<PAGE>

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



                                   FORM 10-QSB


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

                For the Quarterly Period Ended September 30, 2001

                                       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                                            65-0127741
(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 [ ]


           34,320,272 shares, $.01 par value, as of September 30, 2001

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


                                      F-1
<PAGE>


                       CFI MORTGAGE INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                               SEPTEMBER 30, 2001
                                   (Unaudited)


                                    I N D E X



                                                                        Page No.
                                                                        --------


Part I  - Financial Information:

          Item 1. Consolidated Financial Statements:

                  Consolidated Balance Sheets
                  As at September 30, 2001 and December 31, 2000 ...   F-3 - F-4


                  Consolidated Statements of Operations
                  For the Nine and Three Months Ended
                  September 30, 2001 and 2000 ......................      F-5


                  Consolidated Statement of Stockholders'
                  Equity (Capital Deficiency)
                  For the Nine Months Ended
                  September 30, 2001 ...............................      F-6


                  Consolidated Statements of Cash Flows
                  For the Nine Months Ended
                  September 30, 2001 and 2000 ......................   F-7 - F-8


                  Notes to Consolidated Financial Statements .......  F-9 - F-25


          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-??


                                      F-2
<PAGE>



                       CFI MORTGAGE INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)


                                   A S S E T S


                                                September 30,  December 31,
                                                     2001          2000
                                                ------------   -----------
Current assets:
  Cash                                           $    14,042   $    33,547
  Mortgage loans held for sale                       724,760    13,149,612
  Accounts receivable                                 81,665        20,428
  Rent receivable                                    297,210       115,075
  Due from related parties                            85,726        85,726
  Deferred finance costs                              20,953          --
  Prepaid expenses and other current assets           24,094        17,811
                                                 -----------   -----------
        Total current assets                       1,248,450    13,422,199
                                                 -----------   -----------

Property and equipment, at cost, less
  accumulated depreciation of $191,980
  and $97,524, respectively                        2,774,504     2,854,833
                                                 -----------   -----------

Other assets:
  Investment - at equity                             120,000       120,000
  Capitalized software development costs, less
    accumulated amortization of $307,592
    and $230,368, respectively                       207,226       284,450
  Goodwill, less accumulated amortization
    of $230,601 and $123,666, respectively         1,234,479     1,341,414
  Notes receivable                                   100,000       100,000
  Security deposits                                   12,205        18,955
                                                 -----------   -----------
        Total other assets                         1,673,910     1,864,819
                                                 -----------   -----------

                                                 $ 5,696,864   $18,141,851
                                                 ===========   ===========


                 See accompanying notes to financial statements.


                                      F-3
<PAGE>


                       CFI MORTGAGE INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)


            LIABILITIES AND STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)


                                                   September 30,   December 31,
                                                       2001            2000
                                                   ------------    ------------
Current liabilities:
  Warehouse bank line of credit                    $    722,750    $ 12,727,195
  Accounts payable                                      259,156         153,744
  Current portion of mortgage payable                   120,305          66,754
  Note payable - bank                                   104,927            --
  Due to affiliated company                             159,406         150,135
  Due to related party                                  169,284            --
  Due to officer                                         30,806         206,068
  Notes payable - other                                 615,000         138,500
  Convertible debentures payable                        350,000            --
  Accrued expenses and other current liabilities      1,884,315       1,046,127
                                                   ------------    ------------
        Total current liabilities                     4,415,949      14,488,523
                                                   ------------    ------------

Mortgage payable - long-term portion                  1,372,146       1,425,697
                                                   ------------    ------------

Deferred income                                            --           221,058
                                                   ------------    ------------

Commitments and contingencies                              --              --

Stockholders' equity (capital deficiency):
  Common stock, $.01 par value
    Authorized 35,000,000 shares
    Issued and outstanding - 34,320,272 and
      26,331,151 shares, respectively                   343,202         263,311
  Preferred stock, no par value
    Authorized 10,000,000 shares
    Issued and outstanding - 2 shares                 1,721,596       1,721,596
  Additional paid-in capital                          7,923,967       7,066,321
  Accumulated deficit                               (10,017,158)     (6,998,838)
                                                   ------------    ------------
                                                        (28,393)      2,052,390
  Less: Stock subscriptions receivable                  (64,848)        (45,817)
                                                   ------------    ------------
        Total stockholders' equity
         (capital deficiency)                           (93,241)      2,006,573
                                                   ------------    ------------

                                                   $  5,696,864    $ 18,141,851
                                                   ============    ============


                 See accompanying notes to financial statements.


                                      F-4
<PAGE>



                       CFI MORTGAGE INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                  For the Nine Months Ended     For the Three Months Ended
                                                        September 30,                  September 30,
                                                   2001            2000            2001            2000
                                              ------------    ------------    ------------    ------------
<S>                                           <C>             <C>             <C>             <C>
Revenues:
  Commissions, fees and interest -
   mortgages                                  $    740,632    $  1,135,196    $     57,559    $    974,217
  Software                                         327,930         314,307          82,076          58,453
  Rental income                                    181,180          76,690          66,109          57,518
                                              ------------    ------------    ------------    ------------
Total revenues                                   1,249,742       1,526,193         205,744       1,090,188
                                              ------------    ------------    ------------    ------------

Expenses:
  Selling                                          777,090         440,419         250,098         260,643
  General and administrative                     2,623,285       1,911,326         933,821         624,187
  Interest                                         306,619          70,376          36,898          37,598
  Loss on sale of mortgages and
   other fees                                      431,896            --            43,728            --
                                              ------------    ------------    ------------    ------------
Total expenses                                   4,138,890       2,422,121       1,264,545         922,428
                                              ------------    ------------    ------------    ------------

Income (loss) from operations                   (2,889,148)       (895,928)     (1,058,801)        167,760
                                              ------------    ------------    ------------    ------------

Other income (expenses):
  Financial costs                                 (129,172)       (405,460)        (52,660)           --
  Settlement fee from cancelled
   acquisition                                        --           100,000            --              --
  Writedown of investment                             --          (105,000)           --              --
                                              ------------    ------------    ------------    ------------
Total other income (expenses)                     (129,172)       (410,460)        (52,660)           --
                                              ------------    ------------    ------------    ------------

Income (loss) before extraordinary gain         (3,018,320)     (1,306,388)     (1,111,461)        167,760

Extraordinary gain - forgiveness of debt              --         4,402,147            --            30,168
                                              ------------    ------------    ------------    ------------

Net income (loss)                             ($ 3,018,320)   $  3,095,759    ($ 1,111,461)   $    197,928
                                              ============    ============    ============    ============


Basic earnings (loss) per common share:
  Loss before extraordinary gain              ($ 3,018,320)   ($ 1,306,388)   ($ 1,111,461)   $    167,760
  Extraordinary gain                                  --         4,402,147            --            30,168
                                              ------------    ------------    ------------    ------------
  Net income (loss) available for
    common shareholders                       ($ 3,018,320)   $  3,095,759    ($ 1,111,461)   $    197,928
                                              ------------    ------------    ------------    ------------

