FORM 10-KSB
     U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

               ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
                   THE SECURITIES EXCHANGE ACT OF 1934
               For the fiscal year ended December 31, 1998

(x) Annual report under section 13 or 15(d) of the Securities Exchange Act
    of 1934
( ) Transition report pursuant to section 13 or 15(d) of the Securities
    Exchange Act of 1934

Commission File Number 0-14888

                        PRIME CAPITAL CORPORATION
             (Name of small business issuer in its charter)
           Delaware                                         36-3347311
    (State or other jurisdiction               (IRS Employer Identification No.)
  of incorporation or organization)

O'Hare International Center,
10275 W. Higgins Rd., Rosemont, IL                          60018-3890
(Address of principal executive offices)                    (Zip Code)

Registrant's telephone number, including area code:         (847) 294-6000

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock,
                                                            $0.05 par value

Check whether the issuer (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  (  ).

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

Issuer's revenues for year ended December 31, 1998 were $15,074,298.

The approximate market value of stock held by non-affiliates was
$3,745,500 based upon 2,248,258 shares held by such persons and a
closing price of the Common Stock on May 24, 1999 of $1.6875.  The number of
shares outstanding of the Registrant's $0.05 par value common stock at
December 31, 1998 was 4,467,840.

Exhibit Index is located on page 19.  The total number of pages is 43.

                    PRIME CAPITAL CORPORATION
                           FORM 10-KSB
                  YEAR ENDED DECEMBER 31, 1998
                              INDEX
Item
Number                                                       Page

                             PART I

1.     BUSINESS                                                2
2.     PROPERTIES                                              8
3.     LEGAL PROCEEDINGS                                       8
4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS     8

                             PART II

5.     MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
         STOCKHOLDER MATTERS                                   8
6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS                   9
7.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA            14
8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURES                 14

                            PART III

9.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT     14
10.    EXECUTIVE COMPENSATION AND OTHER INFORMATION           15
11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
         AND MANAGEMENT                                       17
12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS         18
13.    EXHIBITS AND REPORTS ON FORM 8-K                       19

                        OTHER INFORMATION

       INDEPENDENT AUDITORS' REPORT                           19
       CONSOLIDATED BALANCE SHEETS                            20
       CONSOLIDATED STATEMENTS OF OPERATIONS                  21
       CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY        22
       CONSOLIDATED STATEMENTS OF CASH FLOWS                  23
       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS             24
       EXHIBIT INDEX                                          38
       SIGNATURES FOR ELECTRONIC SUBMISSION                   39
       EXHIBIT 21:  SUBSIDIARIES OF THE REGISTRANT            41
       EXHIBIT 23:  CONSENT OF KPMG PEAT MARWICK LLP          42
       SIGNATURES                                             43
PART I

Item 1.   BUSINESS

General
-------

Prime Capital Corporation is a diversified specialty finance company that
originates, aggregates and services loans, installment purchase agreements and
leases ("Financial Contracts") primarily in the software, specialty vehicle,
communications and medical industries.  Prime Capital Corporation principally
operates through its wholly-owned subsidiary, Prime Leasing, Inc. and has
several wholly-owned subsidiaries including special purpose bankruptcy remote
corporations that have been organized in order to complete the sale of certain
asset-backed securities (collectively referred to as "Prime" or the "Company").

Prime develops new business through formal vendor finance programs with
equipment manufacturers, dealers and distributors and, to a lesser degree,
directly with end users.  Prime seeks to become an effective business partner
with its clients by creating comprehensive programs and structures to develop,
promote and administer customer financing programs.  Prime funds its loan and
lease receivables primarily by issuing asset-backed securities to institutional
investors.

Headquartered in Rosemont, Illinois, Prime's target markets are those which are
underserved and underdeveloped, with the objective of developing niche markets
that combine high growth potential with credit and collateral characteristics
consistent with Prime's underwriting standards.  Currently, management believes
that the specialty vehicle and communications industries offer strong
opportunity for accelerated growth.

Prime originates business through formal alliances with major vendors,
distributors and others.  As part of a re-engineering program that was initiated
in 1997, Prime strengthened its operating platform processes by implementing
a Time Based Response ("TBR") strategy that allows Prime to provide rapid and
efficient execution of transactions.  Also in 1997, Prime began its Inventory
Floorplan and Leasing Programs for the specialty vehicle industry, with a
division known as Capital Alliance Financial Services ("Capital Alliance").
The specialty vehicle industry includes hearses, limousines, and shuttle buses,
among other commercial vehicles.

Prime differentiates itself through its sales culture, which continues to focus
more on relationships rather than transactions.  Salespeople are continually
involved in assessing the needs of their clients, and the structuring of
flexible financing options to promote the sale of its vendor's product.

Marketing/Origination Franchise
-------------------------------

Prime has shifted its origination philosophy from larger, one-off financing
transactions to focus almost entirely on smaller ticket vendor programs.  The
development of formal relationships with quality vendors in niche markets allows
Prime to leverage its vendor's sales organizations to gain access to end users
without the high costs of establishing independent customer relationships.
Vendor business further enhances the predictability of transaction flow and
further improves control over credit risk by creating a more homogenous obligor
base and standardized documentation.  Prime's operating platform and information
systems are key elements to its success and growth potential as a leading
vendor finance company.  An internet-based system to be launched in 1999 will
allow customers to submit completed lease applications on-line and receive an
expedited response from Prime's underwriting group.

Profitability of the Company is dependent on a number of factors, including
the following; (a) the volume of originations of Financial Contracts
("Financial Contract Volume"), (b) on a short-term basis, the net interest
spread between the cost of borrowing under the warehouse credit facilities
and the all-inclusive interest rate on the Financial Contracts (the
"Short-Term Interest Spread"); and on a long-term basis, the difference
between the implied rate or yield (after factoring in various components such
as expenses, required reserves, subordination levels and the like) on the
securitizations sponsored by the Company and the weighted average interest
rate on the Financial Contracts sold into such securitizations, (c) the amount
of credit losses arising from delinquencies and defaults on the Financial
Contracts originated or purchased by the Company, and (d) the expenses incurred
by the Company in the operation of its business, including salaries,
commissions and other selling, general and administrative expenses
(collectively, "SG&A Expenses").

The ability of the Company to generate an acceptable Financial Contract
Volume is, itself, dependent upon a number of factors, including (i) the
size, experience and expertise of its sales staff, (ii) the availability of
sufficient amounts under the warehouse credit facilities to finance such
Financial Contract volume, (iii) the underwriting disciplines of the Company
to identify and reject unattractive credit risk in respect of a particular
borrower or borrowers, (iv) the necessity of such Financial Contracts to meet
the requirements and criteria of a securitization or other funding source and
(v) the competition in the financial market-place to provide financing to
customers (including competition from commercial banks, finance companies and
other suppliers of capital).

The ability of the Company to maintain an acceptable level of Short-Term
Interest Spread and to generate an acceptable level of Securitization Profit
is, itself, dependent upon a variety of factors and considerations, including
(i) competition in the financial market-place, (ii) the borrowing cost to the
Company under its warehouse credit facilities, and (iii) the all-in cost
associated with the securitization of the Financial Contracts originated and
sold into such securitization.

The ability of the Company to decrease or eliminate credit risk (and, thus,
write-offs and write-downs of the assets) is highly dependent on an effective
system (and the employment and retention of adequate personnel to implement
and monitor such system) to review, analyze and assess both the credit
quality of the borrowers and the continuing residual value of the equipment
or other items which form the security for the Financial Contract.
Securitization of a particular portfolio of Financial Contracts significantly
reduces the Company's exposure to credit risk by transferring a substantial
portion of such risk to the purchasers of the securities.  Additionally, any
substantial decrease in the credit quality of a previously-securitized
portfolio will impact the ability of the Company to realize reserve fund
amounts and would likely impact the ability of the Company to sell subordinated
securities in future securitizations.

The ability of the Company to manage its expenses, including its SG&A
expenses, is a major factor in determining profitability.  Any decrease in
such expenses must be balanced against the risk associated with possible
defections of key personnel and inadequate staffing levels, particularly with
respect to the sales personnel.  The Company believes that some portion of
its SG&A expenses is attributable to (i) the re-focusing of its product
lines, (ii) the functional equivalent of research-and-development with
respect to new products and services offered by the Company, and (iii)
collection and litigation expenses related to defaulted Financial Contracts.

Marketing and Sales Activities
------------------------------

Prime's sales force focuses on providing specialty and high value-added
financial products targeted to specific markets with an emphasis on programs
producing predictable flow with homogenous characteristics and profitability.
Financial contracts are originated by the following groups:

  Vendor Services Group.  The vendor services group builds and maintains formal
alliances with manufacturers or distributors of equipment or software, each of
whom directly or indirectly control the distribution of such products.  This
allows Prime to capture the financing opportunity at the point of sale and
creates a steady flow of originations.  The typical transaction size ranges from
$25,000 to $2,000,000.

  Specialty Vehicle Division.  Capital Alliance, is principally engaged in the
lease financing of professional vehicles to commercial end-users.  Capital
Alliance finances and services dealer or distributor originated leases for
funeral cars, limousines, and shuttle buses to various end-users, including
funeral homes, hotel and motel properties, airport shuttle operations and
corporations.  Secured inventory financing (floorplanning) is offered to select
dealers, distributors and manufacturers where it enhances Capital Alliance's
position as the primary financing source for lease fundings in its niche
markets.  A typical transaction size ranges from $10,000 to $80,000.

Prime has developed considerable expertise in servicing the financing needs
of its core customers as well as the corresponding need for equipment
manufacturers to arrange financing for their customers.  Prime has established
a niche in markets underserved by the traditional capital providers and has
achieved beneficial synergies with vendors and providers of capital.

Credit Underwriting
-------------------

In its second quarter 1997 report Form 10QSB, Prime disclosed that it had
identified customers who had experienced significant deterioration in their
financial condition thereby adversely impacting their ability to repay
financial obligations to Prime.  As a result, Prime initiated a special
review of its underwriting process.  As part of this special review all
troubled transactions were re-underwritten, certain underwriting criteria were
adjusted and applied to new business, and the size of the collection staff was
increased.  A common element to the significant credit losses taken in 1997 and
further provided for in 1998, is that they relate to contracts underwritten in
1996 and early 1997.  Financial Contracts originated before and after that time
period have performed in line with expectations.

Prime performs a credit review of prospective customers through an
examination of their financial statements and credit history.  Prime's at-risk
portfolio is composed of approximately 4,400 leases with 3,200 lessees/borrowers
and has a net investment balance of approximately $257.8 million as of
December 31, 1998.

See Management's Discussion and Analysis of Financial Condition and
Results of Operations, Credit Losses.

Corporate Operations and Portfolio Servicing
--------------------------------------------

Services provided by the common back-room include documentation, underwriting,
credit review, portfolio administration/servicing and capital funding of
transactions.  Prime has lowered its transactional costs of doing business
through centralizing those functions that can benefit from economies of scale
and specialization of functions, but do not hinder the individual group's
marketing activities.

