HENNESSEY FINANCIAL, LLC AND SUBSIDIARY St. Paul, Minnesota December 31, 2004 and2003 CONSOLIDATED FINANCIAL STATEMENTS Including Independent Auditors Report

EXHIBIT 10.2

HENNESSEY FINANCIAL, LLC AND SUBSIDIARY

St. Paul, Minnesota

December 31, 2004 and 2003

CONSOLIDATED FINANCIAL STATEMENTS

Including Independent Auditors’ Report

HENNESSEY FINANCIAL, LLC AND SUBSIDIARY

TABLE OF CONTENTS

Virchow Krause & Company logo

INDEPENDENT AUDITORS’ REPORT

To the Members
Hennessey Financial, LLC
St. Paul, Minnesota

We have audited the accompanying consolidated balance sheets of Hennessey Financial, LLC (a Minnesota limited liability company) and subsidiary as of December 31, 2004 and 2003, and the related consolidated statements of operations, members’ equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Hennessey Financial, LLC and subsidiary as of December 31, 2004 and 2003, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Virchow, Krause & Company, LLP

Minneapolis, Minnesota
January 21, 2005

Virchow, Krauss & Company, LLP
Certified Public Accountants & Consultants + An independent Member of Baker Tilly International

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HENNESSEY FINANCIAL, LLC AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
December 31, 2004 and 2003

See accompanying notes to consolidated financial statements.

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HENNESSEY FINANCIAL, LLC AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS
December 31, 2004 and 2003

See accompanying notes to consolidated financial statements.

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HENNESSEY FINANCIAL, LLC

CONSOLIDATED STATEMENTS OF MEMBERS’ EQUITY

Years Ended December 31, 2004 and 2003

See accompanying notes to consolidated financial statements.

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HENNESSY FINANCIAL, LLC AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2004 and 2003

See accompanying notes to consolidated financial statements.

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HENNESSEY FINANCIAL, LLC AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004 and 2003

NOTE 1 – Summary of Significant Accounting Policies

                Nature of Operations

Hennessey Financial, LLC provides secured mezzanine financing to companies engaged in residential building construction, land development, commercial real estate investments, and other business ventures throughout the central United States. The members of the LLC have limited liability for the obligations or debts of the Company.

                Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the parent company, Hennessey Financial, LLC (the Company) and its wholly-owned subsidiary, Hennessey Financial Note Holdings, LLC (the Subsidiary). The Subsidiary was formed November 2004 for the purposes of originating loans and managing loan portfolios. All significant intercompany transactions and balances have been eliminated in the presentation of the consolidated financial statements.

                Concentration of Credit Risk

The Company maintains all of its cash balances with a high quality financial institution. Balances, at times, may exceed federally insured limits.

                Finance Receivables

Finance receivables that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding unpaid principal balances reduced by any chargeoff or specific valuation accounts and net of any deferred fees or costs on originated loans, or unamortized premiums or discounts on purchased loans. The Company requires a security interest be granted in real estate to secure the finance receivables. Interest on loans is recognized over the term of the loan and is calculated using the compounded interest or simple-interest methods on principal amounts outstanding. Accrual of interest income is suspended when collateral is acquired through foreclosure or other proceedings. The average term for loans is one to five years, however, certain loans are subject to an annual renewal clause. Loan origination and extension fees are recognized as income over the life of the loan and unpaid fees accrue interest.

Allowance for loan losses is increased by charges to expense and decreased by chargeoffs (net of recoveries). Management’s periodic evaluation of the adequacy of the allowance is based on the Company’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral and current economic conditions. Management has determined all loans are collectible and therefore did not record an allowance at December 31, 2004 and 2003.

                Property, Equipment and Depreciation

Property and equipment are recorded at cost. Depreciation is provided for using straight-line and accelerated methods over periods ranging from four to seven years. Maintenance, repairs and minor renewals are expensed when incurred.

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                Debt Issuance Costs

Costs incurred in connection with obtaining financing are deferred and amortized over the term of the related financing agreement using the straight-line method, which approximates the interest method. Total costs were $307,101 and $150,595 and accumulated amortization was $84,585 and $34,532 at December 31, 2004 and 2003, respectively. Amortization of debt issuance costs was $72,953 and $30,067 for the years ended December 31, 2004 and 2003, respectively. The weighted average life of these costs is approximately 2.3 years.

Future estimated amortization expense is as follows for the years ending December 31:

                Advertising

Advertising costs are expensed as incurred. Advertising expense was $7,221 and $1,550 for the years ended December 31, 2004 and 2003, respectively.

                Income Taxes

The Company is treated as a partnership for federal and state income tax purposes. As such, the Company’s income, losses, and credits are included in the income tax returns of its members. Therefore, these consolidated financial statements do not include any provision or liability for income taxes.

                Management’s 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 that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

                Reclassifications

Certain amounts in the prior year financial statements have been reclassified for comparative purposes to conform with the presentation in the current year financial statements. These reclassifications had no effect on net income or total members’ equity.