Weighted average shares - basic                 29,585,778      17,727,305      32,769,640      22,820,267
                                              ============    ============    ============    ============

Earnings (loss) per share - basic:
  Earnings (loss) per share from continuing
    operations before extraordinary gain             ($.10)          ($.07)          ($.03)           $.01
  Extraordinary gain                                   --              .25             --              --
                                                     -----           -----           -----            ----

  Net income (loss)                                  ($.10)           $.18           ($.03)           $.01
                                                     =====            ====           =====            ====

Weighted average shares - diluted               29,585,778      19,300,941      32,769,640      24,626,245
                                              ============    ============    ============    ============


Earnings (loss) per share - diluted:
  Earnings (loss) per share from continuing
    operations before extraordinary gain             ($.10)          ($.07)          ($.03)           $.01
  Extraordinary gain                                   --              .23             --              --
                                                     -----           -----           -----            ----

  Net income (loss)                                  ($.10)           $.16           ($.03)           $.01
                                                     =====            ====           =====            ====
</TABLE>


                 See accompanying notes to financial statements.


                                      F-5
<PAGE>



                       CFI MORTGAGE INC. AND SUBSIDIARIES

       CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)

                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                          Additional
                                                     Common Stock                 Preferred Stock           Paid-In
                                                 Shares        Amount           Shares       Amount         Capital
                                               ----------   ------------      ---------   ------------   ------------
<S>                                           <C>           <C>                  <C>      <C>            <C>
Balance at January 1, 2001                     26,331,151   $    263,311              2   $  1,721,596   $  7,066,321

Shares to be issued as repayment
  of advance                                      375,000          3,750           --             --           81,250

Shares to be issued pursuant to employment
  contract and purchase of stock                  250,000          2,500           --             --           47,500

Share issued pursuant to employment
  contract and purchase of stock                  125,000          1,250           --             --           23,750

Shares issued for sale of
  convertible debentures                          140,000          1,400           --             --           33,300

Shares issued for employee compensation         4,756,086         47,561           --             --          406,430

Shares issued for consulting services           2,148,117         21,481           --             --          236,293

Shares issued for services rendered
  and a prior year liability                      100,000          1,000           --             --           15,000

Shares issued against prior
  period liabilities                               14,918            149           --             --            2,123

Shares issued in consideration
  for notes payable                                80,000            800           --             --           12,000

Cash receive from stock subscription                 --             --             --             --             --

Net loss for the nine months
  ended September 30, 2001                           --             --             --             --             --
                                               ----------   ------------         ------   ------------   ------------
Balance at September 30, 2001                  34,320,272   $    343,202              2   $  1,721,596   $  7,923,967
                                               ==========   ============         ======   ============   ============

<CAPTION>

                                                                 Stock
                                              Accumulated    Subscriptions
                                                Deficit       Receivable         Total
                                             ------------    ------------    ------------
<S>                                          <C>             <C>             <C>
Balance at January 1, 2001                   ($ 6,998,838)   ($    45,817)   $  2,006,573

Shares to be issued as repayment
  of advance                                         --              --            85,000

Shares to be issued pursuant to employment
  contract and purchase of stock                     --           (50,000)           --

Share issued pursuant to employment
  contract and purchase of stock                     --              --            25,000

Shares issued for sale of
  convertible debentures                             --              --            34,700

Shares issued for employee compensation              --              --           453,991

Shares issued for consulting services                --              --           257,774

Shares issued for services rendered
  and a prior year liability                         --              --            16,000

Shares issued against prior
  period liabilities                                 --              --             2,272

Shares issued in consideration
  for notes payable                                  --              --            12,800

Cash receive from stock subscription                 --            30,969          30,969

Net loss for the nine months
  ended September 30, 2001                     (3,018,320)           --        (3,018,320)
                                             ------------    ------------    ------------
Balance at September 30, 2001                ($10,017,158)   ($    64,848)   ($    93,241)
                                             ============    ============    ============
</TABLE>


                 See accompanying notes to financial statements.


                                      F-6
<PAGE>


                       CFI MORTGAGE INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                  For the Nine
                                                                   Months Ended
                                                                  September 30,
                                                           ----------------------------
                                                                2001            2000
                                                           ------------    ------------
<S>                                                        <C>             <C>
Cash flows from operating activities:
  Net income (loss) from operations                        ($ 3,018,320)   $  3,095,759

  Adjustments to reconcile net income (loss)
      to net cash provided by (used in)
      operating activities:
    Writedown of investment                                        --           105,000
    Loss on sale of mortgages and other fees                    185,000            --
    Forgiveness of debt                                            --        (4,402,147)
    Deferred income                                            (219,048)           --
    Rent receivable                                            (182,135)           --
    Depreciation and amortization                               278,615         175,397
    Financial costs                                             129,172         389,071
    Common stock issued for salaries and other expenses         727,765          53,552
    Interest accrued on related party loans                       9,271           9,276
    Increase (decrease) in cash flows as a result of
        changes in asset and liability account balances:
      Mortgage loans held for sale                           12,239,852            --
      Accounts receivable                                       (61,237)        105,650
      Prepaid expenses and other current assets                  (6,283)         44,113
      Security deposits                                           6,750         (23,625)
      Accounts payable                                          105,412            --
      Accrued expenses and other current liabilities            762,835         408,445
                                                           ------------    ------------
  Total adjustments                                          13,975,969      (3,135,268)
                                                           ------------    ------------

Net cash provided by (used in) operating activities          10,957,649         (39,509)
                                                           ------------    ------------

Cash flows from investing activities:
  Due from related parties                                         --          (153,539)
  Software development costs                                       --          (182,639)
  Expenditures for property and equipment                       (14,127)       (244,566)
                                                           ------------    ------------
Net cash used in investing activities                           (14,127)       (580,744)
                                                           ------------    ------------

Cash flows from financing activities:
  Due to related party                                           (5,978)           --
  Warehouse bank line of credit                             (12,004,445)           --
  Note payable - bank                                           104,927            --
  Proceeds from private placement                                  --           445,083
  Proceeds from convertible debentures                          350,000            --
  Mortgage payable                                                 --           (19,964)
  Common stock issued                                            85,000          20,000
  Note payable - other                                          476,500
  Due to officer                                                   --           200,000
  Due to affiliate                                                 --            (2,000)
  Stock subscription receivable                                  30,969            --
                                                           ------------    ------------
Net cash provided by (used in) financing activities         (10,963,027)        643,119
                                                           ------------    ------------

Net (decrease) increase in cash                                 (19,505)         22,866

Cash at beginning of period                                      33,547           7,574

Cash of subsidiary                                                 --             2,466
                                                           ------------    ------------
Cash at end of period                                      $     14,042    $     32,906
                                                           ============    ============
</TABLE>


                See accompanying notes to financial statements.


