<PAGE>   1
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549


                                    FORM 10-Q

(MARK ONE)

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

                FOR THE QUARTERLY PERIOD ENDED: NOVEMBER 30, 1998

                                       OR

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

             FOR THE TRANSITION PERIOD FROM __________ TO _________

                         COMMISSION FILE NUMBER: 1-8645




                              MEGO FINANCIAL CORP.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                                <C>
                 NEW YORK                              13-5629885
     (STATE OR OTHER JURISDICTION OF               (I. R. S. EMPLOYER
      INCORPORATION OR ORGANIZATION)               IDENTIFICATION NO.)
</TABLE>

                   4310 PARADISE ROAD, LAS VEGAS, NEVADA 89109
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

                                 (702) 737-3700
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)


        Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]



                      APPLICABLE ONLY TO CORPORATE ISSUERS:

        As of January 11, 1999, there were 21,009,506 shares of Common Stock,
$.01 par value per share, of the Registrant outstanding.

================================================================================



<PAGE>   2

                      MEGO FINANCIAL CORP. AND SUBSIDIARIES



                                      INDEX



<TABLE>
<CAPTION>
                                                                                     Page
                                                                                     ----
<S>        <C>                                                                       <C>
PART I     FINANCIAL INFORMATION

Item 1.    Condensed Financial Statements (unaudited)

           Condensed Consolidated Balance Sheets at
            November 30, 1998 and August 31, 1998.....................................1

           Condensed Consolidated Statements of Operations for the Three Months 
            Ended November 30, 1998 and 1997  ........................................2

           Condensed Consolidated Statements of Stockholders' Equity for the 
            Three Months Ended November 30, 1998 .....................................3

           Condensed Consolidated Statements of Cash Flows for the Three Months
            Ended November 30, 1998 and 1997 .........................................4

           Notes to Condensed Consolidated Financial Statements.......................5

Item 2.    Management's Discussion and Analysis of Financial Condition
            and Results of Operations.................................................7

Item 3.    Quantitative and Qualitative Disclosures About Market Risk................15


PART II    OTHER INFORMATION

Item 1.    Legal Proceedings.........................................................16

Item 4.    Submission of Matters to a Vote of Security Holders.......................16

Item 6.    Exhibits and Reports on Form 8-K..........................................17

SIGNATURE ...........................................................................18
</TABLE>



                                        i
<PAGE>   3

PART I     FINANCIAL INFORMATION
ITEM 1.    CONDENSED FINANCIAL STATEMENTS


                      MEGO FINANCIAL CORP. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                (thousands of dollars, except per share amounts)
                                   (unaudited)


<TABLE>
<CAPTION>
                                                                                 NOVEMBER 30,      AUGUST 31,
                                                                                    1998             1998
                                                                                -------------    -------------
<S>                                                                             <C>              <C>  
ASSETS
Cash and cash equivalents                                                           $  2,293      $  1,813
Restricted cash                                                                        1,797         1,694
Notes receivable, net of allowance for cancellations and discounts of
    $12,917 at November 30, 1998 and $12,403 at August 31, 1998                       52,207        47,789
Interest only receivables, at fair value                                               3,232         3,367
Timeshare interests held for sale                                                     34,922        35,798
Land and improvements inventory                                                        7,672         7,965
Other investments                                                                      4,356         4,395
Property and equipment, net of accumulated depreciation of $14,709 at
    November 30, 1998 and $14,119 at August 31, 1998                                  23,794        23,950
Deferred selling costs                                                                 3,881         3,719
Prepaid debt expenses                                                                  1,468         1,431
Other assets                                                                          10,230        10,155
                                                                                    --------      --------
           TOTAL ASSETS                                                             $145,852      $142,076
                                                                                    ========      ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Notes and contracts payable                                                       $ 87,021      $ 81,986
  Accounts payable and accrued liabilities                                            20,416        19,098
  Reserve for notes receivable sold with recourse                                      6,008         6,620
  Deposits                                                                             4,267         4,877
  Accrued income taxes                                                                 3,954         4,468
                                                                                    --------      --------
           Total liabilities before subordinated debt                                121,666       117,049
                                                                                    --------      --------
Subordinated debt                                                                      4,247         4,348