Lease Terms and Conditions
--------------------------

Substantially all leases and loans written by Prime are non-cancelable, triple-
net, full payout leases or loans under which the aggregate rental due during the
initial lease term exceeds the acquisition cost of the related equipment.
During 1998, initial contract terms ranged from 12 to 84 months, with
approximately 94.5% of the Contracts having an initial term of 24 to 60 months
and the weighted average yield for all Financial Contracts was 9.77% per annum
with a weighted average initial term of 52 months.

In substantially all cases, lessees or borrowers are obligated to:  (i) remit
all rents due regardless of the performance of the equipment;  (ii) operate
the equipment in compliance with the manufacturer's instruction manuals and
governmental rules and regulation;  (iii) maintain and service the equipment;
(iv) insure the equipment against casualty loss and provide public liability
coverage for bodily injury and property damage; and (v) pay directly or
reimburse the lessor for any property, use or similar taxes associated with the
equipment.

Under each lease or loan agreement, in the event of a default by a lessee
or borrower, Prime may declare the lease or loan in default and pursue its
contractual remedies, including repossession of the equipment.

The lease or loan agreement gives the lessee or borrower the right to enforce
the warranties made by equipment vendors and manufacturers.  Prime makes no
representations or warranties to the lessee or borrower regarding
marketability, fitness for any purpose, condition, quality, delivery or
installation of the equipment.  The equipment is delivered from the supplier
directly to the lessee or borrower and, following the lessee's or borrower's
acceptance of the equipment, Prime pays the purchase price to the supplier.  In
the case of operating leases, Prime maintains title to the equipment throughout
the lease term, while in the case of finance leases and loans, Prime maintains
a lien and perfected security interest in the equipment throughout the term of
the loan.  A lease may also provide for the renewal of the lease and/or the
purchase of the equipment at the end of the initial lease term.

Residual Terms
--------------

Prime has standardized its lease contracts in the following four categories:

Balloon Payment:  Under this provision the lessee, equipment vendor or dealer
is obligated to purchase the leased equipment at the end of the lease term for a
predetermined price which is greater than the monthly rental payment paid by the
lessee during the term of the lease.  The amount of the final balloon payment is
an unconditional promise of the lessee, vendor or dealer.

Bargain Purchase Option:  This option gives the lessee the right, but not the
obligation, to purchase the equipment at lease maturity for a price below the
expected fair market value.  This provision, the most common provision in a
finance lease, is often referred to as a dollar buyout lease, for it commonly
allows the lessee to purchase the equipment for a nominal amount.  The lease
payments are structured to fully amortize the equipment cost over the term of
the lease.  The lessee pays a greater amount for use of the equipment, but
effectively obtains the ownership of the equipment at lease maturity.

Fixed Price Purchase Option:  This provision gives the lessee the right, but
not the obligation, to purchase the equipment at the end of the lease term for
a predetermined price.  This provision may characterize either a finance or an
operating lease.

Fair Market Value Purchase Option:  This provision gives the lessee the right,
but not the obligation, to purchase the equipment at the end of the lease
term at its then fair market value.  This is the most common termination
provision in an operating lease.  This provision allows Prime to retain the
upside potential of the equipment value.

Prime also structures certain financing transactions as loans with a note and
security agreement as the underlying documentation.  Loan agreements require the
full amortization of the equipment cost (generally the loan principal balance)
during the term of the agreement.  Title to the equipment is held by the
borrower, with Prime having a perfected security interest in and lien upon
the equipment.  Upon maturity, the security interest is released and the
equipment is owned by the borrower.

Financial Contract Volumes
--------------------------

During 1998, approximately 95.3% of the number of Financial Contracts originated
had an initial contract balance of less than $100,000.  The following table
summarizes the number and amount of Financial Contracts originated during
the three most recent years:

<TABLE>

                                    For the years ended December 31,
                                    1998          1997          1996
<S>                             <C>            <C>           <C>
Total amount financed           $  160,349,508   144,142,162  181,748,636
Number of contracts                      2,911         1,143          498
Average contract amount                 55,084       126,109      364,957

The assets that Prime finances for its clients varies within the software/
information technology, specialty vehicle, telecommunications and medical
industries.

                                    For the years ended December 31,
                                   1998           1997         1996
<S>                             <C>             <C>          <C>
Channel of Origination:
  Direct transactions            $  21,418,056    54,602,425   70,938,413
  Vendor Programs                  118,212,408    52,870,228   30,493,679
  Broker transactions               20,719,044    36,669,509   80,316,544
                                   -----------   -----------  -----------
                                 $ 160,349,508   144,142,162  181,748,636
                                   ===========   ===========  ===========


                                    For the years ended December 31,
                                   1998            1997        1996
<S>                                <C>            <C>         <C>
Originations by Industry:
  Medical                        $   4,231,722    35,664,074   59,536,625
  Physician Practice Acquisitions   15,000,000    19,701,715   27,500,000
  Software/Information Technology   64,517,567    31,250,020   29,521,994
  Telecommunications                 7,397,719    27,359,927    7,210,779
  Specialty Vehicle                 42,065,401     3,987,358      367,140
  Other                             27,137,099    26,179,068   57,612,098
                                   -----------   -----------  -----------
                                 $ 160,349,508   144,142,162  181,748,636
                                   ===========   ===========  ===========
Customers
---------

Since its inception, the Company has entered into financing transactions with
over 4,400 customers.

Employees
---------

As of December 31, 1998, the Company had 76 employees, none of whom were
represented by a labor union.

Competition
-----------

The equipment leasing and related businesses of the Company are highly
competitive.  Many firms are engaged in the same types of businesses as the
Company, including (i) finance divisions, affiliates and subsidiaries of
equipment manufacturers, (ii) banks, their affiliates or subsidiaries, several
of which lend funds to the Company, (iii) other leasing and finance companies,
(iv) companies and state agencies which sponsor tax-exempt financing or other
investor programs for the acquisition and lease of equipment and (v)
independently formed partnerships of individuals or corporations operated for
the specific purpose of leasing equipment.  Many of these organizations have
greater financial or other resources than the Company and, therefore, may be
able to obtain funds on terms more favorable than those available to the
Company.

The Company believes that its ability to compete effectively depends to a great
extent upon:  a) its knowledge of the marketplace,  b) the education, training
and experience of its personnel,  c) the relationship and reputation it has
established for service and keeping its commitments with customers and vendors,
and d) its flexibility and adaptability to the special needs of its
institutional and technologically-oriented customers.

Forward-Looking Statements
--------------------------

This Form 10-KSB contains certain forward-looking statements that involve
substantial risks and uncertainties.  When used in this Form 10-KSB, the
words and phrases "expects", "intends", "believes", "will seek", and
"will realize" and similar expressions as they relate to the Company
or its management are intended to identify such forward-looking statements.
The Company's actual results, performance or achievements could differ
materially from the results, performance or achievements expressed in,
or implied by, these forward-looking statements.

Item 2.     PROPERTIES

The Company's leased corporate headquarters occupied approximately 14,500 square
feet of space in an office building located in Rosemont, Illinois (a suburb of
Chicago) near O'Hare International Airport.  The lease, which expired on
December 31, 1996, has been extended pursuant to a seven-year renewal.  In 1997,
the Company exercised its option to lease 4,900 square feet of additional space
contiguous with the existing space.  The Company also leases nine smaller sales
offices throughout the United States.

Item 3.     LEGAL PROCEEDINGS

While the Company is subject, from time to time in the ordinary course of its
business, to legal actions and claims, it is not now a party to any legal
proceeding that could have material adverse effect on the Company's financial
position or results of operations.

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

None.

PART II

Item 5.     MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
            MATTERS

(a)  Market Information

The Common Stock is traded on the NASDAQ SmallCap Market System under the
symbol: PMCP.  The following table summarizes the quarterly price range of the
Common Stock for 1998 and 1997:


                          1998                      1997
                    ------------------      ------------------
         Quarter     High         Low         High        Low
         -------    -------     -------     -------     -------
         First      $ 6          $4 1/2       6 1/8       4

         Second       6           4           7 1/2       4 3/4

         Third        4 5/16      2 1/2       6 1/4       4 7/8

         Fourth       3           1 1/2       6 5/8       5


(b)  Holders

As of December 31, 1998, there were approximately 400 holders of record of
common stock.

(c)   Dividends

The Company has never paid a dividend on its Common Stock, and no dividends are
contemplated in the foreseeable future.  Payment of dividends is within the
discretion of the Company's Board of Directors.

ITEM  6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS

The operating results of Prime Capital are primarily affected by the following
factors:  (1) the volume of Financial Contract activations,  (2) the amount and
timing of Financial Contract sales,  (3) the level of operating expenditures
required to originate and service the volume of Financial Contract activations
and sales, and (4) credit losses.

Sales and Securitization of Financial Contracts
Completed During the Years Ended December 31, 1998, 1997, and 1996
------------------------------------------------------------------

Once a Financial Contract is activated, it is generally funded through a
warehouse finance facility until it is sold through securitization.  Warehousing
a contract for a period of time results in increased rentals on leased equipment
or direct finance lease income and correspondingly increased interest expense
and, if the contract is an operating lease, depreciation on leased equipment.
When contracts are accumulated to a certain level and sold into securitization,
the Company recognizes fee income from the gain on securitization and ceases to
recognize direct finance lease income and interest expense associated with the
sold contracts.  Future revenues from the  securitizations include fee income
derived from servicing the securitization pool and interest income earned on
cash reserve balances until all the contracts in the pool have expired.

Sale of a contract to a third party results in immediate fee income.

The following table summarizes the sale and securitization of Financial
Contracts completed during the years ended December 31, 1998, 1997, and 1996.

                                           Years Ended December 31,
                                           (Amounts in thousands)
Description                  Date          1998      1997      1996
----------------------   --------------- --------- --------- ---------
Prime Finance
  Corporation 1995-A    January, 1996           0          0    85,273
Prime Finance
  Corporation 1996-A    December, 1996          0          0    66,322
Prime Finance
  Corporation 1997-A    March, 1997             0     77,476         0
Private whole-loan
  sale                  September, 1997         0     44,017         0
Prime Finance Corporations
  1998-A-1 and 1998-A-2 March, 1998        38,937          0         0
                                         --------- ---------  --------
   Subtotal                                38,937    121,493   151,595

True sale facility      Various            65,074     12,091         0

Other sale transactions Various            37,389     44,046    36,382
                                         --------- ---------  --------
   Total                                $ 141,400    177,630   187,977
                                         ========   ========   =======

Credit Losses
-------------

An allowance for credit losses is initially established when Financial
Contracts are sold or securitized in transactions where the Company retains
recourse for losses, partial or otherwise. This initial estimate of future
losses reduces the gain recorded at the time sale. If necessary, a provision
for credit losses is charged against earnings to maintain the allowance for
credit losses at an amount management believes necessary to absorb potential
losses in the finance contract portfolio.

Management evaluates the adequacy of the allowance for credit losses by
reviewing credit loss experience, delinquencies, the value of the underlying
collateral, including third party guarantees or insurance recoveries, the
level of finance contract portfolio, as well as, general economic conditions.