                                      F-7
<PAGE>


                       CFI MORTGAGE INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                                   (Unaudited)

                                                              For the Nine
                                                              Months Ended
                                                              September 30,
                                                         -----------------------
                                                            2001         2000
                                                         ----------   ----------
Supplemental Disclosures of Cash Flow Information:
  Cash paid during the period for:

    Income taxes                                         $     --     $     --
                                                         ==========   ==========
    Interest                                             $  306,619   $   41,187
                                                         ==========   ==========

Supplemental Schedules of Noncash Investing
    and Financing Activities:

  Common stock issued in satisfaction of liabilities     $     --     $2,370,938
                                                         ==========   ==========
  Common stock issued for convertible
   debentures finance costs                              $   34,700   $     --
                                                         ==========   ==========

  Common stock issued for salaries and other expenses    $  293,819   $   53,552
                                                         ==========   ==========
  Common stock issued for investment
   in First Mortgage Securities, Inc.                    $     --     $  422,640
                                                         ==========   ==========

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

  Transfer of interest in notes payable
   from officer to related party                         $  175,262   $     --
                                                         ==========   ==========

  Deferred financing costs                               $  112,325   $     --
                                                         ==========   ==========

                 See accompanying notes to financial statements.


                                      F-8
<PAGE>



                       CFI MORTGAGE INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               SEPTEMBER 30, 2001
                                   (UNAUDITED)


NOTE  1 -  GOING CONCERN.

                 The accompanying interim unaudited consolidated financial
           statements have been prepared assuming the Company will continue as a
           going concern. The Company recently completed a voluntary plan of
           reorganization. The Company may continue to need to raise additional
           capital to fund operations until such time as 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  2 -  SIGNIFICANT ACCOUNTING POLICIES.

           (a)   Basis of Presentation:

                 The accompanying interim unaudited consolidated financial
           statements have been prepared in accordance with accounting
           principles generally accepted in the United States of America. The
           financial statements include the accounts of CFI mortgage Inc.
           ("CFI"), First United MortgageBanc, Inc. ("FUMB"), Inventek, Inc.,
           doing business as Surfside Software Systems ("Surfside") and
           Monetech, Inc., all wholly owned subsidiaries of CFI. 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. CFI and its subsidiaries are hereafter
           collectively referred to as the "Company".

                 The accompanying unaudited consolidated financial statements
           have been prepared in accordance with accounting principles generally
           accepted in the United States of America 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 September 30, 2001 and the results of
           operations and cash flows for the nine months and three months ended
           September 30, 2001 and 2000. The results of operations for the nine
           and three months ended September 30, 2001 and 2000 are not
           necessarily indicative of the results to be expected for the full
           year.



                                      F-9
<PAGE>

NOTE 2 -  SIGNIFICANT ACCOUNTING POLICIES. (Continued)

          (a)    Basis of Presentation: (Continued)

                 The December 31, 2000 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.


           (b)   Use of Estimates:

                 The preparation of financial statements in conformity with
           accounting principles generally accepted in the United States of
           America 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
           the consolidated financial statements, and the reported amounts of
           revenues and expenses during the year. Actual results could differ
           from those estimates.


           (c)   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.

                 Fee income in connection with mortgage loans, is accounted for
           in conformity with Statement of Financial Accounting Standards No.
           91. This statement requires that 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.

                 Upon sale of the related collateral mortgages, the net fee
           income previously being amortized is then recognized into income.

                 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.


                                      F-10
<PAGE>


NOTE  2 -  SIGNIFICANT ACCOUNTING POLICIES. (Continued)

           (d)   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 3 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.


           (e)   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 $77,224 and $46,519 for the nine months ended September 30, 2001
           and 2000, respectively, and $25,742 and $17,410 for the three months
           ended September 30, 2001 and 2000, respectively.


           (f)    Mortgage Loans Held for Sale:

                 Mortgage loans are carried at the lower of cost or market
           determined on an aggregate basis.


           (g)   Sale of Loans:

                 Premiums received from investors are recognized as revenue upon
           the sale of mortgage loans when all of the incidence of ownership
           passes to the permanent investor.


                                      F-11
<PAGE>

NOTE  2 -  SIGNIFICANT ACCOUNTING POLICIES. (Continued)

           (h)   Goodwill:

                 In conjunction with the Company's acquisition of a 100%
           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 $1,347,880. 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 the
           acquisition of the buildings over a period of 15 years. Amortization
           expense charged to operations amounted to $106,935 and $84,527 for
           the nine months ended September 30, 2001 and 2000, respectively, and
           $36,221 and $30,906 for the three months ended September 30, 2001 and
           2000, respectively.

                 Management periodically reviews 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.


           (i)   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.


           (j)   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", 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 by the weighted average
           number of shares outstanding for the period. Diluted earnings per
           share 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 has not been presented in the financial
           statements for the nine and three months ended September 30, 2001, as
           the effect of including the common stock equivalents would be
           antidilutive for these periods.


                                      F-12
<PAGE>

NOTE  2 -  SIGNIFICANT ACCOUNTING POLICIES. (Continued)

           (j)   Earnings (loss) Per Common Share:  (Continued)

                 Below is the calculation of basic and diluted earnings per
           share of the periods presented in the financial statements.

<TABLE>
<CAPTION>
                                                 For the Nine Months Ended     For the Three Months Ended
                                                       September 30,                  September 30,
                                               ----------------------------   ----------------------------
                                                    2001            2000           2001            2000
                                               ------------     -----------   ------------     -----------
           <S>                                 <C>              <C>           <C>              <C>
           Net income (loss) available
             to common stockholders            ($ 3,018,320)    $ 3,095,759   ($ 1,111,461)    $   197,928
                                               ============     ===========   ============     ===========

           Weighted average shares
             outstanding - basic                 29,585,778      17,727,305     32,769,640      22,820,267
           Warrants                                    --         1,573,636           --         1,805,978
                                               ------------     -----------   ------------     -----------

           Weighted average shares
             outstanding - diluted               29,585,778       1,573,636     32,769,640      24,626,245
                                               ============     ===========   ============     ===========

           Earnings (loss) per common share:

             Basic                                    ($.10)           $.18          ($.03)           $.01
                                                      =====            ====          =====            ====

             Diluted                                  ($.10)           $.16          ($.03)           $.01
                                                      =====            ====          =====            ====
</TABLE>

           (k)   Recently Issued Accounting Pronouncements.

                 In June 2001, the Financial Accounting Standards Board issued
           Statement No. 141, Accounting for Business Combinations, and
           Statement No. 142, Goodwill and Other Intangible Assets. These
           Statements modify accounting for business combinations after June 30,
           2001 and will affect the Company's treatment of goodwill at the start
           of fiscal year 2002. SFAS No. 141 prohibits pooling-of-interests
           accounting for acquisitions. SFAS 142 requires that goodwill existing
           at the date of adoption to be reviewed for possible impairment and
           the impairment tests to be periodically repeated, with impaired
           assets written-down to fair value. Additionally, existing goodwill
           must be assessed and classified consistent with the Statements'
           criteria. Amortization of goodwill will cease on January 1, 2002. At
           this time, the Company has not determined the complete impact of
           these Statements. However, for the nine months ended September 30,
           2001, the Company has recognized $106,935 of goodwill amortization.


