3,826,412
                                                         ============       ==========         ===========       ==========

Earnings (loss) per share - basic:
  Loss per share from
    continuing operations
    before extraordinary
    gain                                                    ($.10)            ($.07)             ($.10)            ($.05)
  Extraordinary gain                                          .30                -                 .31                -
                                                         ------------       ----------         ----------        ----------

  Net income (loss)                                          $.20             ($.07)              $.21             ($.05)
                                                             ====             ======              ====             =====

Weighted average shares - diluted                         16,098,919         3,708,391         15,788,472         3,826,412
                                                         ============       ==========         ===========       ==========

Earnings (loss) per share - diluted:
  Loss per share from
    continuing operations
    before extraordinary
    gain                                                    ($.09)            ($.07)             ($.08)            ($.05)
  Extraordinary gain                                          .27                -                 .27                -
                                                         ------------       ----------         ----------        ----------

  Net income (loss)                                          $.18             ($.07)              $.19             ($.05)
                                                             ====             ======              ====             ======
</TABLE>


                See accompanying notes to financial statements.

                                      F-5

<PAGE>

                       CFI MORTGAGE INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                      FOR THE SIX MONTHS ENDED JUNE 30 2000
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                   Common Stock                         Preferred Stock
                                          ------------------------------           --------------------------
                                             Shares             Amount             Shares            Amount
                                          ------------        ----------           -------        -----------
<S>                                       <C>                 <C>                  <C>            <C>
Balance - January 1, 2000                   15,676,451          $156,764               -          $        -

Shares issued for payment
  of prior period liability
  on February 22, 2000                          59,000               590               -                   -

Shares issued for payment
  of prior liability on
  March 10, 2000                                53,864               539               -                   -


Issuance of preferred
  stock for acquisition
  of Inventek, Inc.                                -                -                  1              700,000

Issuance of preferred stock
  for acquisition for First

  United MortgageBanc, Inc.                        -                -                  1            1,021,596

Shares to be issued for
  payment of prior period
  liabilities (1)                              170,000             1,700               -                   -

Shares to be issued in
  conjunction with a private
  placement funding (1)                      1,778,143            17,781               -                   -

Shares to be issued for
  employee compensation
  bonus (1)                                  3,135,288            31,353               -                   -

Shares to be issued for 40%
  investment in First Mortgage
  Securities, Inc. (1)                         400,000             4,000               -                   -

Shares to be issued for
  payment of bank debt (1)                   2,400,000            24,000               -                   -

Cancellation of shares
  issued as collateral
  for loan                                ( 2,000,000)        (   20,000)              -                   -

Shares to be issued for
  exercise of common
  stock warrants (1)                           100,000             1,000               -                   -

Net income for the
  six months ended
  June 30, 2000                                   -                 -                  -                   -
                                          ------------        ----------           -------        -----------

Balance - June 30, 2000                     21,772,746        $  217,727                 2        $ 1,721,596
                                          ============        ==========           =======        ===========


<CAPTION>
                                            Additional
                                             Paid-In          Accumulated
                                             Capital            Deficit            Total
                                          ------------      -------------       -----------
<S>                                        <C>              <C>                <C>
Balance - January 1, 2000                  $12,434,602      ($20,274,686)      ($7,683,320)

Shares issued for payment
  of prior period liability
  on February 22, 2000                          21,535                -             22,125

Shares issued for payment
  of prior liability on
  March 10, 2000                                19,660                -             20,199

Issuance of preferred
  stock for acquisition
  of Inventek, Inc.                            454,143                -          1,154,143

Issuance of preferred stock
  for acquisition for First
  United MortgageBanc, Inc.                    117,200                -          1,138,796

Shares to be issued for
  payment of prior period
  liabilities (1)                               18,175                -             19,875

Shares to be issued in
  conjunction with a private
  placement funding (1)                        871,690                -            889,471

Shares to be issued for
  employee compensation
  bonus (1)                                  1,389,246                -          1,420,599

Shares to be issued for 40%
  investment in First Mortgage
  Securities, Inc. (1)                         221,000                -            225,000

Shares to be issued for
  payment of bank debt (1)                     876,000                -            900,000

Cancellation of shares
  issued as collateral
  for loan                                      20,000                -                 -

Shares to be issued for
  exercise of common
  stock warrants (1)                            19,000                -             20,000

Net income for the
  six months ended
  June 30, 2000                                    -           2,897,831         2,897,831
                                          ------------      -------------       -----------

Balance - June 30, 2000                   $16,462,251       ($17,376,855)       $1,024,719
                                          ============      =============       ===========
</TABLE>


(1) Issued on July 14, 2000.


                See accompanying notes to financial statements.

                                       F-6

<PAGE>


                       CFI MORTGAGE INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                   For the Six
                                                                  Months Ended
                                                                    June 30,
                                                           --------------------------
                                                               2000          1999
                                                           -----------    -----------
<S>                                                        <C>            <C>
Cash flows from operating activities:

  Net income (loss) from operations                        $ 2,897,831    ($  195,044)
                                                           -----------    -----------

  Adjustments to reconcile net income (loss) to net
      cash used in operating activities:

    Forgiveness of debt                                     (4,371,979)          --

    Writedown of investment                                    105,000           --

    Depreciation and amortization                               98,851          3,080

    Financial costs                                            405,460           --

    Common stock issued for salaries and other expenses         43,280           --

    Interest accrued on related party loans                      6,152          5,463

    Increase (decrease) in cash flows as a result of
        changes in asset and liability account balances:

      Accounts receivable                                       52,306           --

      State tax refund receivable                                 --           76,621

      Prepaid expenses and other current assets                 (3,124)        30,591

      Security deposits                                        (10,315)          --

      Accounts payable, accrued expenses

        and other current liabilities                          637,583         26,605
                                                           -----------    -----------

  Total adjustments                                         (3,036,786)       142,360
                                                           -----------    -----------


Net cash used in operating activities                         (138,955)       (52,684)
                                                           -----------    -----------

Cash flows from investing activities:

  Software development costs                                  (115,969)          --

  Expenditures for property and equipment                      (40,918)          --
                                                           -----------    -----------

Net cash used in investing activities                         (156,887)          --
                                                           -----------    -----------

Cash flows from financing activities:

  Proceeds from 15% demand convertible debentures                 --          101,420

  Mortgage payable                                              (4,930)          --

  Common stock issued for exercise of warrants                  20,000           --

  Decrease in due to affiliate                                  (2,000)          --

  Proceeds from private placement                              495,083           --
                                                           -----------    -----------

Net cash provided by financing activities                      508,153        101,420
                                                           -----------    -----------

Net increase in cash                                           212,311         48,736

Cash at beginning of period                                      7,574          2,371

Cash of subsidiary                                               2,466           --
                                                           -----------    -----------

Cash at end of period                                      $   222,351    $    51,107
                                                           ===========    ===========

</TABLE>

                See accompanying notes to financial statements.