The Company has incurred charge-offs totaling $2,675,000, $8,178,000 and
$240,000 during 1998, 1997, and 1996, respectively.  The significant increase
from 1996 to 1997 was primarily caused by a small number of customers that
represented a relatively significant investment in the Company's various pools
of securitized receivables.  Furthermore, the 1998 charge-offs predominately
stemmed from contracts that had been originated by third-party broker-business
originated between May 1996 through May 1997.

When recording charge-offs, legal fees and other costs reduce estimated
recoveries.  Legal fees paid including pro-rata trustee or receiver fees
withheld from settlements, were approximately $1,212,000 and $845,000 in 1998
and 1997, respectively.  However, salaries paid to employees directly associated
with pursuing recoveries are expensed as incurred; such costs exceeded $200,000
during 1998.  Furthermore, management estimates that costs indirectly related to
pursuing these recoveries totaled at least $300,000 during 1998.

The Company has recorded additional provisions for credit losses totaling
$4,300,000, $7,000,000 and $342,000 during 1998, 1997 and 1996, respectively.
These provisions were recorded to replenish the allowance for credit losses,
and are exclusive of the Company's policy to record provisions against current
period new business originations.  The allowance for credit losses totaled
$5.7 million and $2.5 million at December 31, 1998 and 1997, respectively.
With additional provisions for credit losses totaling $11.3 million during
1997 and 1998, management believes that it has adequately reserved for its
future credit losses, including potential charge-offs that might stem from
contracts originated by third-party broker-business between May 1996 and May
1997.

Adjusted Results of Operations
------------------------------

Net income from operations for the year ended December 31, 1998, would have
been $87,000, after adding back the above-mentioned provision for credit losses
and the $500,000 of costs associated with the mitigation of credit losses.

Year Ended December 31, 1998 Compared With Year Ended December 31, 1997
-----------------------------------------------------------------------

The Company activated Financial Contracts totaling $160.3 million in 1998, an
increase of 11.2% from the $144.1 million activated in 1997.

Fee income decreased $4.5 million, or 43.4% to $5.8 million in 1998
from $10.3 million in 1997.  Fee income primarily relates to gains from the
sale or securitization of Financial Contracts.  The initial value of the
contracts sold or securitized was $141.4 million and $177.6 million in 1998
and 1997, respectively.

Direct financing lease income decreased $2.2 million, or 48.7%, to $2.3
million in 1998 from $4.5 million in 1997.  This decrease is attributable to
a shorter holding period of Financial Contracts resulting in lower average
contract balances held in the warehouse.

Rentals on leased equipment increased $2.3 million to $3.3 million in 1998 from
$1.0 million in 1997.  There was a corresponding increase in depreciation of
leased equipment of $2.1 million, to $2.6 million in 1998 from $0.5 million
in 1997.

Interest income increased $0.3 million, or 35.8%, to $1.3 million in
1998 from $1.0 million in 1997.

Other income increased $2.0 million to $2.3 million in 1998 from $300,000
in 1997.  The increase was attributable to a $1.9 million gain from the
sale of warrants.

Interest expense decreased $0.3 million, or 8.0%, to $3.2 million
in 1998 from $3.5 million in 1997.  Interest related to subordinated debt
totaled $631,944 in 1998.  (See "Liquidity and Capital Resources.")

The Company recorded a provision for credit losses of $4.3 million in
1998, compared with a $7.0 million provision recorded in 1997.  (See "Credit
Losses.")

Selling, general and administrative expenses increased $1.0 million, or
11.2%, to $9.6 million in 1998 from $8.6 million in 1997.  Employee compensation
and related costs, including commissions, accounted for 63.8% and 66.6% of total
selling, general and administrative expenses in 1998 and 1997, respectively.
The Company had 76 and 62 employees at December 31, 1998 and 1997,
respectively.  Selling, general and administrative expenses have increased
primarily due to the hiring of additional employees and the increase in the
serviced Financial Contract portfolio.  Also, during 1997 selling, general and
administrative expenses had been reduced by $328,000, which represents the net
effect of capitalizing initial direct costs of Financial Contracts.  No such
reduction was recorded during 1998.

As a result of the factors described above, the net loss from operations was
$4.7 million in 1998 and $2.6 million in 1997.  The net loss allocated for
common shareholders includes dividends declared payable to holders of preferred
stock.  Preferred stock dividends declared payable were $228,000 and $229,000 in
1998 and 1997, respectively. (See "Liquidity and Capital
Resources.")

Year Ended December 31, 1997 Compared With Year Ended December 31, 1996
-----------------------------------------------------------------------

The Company activated Financial Contracts totaling $144.1 million in 1997, a
decrease of 20.7% from the $181.8 million activated in 1996.

Fee income increased $0.2 million, or 2.1% to $10.3 million in 1997 from
$10.1 million in 1996.  Fee income primarily relates to gains from the sale
or securitization of Financial Contracts.  The initial value of the contracts
sold or securitized was $177.6 million and $188.0 million in 1997 and 1996,
respectively.

Direct financing lease income increased $1.0 million, or 29.0%, to $4.5
million in 1997 from $3.5 million in 1996.  The longer holding period of
Financial Contracts and higher average contract balances held in the warehouse
accounted for this increase.

Rentals on leased equipment decreased $0.2 million, or 14.8%, to $1.0 million
in 1997 from $1.2 million in 1996.  There was a corresponding decrease in
depreciation of leased equipment of $95,000, or 15.6%, to $513,000 in 1997
from $608,000 in 1996.

Interest income decreased $0.1 million, or 8.6%, to $1.0 million in 1997 from
$1.1 million in 1996.

Other income decreased $153,000, or 33.8%, to $301,000 in 1997 from $454,000
in 1996.

Interest expense decreased $0.1 million, or 3.6%, to $3.5 million in 1997 from
$3.7 million in 1996.  Interest related to subordinated debt totaled $633,681 in
1997.  (See "Liquidity and Capital Resources.")

The Company recorded a provision for credit losses of $7.0 million in 1997,
compared with a $0.3 million provision recorded in 1996.  (See "Credit Losses.")

Selling, general and administrative expenses increased $1.0 million, or 13.0%,
to $8.6 million in 1997 from $7.6 million in 1996.  Employee compensation and
related costs, including commissions, accounted for 63.4% and 63.1% of total
selling, general and administrative expenses in 1997 and 1996, respectively.
The Company had 62 and 52 employees at December 31, 1997 and 1996, respectively.
Selling, general and administrative expenses have increased primarily due to the
hiring of additional employees and the increase in the serviced Financial
Contract portfolio.

As a result of the factors described above, operations produced a net loss of
$2.6 million in 1997 compared with net income of $4.0 million in 1996.  Earnings
available for common shareholders includes dividends declared payable to holder
of preferred stock.  Preferred stock dividends declared payable were $229,000
and $56,000 in 1997 and 1996, respectively.  (See "Liquidity and Capital
Resources.")

Liquidity and Capital Resources
-------------------------------

Prime conducts its business in a manner designed to conserve its working
capital and minimize its credit exposure.  The Company does not purchase
equipment or disburse funds until: (1) it has received an executed lease
or loan agreement from its customer, and  (2) it has determined that the
lease or loan agreement (a) can be discounted with a bank or financial
institution on a non-recourse basis, or (b) meets the origination standards
established for a securitized pool.

In October, 1996, Prime raised additional capital by completing a private sale
of $5.0 million principal amount of five year, 12.5% subordinated debentures
and $2.5 million of 9% preferred stock to Banc One Capital Corporation ("BOCC"),
a subsidiary of Bank One Corporation. As part of the transaction, BOCC also
received warrants to purchase 499,606 shares of Prime Capital's common stock at
$1.00 per share.

In November 1997, the Company entered into a $75.0 million credit facility.
In December, 1998, the total amount of available credit was increased to
$100.0 million.  The facility allows the Company, on an ongoing basis, to
transfer and sell finance lease receivables to a wholly-owned, bankruptcy
remote, special purpose entity, Prime Receivables Finance Corporation I,
which will sell such receivables to one or more trusts.  Each trust will issue
two classes of certificates of beneficial ownership, a senior certificate and a
residual interest that will be owned by the Company.  Transfers and sales of
finance lease receivables pursuant to the facility are accounted for as sales
under generally accepted accounting principles and the related gains on the
sale are recognized on the date of such transfers.

At December 31, 1998, the Company had credit available totaling $88.0 million
under three other credit facilities. At December 31, 1998, $17.2 million was
utilized under these facilities.  These credit facilities will be used to fund
Financial Contracts that arise during the normal course of business.  During
the first and second quarters of 1999, $78 million of these facilities expired.
The Company plans to negotiate the renewal of these facilities in the second
calendar quarter of 1999.

On May 4, 1999, the Company completed the sale of Financial Contracts by issuing
asset-backed notes.  The notes were issued through the Company's wholly-owned
subsidiaries, Prime Finance Corporation 1999-A-1 and Prime Finance Corporation
1999-A-2.  The initial aggregate principal amount of the notes was $74.0
million.  Proceeds from the issuance of the notes were used to reduce borrowings
under several of the Company's warehouse credit facilities and to increase
working capital.

Management believes that in order to meet the expected growth in new business,
the Company will require additional capital resources to supplement the expected
cash flows of its operating activities and anticipated borrowings under its
warehouse credit facilities.  Prime expects to continue using securitization
as a means of permanently funding a significant portion of its Financial
Contracts.  The Company is exploring other sources of liquidity to satisfy
its ongoing need for additional capital resources.

Year 2000 Compliance
--------------------

Year 2000 compliance refers to the ability of computer hardware and software
to respond to the problems posed by the fact that computer programs have
traditionally been written using two digits rather than four to define the
applicable year. As a consequence, unless modified, computer systems will not
be able to differentiate between the year 2000 and 1999. Failure to address
this problem could result in system failures and the generation of erroneous
data.

The Company believes that its information technology ("IT") systems are year
2000 compliant. The Company also has several non-IT systems, including voice
mail and phone systems, which use dates electronically that are being
reviewed for compliance. The Company expects to have all systems year 2000
compliant by the end of the second quarter of 1999 and plans to complete
comprehensive, full system testing in the second quarter of 1999.  The Company
believes that significant third parties in which the Company conducts
business with, including parties to the Company's credit facilities, are or
will be year 2000 compliant by January 1, 1999.

The Company has not prepared estimates of costs for the correction of year 2000
issues. Based on information available at this time, including the year 2000
compliance status of information technology systems as well as the anticipated
replacement costs for non-compliant systems, the Company does not believe that
the cost will have a material adverse effect on the Company's results of
operations or financial condition.   However, there can be no assurance of
unforeseen problems in its own computer systems or computer systems of third
parties with which the Company conducts business. Such problems, depending on
the extent and nature, could materially and adversely effect the Company's
operations and financial condition. For each primary counterparty upon which
the Company relies, there are alternate providers of such services in the
marketplace.  Based on its assessment of the year 2000 issue to date, the
Company has not developed a contingency plan. However, the Company continues
to evaluate the impact of year 2000 issues and will create a contingency plan
if considered warranted.