                                      F-13
<PAGE>



NOTE  3 -  FORGIVENESS OF DEBT.

                 On July 6, 1999, pursuant to the filing of Chapter 11 by the
           Company, the Court confirmed a plan of reorganization effective
           August 2, 1999 (the "Plan"), whereby creditors' claims that were
           approved by the Court were satisfied by the issuance of one share of
           the Company's common stock in exchange for each dollar of debt of the
           approved claim. As a result of the satisfaction of the pre-petition
           liabilities, the Company has recognized forgiveness of debt in the
           amount of $-0- and $4,402,107 for the nine months ended September 30,
           2001 and 2000, respectively, and $-0- and $30,168 for the three
           months ended September 30, 2001 and 2000, respectively.



NOTE 4 - 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. Surfside creates and
               markets proprietary software products. 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. 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.

               On August 4, 2000, the Company acquired the remaining 35%
               minority interest in Inventek, Inc. in exchange for 300,000
               shares of the Company's common stock and 30,000 common stock
               purchase warrants at an exercise price of 120% of the average
               closing price or average closing asked price for the Company's
               common stock on the date of the grant. These warrants are
               exercisable for a period of two years.

               The Company also agreed to contribute $250,000 as additional
               paid-in capital, at various dates through June 1, 2000. As of
               September 30, 2001, 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 at par value.


                                      F-14
<PAGE>



NOTE  4 -  ACQUISITIONS.  (Continued)

          (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 the net profit of FUMB 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 three warrants, each for 250,000 shares of
               the Company's common stock, are exercisable at prices of $.15,
               $.35 and $.50 per share, respectively. The warrants are
               exercisable for a period of five years from the date of issuance.

          (c)  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 purchase
               warrants to acquire 400,000 shares of the Company's common stock
               at an exercise price of $.67 per share. The acquisition was
               accounted for under the equity method.

               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 wrote down the investment by $105,000 during
               fiscal 2000, based on then most current financial information
               available for FMS. The Company has become aware through public
               documents, that FMS and its parent company were acquired by
               Tidalwave Holdings, Inc. in a stock exchange. As a result of the
               Tidalwave acquisition, the Company's investment in FMS may be
               worth at least $225,000. However, the Company could not quantify
               the value as of the date of this report.

          (d)  On April 28, 2000, the Company formed a wholly-owned subsidiary
               Monetech, Inc. for the purpose of acquiring the net assets of RJ
               Systems, Inc., a software development company. In March 2001 the
               Company determined that this acquisition would not be beneficial
               to its future plans and has decided not to pursue the
               acquisition. Monetech, Inc. will continue as an inactive company,
               to be used for future acquisitions the Company may be involved
               with.


                                      F-15
<PAGE>



NOTE  5 -  PROPERTY AND EQUIPMENT.

                 Property and equipment, at cost, consists of the following:

                                         September 30,   December 31,
                                              2001           2000
                                         -------------   ------------
           Buildings                        $2,550,000   $2,550,000
           Leasehold improvements               15,031       15,031
           Furniture                           217,661      217,661
           Computer equipment                  129,508      115,381
           Office equipment                     54,284       54,284
                                            ----------   ----------
                                             2,966,484    2,952,357
           Less: Accumulated depreciation
                   and amortization            191,980       97,524
                                            ----------   ----------
                                            $2,774,504   $2,854,833
                                            ==========   ==========


                 Depreciation and amortization expense amounted to $94,456 and
           $44,351 for the nine months ended September 30, 2001 and 2000,
           respectively, and $31,480 and $28,230 for the three months ended
           September 30, 2001 and 2000, respectively.



NOTE  6 -  RELATED PARTY TRANSACTIONS.

          (a)  For the nine months ended September 30, 2001, all of the rental
               income was derived from a company owned by a preferred
               stockholder of the Company. The Company was due $297,210 and
               $115,075 at September 30, 2001 and December 31, 2000,
               respectively from this company for rent and is reflected in the
               financial statements as a current asset. In addition there is a
               note receivable from this company in the amount of $100,000. The
               note receivable with accrued interest at 6% is due on March 31,
               2002. This company has filed under Chapter 7 of the United States
               Bankruptcy Code. Neither the lease or the note have been included
               in the petitioner's schedule of debts submitted to the court.
               Management of the Company expects full recovery of both amounts.
               Should the Company be unsuccessful in asserting these claims, it
               believes it can offset them against certain stock rights the
               individual has been granted by the Company in the aforementioned
               acquisition of the Indiana property. The ultimate resolution of
               these events are undeterminable as of the date of this report.

               As of September 30, 2001, the Company owes this preferred
               stockholder $175,262. The notes payable were originally issued to
               an officer of the Company who has assigned his rights to the
               aforementioned individual.

          (b)  The Company has made advances to two individuals, one of whom is
               a former director of the Company. The balance amounted to $85,726
               at each of September 30, 2001 and December 31, 2000. The advances
               are due on demand and there has been no interest charged on the
               outstanding balances.


NOTE  6 -  RELATED PARTY TRANSACTIONS.  (Continued)

          (c)  The Company had 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 $156,406 and $150,135 at September
               30, 2001 and December 31, 2000, respectively. The balances
               include accrued interest of $21,671 and $12,400, respectively.


                                      F-16
<PAGE>

                 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. During the year 2000 the sole stockholder of this
                 affiliate passed away and all interests have passed through to
                 his estate.

NOTE  7 -  NOTE PAYABLE - BANK.

                 The note is payable in twelve monthly installments of
           approximately $11,800 including interest at a rate of prime plus 2%
           beginning June 2001. No payments have been made on the note since
           August 2001.



NOTE  8 -  NOTES PAYABLE - OTHER.

                 Notes payable other is comprised of notes to various
           individuals for advances made to the Company. These notes are either
           due on demand or have a due date within the next twelve months. The
           interest rates on these notes range between 9% and 12%. At September
           30, 2001, $10,293 of interest has been accrued on these notes and is
           reflected in accrued expenses and other current liabilities. As an
           inducement to make these loans, certain of the individuals have
           received the Company's common stock totaling 80,000 shares. Included
           in the balance at September 30, 2001 of $615,000 is $210,000 of notes
           payable to a Director of the Company with interest at 9%.


NOTE 9 -  DUE TO OFFICER.

                 During the period ended December 31, 2000, the Company received
           advances from an officer totaling $200,000 of which $170,000 plus
           interest was assigned to a preferred stockholder of the Company. The
           remaining loan balance is payable on demand and bears interest at 9%
           per annum.


NOTE 10 -  WAREHOUSE LINE OF CREDIT.

                 FUMB had an agreement with an institution that provided a
           $15,000,000 warehouse credit facility, whereby advances were
           available up to the extent of the loan limit based upon submitted
           mortgage documents which collateralize the loan. As the mortgages
           were sold to investors, the proceeds were used to reduce the loan
           advances specifically identified with those mortgages sold.