                                      F-7

<PAGE>


                       CFI MORTGAGE INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                             For the Six
                                                                             Months Ended
                                                                                June 30,
                                                                  ------------------------------
                                                                    2000                  1999
                                                                  ---------             --------
<S>                                                               <C>                   <C>
Supplemental Disclosures of Cash Flow Information:
  Cash paid during the period:
    Income taxes                                                  $    -                $    -
                                                                  ===========           ========

    Interest                                                      $    10,238           $    -
                                                                  ===========           ========

Supplemental Schedules of Noncash Investing
    and Financing Activities:

  Accrued dividends on preferred stock                            $    -                $ 79,640
                                                                  ===========           ========

  Common stock issued and to be issued
    for salaries and other expenses                               $    43,480           $    -
                                                                  ===========           ========

  Common stock issued for investment in
    First Mortgage Securities, Inc.                               $   225,000           $    -
                                                                  ===========           ========

  Preferred stock issued for acquisition of
    two wholly owned subsidiaries                                 $ 2,292,939           $    -
                                                                  ===========           ========

  Common stock issued in satisfaction of liabilities              $ 2,352,837           $    -
                                                                  ===========           ========
</TABLE>


                See accompanying notes to financial statements.

                                      F-8

<PAGE>

                       CFI MORTGAGE INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  JUNE 3O, 2000
                                   (UNAUDITED)

NOTE  1-  BASIS OF PRESENTATION.

                           The accompanying interim unaudited consolidated
                financial statements include the accounts of CFI mortgage Inc.
                ("CFI"), Direct Mortgage Partners, Inc. ("DMP"), First United
                MortgageBanc, Inc. ("FUMB") and Inventek, Inc., doing business
                as Surfside Software Systems ("Surfside") DMP and FUMB are
                wholly owned subsidiaries of CFI and Surfside is a majority
                owned subsidiary. The financial statements also include the
                Company's 40% minority interest in First Mortgage Securities,
                Inc., of Clearwater Florida ("FMS")accounted for under the
                equity method. As discussed in Note 6, DMP was disolved in June,
                2000. CFI and its subsidiaries are hereafter collectively
                referred to as the "Company".

                           The accompanying unaudited consolidated financial
                statements have been prepared in accordance with generally
                accepted accounting principles for interim financial information
                and with 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 June 30, 2000 and
                the results of operations and cash flows for the six months and
                three months ended June 30, 2000 and 1999. The results of
                operations for the six months and three months ended June 30,
                2000 and 1999 are not necessarily indicative of the results to
                be expected for the full year.

                           The December 31, 1999 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.



NOTE 2 - ACQUISITIONS.

                (a) On January 14, 2000, the Company acquired a 65% interest in
                Inventek, Inc. (Doing business as Surfside Software Systems of
                Clearwater, Fl.) ("Surfside"), in exchange for the Company's
                convertible preferred stock and certain common stock purchase
                warrants valued at approximately $1,080,000. The Company issued
                preferred stock with a par value of $700,000 and 1,000,000
                common stock purchase warrants, to which the Company attributed
                a value of $380,000. Surfside creates and markets proprietary
                software products.

                                      F-9
<PAGE>


NOTE  2 -  ACQUISITIONS.  (Continued)

                           The preferred stock is convertible into shares of the
                Company's common stock based on the average ask price for the
                five trading days at the end of the month prior to conversion.
                The preferred shares have no cumulative dividend features, but
                do entitle the holders thereof to participate in any dividends
                payable to holders of common stock on a pro rata basis as if the
                shares had previously been converted. The warrants entitle the
                holders thereof to purchase one share of the Company's common
                stock at an exercise price of $.15 per share for a period of
                five years from the issue date.

                           The Company also agreed to contribute $250,000 as
                additional paid-in capital, at various dates through June 1,
                2000. As of June 30, 2000, the Company has contributed $229,000
                of the total due to be contributed.

                           The agreement calls for a potential adjustment to the
                purchase price, based on earnings of Surfside over the
                twenty-four month period following the closing of the
                transaction. Such adjustment would be in the form of additional
                convertible preferred stock up to an additional $4,000,000.

                (b) On June 13, 2000, the Company acquired two commercial office
                buildings from Flamingo Financial Services, Inc. The buildings
                have been appraised at a value of $2,550,000 and the Company
                assumed the related collateral mortgages, which amounted to
                $1,528,404. In exchange, the Company gave the sellers one share
                of its convertible preferred stock with a par value of
                $1,021,596 and warrants to purchase 750,000 shares of its common
                stock. The agreement also provides for a potential adjustment to
                the purchase price, based on earnings derived from the rental
                property over the eighteen month period following the closing of
                the transaction. This adjustment will be satisfied by the
                issuance of a 2nd share of CFI's preferred stock. CFI then
                contributed the two buildings along with the underlying mortgage
                to a newly formed company, First United MortgageBanc, Inc.
                ("FUMB"), a wholly owned subsidiary.

                           The preferred stock is convertible into shares of the
                Company's common stock based on the average asking price for the
                five trading days at the end of the month prior to conversion.
                The preferred shares have no cumulative dividends rights, but
                permit the holders thereof to participate in any dividends
                payable to holders of common stock on a pro rata basis, as if
                the shares had been converted. The warrants consist of three
                issuances, each for a total of 250,000 shares of the Company's
                common stock. The first 250,000 are exercisable at a price of
                $.15 per share, the next 250,000 shares are exercisable at a
                price of $.35 per share and the last 250,000 are exercisable at
                a price of $.50 per share. The warrants are exercisable for a
                period of five years from the date of issuance.



NOTE  2 -  ACQUISITIONS.  (Continued)

                (c) On April 5, 2000, the Company acquired a 40% interest in
                First Mortgage Securities, Inc., of Clearwater Florida, in
                exchange for 400,000 shares of its common stock and common stock
                purchase warrants to acquire 400,000 shares of the Company's
                common stock at an exercise price of $.67 per share. The
                acquisition has been accounted for under the equity method of
                accounting.

                (d) On May 11, 2000, the Company executed a letter of intent
                to acquire RJ Systems, Inc., a software development company.
                The Company is in the process of performing its due diligence.

                           The Company attributed a value of $225,000 to the
                common stock and common stock purchase warrants exchanged for
                the interest in FMS. The Company has written down its investment
                by $105,000 at June 30, 2000, based on the most recently
                available financial information for FMS.



NOTE  3 -  GOING CONCERN.