Item 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following financial statements of the registrant and the report thereon
of KPMG LLP are filed as part of this annual report on Form 10-KSB:

     Consolidated Balance Sheets - December 31, 1998 and 1997

     Consolidated Statements of Operations - Years ended December 31, 1998,
       1997 and 1996

     Consolidated Statements of Stockholders' Equity - Years ended December 31,
       1998, 1997 and 1996

     Consolidated Statements of Cash Flows - Years ended December 31,
       1998, 1997 and 1996

     Notes to Consolidated Financial Statements

Item 8  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURES

Not applicable.

PART III

Item 9.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


                       Directors of the Registrant

                      Principal Occupation During Past
Director
Name                  Five Years and Other Information    Age      Since

James A. Friedman     President and Chief Executive        53       1978
                      Officer of the Company or its
                      predecessor since November 1978.

Mark P. Bischoff      Senior Managing Partner of           52       1996
                      Bischoff & Swabowski,Ltd. since
                      1988; Secretary of the
                      Board of Directors and Outside
                      General Counsel of the Company
                      since 1986.

William D. Smithburg  Retired Chairman, President and      60       1986
                      Chief Executive Officer of The
                      Quaker Oats Company;  Director of
                      Abbott Laboratories, The
                      Northern Trust Company, The Flying
                      Food Group and Corning Incorporated.

John R. Walter        Chairman of the Board of Manpower,   52       1988
                      Inc.  Retired President and Chief
                      Operating Officer of AT&T Corporation
                      and Former Chairman, President and
                      Chief Executive Officer of R.R.
                      Donnelley; Director of Abbott
                      Laboratories, Deere & Company,
                      Celestica, Inc., Manpower, Inc.,
                      Cornerstone Brands and Jones Lang
                      LaSalle, Inc.

Robert R. Youngquist  Practicing Orthodontist and owner    50       1978
D.D.S.                of Robert R. Youngquist D.D.S.,
                      Ltd. during the past eight years.



                      Executive Officers of the Registrant

                      Principal Occupation During Past Five
Name of Officer            Years and Other Information               Age

James A. Friedman   President and Chief Executive Officer of          53
                    the Company or its predecessor since
                    November 1978.

John W. Altergott   Senior Vice President of the Company              39
                    since January 1996.  Vice President of
                    the Healthcare Finance Group of Prime
                    Capital Corporation since March 1988.

Vern E. Landeck     Vice President and Chief Financial                40
                    Officer of the Company since July 1997.
                    Vice President - Treasurer of the Company
                    from June 1996 through June 1997.
                    President of  Atlantic Capital Exchange,
                    Inc. 1988 to 1996.


Item 10.  EXECUTIVE COMPENSATION AND OTHER INFORMATION

The following table shows all the cash compensation paid or to be paid by the
Company or any of its subsidiaries, as well as certain other compensation
paid or accrued, during the fiscal years indicated, to the President and
Chief Executive Officer, and the highest paid executive officers of the
Company whose compensation was at least $100,000 for the last fiscal year
in all capacities in which they served:


</TABLE>
<TABLE>
                                          SUMMARY COMPENSATION
TABLE

                            Annual Compensation          Long-Term Compensation
<S>                <C>    <C>     <C>     <C>     <C>      <C>     <C>  <C>
                        =======================================================
                                                           Awards   Payouts

  (a)              (b)   (c)      (d)     (e)     (f)        (g)     (h)    (i)
                                          Other                             All
                                          Annual  Restricted               Other
Name and                                  Compen-   Stock Options/ LTIP  Compen-
Principal Position Year  Salary   Bonus   sation   Award(s)  SAR  Payouts sation
                          ($)     ($)     ($)     ($)               ($)     ($)
James A. Friedman
President and      1998   365,000           4,932
Chief Executive    1997   361,710           6,135
Officer            1996   296,050

John W. Altergott  1998   157,800          152,121
Sr. Vice President 1997   157,800          257,646
                   1996    97,500          195,849          50,000

Philip M. Dinielli 1998   108,720  15,150    9,913
Vice President     1997   114,276  28,706   36,295
                   1996    94,222           87,965

Thomas R. Ehmann   1998   150,000
Vice President,    1997    41,589 (1)                       35,000
Finance

Vern E. Landeck    1998   111,042  36,350                   10,000
Vice President and 1997    83,246  51,350
Chief Financial    1996    53,643                           20,000
Officer

(1)  Mr. Ehmann's employment commenced in September, 1997.
</TABLE>


               Aggregated Option/SAR Exercises in Latest Fiscal Year
                           and FY-End Option/SAR Values
<TABLE>
<S>            <C>              <C>          <C>            <C>
(a)               (b)              (c)           (d)        (e)
Name           Shares Acquired   Value       Number of      Value of Unexercised
               on Exercise (#)  Realized($)  Unexercised    In-the-Money Options
                                             Options at         at FY-End ($)
                                             FY-End             (#Exercisable/
                                             Exercisable/        Unexercisable)
                                             Unexercisable

John W. Altergott                          118,334/16,666    $264,493 / $20,833
Vern E. Landeck                             13,334/16,666      16,668 /  20,833
Thomas R. Ehmann                            11,667/23,333           0 /       0

</TABLE>


Director's Compensation
-----------------------

Each Director of the Company who is not an Executive Officer receives an annual
retainer of $10,000 plus a fee of $500 for attendance at each meeting of the
Board.  In addition, members of the Committees of the Board who are not
Executive Officers receive a fee of $300 for each Committee meeting attended.
Directors of the Company who are also Executive Officers receive no
compensation for rendering services as a Director except for reimbursement of
out-of-pocket expenses.

Employment Agreements
---------------------

With the exception of Mr. Friedman, the Company has entered into employment
agreements with each of the executive officers of the Company to assure the
continued service of such persons.  Each of the agreements are substantively
similar, except with regard to compensation.  Such agreements generally
provide for a one-year term of employment automatically renewable unless
otherwise terminated.  The executive may terminate his employment at any time
upon appropriate notice.  The executive agrees to be bound by certain
confidentiality, non-solicitation and non-compete provisions contained in the
respective agreements.

Compensation Pursuant to Plans
------------------------------

The Company has adopted the 1984 Incentive Stock Option Plan (the "ISO Plan"),
the 1986 Non-Qualified Stock Option Plan (the "Non-Qualified Plan"), the 1987
Stock Option Plan (the "1987 Plan") and the 1997 Plan.  All descriptions of the
various plans are qualified in their entirety by reference to the actual Plan
documents which are available for examination.

The 1997 Plan supercedes and replaces the ISO Plan, the Non-Qualified Plan and
the 1987 Plan (collectively, the "Former Plans").  No additional stock options
can be granted under the Former Plans.  Any unexercised options granted under
the Former Plans that expire or are otherwise terminated pursuant to the terms
of the Former Plans shall be immediately made available for the grant of new
options under the 1997 Plan.

The 1997 Plan is administered by the Board of Directors.  The Board selects
eligible persons for participation and determines the number of shares to be
subject to option, the per share option price, the time and conditions of
exercise, the vesting rights of the optionee, the repurchase rights of the
Company, and all other terms and conditions of the options not specified in the
1997 Plan.  The Board interprets the provisions of the 1997 Plan, may prescribe
rules for its operation, and any such interpretation or rule will be final and
conclusive as to all parties.  The Board may delegate the responsibility for
the administration of the 1997 Plan to the Compensation Committee.

Item 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Current Ownership
-----------------

The following table sets forth certain information as of December 31, 1998 with
respect to the beneficial ownership of the Company's common stock by each
stockholder or group known by the Company to be the beneficial owner of more
than 5% of its outstanding common stock, by each Director, and by all Executive
Officers and Directors as a group.  The information is based, in part, on data
furnished by such Executive Officers, Directors and stockholders.  The address
of each holder of more than 5% of the Company's common stock other than Banc
Once Capital Corporation, First Financial Fund, Inc. and Wellington Management
Company is O'Hare International Center, 10275 West Higgins Road, Rosemont,
Illinois 60018.  The address for Banc One Capital Corporation is 150 E. Gay
Street, Columbus, Ohio  43215.  The address for Wellington Management Company
is 75 State Street, Boston, Massachusetts 02109.  First Financial Fund, Inc.'s
address is One Seaport Plaza, 25th Floor, New York, New York 10292.

<TABLE>
<S>                                  <C>
<C>
Name of                           Amount and Nature
Beneficial Owner                of Beneficial Ownership     Percent of Class
================                =======================     ================
James A. Friedman (1)               2,205,425                    49.4%
Mark P. Bischoff  (2), (3)            486,642                    10.9%
John W. Altergott (2)                 118,334                     2.6%
William D. Smithburg (2)               43,667                     1.0%
Robert R. Youngquist, D.D.S. (2),(4)   36,666                       *
Vern E. Landeck (2)                    13,334                       *
Thomas R. Ehmann (2)                   11,667                       *
Banc One Capital Corporation (6)      499,606                    11.2%
First Financial Fund, Inc. (5)        330,000                     7.4%
All Executive Officers and Directors
as a group (7 persons) (2)          2,455,759                    55.0%

</TABLE>
* Less than 1%

(1)  Includes 459,975.67 shares owned by a trust for the benefit of Mr.
     Friedman's children (the "Childrens Trust") for which Mr. Friedman
     disclaims beneficial ownership.  The named trustee of the trust is Mark
     P. Bischoff.
(2)  Includes outstanding options which are currently exercisable with respect
     to the following named individuals or groups: Mr. Bischoff, 16,667 shares;
     Mr. Smithburg, 29,167 shares; Mr. Youngquist, 16,667 shares; Mr. Landeck,
     13,334 shares; Mr. Altergott, 118,334 shares; Mr. Ehmann, 11,667 shares.
     All Executive Officers and Directors as a group, 189,169 shares.
(3)  Includes 459,975.67 shares owned by the Childrens Trust for which Mr.
     Bischoff is trustee but for which he disclaims beneficial ownership.
(4)  Includes 15,000 shares held in a pension plan of which Dr. Youngquist is a
     fiduciary and for which Dr. Youngquist disclaims beneficial ownership.
(5)  According to Schedules 13G filed with the Securities and Exchange
     Commission on February 12, 1999, First Financial Fund, Inc., an investment
     company, is the beneficial owner of such shares, and Wellington Management
     Company, LLP, its investment advisor, may also be deemed to be a beneficial
     owner of those shares.
(6)  Consists of warrants to purchase 499,606 shares of the Company's common
     stock.

Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

There are no family relationships among the Directors and Executive Officers
of the Company.

Item 13. EXHIBITS AND REPORTS ON FORM 8-K

1.   Financial Statements

The following financial statements of Prime Capital Corporation and subsidiaries
are filed as part of this annual report on Form 10-KSB:

                                                Sequential
                                                 Page No.
                                                ----------
   a) Independent Auditors' Report                  19

   b) Consolidated Balance Sheets as of
          December 31, 1998 and 1997                20

   c) Consolidated Statements of Operations
      for the years ended December 31, 1998,
      1997 and 1996                                 21

   d) Consolidated Statements of Stockholders'
      Equity for the years ended
      December 31, 1998, 1997 and 1996              22

   e) Consolidated Statements of Cash Flows
      for the years ended December 31, 1998,
      1997 and 1996                                 23

   f) Notes to Consolidated Financial Statements    24

2.    Exhibits

The exhibits filed in response to Item 601 of Regulation S-B as part of this
Annual Report on Form 10-KSB are listed in the Exhibit Index on pages 39
through 40.