                                      F-17
<PAGE>

                 As of February 13, 2001 the financial institution terminated
           the warehouse line of credit due in part to the unauthorized
           misrepresentation of a former officer of the Company. As a result of
           this default the outstanding principal balance, accrued interest and
           fees became due. As of the report date, the Company has sold all of
           the collateral mortgages and repaid the institution in full.

                 The terms of the credit facility called for an interest rate at
           the bank's prime rate. Interest expense on the warehouse line
           amounted to approximately $200,000 and $-0- for the nine months ended
           September 30, 2001 and 2000, respectively, and $-0- and $-0- for the
           three months ended September 30, 2001 and 2000, respectively.

                 In addition, for the nine months and three months ended
           September 30, 2001 the Company charged operations for approximately
           $267,000 and $40,000 to recognize the loss on the mortgages sold with
           recourse.

                 In May 2001, the Company obtained a $3,000,000 warehouse credit
           facility with a new institution, whereby advances will be available
           up to the extent of the loan limit based upon submitted mortgage
           documents which collateralize the loan. The terms of the credit
           facility call for interest to be charged on the unpaid amount of
           advances made to the Company at variable rates consisting of the
           published "One Month LIBOR rate" plus some applicable margin as
           determined by the bank based on the type of mortgage. At September
           30, 2001 there were borrowings of $722,750 under this credit
           facility.


NOTE 11 -  MORTGAGE PAYABLE.

                 The mortgage is payable in monthly installments of $15,168
           including interest at 7.75% with a final payment due on December 31,
           2014. The buildings collateralize the mortgage, and in addition, the
           sellers remain primarily liable. The mortgage balance consists of the
           following:

                                    September 30,         December 31,
                                         2001                 2000
                                     ----------            ----------
                 Current portion     $  120,305            $   66,754
                 Long-term portion    1,372,146             1,425,697
                                     ----------            ----------
                                     $1,492,451            $1,492,451
                                     ==========            ==========

NOTE 11 -  MORTGAGE PAYABLE.  (Continued)

                 Annual maturities for the next five years are as follows:


                                      F-18
<PAGE>

                            Years Ending
                            September 30,
                            -------------

                                 2002                         $  102,305
                                 2003                             75,091
                                 2004                             80,954
                                 2005                             87,850
                                 2006                             95,031
                              Thereafter                       1,051,220
                                                              ----------
                                                              $1,492,451
                                                              ==========

                 Interest expense amounted to $87,014 and $41,847 for the nine
           months ended September 30, 2001 and 2000, respectively, and $29,182
           and $30,930 for the three months ended September 30, 2001 and 2000,
           respectively. In addition, at September 30, 2001 the Company is in
           arrears on its mortgage principal payments amounting to $53,551 plus
           unpaid interest of $87,014 and the bank has begun foreclosure
           proceedings.

NOTE 12 - 12% CONVERTIBLE DEBENTURES.

                 During the nine months ended September 30, 2001, the Company
           received $350,000 from the sale of 12% convertible debentures through
           a private securities subscription agreement. The agreement calls for
           a maximum of $700,000 in debentures to be sold in $25,000 minimum
           increments. The debentures are collateralized by a second trust deed
           up to the value of $700,000 in the Company's real property. The
           debentures have a maturity date of 190 days from the date of issue
           and allow the holders the option of converting 15% of their
           investment into the Company's common stock at $0.10 per share upon
           maturity. In addition each holder of a $25,000 unit shall be issued
           10,000 shares of the Company's common stock upon subscription.

NOTE 13 -  ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES.

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

                                      F-19
<PAGE>

                                                 September 30,  December 31,
                                                     2001          2000
                                                 ------------- -------------
Professional fees                                 $  146,900   $   96,900
Provision for loss of mortgages previously sold      185,000         --
Accrued compensation of employees                       --         52,206
Accrued compensation of officers                     542,651      512,651
Accrued finance costs -
 convertible debentures                               77,625         --
Payroll and payroll taxes advanced
 by payroll service provider                          95,492         --
Rent                                                 115,900         --
Payroll taxes, penalties and interest                611,768      210,069
Interest accrued on mortgage                          87,014         --
Interest accrued on notes payable                     10,293         --
Interest accrued on warehouse line                      --        150,402
General and administrative expenses                   11,672       23,899
                                                  ----------   ----------
                                                  $1,884,315   $1,046,127
                                                  ==========   ==========


                 Included in accrued compensation of officers is $405,150, which
           represents the aggregate compensatory element of stock bonuses to be
           issued pursuant to employment agreements entered into, subsequent to
           the effective date of the Plan.



NOTE 14 -  COMMITMENTS AND CONTINGENCIES.

           (a)   Leases:

                 In January 2000, the Company's wholly 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:

                 Years Ending
                September 30,
                -------------

                     2002                              $155,325
                     2003                               163,074
                     2004                               171,204
                     2005                                43,314
                                                       --------
                                                       $532,917
                                                       ========


                 Rent expense amounted to $152,897 and $88,779 for the nine
           months ended September 30, 2001 and 2000, respectively, and

NOTE 14 -  COMMITMENTS AND CONTINGENCIES.  (Continued)

                 $56,712 and $38,491 for the three months ended September 30,
           2001 and 2000, respectively.

           (b)   Employment Contracts:


                                      F-20
<PAGE>

                 In August 1999, the Company entered into employment contracts
           with the (then) four officers. The contracts provided for annual base
           salaries and escalation clauses. They also provided for mandatory
           cash bonuses accruable ratably throughout the year and payable at the
           end of each fiscal year. The contracts also included a provision,
           which granted each of the four individuals a stock bonus equal to 5%
           of the Company's common stock issued during each fiscal year of the
           contract. The mandatory cash bonuses were accrued throughout fiscal
           year and payable at the end of the year. Each of the individuals were
           given the option to take the bonus in shares of the Company's common
           stock, valued at a 50% discount to the average closing bid price for
           the five trading days immediately after the close of the fiscal year.

                 In November 2000, the Company's corporate counsel advised
           management that the stock bonus provision of the employment contracts
           was illegal under Delaware corporate law. Accordingly, in December
           2000, the Company's Board of Directors voted to terminate this
           provision retroactively to January 1, 2000. As a result of the
           board's action, the Company' reversed approximately $539,000 of
           compensation in the fourth quarter that had been accrued through
           September 30, 2000.

                 In September 2000, one of the above individuals and in December
           2000 two of the other individuals covered by these employment
           contracts were terminated for cause. All other compensation due these
           individuals under the agreements has been accrued to the date of
           termination.

                 Included in the results of operations is $190,169 and $635,282
           for the nine months ended September 30, 2001 and 2000, respectively,
           and $69,501 and $-0- for the three months ended September 30, 2001
           and 2000, respectively, for compensation due to the officers under
           the terms of the contracts. At September 30, 2001, $542,651 remains
           unpaid of which $30,000 applies to 2001 and $512,651 applies to 2000
           and prior.

                 In July 2000, the Company entered into an employment contract
           with an individual to become the Company's Chief Financial Officer
           ("CFO"). The contract is for a period of three years and provides for
           a base salary of $120,000 per annum for the first year. Salary
           increases and cash bonuses, if any, shall be determined by The Board
           of Directors.