                           The accompanying financial statements have been
                prepared assuming the Company will continue as a going concern.
                As described more fully in the Company's Form 10-K for the year
                ended December 31, 1999, the Company has recently completed a
                voluntary plan of reorganization. The Company may continue to
                need to raise additional capital to fund operations until such
                time as


                                      F-10
<PAGE>



                operating cash flows are sufficient to sustain the operations
                of the Company. There are no assurances that the Company can
                raise capital to sustain operations until cash flows from
                operations are sustainable. Should the Company be unable to
                obtain such capitalization, management might be forced to
                cease operations and liquidate the Company. Such conditions
                raise substantial doubt about the Company's ability to
                continue as a going concern. The consolidated financial
                statements contained herein do not include any adjustments
                that might result from the outcome of this uncertainty.


NOTE  4 -  SIGNIFICANT ACCOUNTING POLICIES.

                (a)      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 liabilities as of the date of financial
                statements, and the reported amounts of revenues and expenses
                during the period. Actual results could differ from those
                estimates.






NOTE  4 -  SIGNIFICANT ACCOUNTING POLICIES. (Continued)

                (b)      Applicable Accounting Pronouncements:

                           The Company has previously adopted Statement of
                Financial Accounting Standards No. 125, "Accounting for
                Transfers and Servicing of Financial Assets and Extinguishments
                of Liabilities" ("SFAS No. 125"), which provides accounting and
                reporting standards for transfers and servicing of financial
                assets and extinguishments of liabilities. The statement also
                provides standards for distinguishing transfers of financial
                assets that are sales from transfers that are secured
                borrowings. The adoption of SFAS No. 125 by the Company did not
                have a material impact on the Company's financial statements.

                           Origination fee income is accounted for in conformity
                with Statement of Financial Accounting Standards No. 91. This
                statement requires that origination fees are offset by their
                direct loan costs and the net deferred income is recognized over
                the life of the loan. The Company has previously adopted the
                guidance under SFAS No. 91.

                           Concurrent with the acquisition of its new
                subsidiary, Surfside, the Company has adopted the guidance
                provided under SFAS No. 86, "Accounting for the Costs of
                Computer Software to Be Sold, Leased, or Otherwise Marketed".
                SFAS No. 86 provides guidance for the specific costs in the
                development of proprietary software products which may be
                capitalized, and the stages of development during which they may
                be capitalized. The adoption by the Company of SFAS No. 86 did
                not have a material impact on the Company's financial
                statements.


                (c)      Property and Equipment:

                           Property and equipment are stated at cost less
                accumulated depreciation. The Company's policy is to provide for
                depreciation over the estimated useful lives of the assets
                ranging from three to 39 years. Expenditures for leasehold
                improvements are capitalized and amortized over their estimated
                useful lives or the life of the lease, whichever is shorter in
                duration. Expenditures for betterments are capitalized and
                depreciated as described above.

                           Expenditures for repairs, maintenance and minor
                renewals are charged to operations as incurred. Upon retirement
                or abandonment of the property and equipment, the carrying value
                and related accumulated depreciation and amortization are
                removed from the accounts.

                           Depreciation expense attributable to property and
                equipment and charged to operations was $16,121 and $3,080 for
                the six months ended June 30, 2000 and 1999, respectively and
                $10,595 and $1,540 for the three months ended June 30, 2000 and
                1999, respectively.


                                      F-11

<PAGE>


NOTE  4 -  SIGNIFICANT ACCOUNTING POLICIES. (Continued)

                (d)      Capitalized Software Development Costs:

                           Capitalized software costs, which represent the costs
                incurred by the Company to develop its proprietary software
                products subsequent to determining the programs' technical
                feasibility and prior to availability for sale to the general
                public, are capitalized and amortized over a period of five
                years. Any remaining unamortized costs relating to program
                development which is considered obsolete is written off in the
                period of obsolescence.

                           Amortization of capitalized software development
                costs amounted to $29,109 and $0 for the six months ended June
                30, 2000 and 1999, respectively, and $18,464 and $0 for the
                three months ended June 30, 2000 and 1999, respectively.


                (e)      Goodwill:

                           In conjunction with the Company's acquisition of a
                majority interest in Surfside, the value of assets exchanged,
                which was in excess of the value of assets received, net of
                liabilities, resulted in the creation of goodwill in the amount
                of $1,076,094. The Company is amortizing the goodwill over a
                period of ten years. Additionally, the acquisition by one of the
                Company's subsidiaries of two buildings net of liabilities
                resulted in the creation of goodwill in the amount of $117,200.
                The subsidiary is amortizing the goodwill created in acquiring
                the buildings over a period of 15 years. Amortization expense
                charged to operations amounted to $53,621 and $0 for the six
                months ended June 30, 2000 and 1999, respectively, and $29,563
                and $0 for the three months ended June 30, 2000 and 1999,
                respectively.

                           Management will periodically review the value of all
                long-lived assets, including goodwill, to determine if there has
                been any impairment in the carrying value of the asset. Should
                management determine that such an impairment has occurred, an
                appropriate allowance will be set up to reflect the impairment
                of said asset.


                (f)      Income Taxes:

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




NOTE  4 -  SIGNIFICANT ACCOUNTING POLICIES. (Continued)

                (g)      Earnings (Loss) Per Common Share:

                           Earnings (loss) per common share is based on the
                weighted average number of common shares outstanding. SFAS No.
                128, "Earnings Per Share",



                                      F-12

<PAGE>

                requires dual presentation of basic and diluted earnings per
                share on the face of the statements of operations. Basic
                earnings (loss) per share excludes any dilutive common stock
                equivalents and is computed by dividing net income or loss,
                less any accretion for preferred stock discounts and
                dividends, which totaled $0 in 2000 and $79,640 and $55,847
                for the six and three months ended June 30, 1999,
                respectively, by the weighted average number of shares
                outstanding for the period. Diluted earnings per share in 2000
                reflect the potential dilution to common shareholders as if
                all common stock equivalents were converted into equivalent
                shares of common stock, thereby diluting net income available
                to holders of the common stock.

                           Diluted loss per share in 1999 has not been presented
                in the financial statements herein, as the effect of including
                the common stock equivalents would be antidilutive. Below is the
                calculation of basic and diluted earnings per share for each of
                the periods presented in the financial statements.


<TABLE>
<CAPTION>

                                                        For the Six                              For the Three
                                                        Months Ended                              Months Ended
                                                          June 30,                                   June 30,
                                             --------------------------------           ---------------------------------
                                                  2000                 1999                 2000                  1999
                                             ------------          ----------           -----------           -----------
<S>                                          <C>                   <C>                  <C>                   <C>
Net income (loss) available to
  common stockholders                        $  2,897,831          ($ 274,684)          $ 2,935,529           ($ 206,781)
                                             ------------          ----------           -----------           -----------
Weighted average shares
  outstanding - basic                          14,482,512           3,708,391            14,058,497            3,826,412

Warrants                                        1,616,407                  -              1,729,975                  -
                                             ------------          ----------           -----------           -----------

Weighted average shares
  outstanding - diluted                      $ 16,098,919          $3,708,391           $15,788,472           $3,826,412
                                             ============          ==========           ===========           ===========

Earnings (loss) per common share:

  Basic                                          $.20                ($.07)                $.21                ($.05)
                                                 ====                =====                 ====                =====
  Diluted                                        $.18                ($.07)                $.19                ($.05)
                                                 ====                =====                 ====                =====

</TABLE>


NOTE  5 -  RELATED PARTY TRANSACTIONS.