3.    Reports on Form 8-K

There were no reports on Form 8-K filed by the Company during the fourth
quarter of the Company's fiscal year ended December 31, 1998.


INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Prime Capital Corporation:

We have audited the accompanying consolidated balance sheets of Prime Capital
Corporation and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1998.
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 generally accepted auditing
standards. 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 Prime Capital
Corporation and subsidiaries at December 31, 1998 and 1997, and the results
of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998 in conformity with generally
accepted accounting principles.


KPMG LLP

Chicago, Illinois

May 20, 1999

<TABLE>
                  PRIME CAPITAL CORPORATION AND SUBSIDIARIES
                          Consolidated Balance Sheets
<CAPTION>
                                                December 31,
                                        --------------------------
ASSETS                                       1998             1997
                                         -------------   ------------
<S>                                      <C>             <C>
Cash and cash equivalents                $ 2,265,780       3,572,553
Receivables:
 Operating lease rentals                     143,371         115,930
 Inventory finance receivables             5,659,700       1,450,840
 Other                                     4,386,922       6,598,431
Net investment in direct financing
 leases and loans                         26,712,504      17,881,502
Investment in securitized receivables,
 including restricted cash                12,388,932       7,799,195
Leased equipment, net of accumulated
 depreciation                             10,217,831       4,188,097
Deposits on equipment                         91,082       1,370,326
Equipment and furniture, net of
 accumulated depreciation                    715,326         720,725
Other assets                               1,554,105       2,133,957
                                           ----------      ----------
  Total assets                           $64,135,553      45,831,556
                                          ==========      ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable                             27,645,329      16,357,347
Accounts payable for equipment            16,106,095       6,565,270
Accrued expenses and other liabilities    11,586,839       8,244,271
Deposits and advances                      2,455,803       2,415,476
                                           ----------     ----------
                                          57,794,066      33,582,364
Subordinated debt                          5,000,000       5,000,000
                                          ----------      ----------
  Total liabilities                       62,794,066      38,582,364
                                          ----------      ----------
Stockholders' equity
Preferred stock $100 par value:
 authorized 250,000 shares;
 issued 25,000 shares                       2,500,000      2,500,000
Common stock, $0.05 par value:
 authorized 10,000,000 shares;
 issued 4,467,840 and 4,396,265
 shares in 1998 and 1997, respectively        223,392        219,813
Additional paid-in capital                  9,518,356      9,483,852
Accumulated deficit                       (10,600,461)    (5,659,673)
Accumulated other comprehensive income              0      1,005,000
Treasury stock, at cost; 94,200 shares
 at December 31, 1998 and 1997               (299,800)      (299,800)
                                           ----------      ---------
  Total stockholders' equity                1,341,487      7,249,192
Total liabilities and
  stockholders' equity                    $64,135,553     45,831,556
                                           ==========     ==========
</TABLE>
See accompanying notes to consolidated financial statements



<TABLE>
                       PRIME CAPITAL CORPORATION AND SUBSIDIARIES
                          Consolidated Statements of Operations
<CAPTION>
                                 Years Ended December 31,
                          ------------------------------------
                                1998       1997         1996
                          ------------ ----------- -----------
<S>                      <C>           <C>         <C>
Revenues:
Fee Income                $ 5,822,699   10,296,305  10,087,077
Direct finance leases
 and loans                  2,324,405    4,534,897   3,514,885
Rentals on operating
 leases                     3,324,294      987,574   1,158,419
Interest income             1,312,834      966,925   1,057,437
Other income                2,290,066      300,769     454,211
                          -----------   ----------  ----------
 Total revenues            15,074,298   17,086,470  16,272,029
                          -----------   ----------  ----------

Expenses:
Depreciation of leased
 equipment                  2,643,813      513,193     607,795
Interest                    3,239,910    3,521,361   3,650,901
Selling, general and
 administrative             9,603,863    8,640,037   7,645,275
Provision for credit losses 4,300,000    7,000,000     342,000
                           ----------   ----------  ----------
 Total expenses            19,787,586   19,674,591  12,245,971

Income (loss) before income
 taxes and dividends       (4,713,288)  (2,588,121)  4,026,058
Income taxes                        0            0           0
                           ----------    ---------   ---------
Net income (loss)        $ (4,713,288)  (2,588,121)  4,026,058
                           ==========    =========   =========
Basic earnings (loss) per
 share                   $      (1.14)       (0.66)       0.93
                          ===========  =========== ===========
Diluted earnings (loss)
 per share               $      (1.14)       (0.66)       0.85
                          ===========  =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.


<TABLE>
              PRIME CAPITAL CORPORATION AND SUBSIDIARIES
             Consolidated Statements of Stockholders' Equity
              Years Ended December 31, 1998, 1997 and 1996
<CAPTION>

                                                          Accumulated
                                     Additional            Comprehen-              Other          Total
                 Preferred    Common  paid-in   Treasury  sive Income Accumulated  Comprehensive  Shareholders'
                 Stock        Stock   capital    Stock       (Loss)    Deficit     Income (Loss)  Equity

<S>               <C>        <C>      <C>       <C>        <C>         <C>           <C>         <C>
Balance at
December 31, 1995         0   218,718 9,681,225  (299,800)              (6,813,235)         0      2,786,908

Comprehensive income:
  Net income              0         0         0         0   4,026,058    4,026,058          0      4,026,058
                                                            ---------
Comprehensive income      0         0         0         0   4,026,058            0          0
Dividends - preferred     0         0         0         0                  (55,625)         0        (55,625)
Exercise of options       0       500     2,163         0                        0          0          2,663
Issuance of preferred
 stock            2,500,000         0  (202,713)        0                        0          0      2,297,287
                  ---------   ------- ---------  ---------                --------    --------     ---------
Balance at
December 31, 1996 2,500,000   219,218 9,480,675  (299,800)              (2,842,802)         0      9,057,291

Comprehensive loss:
  Net loss                0         0         0          0 (2,588,121)  (2,588,121)         0     (2,588,121)
  Net change in unrealized
    gains on securities   0         0         0          0  1,005,000            0  1,005,000      1,005,000
                                                            ---------
Comprehensive loss        0         0         0          0 (1,583,121)           0          0
Dividends preferred       0         0         0          0                (228,750)         0       (228,750)
Exercise of options       0       595     3,177          0                       0          0          3,772
                  ---------   ------- ---------  ---------               ---------   --------      ---------
Balance at
December 31, 1997 2,500,000   219,813 9,483,852   (299,800)             (5,659,673) 1,005,000      7,249,192

Comprehensive loss:
  Net loss                0         0         0          0 (4,713,288)  (4,713,288)         0     (4,713,288)
  Net change in unrealized
    gains on securities   0         0         0          0 (1,005,000)           0 (1,005,000)    (1,005,000)
                                                            ---------
Comprehensive loss        0         0         0          0 (5,718,288)           0          0
Dividends preferred       0         0         0          0                (227,500)         0       (227,500)
Exercise of options       0     3,579    34,504          0                       0          0         38,083
                  ---------   ------- ---------  ---------               ---------   --------      ---------
Balance at
December 31, 1998 2,500,000   223,392 9,518,356   (299,800)            (10,600,461)         0      1,341,487


</TABLE>

See accompanying notes to consolidated financial statements

<TABLE>
                    PRIME CAPITAL CORPORATION AND SUBSIDIARIES
                       Consolidated Statements of Cash Flows

                                Years Ended  December 31,
                                  1998         1997         1996
                             ------------  ------------  -----------
<S>                          <C>              <C>            <C>
CASH FLOWS FROM OPERATING
 ACTIVITIES
Net income (loss)            $ (4,713,288)    (2,588,121)    4,026,058
Adjustments to reconcile
 net income (loss) to net
 cash used in operating
 activities:
 Depreciation of leased
 equipment                      2,326,725        513,193       607,795
 Other depreciation and
 amortization                     347,561        218,630       146,555
 Amortization of debt
 financing fees                   121,563        121,563        30,719
 Non-cash gain on
 securitization                  (374,444)    (2,850,064)   (4,859,389)
 Provision for credit losses    4,300,000      7,000,000       342,000
Changes in assets and
 liabilities:
 Rentals on leased
 equipment and other
 receivables                      701,170     (1,158,565)   (4,366,474)
 Other assets                    (622,134)      (511,828)     (196,605)
 Accrued expenses and
 other liabilities               (568,532)       586,666       911,023
                               ----------     ----------    ----------
Net cash provided by
 (used in) operating
 activities                     1,518,621      1,331,474    (3,358,318)

CASH FLOWS FROM INVESTING
 ACTIVITIES
Cost of equipment acquired
 for lease                    (157,947,581) (146,861,738) (178,734,731)
Customer deposits and
 payments on direct
 finance leases and loans        8,769,940     9,793,153    10,806,507
Purchase of equipment and
 furniture                        (266,738)     (514,884)     (225,455)
Investment in inventory
 finance receivables            (4,208,860)   (1,450,840)            0
Proceeds from sales of
 finance receivables           135,818,184   165,003,773   178,562,299
                              ------------   -----------   -----------
Net cash provided by
 (used in) investing
 activities                    (17,835,055)   25,969,464    10,408,620

CASH FLOWS FROM FINANCING
 ACTIVITIES:
Proceeds from issuance of
 subordinated debt                       0             0     5,000,000
Net proceeds from issuance
 of preferred stock and
 warrants                                0             0     2,297,287
Proceeds from exercise of
 options                            38,080         3,775         2,663
Payment of debt financing
 fees                                    0             0      (608,143)
Preferred stock dividends         (227,500)     (228,750)      (55,625)
Other liabilities                3,911,099      (505,235)    3,256,297
Net increase (decrease
 in notes payable               11,287,982   (30,061,573)  (11,881,332)
                               -----------   -----------   -----------
Net cash provided by (used
 in) financing activities       15,009,661   (30,791,783)   (1,988,853)

Increase (decrease) in
 cash and cash equivalents      (1,306,773)   (3,490,845)    5,061,449
Cash and cash equivalents:
 Beginning of year               3,572,553     7,063,398     2,001,949
                               -----------   -----------   -----------
 End of year              $      2,265,780     3,572,553     7,063,398
                               ===========   ===========   ===========
Cash paid during the year
 for interest             $      2,819,259     3,827,759     3,030,240
                               ===========  ============   ===========
</TABLE>
See accompanying notes to consolidated financial statements


                             PRIME CAPITAL CORPORATION
                      Notes to Consolidated Financial Statements
                     Years Ended December 31, 1998, 1997 and 1996

(1) Summary of Significant Accounting Policies

Prime  Capital  Corporation, through its wholly-owned subsidiaries, is
engaged principally in providing financial services to non-consumer customers
throughout the United States.  The Company's primary focus is on providing
specialty and high value-added financial products that are targeted to specific
needs within selected markets.  The Company is primarily engaged in the business
of originating or, in some cases, purchasing leases, secured loans or
installment purchase agreements (collectively, "Financial Contracts"),
warehousing such Financial Contracts, and ultimately securitizing (or, in
some cases, selling outright) such Financial Contracts.  The accompanying
consolidated financial statements include the accounts of Prime Capital
Corporation and its wholly-owned subsidiaries, and certain of its special
purpose subsidiaries that have been incorporated to facilitate the sale or
securitization of Financial Contracts ("Prime" or the "Company").  All
material intercompany transactions have been eliminated.