                                      F-21
<PAGE>


NOTE 14 -  COMMITMENTS AND CONTINGENCIES.  (Continued)

           (b)   Employment Contracts:  (Continued)

                 In March 2001, the Company entered into an employment contract
           with an individual to become the president of ("FUMB"). The contract
           is for a period of three years and provides for a base salary of
           $130,000 per annum for the first year. Salary increases shall be
           determined by the Board of Directors on an annual basis. The
           individual has agreed to purchase 375,000 shares of the Company's
           common stock at a price of $0.20 per share for a total of $75,000.
           The September 30, 2001 financial statements give recognition to the
           shares as being issued. In addition the contract allows for a stock
           bonus to be issued to the individual each year during the employment
           contract. The terms call for the Company to issue shares of its
           common stock, the number of shares determined by taking the earnings
           before income tax and depreciation of FUMB and multiplying that
           number by 8.5%. The quotient shall be divided by the mean bid/ask
           price of the Company's common stock for the month following the
           anniversary date of the executives employment contract. The
           individual shall have at his option the right to take up to 15% of
           the stock bonus in cash.


           (c)   Mortgage Loans Held for Sale:

                 The Company sells mortgage loans on a non-recourse basis with
           certain representations and warranties. The Company may be obligated
           by industry practice under certain circumstances to repurchase a loan
           if it goes into default within the first year. At September 30, 2001,
           the Company has a provision of $185,000 for the settlement of future
           loan losses.

NOTE 15 -  401(k) PLAN.

                 The Company has in place a contributory 401(k) plan for its
           eligible employees. Employer contributions are at the discretion of
           the Board of Directors. The employer contribution was $18,540 and
           $-0- for the nine months ended September 30, 2001 and 2000,
           respectively, and $5,467 and $-0- for three months ended September
           30, 2001 and 2000, respectively.

NOTE 16 - LIIGATION.

                 A former Director of the Company has filed suit against the
           Company and the Company's "CEO" for breaches of contracts and return
           of personal property. The parties intend to have a settlement
           conference. Should the parties be unable to settle at that time the
           Company is prepared to vigorously defend the action. Management is of
           the opinion this suit will not have a material impact on the
           financial statements.

                 Additionally, the Company is involved in a disputed mechanic's
           lien on its properties owned in Evansville Indiana. From January 1,
           2001, the Company has not made any payments on the mortgages on these
           properties and the bank has begun foreclosure proceedings. Presently,
           the Company is marketing the properties in an attempt to pay off the
           underlying mortgages and then litigate the disputed mechanic's lien.
           In the opinion of management the value of the properties will be
           sufficient to pay the underlying mortgages and satisfy the mechanic's
           lien.


                                      F-22
<PAGE>

NOTE 17 -  INCOME TAXES.

                 The Company and its wholly owned subsidiaries file a
           consolidated federal income tax return. As of December 31, 2000, the
           Company and its subsidiaries have a net operating loss carryforward
           of approximately $21,000,000 available to reduce future taxable
           income through the year 2020. 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 uncertainty about
           its ability to utilize it in future periods.


NOTE 18 -  STOCKHOLDERS' EQUITY.

           (a)   Common Stock:

                 In February 2001 the Board of Directors approved the issuance
           of 375,000 shares of the Company's common stock to a board member in
           consideration of an advance made by him to the Company. The issuance
           of this stock resulted in a charge to operations of $25,000 for
           financial costs.

                 In conjunction with an employment contract between the Company
           and an individual 375,000 shares of common stock were issued for
           $25,000 cash and a subscription receivable for $50,000 pursuant to
           the terms of the agreement.

                 In conjunction with the issuance of 12% convertible debentures,
           the Company has issued 140,000 shares of its common stock for
           $350,000.

                 In April 2001, the Board of Directors approved the issuance of
           4,455,711 shares of the Company's common stock to three individuals.
           3,800,000 shares were issued to a board member pursuant to a board
           resolution. The issuance of this stock resulted in a charge to
           operations of $356,440 for compensation. The remaining 655,711 shares
           were issued to two individuals, both officers of the Company in
           accordance with employment agreements in effect. The issuance of
           these shares resulted in a charge to operations of $61,506 for
           compensation.

                 In April 2001, the Company issued 14,918 shares of its common
           stock to an individual in satisfaction of a liability that had been
           included in the Company's previous bankruptcy filing.

                 In June 2001, the Company issued 100,000 shares of its common
           stock to an individual for services rendered. The issuance of these
           shares resulted in a charge to operations of $11,250 for professional
           fees.

NOTE 18 -  STOCKHOLDERS' EQUITY. (Continued)

           (a)   Common Stock: (Continued)

                 At September 30, 2001 the Company issued 80,000 shares of its
           common stock to various individuals in consideration of advances made
           by them to the Company. The issuance of this stock resulted in a
           charge to operations of $12,800 for financial costs.


                                      F-23
<PAGE>

                 In August 2001 the Board of Directors approved the issuance of
           234,375 shares of the Company's common stock to the Company's CEO.
           The issuance of this stock resulted in a charge to operations of
           $28,125 for compensation.

                 In August 2001 the Board of Directors approved the filing of a
           Form S-8 registration for the issuance of 2,214,117 shares of the
           Company's common stock. These shares were issued to various
           individuals and resulted in a charge to operations for consulting
           services in the amount of $257,774 and compensation in the amount of
           $7,920.

           (b)   Warrants:

                 During the nine months ended September 30, 2001 in connection
           with loans made to the Company by an individual, the Company issued
           10,000 and 5,000 common stock purchase warrants both exercisable at
           $.18 per share, as an inducement to make the loans. The warrants are
           exercisable for a period of one year expiring on February 9, 2002 and
           February 22, 2002, respectively.

                 At September 30, 2001 the Company had outstanding warrants
           entitling the holders to purchase common stock as follows:

                                    Exersise                   Expiration
           Number of                 Price                        Date
            Shares                  (Range)                 (Fiscal Year End)
           ---------              -------------             -----------------
             476,000              $0.08 - $0.41             December 31, 2001
           3,382,143              $0.18 - $1.44             December 31, 2002
             110,000                  $0.39                 December 31, 2003
           1,750,000              $0.15 - $0.50             December 31, 2005


                 The warrants are not valued in the financial statements as the
           amounts are immaterial.


                                      F-24
<PAGE>

NOTE 19 -  SEGMENT INFORMATION.

                 The Company is engaged in two segments; residential mortgage
           lending and licensing of proprietary computer software solutions.