                           The Company has made advances to three individuals,
                two of whom are officers of the Company. The balance amounted to
                $90,726 at each of June 30, 2000 and December 31, 1999. The
                advances are due on demand and there has been no interest
                charged on the outstanding balances.





NOTE  5 -  RELATED PARTY TRANSACTIONS. (Continued)

                           The Company has a revolving line of credit with an
                affiliate, whereby it can borrow up to $150,000, with interest
                charged at 9% per annum. The loan is due on demand. The Company
                was liable under this credit facility for $143,887 and $139,735,
                at June 30, 2000 and December 31, 1999, respectively.

                           As an inducement to make the loan, the affiliate was
                previously granted warrants to purchase 150,000 shares of the
                Company's common stock at an exercise price of $.25 per share,
                which represented 105 % of the closing bid price on the date of
                the grant.



NOTE  6 -  DISSOLUTION OF SUBSIDIARY AND CANCELLATION OF DEBT.

                           On June 9, 2000, Direct Mortgage Partners, Inc.
                ("DMP"), a wholly owned subsidiary of the Company, made an
                assignment for the benefit of creditors for



                                      F-13

<PAGE>


                the purpose of liquidating DMP. On June 29, 2000, articles of
                dissolution were filed with the Delaware Secretary of State.

                           As a result of the assignment and subsequent
                dissolution, the Company has recognized forgiveness of debt in
                the amount of $1,168,314 as at June 30, 2000 and for the six and
                three months then ended.



NOTE  7 -  DUE TO BANKS AND SUNDRY CREDITORS.

                           As described more fully in the notes to the audited
                financial statements included in the Company's Form 10- KSB for
                the period ended December 31, 1999, the Plan of Reorgainzation
                included claims from two financial institutions in the amount of
                $4,000,000, as well as certain non- priority claims from present
                and former employees for unpaid compensation up to the petition
                date amounting to $83,328. During the six months ended June 30,
                2000, the Company issued 2,400,000 shares of its common stock in
                satisfaction of the claims, from the two financials institutions
                which resulted in the recognition of forgiveness of debt
                amounting to $3,100,000. Additionally, the Company issued 19,500
                shares of its common stock in satisfaction of $20,146 of
                liabilities.



NOTE  8 -  ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES.

                           Accrued expenses and other current liabilities are
comprised of the following:


<TABLE>
<CAPTION>

                                                               June 30,         December 31,
                                                                 2000               1999
                                                              ----------        -----------
<S>                                                           <C>               <C>
Professional fees                                             $  126,854         $  241,300
Accrued compensation of employees                                155,487            127,000
Accrued compensation of officers                               1,261,211          2,002,731
General and administrative expenses                              228,884             30,392
Payroll taxes                                                    142,672                 -
                                                              ----------         ----------

                                                              $1,915,108         $2,401,423
                                                              ==========         ==========

</TABLE>



                           Included in accrued compensation of officers is
                $1,034,230 and $1,775,750 at June 30, 2000 and December 31,
                1999, respectively, which represent the compensatory element of
                stock bonuses to be issued pursuant to employment agreements
                entered into subsequent to the effective date of the Plan. The
                accrued compensation to officers also includes $119,000 due to
                officers of the Company as part of the administrative expenses
                approved by the court under the plan.



NOTE  9 -  COMMITMENTS AND CONTINGENCIES.

                (a)      Leases:

                           In January 2000, the Company's majority owned
                subsidiary, Surfside, entered into a lease for office space
                which runs through December 31, 2004. Minimum annual rents under
                the lease are as follows:


                                      F-14

<PAGE>


              Years Ending
                 June 30,
                 --------
                  2001                           $146,253
                  2002                            153,483
                  2003                            161,114
                  2004                            169,148
                  2005                             86,627
                                                 --------

                                                 $716,625
                                                 ========



                           Rent expense amounted to $50,288 and $5,670 for the
                six and three months ended June 30, 2000 and 1999, respectively
                and $34,155 and $5,670 for the three months ended June 30, 2000
                and 1999, respectively.




NOTE  9 -  COMMITMENTS AND CONTINGENCIES. (Continued)

                (b)      Employment Contracts:

                           In August 1999, the Company entered into employment
                contracts with four officers. The contracts are for a period of
                three years, and are described in greater detail in the notes to
                the audited financial statements included in the Company's Form
                10-KSB for the year ended December 31, 1999.

                           The contracts include provisions for salary
                escalations for each year of service under the contract, which
                are accrued ratably throughout the year and payable at the end
                of the fiscal year. This escalation may be paid to the
                individuals in the form of the Company's common stock, with the
                share values discounted at a rate of 50% of the average closing
                bid price of the stock for the five trading days after the close
                of the fiscal year.

                           The contracts also include a provision which
                essentially grants each of the individuals a stock bonus equal
                to the amount necessary to assure that they each remain 5%
                shareholders after giving effect to all shares issued during the
                year. The agreements also provide that the individuals may
                receive discretionary bonuses as determined by the Company's
                Board of Directors.

                           Included in the results of operations is $679,017 and
                $0 for the six months ended June 30, 2000 and 1999,
                respectively, and $606,693 and $0 for the three months ended
                June 30, 2000 and 1999, respectively, for unpaid compensation
                due the officers under the terms of these contracts.




NOTE 10 -  INCOME TAXES.

                           The Company and its wholly owned subsidiaries file a
                consolidated federal income tax return. As of June 30, 2000, the
                Company and its subsidiaries have a net operating loss
                carryforward of approximately $19,500,000 available to reduce
                future taxable income through the year 2019. The Company's
                ability to utilize its net operating loss carryforward could be
                limited following a change in ownership in excess of 50%, which
                resulted from the Company's reorganization and recapitalization
                under the Plan. The Company has fully reserved its deferred tax
                asset due to the uncertainity about its ability to utilize it in
                future periods.


                                      F-15

<PAGE>


NOTE 11 -       STOCKHOLDERS' EQUITY.

                (a)      Preferred Stock:

                           During the period ended June 30, 2000 the Company
                issued two shares of its convertible preferred stock in
                conjuction with two acquisitions during the period. In the first
                acquisition, that of Surfside the Company issued one share of
                its preferred stock with a par value of $700,000. In connection
                with the second acquisition, First Union MortgageBanc, Inc., the
                Company issued one share of its preferred stock with a par value
                of $1,021,596.