The Company's financial condition will continue to be dependent upon certain
critical elements.  First, the Company must be able to obtain recourse and
non-recourse financing to fund future acquisitions and originations of
Financial Contracts.  Second, the Company must originate a sufficient volume
of new business which is structured and priced in such a way so as to permit
the Company to finance or sell those Financial Contracts for an amount which,
in the aggregate, covers the Company's cost of operations, plus provides a
return on stockholders' equity.  Prime intends to utilize a combination of
interim warehouse borrowing and long-term funding methodologies to provide it
with borrowing and funding availability at competitive rates of interest.  The
long-term funding methodologies will include (1) the continued issuance of
asset-backed securities, (2) portfolio sales, (3) program financings, and
(4) the discounting of individual Financial Contracts.


   (a) Use of Estimates

   The preparation of financial statements in conformity with generally accepted
accounting principles 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.

   (b) Direct Financing Leases and Loans

   Loans and lease contracts which qualify as direct financing leases, as
defined by Statement of Financial Accounting Standards (SFAS) No. 13, are
accounted for by recording on the consolidated balance sheet the total loan or
minimum lease payments receivable, plus the estimated unguaranteed residual
value of the leased equipment, less the unearned income. The unearned lease
income represents the excess of the total minimum payments, plus the estimated
residual expected to be realized at the end of the lease term, over the cost of
the related equipment or initial principal balance. Unearned income is
recognized as revenue over the term of the contract as a constant percentage
interest return on the net investment. The initial direct costs are capitalized
as part of the net investment in direct financing leases or loans
and amortized over the lease term as a reduction in yield.

   (c) Operating Leases

   The cost of equipment acquired for the Company's lease transactions that
qualify as operating leases, as defined by SFAS No. 13, is recorded as leased
equipment and depreciated on a straight-line basis to an estimated residual
value at lease termination.  Lease revenue consists of periodic rentals.
Initial direct costs of originating operating leases are capitalized and
amortized on a straight-line basis over the lease term.

   (d) Gain on Sale of Finance Receivables

   The Company generally sells or assigns the Financial Contracts it acquires
or originates through securitization and other structured finance transactions.
Gains on the sale or securitization of Financial Contracts are included in fee
income in the consolidated statement of operations.  In a securitization
transaction, the Company sells and transfers a pool of Financial Contracts to a
wholly-owned, bankruptcy remote, special purpose subsidiary.  This subsidiary
in turn simultaneously sells and transfers its interest in the Financial
Contracts to a trust which issues beneficial interests in the Financial
Contracts in the form of senior and subordinated securities.

   Gains on sale of Financial Contracts sold through securitization transactions
are recorded as the difference between the proceeds received from the sale of
senior and subordinated securities including amounts deposited in restricted
cash reserve accounts (Prime's residual interest), plus the estimated value of
excess cash flows, less future losses expected to arise from recourse
obligations related to the sale of the Financial Contracts and related insurance
expenses, and the carrying value of the Financial Contracts.

   On January 1, 1997, the Company adopted SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities"
("SFAS 125"). SFAS 125 provides consistent standards for distinguishing
transfers of financial assets that are sales from transfers that are secured
borrowings.  Under SFAS 125, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the liabilities
it has incurred, derecognizes financial assets when control has been
surrendered, and derecognizes liabilities when extinguished.  SFAS 125
prohibits early application and, accordingly, the Company adopted this standard
for transactions which occurred after December 31, 1996.  Under SFAS 125, a
transfer of lease assets in which the transferor surrenders control of the
lease assets is accounted for as a sale and the transferred lease assets are
removed from the balance sheet with the resulting gain or loss on sale
reflected in the statement of operations.

   The Company also enters into transactions to sell Financial Contracts,
either in single contract or pool transactions.  Gains on such contracts are
calculated as the difference between the proceeds received, net of related
selling expenses, and the carrying amount of the related Financial Contracts
adjusted for ongoing recourse obligations of the Company, if any.

   (e) Allowance for Credit Losses and Estimated Recoveries

   An allowance for credit losses is initially established when Financial
Contracts are sold or securitized in transactions where the Company retains
recourse for losses, partial or otherwise.  This initial estimate of future
losses reduces the gain recorded at the time sale. If necessary, a provision
for credit losses is charged against earnings to maintain the allowance for
credit losses at an amount management believes necessary to absorb potential
losses in the finance contract portfolio.

   Management evaluates the adequacy of the allowance for credit losses by
reviewing credit loss experience, delinquencies, the value of the underlying
collateral, including third party guarantees or insurance recoveries,
the level of finance contract portfolio, as well as, general economic
conditions.

   An account is reported as charged off at the time the account is to be
repurchased under the Company's recourse obligations of a securitization or
other structured financing transaction.  The Company's recourse obligations
generally require an account to be repurchased if the lessee or borrower
declares bankruptcy, the collateral is repossessed, or the account becomes more
than 120 days past due.

   At the time an account is charged-off, the initial charge-off is recorded
net of an estimated recovery that is expected to be realized in the future.
Examples of such recoveries include continuing payments from lessees or
borrowers, payments from guarantors, proceeds from the sale of equipment or
other collateral, proceeds from insurance contracts, or settlement proceeds
from law suits or other actions brought against obligors.  Depending upon the
method of recovery, the time for which it takes the Company to receive cash
will vary.  In many cases, particularly those involving litigation, it may take
more than one year from the time the account is charged-off to when the Company
begins receiving cash recoveries.

   (f) Portfolio Servicing Fees

   The Company generally agrees to continue servicing the receivable portfolio
it has sold or securitized.  Servicing fees are received monthly and recorded
as fee income as earned.

   (g) Cash and Cash Equivalents

   Cash and cash equivalents are comprised of highly liquid instruments with
original maturities of 90 days or less.

   (h) Restricted Cash

   In connection with each securitization completed by the Company, certain
cash reserves are set aside for credit enhancement of the securitization pools.
These reserve balances are reported as restricted cash and included in the
Company's net investment in securitized receivables.  Cash reserve accounts are
initially funded from the proceeds received from the securitization and are
increased by the excess spread realized from the receipt of payments from
borrowers or lessees over the payments due to the securitization noteholders.
In the event of default or delinquency by a borrower or lessee, payments to the
noteholder are disbursed from the cash reserve fund.  Typically, the cash
reserve funds become available as unrestricted cash to the Company once all
contracts in the securitization pool are paid in full, however, payout is
sometimes sooner depending upon the specific pool indenture agreement.

   (i) Investments

   The Company has classified its entire investment portfolio as available-for-
sale.  Available-for-sale securities are stated at fair value with unrealized
gains and losses included in stockholders' equity.  Fair value of the
securities is determined based on market prices.  Securities for which a
readily determinable market price is not available are recorded at cost.

   (j) Income Taxes

   The Company uses the asset and liability method to account for income taxes.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis.  The measurement of deferred tax assets is reduced, if necessary, by a
valuation allowance for any tax benefits of which future realization is
uncertain.

   (k) Net Income (Loss) per Common Share

    In 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings Per Share" ("SFAS 128").  SFAS 128 replaced the calculation of primary
and fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share exclude any dilutive
effect of options and warrants.  Diluted earnings per share are very similar to
the previously reported fully diluted earnings per share.  Earnings  per  share
amounts for all periods have been restated to conform to the SFAS 128
requirements.

   (l)  Financial Instruments

    The carrying value of the Company's financial instruments approximates their
fair value.

   (m)  Stock Based Compensation

     The Company uses the intrinsic value based method of accounting for its
stock-based compensation arrangements as promulgated by the Accounting
Principles Board ("APB")  Opinion No. 25 and related Interpretations.

   (n)  Reclassifications

     Certain 1997 and 1996 amounts have been reclassified to conform to the 1998
 presentation.

(2)  Net Investment in Direct Financing Leases and Loans

     The components of the net investment in direct financing leases and loans
as of December 31 were as follows:

<TABLE>
<CAPTION>
                                         1998            1997
                                      ------------- ------------
     <S>                              <C>           <C>
     Minimum lease and loan payments   $33,878,535    21,849,420
     Estimated unguaranteed residual
       value of leased equipment            98,091       512,708
     Initial direct costs                    6,577         6,576
     Unearned income                    (6,659,022)   (4,477,202)
     Allowance for uncollectible
        accounts                          (611,677)      (10,000)
                                        ----------     ---------
     Net investment in direct
       financing leases and loans      $26,712,504     17,881,502
                                        ==========     ==========
</TABLE>

     At December 31, 1998, the Financial Contracts in the Company's portfolio
consisted primarily of medical, software, telecommunication, specialty vehicle
and other equipment with average initial contract terms of 39 months.

     The following table summarizes the minimum lease and loan payments to be
received and the estimated unguaranteed residual values of maturing direct
financing leases and loans in each of the next five years and thereafter:

<TABLE>
<CAPTION>
                                     Estimated
                    Minimum          Unguaranteed
     Years Ending   Lease and        Residual
     December 31,   Loan Payments    Values
     ------------   --------------   ------------
     <S>            <C>              <C>
     1999           $ 9,503,696         64,318
     2000             8,327,469              0
     2001             6,088,729         17,740
     2002             4,684,853         11,033
     2003             3,596,482          5,000
    Thereafter        1,677,306              0
    ------------    -----------      ---------
     Total          $33,878,535         98,091
     ============   ===========      =========
     </TABLE>

(3)  Leased Equipment, Net of Accumulated Depreciation
     <TABLE>
     <CAPTION>

                                           1998       1997
                                      -----------  ----------
     <S>                              <C>          <C>
     Equipment under operating leases $12,570,734   4,214,274
     Accumulated depreciation          (2,352,903)    (26,177)
                                       ----------   ---------
     Net                              $10,217,831   4,188,097
                                       ==========   =========
     </TABLE>

     At December 31, 1998, the minimum lease payments to be received under
operating leases for each of the next five years and thereafter were as follows:

<TABLE>
<CAPTION>
     Years Ending      Minimum Lease
     December 31,         Payments
     ------------      --------------
     <S>               <C>
     1999                   3,044,715
     2000                   2,418,498
     2001                   1,645,644
     2002                     774,988
     2003                     285,556
                             --------
     Total                 $8,169,401
                            =========
</TABLE>

(4)  Net Investment in Securitized Receivables, Including Restricted Cash.