<TABLE>
<CAPTION>
                                     Nine Months Ended             Three Months Ended
                                        September 30,                 September 30,
                                    2001           2000           2001           2000
                                -----------    -----------    -----------    -----------
<S>                             <C>            <C>            <C>            <C>
Revenues:
  Mortgage lending              $   741,000    $ 1,135,000    $    58,000    $   974,000
  Licensing computer software       328,000        314,000         82,000         58,000
  Other                             181,000         77,000         66,000         58,000
                                -----------    -----------    -----------    -----------
                                $ 1,250,000    $ 1,526,000    $   206,000    $ 1,090,000
                                ===========    ===========    ===========    ===========

Operating loss:
  Mortgage lending              ($1,447,000)   $   355,000    ($  451,000)   $   501,000
  Licensing computer software      (595,000)      (684,000)      (290,000)      (319,000)
  Other                            (847,000)      (567,000)      (318,000)       (14,000)
                                -----------    -----------    -----------    -----------
                                ($2,889,000)   ($  896,000)   ($1,059,000)   $   168,000
                                ===========    ===========    ===========    ===========
</TABLE>

                                September 30,    December 31,
                                    2001             2000
                                ------------    ------------
Identifiable assets:
  Mortgage lending              $  3,578,000    $ 16,937,000
  Licensing computer software      1,476,000       1,607,000
  Other                            3,497,000       3,542,000
  Eliminations                    (3,579,000)     (3,944,000)
                                ------------    ------------
                                $  4,972,000      18,142,000
                                ============      ==========


NOTE 20 -  SUBSEQUENT EVENT.

                 On September 7, 2001 the Company signed a letter of intent to
           acquire two companies located in Michigan, one a mortgage company and
           the other a technology consulting company for $8,000,000. The terms
           of the transaction call for $6,000,000 to be paid in cash and
           $2,000,000 to be paid through the issuance of convertible preferred
           shares of the Company. It is the intention of the Company to finance
           the acquisition through borrowings from a private investment group.
           The Company signed a letter of offer dated October 18, 2001 whereby
           it will borrow $8,000,000 with an interest rate of 400 basis points
           over the ten year US treasury bill rate. Repayment of the loan is to
           be over a ten year term calculated on a 20 year amortization. The
           loan is collaterlized by substantially all of the assets of the
           Company. In addition, the Company is required to pay a fee of 3% of
           the total amount borrowed upon closing.


                                      F-25
<PAGE>

                                     PART I

ITEM 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations


Results of Operations

Three Months Ended September 30, 2001 Compared to Three Months Ended
September 30, 2000

The Company recognized a loss from operations of $1,058,801 for the three months
ended September 30, 2001 compared to income from operations of $167,760 for the
comparable period in 2000 a decrease of $1,226,561. The revenues and expenses
relating to the software operations have remain relatively constant for the
three months ended September 30, 2001 as compared to the same period in 2000.
The loss from operations is primarily the result of the termination of the
warehouse line of credit in the first quarter of 2001. As a result, the Company
had to shut down and restart the entire mortgage operation with new employees,
brokers and a new warehouse line of credit. This resulted in a loss per share of
$.03 from continuing operations for the three months ended September 30, 2001
compared to income per share of $0.01 from continuing operations for the same
period in 2000. The net loss available to stockholders before extraordinary gain
for the three months ended September 30, 2001 is $1,111,461 compared to net
income available to stockholders of $167,760 for the same period in 2000, a
decrease of $1,279,221.

Total revenues decreased $884,444 to $205,744 for the three months ended
September 30, 2001 compared to $1,090,188 for the same period in 2000. This
large decrease is the result of shutting down and attempting to restart the
entire mortgage operation in the second quarter of 2001 due to the termination
of the warehouse line of credit. In February 2001, the Company discovered that a
former director and officer who was responsible for overseeing the Company's
mortgage lending operations had diverted approximately $54,000 in mortgage
payment checks due to the Company to his own company. The Company believes that
all the funds are in an account that has been frozen and is confident that it
will be able to recover the funds in civil litigation.

Total operating expenses increased $342,117 or 27% to $1,264,545 for the three
months ended September 30, 2001 compared to $922,428 for the same period in
2000. Selling expenses decreased $10,545 or 4% to $250,098 for the three months
ended September 30, 2001 compared to $260,643 for the same period in 2000.
General and administrative expenses increased $309,634 or 33% to $933,821 for
the three months ended September 30, 2001 compared to $624,187 for the same
period in 2000. Salaries and related employee benefits and payroll taxes
increased $142,350 or 42% to $341,663 for the three months ended September 30,
2001 compared to $199,313 for the same period in 2000. The largest increase was
with consulting fees, which increased $243,613 or 87% to $280,899 for the three
months ended September 30, 2001, compared to $37,286 for the same period in
2000, due to engaging consultants to assist management in its goal of enhancing
shareholder value. Rent expense increased $18,161 or 32% to $56,712 for the
three months ended September 30, 2001 compared to $38,551 for the same period in
2000, due to the renting of additional office space. Legal and accounting fees
decreased $83,058 or 81% to $20,000 for the three months ended September 30,
2001 compared to $103,058 for the same period in 2000. The decrease is due to
less litigation due to the finalization of all bankruptcy issues, and less
accounting fees due to no additional acquisitions for the three months ended
September 3, 2001. Depreciation and Amortization expense increased $17,166 or
18% to $93,712 for the three months ended September 30, 2001 compared to $76,546
for the same period in 2000. Interest expense decreased $15,058 or 29% to
$36,898 for the three months ended September 30, 2001 compared to $51,956 for
the same period in 2000. The decrease is the result of less interest expense
charged for loans on the warehouse line due to fewer loans on the line for the
three months ended September 30, 2001. The Company experienced a loss on sale of
mortgages of $43,728 for the three months ended September 30, 2001 compared to
none for the same period in 2000.


                                       1
<PAGE>

Nine Months Ended September 30, 2001 Compared to Nine Months Ended September 30,
2000

The Company recognized a loss from operations of $2,889,148 for the nine months
ended September 30, 2001 compared to a loss of $895,928 for the comparable
period in 2000 an increase of $1,993,220. The revenues and expenses relating to
the software operations have remain relatively constant for the nine months
ended September 30, 2001 as compared to the same period in 2000. The large
increase in the loss from operations for the none months ended September 30,
2001, is primarily the result of the termination of the warehouse line of credit
that was due in part to the unauthorized misrepresentations by a former officer
of the Company in the initial credit application. As a result, the Company had
to shut down and attempted to restart the entire mortgage operation with new
employees, brokers and a new warehouse line of credit. This resulted in a loss
per share of $.10 from continuing operations for the nine months ended September
30, 2001 compared to a loss per share of $0.07 from continuing operations for
the same period in 2000. The net loss from operations available to stockholders
before extraordinary gain for the nine months ended September 30, 2001 is
$3,018,320, compared to a loss of $1,306,388 for the same period in 2000, and
increase of $1,711,932.

Total revenues decreased $276,451 or 18% to $1,249,742 for the nine months ended
September 30, 2001 compared to $1,526,193 for the same period in 2000. The
decrease is the direct result of the termination of the warehouse line of credit
that was due in part to the unauthorized misrepresentations by a former officer
of the Company in the initial credit application. Consequently, the Company had
to shut down and attempted to restart the entire mortgage operation in the 2nd.
quarter of 2001. In February 2001, the Company discovered that this same officer
who was responsible for overseeing the Company's mortgage lending operations had
diverted approximately $54,000 in mortgage payment checks due to the Company to
his own company. The Company believes that all the funds are in an account that
has been frozen and is confident that it will be able to recover the funds in
civil litigation.