                (b)      Common Stock:

                           In conjuction with employee contracts that are in
                place with four key executives,, 3,135,288 shares of common
                stock were issued pursuant to a stock bonus plan in effect.
                These shares were issued to satisfy a liability that was charged
                to operations at December 31, 1999.

                           In April 2000 the Company entered into a private
                placement agreement with Ronco Funding, Inc. whereby the Company
                issued 1,787,143 shares of its common stock for $500,400.

                           In connection with the acquisition of a 40% interest
                in First Mortgage Securities, Inc. the Company issued 400,000
                shares of its common stock.

                           In April 2000 the holder for common stock purchase
                warrants exercised the warrants for $20,000 and received 100,000
                shares of the Company's common stock.

                           Pursuant to the plan of bankruptcy the Company issued
                a total of 2,570,000 shares of its common stock in satisfaction
                of the corresponding pre petition liabilities.


                (c)      Warrants:

                           In connection with the acquisition of Surfside as
                discussed above, the Company issued 1,000,000 common stock
                purchase warrants, exercisable for a five-year period expiring
                on January 14, 2005. The warrants have an exercise price of
                $.15.

                           In conjunction with the acquisition of First United
                MortgageBanc, Inc. the Company issued 750,000 common stock
                purchase warrants, exercisable in blocks of 250,000 each with
                exercise prices ranging from $.15 to $.50 respectively. The
                warrants expire on June 13, 2005.








NOTE 11 -       STOCKHOLDERS' EQUITY. (Continued)

                (c)   Warrants: (Continued)

                           In conjuction with the acquisition of the 40%
                interest in First Mortgage Securities, Inc. as discussed above,
                the Company issued 400,000 common stock purchases warrants
                exercisable for a two-year period expiring on April 7, 2002. The
                warrants have an exercise price of $.67.

                           In April 2000 in conjuction with a private placement
                discussed above the Company issued 1,787,143 common stock
                purchase warrants exercisable for a two-year period expiring on
                April 11, 2002. The warrants have an exercise price of $1.67.



NOTE 12 -  SUBSEQUENT EVENTS.

                           In July 2000, the Company acquired the remaining 35%
                of Surfside in exchange for 300,000 shares of its common stock
                and 30,000 common stock purchase warrants. As a result of this
                transaction Surfside will become a wholly owned subsidiary of
                the Company.


                                      F-16





<PAGE>

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") headquartered in Clearwater, Florida is a
broad, technology-based consumer finance company serving the national and
international markets. CFI's goal is to become a diversified eCommerce financial
services company with a 50-state lending capability. The company's strategy is
to introduce a solution into the financial services marketplace, offering it as
the most efficient and flexible web-enabled mortgage solution that supports all
borrowing channels, consumer direct, retail and wholesale.

Financial Services

The Company through its wholly owned subsidiary First United MortgageBanc, Inc
("FUMB") provides mortgages and mortgage-related services to individuals
directly and indirectly through mortgage brokers and mortgage lenders. The
Company originates, processes, and underwrites residential mortgage loans that
are sold on either an individual or bulk basis to institutional investors. The
Company originates and purchases loans originated 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.

On June 13, 2000 the Company acquired two commercial office buildings from
Flamingo Financial Services, Inc., in exchange for two shares of its convertible
preferred stock and stock purchase warrants exercisable for the purchase of
750,000 shares of its common stock. The buildings have been appraised at a value
of $2,550,000 with the underlying mortgage on the properties having an
outstanding balance of $1,528,404. The Company treated the difference between
the appraised value of the assets acquired and the liabilities assumed as
additional paid-in capital. The transaction resulted in goodwill in the amount
of $117,200. This goodwill which is directly attributable to the purchase of the
buildings, has been transferred along with the assets to the Company's wholly
owned subsidiary "FUMB" for the purposes of securing credit facilities,
licensing and investor approvals.

The preferred stock is convertible into shares of the Company's common stock
based on the average ask price for the five trading days at the end of the month
prior to conversion. The preferred shares have no cumulative dividend features,
but do entitle the holders thereof to participate in any dividends payable to
holders of common stock on a pro rata basis as if the shares had previously been
converted. The warrants entitle the holders thereof to purchase one share of the
Company's common stock at an exercise price of $.15 per share for the initial
250,000 shares, $.35 for the next 250,000 shares and $.50 for the next 250,000
shares, for a period ending five years after the issue date. The agreement calls
for a potential adjustment to the purchase price, based on earnings from "FUMB"
over the eighteen-month period following the closing of the transaction.

On May 4, 2000 the Company acquired a 40% interest in First Mortgage Securities,
Inc., of Clearwater, Florida in exchange for 400,000 shares of its common stock
and common stock warrants to acquire 400,000 shares of the Company's common
stock at an exercise price of $.67 per share. First Mortgage Securities, Inc.,
is a mortgage lender operating primarily in the niche mobile home financing
market. The Company intends to pursue a strategic relationship with First
Mortgage Securities, Inc., to markets its niche programs nationwide.

<PAGE>

Software

On January 14, 2000, the Company acquired a 65% interest in Inventek, Inc.
(doing business as Surfside Software Systems of Clearwater, FL.) ("Surfside"),
in exchange for the Company's convertible preferred stock and certain common
stock purchase warrants valued at approximately $1,080,000. The Company issued
preferred stock with a par value of $700,000 and 1,000,000 common stock purchase
warrants, to which the Company attributed a value of $380,000. On August 2, 2000
the Company acquired the remaining 35% interest in Inventek that it did not own
in exchange for 300,000 shares of the Company's common stock and 30,000 common
stock purchase warrants at 120% of the Company's closing price on the day of
closing. The Company also agreed to contribute $250,000 as additional paid-in
capital, at various dates through June 1, 2000. As of June 30, 2000, the Company
has contributed $229,000 of the total to be contributed.

The Company, through its now wholly owned subsidiary Surfside Software Systems
is in the business of providing PC-based, DOS and WINDOWS 95 solutions, under
the name TranWare to the taxi, courier, para-transit, shuttle and limousine
industries. TranWare consists of the following products: dispatch management,
scheduling and reservations, account billing/accounts receivable, driver
cashiering/shifting, insurance claims management and vehicle maintenance. It
interfaces with a number of different wireless technologies as well as
stand-alone financial products. Surfside provides the base products,
customization, product support and product training.

Substantially all Surfside Software customers subscribe to Company's service and
support programs, which provide ongoing product and, where applicable, updates.
The Company's cost structure is relatively fixed and the cost of generating, in
aggregate, does not vary significantly with changes in revenue. As a result, the
Company typically generates significantly greater profit margins from
incremental sales once fixed costs are covered.