     The components of net investment in securitized receivables as of
December 31 were as follows:

<TABLE>
<CAPTION>
                                     1998        1997
                                 -----------  -----------
     <S>                         <C>          <C>
     Restricted cash             $ 6,360,236   6,745,049
     Reserve advances                323,775   1,057,439
     Notes receivable              7,593,014   1,215,145
     Servicer advances             2,357,440     239,707
     Estimated excess spread         872,441   1,041,359
     Allowance for credit losses  (5,117,974) (2,499,504)
                                  ----------   ---------
     Total                       $12,388,932   7,799,195
                                  ==========  ==========
</TABLE>

The Company acts as servicer for each of its securitizations as well as its
assets in various warehouse credit facilities.  As servicer, the Company
receives funds due its affiliated special purpose entities.  These funds,
certain of which were required to be transferred to these entities in 1998 and
were transferred in 1999, are included in accrued expenses and other liabilities
and totaled $6,742,681 and $3,563,195, at December 31, 1998 and 1997,
respectively.

(5)  Allowance for Credit Losses

<TABLE>
<CAPTION>
                                 1998      1997       1996
                             ----------  ---------  ---------
     <S>                    <C>          <C>        <C>
     Balance at beginning
       of year              $2,509,504    1,998,994  1,120,767
     Initial reserves
       charged against gains
       on sales of finance
       receivables           1,595,494    1,688,890    776,367
     Additional provisions
       for credit losses     4,300,000    7,000,000    342,000
     Charge-offs, net of
       estimated recoveries (2,675,347)  (8,178,380)  (240,140)
                             ----------   ---------  ---------
     Balance at end of year $5,729,651    2,509,504  1,998,994
                             =========    =========  =========
</TABLE>

     At December 31, 1998, 1997 and 1996, loss reserves were included as
components of the net investment in securitized receivables and net investment
in direct financing leases and loans.  Also at December 31, 1996, $600,000 of
loss reserves were included in accrued expenses and other liabilities.
Estimated recoveries are included in other receivables and totaled $3,119,000
and $5,088,000 at December 31, 1998 and 1997, respectively.

(6)  Investments Available-for-Sale

     During 1998, the Company realized a $1,907,000 gain from the sale of
warrants that were received in connection with originating a lease transaction.
At the date the warrants were received by the Company, they were determined to
have no material value.  There were no securities available-for-sale at
December 31, 1998.  The gain is included in other income.

     At December 31, 1997, the Company held available-for-sale securities with
estimated fair values of $1,005,000 consisting entirely of gross unrealized
gains attributable to warrants to acquire shares of common stock of a customer
of the Company. Available-for-sale securities are reported in other assets.


 (7) Notes Payable

     Notes payable consisted of the following as of December 31:

<TABLE>
<CAPTION>
                                          1998       1997
                                     ------------ ----------
     <S>                             <C>          <C>
     Warehouse Credit Facilities     $23,999,992  14,387,022
     Asset Backed Securities
      for Operating Leases             3,352,367           0
     Other                               292,970   1,970,325
                                      ----------  ----------
     Total                           $27,645,329  16,357,347
                                      ==========  ==========
</TABLE>

     The underlying equipment and lease or loan contracts secure borrowings
under the warehouse credit facilities. The weighted average interest at
December 31, 1998 was 8.01% per annum.

   (a)  Warehouse Credit Facilities

    At December 31, 1998, the Company had a total of $188.0 million of
available credit under four separate agreements.

     (i)  Securitization Funding Facility

     In November 1997, the Company entered into a $75.0 million credit
facility, in December 1998, the total amount of available credit was increased
to $100.0 million.  The facility allows the Company, on an ongoing basis, to
transfer and sell finance lease receivables to a wholly-owned, bankruptcy
remote, special purpose entity, Prime Receivables Finance Corporation I, which
will sell such receivables to one or more trusts.  Each trust will issue two
classes of certificates of beneficial ownership, a senior certificate and a
residual interest that will be owned by the Company.  Transfers and sales of
finance lease receivables pursuant to the facility, other than operating
leases, are accounted for as sales under SFAS 125 and the related gains on the
sale are recognized on the date of such transfers.  The credit facility expires
November 13, 2000.

     At December 31, 1998, $74,964,000 was utilized under this facility
including $5.6 million which was attributable to operating leases.  At
December 31, 1998, this interest rate was 6.03% per annum.

     (ii) Other Credit Facilities

     At December 31, 1998, the Company had credit available totaling $88.0
million under three other credit facilities.  At December 31, 1998, $17.2
million was utilized under these facilities.  These credit facilities will be
used to fund Financial Contracts that arise during the normal course of
business.  These credit facilities expire as follows:  $75.0 million in
April 1999, $3.0 million in May 1999 and $10.0 million in June, 1999.
The Company plans to negotiate the renewal of these facilities in the
second calendar quarter of 1999.

  (b)  Other Matters

     The warehouse credit facilities contain certain covenants and restrictions
with which the Company must comply.  (See Note 8 to the consolidated financial
statements).

(8)  Subordinated Debt and Preferred Stock with Warrants

     On October 4, 1996, Prime received $7,500,000 cash and incurred
approximately $800,000 in expenses, in exchange for a $5.0 million principal
amount of five year, 12.5% subordinated debentures and 25,000 shares of $100
par value 9.0% Dividend non-voting Preferred Stock with warrants to purchase
499,606 shares of the Company's common stock at $1.00 per share.  In May 1999,
the Company changed the exercise price to be $.01 per share.  Expenses
related to the transaction were allocated between the subordinated debt,
preferred stock and warrants based upon their fair value.  Expenses allocated to
the subordinated debt were capitalized and are being amortized over five years.
The unamortized balance of these expenses were included in other assets on the
Company's consolidated balance sheets at December 31, 1998 and 1997.
Amortization of $122,000 in 1998 and 1997, and $31,000 in 1996 is included in
interest expense on the Company's Consolidated Statements of Operations.
The warrants were exercisable in March 1998 and the right to exercise the
warrants expires in September 2006.

     The Company's various debt agreements contain restrictions on, among other
things, the payment of dividends and the amount of recourse indebtedness that
can be incurred.  Furthermore, the Company is required to maintain a minimum
adjusted tangible net worth (as defined), and the Company may not exceed a
specified ratio of total recourse liabilities (as defined) to adjusted tangible
net worth and is required to maintain minimum debt service coverage ratios
(as  defined).  The Company was not in default of any of its debt agreements,
or had received waivers for certain matters of non-compliance, at December 31,
1998.


(9)  Sales and Securitization of Financial Receivables

     During the year ended December 31, 1998, the Company securitized Financial
Contracts totaling $171.1 million.

     During the year ended December 31, 1997, the Company securitized Financial
Contracts in two transactions totaling $89.6 million.  Also, during 1997, the
Company sold a pool of Financial Contracts for $44.0 million.

     During 1996, the Company permanently financed certain assets and
liabilities carried on the Company's consolidated balance sheet through the
issuance and sale of equipment lease and loan backed securities with aggregate
contract values of $151.6 million.  For financial reporting purposes, the assets
and liabilities were removed from the consolidated balance sheets.

     The Company also sold equipment or assigned the related Financial
Contracts to third parties with an aggregate contract value of $37.3 million,
$44.0 million and $36.4 million during the years ended December 31, 1998,
1997, and 1996 respectively.

     The net gains from all sales and securitizations totaled $3.6 million,
$7.2 million, and $7.1 million during the years ended December 31, 1998, 1997,
and 1996, respectively.

(10) Income Taxes

     The Company's net income tax provision after consideration of the tax
effect from utilizing net operating loss carryforwards and passive activity
loss carryforwards was zero for the years ended December 31, 1998, 1997,
and 1996.

     The reported income tax expense differs from the "expected" tax expense
(benefit) as follows:

<TABLE>
<CAPTION>
                                   1998        1997       1996
                               -----------  ---------  ---------
     <S>                       <C>          <C>       <C>
     Computed "expected" tax
       expense (benefit)       $(1,602,518)  (880,000)  1,369,000
     State income tax expense
       (benefit) net of Federal
       income tax expense         (229,287)  (126,000)    201,000
     Other, net                     27,620     17,000      15,000
     Net operating loss
      and passive activity loss
      (utilized) benefit not
      recognized                 1,804,185    989,000  (1,585,000)
                                 ---------   --------   ---------
     Total expense             $         0          0           0
                                 =========   ========   =========
</TABLE>

Deferred tax assets and liabilities at December 31, 1998 and 1997 include:

<TABLE>
<CAPTION>
                                         1998        1997
                                     -----------  -----------
<S>                                  <C>          <C>
  Deferred Tax Assets:
    Net operating and passive
    activity loss carryforwards      $ 7,199,450    9,567,000
  Investment tax credit carryforward     506,475      554,000
  AMT credit carryforward                228,567      135,000
  Financial statement reserves not
    currently deductible for tax
    purposes                             248,995      253,000
                                       ---------   ----------
  Gross deferred tax assets            8,183,487   10,509,000

  Less:  Valuation allowance          (6,443,961)  (7,574,000)
                                       ---------   ----------
  Total deferred tax assets            1,739,526    2,935,000
                                       ---------   ----------

  Deferred Tax Liabilities:
  Difference in securitization
    accounting for tax purposes
    and financial statement purposes   1,325,184    2,527,000
  Other, net                             414,342      408,000
                                       ---------   ----------

  Total deferred tax liabilities       1,739,526    2,935,000
                                       ---------   ----------
  Net deferred taxes                 $         0            0
                                       =========   ==========
</TABLE>

The Company has recorded a valuation allowance to reflect the estimated amount
of deferred tax assets which may not be realized.  In assessing whether to
recognize deferred tax assets, management considers whether it is more likely
than not that some portion or all of the deferred tax assets will not be
realized.

The ultimate realization of deferred tax assets is largely dependent upon the
generation of future taxable income during the periods in which those temporary
differences become deductible.  The Company decreased the valuation allowance
for net deferred tax assets by approximately $1,130,000 for the year ended
December 31, 1998.  This was due mainly to a reduction in the passive activity
loss carryforwards of certain subsidiaries.

At December 31, 1998, the Company had passive activity loss carryforwards of
$14.7 million and net operating loss carryforwards of $3.8 million.  The passive
activity loss carryforwards do not expire and must be used before the net
operating loss carryforwards.  However, the passive losses cannot be used
against passive interest/"portfolio" income.  Therefore, the net operating loss
carryforwards are applied against "portfolio" income, which totaled $469,000 for
1998.  The net operating loss carryforwards expire as follows:  $610,000 in
2001, $1,238,000 in 2002, $1,215,000 in 2003, $102,000 in 2004, $5,000 in 2005,
$575,000 in 2006, and $55,000 thereafter through 2018.

At December 31, 1998, the Company had $506,000 of investment tax credit carry-
forwards available to reduce Federal income taxes, which if unused, will expire
at various times from 1999 through 2001.  In addition, the Company has
alternative minimum tax ("AMT") credit carryforwards of approximately $229,000
which do not expire and are available to reduce regular Federal income taxes.