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NOTE 2 – Finance Receivables

Finance receivables consisted of the following at December 31:

Finance receivables – related parties are loans from entities related by common ownership with the majority member of the Company. Interest rates range from 18% to 20% at December 31, 2004 and 17% to 20% at December 31, 2003, respectively. These loans are secured by real estate and certain loans are personally guaranteed by a member and/or former member of the Company. Interest and fee income from these entities was $3,213,573 and $1,365,035 for the years ended December 31, 2004 and 2003, respectively.

NOTE 3 – Property and Equipment, Net

Property and equipment consisted of the following at December 31:

Depreciation and amortization expense was $1,956 and $2,160 for the years ended December 31, 2004 and 2003, respectively.

NOTE 4 – Related Party Transactions

The balance due from member of $4,819 at December 31, 2003 was received in full during 2004.

In 2004, the Company entered into a office space lease from an entity related by common ownership. The lease requires monthly base rent of $3,109 and expires in September 2009. Rent expense was $27,697 and $18, 788 for the years ended December 31, 2004 and 2003, respectively.

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Future minimum rental payments are as follows for the years ending December 31:

NOTE 5 – Notes Payable

Notes payable consisted of the following at December 31:

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Future maturities on notes payable are as follows for the years ending December 31:

The Company increased its funding during 2004 by issuing debentures under a private placement pursuant to rules under Regulation D as administered by the United States Securities and Exchange Commission. These debentures are reflected in the above notes payable schedule.

The Company had notes payable of $3,662,663 and $2,292,734 to related parties at December 31, 2004 and 2003, respectively. These notes are unsecured and have various due dates through November 2009. Interest rates range from 12% to 15% and certain notes are personally guaranteed by a member of the Company. These notes are included in the above notes payable schedule. Interest payable was $318,801 and $141,867 at December 31, 2004 and 2003, respectively. Interest expense was $392,500 and $139,524 for the years ended December 31, 2004 and 2003, respectively.

NOTE 6 – Capital Lease Obligation

The Company leases computer equipment under a capital lease that expires in June 2006. Monthly payments are $134, Interest is discounted at 8%, and the obligation is secured by the equipment under lease. Total cost was $5,500 at December 31, 2004 and 2003 and accumulated amortization was $3,552 and $2,177 at December 31, 2004 and 2003, respectively.

Future minimum lease payments are as follow for the years ending December 31:

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NOTE 7 – Member Classes and Rights

Classes

During 2004, the Company amended its member control agreement which allowed the issuance of Class D membership units. The Company has 2,000,000 Class A, 500,000 Class B, 500,000 Class C, and 500,000 Class D membership units authorized, of which 1,328,927, 10,012, 104,548 and 0 are issued and outstanding at December 31, 2004.

The Company had 1,000,000 Class A, 500,000 Class B, and 500,000 Class C membership unites authorized, of which 191,210, 18,499 and 104,548 were issued and outstanding at December 31, 2003.

Rights

Owners of Class A membership units have the sole and exclusive rights to manage the Company and elect members of the Board of Governors. Class B, C and D owners have no management rights. Net income is allocated as determined for federal income tax purposes. Net income is first allocated to Class A and then to Class B, C and D pursuant to the member control agreement. All net losses are allocated to Class A members.

NOTE 8 – Membership Control Agreement

Call Option

The Company and sole owner of Class A each have a call option that would require the owners of Class B membership units to sell all of their membership units back to the Company or Class A owner. The purchase price is defined in the Membership Control Agreement and at December 31, 2004 that price was $311,598 for all outstanding Class B membership units.

The Company is obligated to purchase all of the Class C units on or before January 31, 2007 if the sole owner of Class A has not exercised an option to purchase the Class C units by December 31, 2006. The purchase price is defined in the Membership Control Agreement and at December 31, 2004 that price was $2,872,531 for all outstanding Class C membership units.

In December 2004, the Company reclassified certain Class B units to Class D and entered into a membership redemption agreement with the Class D member. The member sold 8,487 Class D membership units for $290,364 (see Note 5).

NOTE 9 – Commitments and Contingencies

Operating Lease

The Company leases a vehicle under an operating lease that expires in August 2005. Monthly payments are $448 and rent expense was $5,376 and $5,036 for the years ended December 31, 2004 and 2003, respectively. Future minimum lease payments are $3,134 for the year ending December 31, 2005.

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Environmental Protection Laws

The Company may be subject to environmental protection laws with regards to the real estate projects the Company finances. Although environmental laws are not initially the Company’s responsibility, the Company would be subject to these laws if the borrower were to default on the construction loan and the Company repossesses the real estate.

Note 10 – Concentrations

At December 31, 2004, the Company had one related party whose loans and accrued interest balances totaled 22.7% of total outstanding balances. At December 31, 2003, the Company had four related parties whose loans and accrued interest balances totaled 28.7%, 15.5%, 11.0% and 10.2% of total interest and fee income for the year ended December 31, 2004. Interest and fee income from three related parties represented 29.0%, 16.5% and 15.0% of total interest and fee income for the year ended December 31, 2003. Due to the significance of these borrowers, the Company would incur significant losses if these borrowers failed to perform according to the terms of the contracts and the collateral or other security for the amount due proved to be of no value to the Company. The Company requires a security interest be granted to secure funds that are loaned to these borrowers. This would enable the Company to acquire rights to the collateral in the event of default.

Note 11 – Supplemental Cash Flow Information

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