The second quarter reflected a turning point for Surfside Software Systems in
that it marks the final stage of development of the core Windows(R) technology
based TranWare(TM) applications. The first of these products which was released
to the market on July 25, 2000 was TranWare WinLimo(TM). WinLimo is a completely
new ground transportation management software system that provides for order
entry & scheduling, dispatching, billing, information tracking, accounting &
reporting functions. The design includes a sophisticated relational database
structure that will be the basis for future transportation systems such as those
for the taxi, courier, para-transit (non-emergency medical), trucking and
service industries.

It also marked a transition in the marketplace from MS-DOS(R) based business
solutions to Windows based solutions. The TranWare DOS transportation software
suite has been in use throughout the US and Canada for over 5 years and has been
the primary source of revenue for Surfside since it's incorporation in 1994. The
most important aspect of this product line is the industry knowledge gained
during the thousands of man-hours designing, installing and modifying the system
while working with our clients. This is truly a system designed in the field
with real-world input. Even though Windows based operating systems and end user
applications have been visible in the marketplace for a few years, vertical
business market software systems such as TranWare have still been operating on
MS-DOS and Unix(R) based computers.

On May 11, 2000 the Company had executed a Letter of Intent to acquire RJ
Systems Inc., the creators of OrganizeIt!, PublishIt! and the Genesis technology
tools for rapid application development. The acquisition will include all of the
proprietary products of RJ Systems Inc. Due diligence is currently being
performed.

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 Bankruptcy Code in the
Southern District of Florida. On July 6, 1999, the bankruptcy court confirmed a
Plan of Reorganization pursuant 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.

<PAGE>

The Company's Reorganization Plan provided for an infusion of $800,000 by a
lender, which was secured by CFI's assets. The Company received $311,920, net of
expenses of $106,900, of funding under the Plan. The lender had the option of
converting the loan to common stock of CFI at a rate of 2% of the Company's
shares outstanding per $80,000 funded to the Company after the effective date of
the Plan. Each general creditor received one share of common stock for each
dollar of debt in the reorganized CFI.

The preferred stockholders of Series "A" and "B" convertible preferred stock
received 2,000,000 shares of common stock in exchange for the preferred stock in
the reorganized CFI. The preferred stockholders of Series "C" convertible
preferred stock have received 2,500,000 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. On June 9, 2000, Direct Mortgage
Partners, Inc. ("DMP"), a wholly owned subsidiary of the Company, made an
assignment for the benefit of creditors for the purpose of liquidating DMP. On
June 29, 2000, articles of dissolution were filed with the Delaware Secretary of
State. As a result of the assignment and subsequent dissolution, the Company has
recognized forgiveness of debt in the amount of $1,168,314 as of June 30, 2000.

The effective date of the Plan was on August 2, 1999. The only additional
liabilities the Company could incur would be if the Court approved the issuance
of additional common stock to creditors with disputes. In the event that the
Company lost some or all of the claims objections the existing shareholders
would be further diluted to the degree that the award to the creditor exceeded
the amount scheduled on the Company's Bankruptcy filings. The overage to these
creditors would be paid in the Company's Common Stock.

As described more fully in the notes to the audited financial statements
included in the Company's Form 10- KSB for the period ended December 31, 1999,
the Plan of Reorganization included claims from two financial institutions in
the amount of $4,000,000, as well as certain non- priority claims from present
and former employees for unpaid compensation up to the petition date amounting
to $83,328. During the six months ended June 30, 2000, the Company issued
2,400,000 shares of its common stock in satisfaction of the claims, from the two
financials institutions that resulted in the recognition of forgiveness of debt
amounting to $3,100,000. Additionally, the Company issued 19,500 shares of its
common stock in satisfaction of $20,146 of liabilities.

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

<PAGE>

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 has since
traded on the Bulletin Market under the symbol "CFIM OB".

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.

COMPARISON OF QUARTERS ENDED JUNE 30, 2000 AND 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
during the quarter ended June 30, 1999 and subsequently did not record any
revenues. As such, the following comparisons reflect the consolidated operations
of Surfside Software Systems and one month of operations of First United
MortgageBanc, Inc., for the current quarter and no operating subsidiaries for
the quarter ended June 30, 1999.

REVENUES

For the three months ended June 30, 2000 the Company had total revenues from
operations of $311,856 compared to $1,358 for the three months ended June 30,
1999. The increase in revenues was primarily attributable to the acquisition of
Surfside Software Systems. Surfside Software Systems spent the majority of the
quarter focusing on the final development of its core Windows(R) technology
based TranWare(TM) applications. The first of these products which was released
to the market on July 25, 2000 was TranWare WinLimo(TM). The release of these
products is expected to significantly increase revenues in future quarters.
First United MortgageBanc, Inc. was capitalized and commenced operations on June
14, 2000 and management anticipates a positive contribution to revenue growth in
the next quarter.

EXPENSES

The Company recorded total operating expenses of $1,167,306 for the three months
ended June 30, 2000 compared to total operating expenses of $152,292 for the
three months ended June 30, 1999. The largest component increase was in general
and administrative expenses, increasing $859,056 to $1,007,385 for the quarter
ended June 30, 2000 compared to $148,329 in the quarter ended June 30, 1999.
Included in this amount is accrued compensation to officers of $606,693 for the
current quarter ended June 30, 2000, which represent the compensatory element of
stock bonuses to be issued pursuant to employment agreements entered into
subsequent to the effective date of the Plan, compared to $.00 for the quarter
ended June 30, 1999. Also, amortization and depreciation expense increased to
$58,622 in the current quarter ended June 30, 2000 compared to $1,540 for the
quarter ended June 30, 1999. Professional fees increased to $70,221 for the
quarter ended June 30, 2000 primarily due to the extenuating circumstances in
resoling pre-petition liabilities and the dissolution of the Company's former
subsidiary "DMP". The remaining increase in general and administration expense
were primarily attributed to the acquisition of Surfside Software Systems and
the staffing of First United MortgageBanc, Inc.

<PAGE>

NET INCOME (LOSS)

The Company generated net loss from operations, before taxes, of $855,450 in the
quarter ended June 30, 2000 compared to a net loss before taxes of $150,934 in
the quarter ended June 30, 1999. Included in this amount is accrued compensation
of officers of $606,693, which represent the compensatory element of stock
bonuses to be issued pursuant to employment agreements entered into subsequent
to the effective date of the Plan, amortization and depreciation expense of
$58,622 and professional fees of $70,221. Without the compensatory stock
bonuses, amortization and depreciation expense, and professional fees, loss from
operations was $119,914 which is primarily attributed to the development of
Surfside Software Systems core Windows(R) technology based TranWare(TM)
applications and the initial staffing of First United MortgageBanc.

For the quarter ended June 30, 2000 the Company realized an extraordinary gain
on the forgiveness of debt of $4,301,439 due to the dissolution of the Company's
former subsidiary Direct Mortgage Partners, and the successful negotiations with
corresponding pre-petition liabilities.