Total operating expenses increased $1,716,769 or 41% to $4,138,890 for the nine
months ended September 30, 2001 compared to $2,422,121 for the same period in
2000. Selling expenses increased $336,671 or 43% to $777,090 for the nine months
ended September 30, 2001 compared to $440,419 for the same period in 2000. The
primary reason for this was an increase of $345,205 or 67% to $567,133 for
salaries related to the mortgage operation compared to $221,928 for the same
period in 2000. General and administrative expenses increased $711,959 or 27% to
$2,623,285 for the nine months ended September 30, 2001 compared to $1,911,326
for the same period in 2000. Salaries expense and related employee benefits and
payroll taxes increased $102,489 or 87% to $1,350,325 for the nine months ended
September 30, 2001 compared to $1,202,836 for the same period in 2000.
Accounting and legal fees increased $32,365 or 20% to $164,158 for the nine
months ended September 30, 2001 compared to $131,793 for the same period in
2000. The increase is due to fees incurred for the year-end 10-KSB, and the
first two-quarter's 10-QSB, as well as the finalization of the bankruptcy, and
ongoing litigation. Consulting fees increased $218,325 or 72% to $303,156 for
the nine months ended September 30, 2001 compared to $84,831 for the same period
in 2000, due to engaging consultants to assist management in its goal of
enhancing shareholder value. Rent expense increased $64,118 or 42% to $152,897
for the nine months ended September 30, 2001 compared to $88,779 for the same
period in 2000, due to the obligation of additional office space. Depreciation
and Amortization expense increased $104,097 or 37% to $279,494 for the nine
months ended September 30, 2001 compared to $175,397 for the same period in
2000. Interest expense increased $254,663 or 83% to $306,619 for the nine months
ended September 30, 2001 compared to $51,956 for the same period in 2000. The
increase is the result of interest expense charged for loans on the warehouse
line until sold. The Company experienced a loss on sale of mortgages of $431,896
for the nine months ended September 30, 2001 compared to none for the same
period in 2000.

Liquidity and Capital Resources

The Company has been dependent on stock sales and third party borrowings to
sustain its operations. In April 2000, the Company sold 1,787,143 shares of
common stock plus 1,787,143 warrants to purchase one share of CFI common stock
at $1.67 per share in a private placement for $500,400. In the second quarter of
2001, the Company raised $350,000 through the sale of convertible debentures.
These debentures give the holders the option to convert up to 15% of their
investment into common stock at maturity. The capital needs of the software
business have remained relatively constant. Due to the deterioration that has
occurred in the sub-prime market, and as a result of the pending acquisition of
Lender Ltd., the Company plans on exiting from the sub-prime market to
concentrate on the retail market. On September 7, 2001, the Company signed a
Letter of Intent to acquire Lender Ltd., one of Michigan's largest private
mortgage companies, as well as Efficiency Experts, LLC, a Michigan based
technology- consulting firm for $8,000,000. The terms of the transaction call
for $6,000,000 to be paid in cash, and $2,000,000 to be paid through the
issuance of convertible preferred shares of CFI stock. Going forward, the
Company believes that cash flow from operations will be sufficient to fund
operations.


                                       2
<PAGE>

Net cash provided by operating activities was $10,957,649 for the nine months
ended September 30, 2001 compared to net cash used in operations of $39,509 for
the comparable period in 2000. The increase is primarily due to the selling of
the mortgage loans held for resale on the Company's warehouse line. Accounts
payable, accrued expenses and other current liabilities increased $459,802 to
$868,247 for the nine months ended September 30, 2001 from to $408,445 for the
comparable period in 2000, primarily due to a increase in accrued compensation
to officers.

Net cash of $14,127 was used in investing activities for the nine months ended
September 30, 2001 compared to net cash used in investing activities of $580,744
for the comparable period in 2000. The change is primarily due to a decrease in
the acquisitions of properties, equipment and capitalized software.

Net cash of $10,963,027 was used in financing activities for the nine months
ended September 30, 2001 compared to net cash provided by financing activities
of $643,119 for the comparable period in 2000. This was primarily the result of
payment of warehouse credit facility.

Working capital at September 30, 2001 was a deficit of $3,167,499 compared with
a deficit of $1,724,062 for the comparable period in 2000. The increase of
$1,445,447 or 45% in the deficit is primarily the result of additional
liabilities incurred in relation to additional fundraising by the Company.


                          Part II - Other Information

ITEM 1: Legal Proceedings.

In the ordinary course of its business, the Company forecloses on real estate
securing mortgage loans in default and may be involved in other legal
proceedings as a plaintiff or a defendant, none of which the Company believes
will be material.

As a result of the closing of the Chapter 11 bankruptcy by the court, the
Company is no longer threatened with any litigation, claims or assessments,
which may have existed prior to the granting of this Decree by the court.

A former executive officer and director was terminated for cause on February 2,
2001. This person holds one share of the Company's Class 4 convertible preferred
stock and one share of the Company's Class 5 convertible preferred stock. The
original par value of the Class 4 convertible preferred stock was equal to the
value of the commercial real estate in Evansville, Indiana acquired by the
Company, less mortgages, liens and encumbrances, which are now in dispute. The
par value of the Class 5 preferred stock is to be equal to two and one half
times the "net profits" from the Company's mortgage lending operation for the
eighteen-month period beginning July 2000. The Company intends to reduce the par
value of its Class 4 preferred stock held by this person by an amount equal to
undisclosed liens on the commercial real estate, which the Company acquired from
this person; furthermore, the Company intends to modify the par value of the
Class 5 preferred stock. This person may seek to enforce the Company's full
obligations under the Class 4 and 5 preferred stock. The Company is presently
involved in a civil suit to recover the embezzled funds, which are in a bank
account that has been frozen, and bonded by the court.

This same individual has filed suit against the Company and the Company's CEO
for alleged breaches of contracts and return of personal property. Management is
prepared to vigorously defend this suit, and is of the opinion that it will not
have a material impact on the financial statements.


Item 2. Changes in Securities

None


                                       3
<PAGE>

Item 3. Defaults Upon Senior Securities

None

Item 4. Submission of Matters to a Vote of Security Holders

None

Item 5. Other Information

None

Item 6. Exhibits and Reports Filed on Form 8-K

None


SIGNATURES

In accordance with the requirements of Section 13 or 15(d) of the Exchange Act,
the Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.


                                        CFI MORTGAGE INC.
                                        (Registrant)


Date: November 14, 2001                 /s/ Stephen E. Williams
                                        ----------------------------------------
                                        Stephen E. Williams
                                        President and Chief Executive Officer


Date: November 14, 2001                 /s/ Daniel M. Brown
                                        ----------------------------------------
                                        Daniel M. Brown
                                        Chief Financial Officer and Principal
                                        Accounting Officer


                                       4