(11) Commitments and Contingencies

     The Company rents office space under various operating lease agreements
expiring during the next five years.  The following is a schedule of future
minimum rental payments required under these leases and does not include the
Company's proportionate share of future real estate taxes and building operating
expenses.

<TABLE>
<CAPTION>
     Year ending
     December 31,    Amount
     ------------ ---------
     <S>          <C>
     1999           267,000
     2000           229,000
     2001           233,000
     2002           243,000
     2003         $ 253,000
</TABLE>

     Rent expense, including the Company's share of real estate taxes and
building operating expenses, for the years ended December 31, 1998, 1997, and
1996 was $474,000, $404,000, and $295,000, respectively.

     As of December 31, 1998, the Company had commitments to finance
approximately $226.2 million of Financial Contracts.  The management of the
Company believes that funding for these Financial Contracts will be obtained
through the normal course of business.

(12) Stock Option Plans

     In 1997, the Company adopted the 1997 Stock Option Plan ("Plan") under
which certain employees and Directors of the Company may be granted the right
to purchase shares of common stock at its fair market value on the date of
grant.  This plan superseded and replaced the Company's 1987 Stock Option Plan.
The Company has authorized an aggregate of 750,000 shares of common stock for
issuance under the Plan.

     The Company continues to apply the accounting specified by APB Opinion No.
25 and related Interpretations in accounting for the Plan.  Accordingly, no
compensation cost has been recognized for options granted under the Plan.  Had
compensation cost for the Plan been determined consistent with FASB Statement
No. 123, the Company's net income (loss) and basic and diluted net income (loss)
per common share would have been reduced to the pro forma amounts indicated
below:

<TABLE>
<CAPTION>
                                 1998         1997       1996
                              -----------  ---------  ----------
     <S>                      <C>          <C>        <C>
     Net income (loss)
      available to common
      shareholders
     As Reported             $ (4,940,788)  (2,816,871) 3,970,433
     Pro Forma               $ (5,181,585)  (3,145,813) 3,712,230

     Basic net income (loss)
     per common share
     As Reported             $      (1.14)       (0.66)      0.93
     Pro Forma               $      (1.19)       (0.73)      0.87

     Diluted net income
     (loss) per common share
     As Reported             $      (1.14)       (0.66)      0.85
     Pro Forma               $      (1.19)       (0.73)      0.80
</TABLE>

     The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1998, 1997 and 1996, respectively:  dividend
yield of 0% for all years; expected volatility of 126%, 71%, and 78%; risk-free
interest rates of 6.00%, 5.97%, and 6.12%; and expected lives of 5 years for
1998, 1997 and 1996.  Additional adjustments were made regarding a 5.5%
estimated forfeit rate on the grants for the years following the initial date of
grant, beginning in 1996.

     A summary of the status of the Company's Stock Option Plan as of December
31, 1998, 1997 and 1996 and changes during the years ended on those dates is
presented below:
<TABLE>
<CAPTION>
                      1998            1997            1996
                 ---------------- --------------- ---------------
                        Weighted-       Weighted-       Weighted-
                         Average         Average         Average
                        Exercise        Exercise        Exercise
                 Shares   Price  Shares   Price  Shares   Price
                -------- ------- ------ -------- ------ --------
<S>             <C>      <C>     <C>    <C>      <C>    <C>
Shares under
 option at
 beginning of
 year            590,583  $3.20   573,500 $ 2.47  336,094 $ 1.28
Options granted  182,500   1.98   146,000   5.89  289,500   4.37
Options expired        0      0         0      0  (24,094) 10.59
Options
 terminated     (207,500)  3.87  (117,017)  2.52  (18,000)  1.25
Options
  exercised      (71,583)  0.53  ( 11,900)  0.32  (10,000)  0.27
Shares under
 option at end
 of year         494,000   2.85   590,583 $ 3.20  573,500 $ 2.47
Options
 exercisable
 at end of year  293,008   2.14   279,912 $ 1.43  236,150 $ 0.39
Weighted average
 fair value of
 options granted
 during the year        $1.42          $3.73          $ 2.59
</TABLE>

The following table summarizes information about stock options
outstanding as of
December 31, 1998:
<TABLE>
<CAPTION>
                        Options Outstanding   Options Exercisable
                       ---------------------  ------------------
                       Weighted-
                       average     Weighted-            Weighted-
Range of     Number    remaining   average              average
exercise     of        contractual exercise  Number     exercise
prices       shares    life        price     of shares  price
----------------------------------------------------------------
<S>          <C>       <C>          <C>        <C>        <C>
$ .01-$1.50  270,500   6.44 years   $ 0.86   193,335     $ 0.63
$1.51-$3.00    6,500   8.84 years     1.89     1,334       1.88
$3.01-$4.50   50,000   7.92 years     4.00    33,334       4.00
$4.51-$6.00  167,000   8.55 years     5.76    65,005       5.68
----------------------------------------------------------------
Total        494,000   7.33 years   $ 2.85   293,008     $ 2.14
================================================================
</TABLE>

(13) Employee Benefit Plan

     During 1985, the Company established a defined contribution benefit plan
under Internal Revenue Code (the "Code") section 401(a) with a cash deferred
benefit arrangement under section 401(k) of the Code.  The plan covers all
employees.  Contributions to the plan are based on percentages of employee
contributions plus discretionary contributions determined annually by the Board
of Directors.  Contributions of $89,700 and $98,400 were made for the benefit
of the plan participants in 1998 and 1997, respectively.  There were no
contributions made in 1996.

(14) Earnings Per Share

     The following table sets forth the computation of basic and diluted
earnings per share:

<TABLE>
<CAPTION>
                                1998         1997       1996
                            ------------   --------- ----------
<S>                        <C>            <C>        <C>
Numerator:
  Net income (loss)        $ (4,713,288)  (2,588,121)  4,026,058
  Preferred dividends          (227,500)    (228,750)    (55,625)
                            ------------   ---------  ----------
Numerator for basic
  and diluted earnings
  per share-income
  (loss) available to
  common shareholders      $ (4,940,788)  (2,816,871)  3,970,433
                            ===========    =========  ==========


Denominator:
  Denominator for basic
   earnings per share-
   weighted average shares   4,345,902     4,293,799   4,282,610

Effect of dilutive securities
 - Options and warrants              0             0     386,352
                            ----------     ---------  ----------
Denominator for diluted
earnings per share-
adjusted weighted
average shares and
assumed conversions           4,345,902    4,293,799   4,668,962
                            ===========    =========  ==========

Basic earnings (loss)
  per share                $      (1.14)       (0.66)       0.93
                            ===========    =========  ==========
Diluted earnings (loss)
per share                  $      (1.14)       (0.66)       0.85
                            ===========    =========  ==========
</TABLE>

(1)  In 1998 and 1997, the weighted average shares under the diluted computation
have an anti-dilutive effect, therefore diluted earnings per share will be shown
equal to basic earnings per share.

For additional disclosures regarding the Employee Stock Options and Warrants,
see Notes 8 and 13 to the consolidated financial statements.


(15)  Subsequent Event

      On May 4, 1999, the Company completed the sale of Financial Contracts by
issuing asset-backed notes.  The notes were issued through the Company's wholly-
owned subsidiaries, Prime Finance Corporation 1999-A-1 and Prime Finance
Corporation 1999-A-2.  The initial aggregate principal amount of the notes was
$74.0 million.  The Company's wholly-owned subsidiary, Prime Leasing, Inc.,
will act as servicer for this pool of Financial Contracts.


                          EXHIBIT INDEX

                    PRIME CAPITAL CORPORATION

Copies of the following documents are filed herewith as exhibits:

Exhibit                                                      Sequential
 No.     Description                                          Page  No.

3.1       Certificate of Incorporation                           (a)
3.2       By-Laws                                                (b)
10.1      Sublease dated October 8, 1985 between
          the Dow Chemical Company and Registrant                (a)
10.2      1984 Incentive Stock Option Plan of Registrant         (a)
10.3      1986 Non-Qualified Stock Option Plan of Registrant     (a)
10.3      1987 Stock Option Plan                                 (a)
10.3      1997 Stock Option Plan                                 (f)
10.13     Master Lease Agreements of Registrant                  (a)
10.13(a)  Revised Master Lease Agreements of Registrant          (d)
10.15     Stock Restriction Agreement dated July 2, 1985
          between Registrant and Marvin T. Keeling               (a)
10.23     Form of Equipment Bill of Sale and Assignment
          contracts used in equipment sale-lease assignment
          transactions between Registrant and each of
          James A. Friedman, Marvin T. Keeling,
          Robert Youngquist, Thomas W. Heimsoth
          and Allen M. Olinger, III                              (a)
10.48     Bill of Sale of Lease to James Friedman                (e)
21        Subsidiaries of Registrant                             39
23.1      Consent of KPMG Peat Marwick LLP                       40
27        Financial Data Schedule                                (c)


(a)  Incorporated by reference to the Company's Registration Statement on Form
S-1, effective May 29, 1986, in which each Exhibit had the same number as
herein.

(b)  Exhibit 3.2 is incorporated by reference to the Company's Proxy Statement,
effective April 29, 1987.

(c)  Incorporated by reference to the Company's electronic filing of the
December 31, 1997 10 KSB as filed on March 31, 1998.

(d)  Incorporated by reference to the Company's Annual Report on Form 10-K as
filed on May 10, 1991.

(e)  Incorporated by reference to the Company's Annual Report on Form 10-K.
For the years ended December 31, 1991 as filed on August 28, 1992 and amended on
Form 8 filed on October 20, 1992.

(f)  Incorporated by reference to the Company's electronic filing of the 1996
Proxy Statement Def-14A filed on June 3, 1997.

Exhibits 21 and 23.1 have been included herein.




                           SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                      PRIME CAPITAL CORPORATION
                                             (Registrant)



Date:  May 28, 1999                   /S/ James A. Friedman
                                          James A. Friedman
                                          President, Chairman and Chief
                                          Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on this 28th day of May, 1999.

     Signature                                  Title


/s/ James A. Friedman              President, Chairman, and Chief
                                   Executive Officer
James A. Friedman                  (Principal Executive Officer)


/s/ Vern E. Landeck                Vice President and
                                   Chief Financial Officer
Vern E. Landeck                    (Principal Financial Officer)


Directors


/s/ James A. Friedman                    /s/ William D. Smithburg
James A. Friedman                        William D. Smithburg


/s/ Mark P. Bischoff                     /s/ Robert R. Youngquist
Mark P. Bischoff                            Robert R. Youngquist


/s/ John R. Walter
John R. Walter

                           SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.



                                 PRIME CAPITAL CORPORATION
                                       (Registrant)


Date:  May 28, 1999
                                          James A. Friedman
                                          President, Chairman and
                                          Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on this 28th day of May, 1999.

          Signature                                    Title


                                       Chairman, President,
                                         Director and
                                       Chief Executive Officer

       James A. Friedman
(Principal Executive Officer)


                                      Vice President
                                      and Chief Financial Officer

        Vern E. Landeck
  (Principal Financial Officer)



Directors



        James A. Friedman                    William D. Smithburg



        Mark P. Bischoff                     Robert R. Youngquist



        John R. Walter