The net income available to common stockholders for the quarter ended June 30,
2000 is $2,935,529 compared to a net loss of $150,934 for the quarter ended June
30, 1999.

COMPARISON OF SIX MONTHS ENDED JUNE 30, 2000 AND 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
during the six months ended June 30, 1999 and subsequently did not record any
revenues. As such, the following comparisons reflect the consolidated operations
of Surfside Software Systems and one month of operations of First United
MortgageBanc, Inc., for the current period and no operating subsidiaries for the
six months ended June 30, 1999.

REVENUES

For the six months ended June 30, 2000 the Company had total revenues from
operations of $436,005 compared to $1,358 for the six months ended June 30,
1999. The increase in revenues was primarily attributable to the acquisition of
Surfside Software Systems. Surfside Software Systems spent the majority of the
quarter focusing on the final development of its core Windows(R) technology
based TranWare(TM) applications. The first of these products which was released
to the market on July 25, 2000 was TranWare WinLimo(TM). The release of these
products is expected to significantly increase revenues in future quarters.
First United MortgageBanc, Inc. was capitalized and commenced operations on June
14, 2000 and management anticipates a positive contribution to revenue growth in
the next quarter.

EXPENSES

The Company recorded total operating expenses of $1,499,693 for the six months
ended June 30, 2000 compared to total expenses of $196,402 for the six months
ended June 30, 1999. The largest component increase was in the general and
administrative expenses, increasing $1,125,589 to $1,303,528 for the six months
ended June 30, 2000 compared to $190,939 in the six month period ended June 30,
1999. Included in this amount is accrued compensation to officers of $679,017,
for the six months ended June 30, 2000, which represent the compensatory element
of stock bonuses to be issued pursuant to employment agreements entered into
subsequent to the effective date of the Plan, compared to $0.00 for the six
month period ended June 30, 1999. Also, amortization and depreciation expense
increased to $98,851 for the six month period ended June 30, 2000 compared to
$3,080 for the six months ended June 30, 1999. The remaining increases in
general and administration expense was primarily attributed to the acquisition
of Surfside Software Systems and the staffing of First United MortgageBanc, Inc.

<PAGE>

NET INCOME (LOSS)

The Company generated net loss from operations, before taxes, of $1,063,688 in
the six-month period ended June 30, 2000 as compared to a net loss before taxes
of $195,044 in the six-month period ended June 30, 1999. Included in this amount
is accrued compensation of officers of $679,017, which represent the
compensatory element of stock bonuses to be issued pursuant to employment
agreements entered into subsequent to the effective date of the Plan, and
amortization and depreciation expense of $98,851. Without the compensatory stock
bonuses, and amortization and depreciation, loss from operations was $285,820
which is primarily attributed to the development of Surfside Software Systems
core Windows(R) technology based TranWare(TM) applications and the initial
staffing of First United MortgageBanc.

For the six months ended June 30, 2000 the Company realized an extraordinary
gain on the forgiveness of debt of $4,371,979 due to the dissolution of the
Company's former subsidiary Direct Mortgage Partners, and the successful
negotiations with corresponding pre-petition liabilities.

The net income available to common stockholders for the six months ended June
30, 2000 is $2,897,831 compared to a net loss of $274,684 for the six months
ended June 30, 1999.

LIQUIDITY AND CAPITAL RESOURCES

The Company's has been dependent on stock sales or third party borrowings to
sustain operations. On April 11, 2000 the Company sold through a private
placement of its securities to Ronco II. Ronco II invested $500,400 and received
1,787,143 shares of common stock of CFI, plus 1,787,143 warrants to purchase one
share of CFI common stock at $1.44 per share. The Company has relied upon
Section 4(2) for an exemption from registration afforded by Section 4(2) of the
Securities Act of 1933, as amended.

The Company believes that the funds to be generated by the Company's operations,
combined with the second quarter capital raised will provide the Company with
sufficient funds to finance its operations. However, if additional funds were
needed to support working capital or to complete acquisitions, the Company would
seek to raise such funds through one or more public or private financing of
equity, or from other sources. Additional financing may not be available or, it
may not be obtainable on terms favorable to the Company.

RISK FACTORS

FINANCIAL SERVICES:

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 tends 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


<PAGE>

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 three competitors in the
market are a) The Associates, b) Household Financial, c) Saxon Mortgage.

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"), Federal National Mortgage Association ("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 the
Real Estate Settlement and Procedures Act ("RESPA") and the regulations
promulgated there under 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
remediation 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.

SOFTWARE RISK FACTORS:

MARKET CHANGES

<PAGE>

The market for the Company's software products and services is characterized by
technological advances and evolving standards. In addition, changes in the
transportation requirements and new product introductions could render the
Company's existing products unmarketable. The Company's future success depends
upon its ability to enhance current products in a timely fashion and to develop
and introduce new products that keep pace with technological developments and
changes in the transportation industry. Further, the Company's future success
depends on ground fleet transportation companies to adopt new technologies for
acceptance in this evolving market.

NEED FOR ADDITIONAL FINANCING

The Company believes that the funds to be generated by the Company's operations
will provide the Company with sufficient funds to finance its operations.
However, if additional funds were needed to support working capital or to
complete acquisitions, the Company would seek to raise such funds through one or
more public or private financing of equity, or from other sources. Additional
financing may not be available or, if may not be obtainable on terms favorable
to the Company.

GROWTH

The growth in the size and complexity of the Company's and the expansion of its
product lines and its customer base have and are expected to continue to place a
significant strain on all aspects of the Company's business. The Company will be
required to upgrade or implement operational and financial systems, procedures
and controls. The future success will depend on its ability to expand its
support and infrastructure commensurate with its expanding base of products and
on its ability to attract, hire and retain skilled employees.

KEY EMPLOYEES AND SOFTWARE ENGINEERS

The Company believes that the future success will depend to a significant extent
upon the contributions of executive officers and key sales, engineering,
marketing and technical personnel. The Company does not have "key person" life
insurance on any of its employees. Competition for highly skilled personnel,
particularly qualified development engineers and systems implementation experts
are intense. The Company has, at times, experienced difficulty in locating
personnel with requisite levels of expertise and experience

SALES AND IMPLEMENTATION CYCLES

The license of the Company's software generally requires the Company to educate
prospective customers on the use and benefits of the Company's products. In
addition, the purchase of the Company's products involves a significant
commitment by prospective customers and can be associated with substantial time
in workflow, processing or the configuration of hardware. The license of the
Company's software products can often require a level or executive decision by
prospective customers. The period between initial indications of interest by a
customer in the Company's product and the ultimate sale and implementation of
the Company's product to the customer can be lengthy (often ranging from three
months to six months) and is subject to a number of significant delays over
which the Company has little or no control.

COMPETITION

The market for the Company's products is intensely competitive and ever
changing. A number of companies offer competitive products addressing some of
the Company's target markets. A number of prospective and existing customers of
the Company have the capability to provide alternative solutions to the
Company's products and may, therefore, be viewed as competing with the Company.
Some of the Company's competitors have significantly greater financial,
technical, sales and resources than the Company.

GROUND FLEET TRANSPORTATION INDUSTRY

<PAGE>

Substantially all of the Company's revenues are derived from licenses and
services, and its future success is dependent on increased sales to the ground
fleet transportation industry. Demand for the Company's products and services
can be disproportionately affected by instability or downturns in the
transportation industry, which may cause existing or potential customers to
delay, cancel or reduce planned expenditures for technology, including those
offered by the Company.

LIABILITY RISKS; SOFTWARE DEFECTS

The Company's software products are complex and sophisticated and could, from
time to time, contain designer software errors that could be difficult to detect
and correct. The implementation of the Company's products may involve a
significant amount of customer-specific customization and may involve
integration with systems developed by third parties. Such errors could give rise
to warranty or liability of the Company and cause delays in product introduction
and require design modifications, which could result in loss of or the delay in
marketing of the Company's products or loss of existing customers

DEPENDENCE UPON PROPRIETARY TECHNOLOGY; INTELLECTUAL PROPERTY RIGHTS

The Company's success and ability to compete are dependent in part upon its
technology. The Company relies primarily on a combination of copyright,
trademark laws, confidentiality procedures and contractual provisions to protect
its proprietary rights. Despite the Company's efforts to protect its rights,
other parties may attempt to reverse, engineer, copy or engage in unauthorized
use of the Company's proprietary information. Technology or proprietary
information incorporated in the Company's products can be licensed from third
parties, generally on a non-exclusive basis. The failure of the third-party
licensors to maintain or update their products could result in delays in the'
Company's ability to ship certain of its products. While it may be necessary in
the future to obtain rights to third party technology, there can be no assurance
that the Company will be able to do so.

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 existed
as a result of the Bankruptcy Filing.

ITEM 2. CHANGES IN SECURITIES

The preferred stockholder of Series "A" and "B" convertible preferred stock
received 2,000,000 shares of common stock in exchange for the preferred stock in
the reorganized CFI.

During the year ended December 31, 1999, 75 shares of preferred stock were
converted into 525,521 shares of common stock and accordingly additional paid-in
capital decreased by $5,255.

On November 29, 1999, Ronco Funding, Inc., had funded debentures in an amount of
$311,000 net of expenses of $106,900. The 15% convertible debentures were
converted into 2,004,986 shares of the Company's common stock.

During the Chapter 11 Bankruptcy Proceeding in 1999, certain non-management
employees were issued 750,000 warrants for the purchase of one share of common
stock of CFI at $.39 per share. The price represents 125 percent of the bid
price of CFI stock on the effective date of the bankruptcy plan, August 2, 1999.

During the third quarter of 1999, after the bankruptcy confirmation, CFI was
short of cash for operational expenses, and accordingly, entered into two loans.
One loan was from Footbridge LTD Trust in the amount

<PAGE>

of $100,000 on a balloon note at 10% interest, which has been subsequently
repaid. As part of the consideration for that loan, the lender was granted
100,000 warrants to purchase one share of common stock of CFI at .20(cent) per
share, which represents 110% of the bid price of CFI stock on date of the loan
agreement. Also, as part of that transaction, a finders fee of $10,000 was paid
together with 10,000 warrants to purchase one share of CFI common stock at $.20
per share. The warrant price represents 110% of the bid price of CFI stock on
the date of the loan agreement.

Additional financing was provided by a Company owned by the Chairman of the
Company, Vincent C. Castoro who made a loan to the Company in the amount of
$140,796 at 9% interest. As an inducement to make this loan, Mr. Castoro was
granted 150,000 warrants for the purchase of one share of CFI common stock at
 .25(cent) per share, which represents 105% of the bid price as of the date of
the loan. This loan has not yet been repaid by CFI.

After the confirmation of the bankruptcy but before the end of the year, the
Company sold through a private placement of securities to Mr. Frank LaForgia. He
invested $300,000 and received 2,000,000 shares of common stock of CFI, plus
150,000 warrants to purchase one share of CFI common stock at 25(cent) per
share, which represents the 125% of the bid price on the date of the investment,
November 8, 1999. The Company has relied upon Section 4(2) for an exemption from
registration afforded by Section 4(2) of the Securities Act of 1933, as amended.

As described more fully in the notes to the audited financial statements
included in the Company's Form 10- KSB for the period ended December 31, 1999,
certain liabilities which were attributable to the Company's wholly owned
subsidiary, DMP, was not subject to compromise under the Company's confirmed
plan of reorganization. On June 9, 2000, Direct Mortgage Partners, Inc. ("DMP"),
a wholly owned subsidiary of the Company, made an assignment for the benefit of
creditors for the purpose of liquidating DMP. On June 29, 2000, articles of
dissolution were filed with the Delaware Secretary of State. As a result of the
assignment and subsequent dissolution, the Company has recognized forgiveness of
debt in the amount of $1,168,314 as of June 30, 2000.

As described more fully in the notes to the audited financial statements
included in the Company's Form 10- KSB for the period ended December 31, 1999,
the Plan of Reorganization included claims from two financial institutions in
the amount of $4,000,000, as well as certain non- priority claims from present
and former employees for unpaid compensation up to the petition date amounting
to $83,328. During the six months ended June 30, 2000, the Company issued
2,400,000 shares of its common stock in satisfaction of the claims, from the two
financials institutions, which resulted in the recognition of forgiveness of
debt amounting to $3,100,000. Additionally, the Company issued 19,500 shares of
its common stock in satisfaction of $20,146 of liabilities. Pursuant to the plan
of bankruptcy, the Company issued a total of 2,570,000 shares of its common
stock in satisfaction of the corresponding pre-petition liabilities.

On April 11, 2000 the Company sold through a private placement of its securities
to Ronco II. Ronco II invested $500,400 and received 1,787,143 shares of common
stock of CFI, plus 1,787,143 warrants to purchase one share of CFI common stock
at $1.44 per share. The Company has relied upon Section 4(2) for an exemption
from registration afforded by Section 4(2) of the Securities Act of 1933, as
amended.

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
Fourth Quarter                     $   0.68      $  0.18

2000

<PAGE>

First Quarter                      $   1.60      $  0.312
Second Quarter                     $   1.65      $  0.343


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

Not Applicable

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)



CFI MORTGAGE INC.
        (Registrant)

Date: August 17, 2000              /s/ Stephen E. Williams
                                   -----------------------

                                   Stephen E. Williams
                                   (President, CEO)

Date: August 17, 2000              /s/ Rodger W. Stubbs
                                   --------------------

                                   Rodger W. Stubbs
                                   (Principal Administrative Officer)