Redeemable preferred stock, Series A, 12% cumulative preferred stock, $.01 par
  value, $10 redemption value, 0 shares issued and outstanding
  at November 30, 1998 and August 31, 1998                                                --            --

Stockholders' equity:
  Preferred stock, $.01 par value (authorized--5,000,000 shares)                          --            --
  Common stock, $.01 par value (authorized--50,000,000 shares); 21,009,506
    shares issued and outstanding                                                        210           210
  Additional paid-in capital                                                          12,789        12,789
  Retained earnings                                                                    6,940         7,680
                                                                                    --------      --------
           Total stockholders' equity                                                 19,939        20,679
                                                                                    --------      --------
           TOTAL LIABILITIES  AND STOCKHOLDERS' EQUITY                              $145,852      $142,076
                                                                                    ========      ========
</TABLE>



            See notes to condensed consolidated financial statements.
                                        1
<PAGE>   4

                      MEGO FINANCIAL CORP. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                (thousands of dollars, except per share amounts)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED
                                                              NOVEMBER 30,
                                                   ------------------------------
                                                          1998              1997
                                                   -------------    -------------
<S>                                                <C>              <C>        
REVENUES
  Timeshare interest sales, net                    $     9,050       $      8,835
  Land sales, net                                        3,491              3,026
  Interest income                                        1,992              1,624
  Financial income                                         309              1,018
  Gain on sale of investments                              513                 --
  Incidental operations                                    690                761
  Other                                                    820                823
                                                  ------------       ------------
           Total revenues                               16,865             16,087
                                                  ------------       ------------
COSTS AND EXPENSES
  Direct cost of:
    Timeshare interest sales                             1,754              1,847
    Land sales                                             580                399
  Incidental operations                                    651                700
  Marketing and sales                                    8,833              7,790
  Depreciation                                             520                579
  Interest expense                                       2,088              1,716
  General and administrative                             3,560              4,421
                                                  ------------       ------------
           Total costs and expenses                     17,986             17,452
                                                  ------------       ------------
LOSS BEFORE INCOME TAXES                                (1,121)            (1,365)

INCOME TAXES (BENEFIT)                                    (381)                --
                                                  ------------       ------------
NET LOSS APPLICABLE TO COMMON STOCK               $       (740)      $     (1,365)
                                                  ============       ============
LOSS PER COMMON SHARE
  Basic:
    Net loss applicable to common stock           $      (0.04)      $      (0.06)
                                                  ============       ============
  Weighted-average number of common shares          21,009,506         21,009,506
                                                  ============       ============

  Diluted:
    Net loss applicable to common stock           $      (0.04)      $      (0.06)
                                                  ============       ============
  Weighted-average number of common shares
    and common share equivalents outstanding        21,009,506         21,009,506
                                                  ============       ============
</TABLE>



            See notes to condensed consolidated financial statements.
                                        2
<PAGE>   5

                      MEGO FINANCIAL CORP. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                (thousands of dollars, except per share amounts)


<TABLE>
<CAPTION>
                                          COMMON STOCK
                                         $.01 PAR VALUE        
                                   ------------------------    ADDITIONAL
                                                                PAID-IN      RETAINED
                                      SHARES        AMOUNT      CAPITAL      EARNINGS      TOTAL
                                   -----------  -----------    -----------  -----------  -----------
<S>                                <C>          <C>            <C>          <C>          <C>    
Balance at August 31, 1998          21,009,506     $ 210          $12,789      $7,680      $20,679
Net loss for three months ended
  November 30, 1998                                                              (740)        (740)
                                   -----------   ----------    -----------  -----------  -----------
Balance at November 30, 1998        21,009,506     $ 210          $12,789      $6,940      $19,939
                                   ===========   ===========   ===========  ===========  ===========
</TABLE>



  See notes to condensed consolidated financial statements.
                                        3
<PAGE>   6

                      MEGO FINANCIAL CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                (thousands of dollars, except per share amounts)

<TABLE>
<CAPTION>
                                                                                      THREE MONTHS ENDED
                                                                                         NOVEMBER 30,
                                                                                   -------------------------
                                                                                      1998          1997
                                                                                   -----------    ----------
<S>                                                                                <C>            <C>  
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                                         $   (740)      $ (1,365)
                                                                                   --------       --------
  Adjustments to reconcile net loss to net cash used in operating activities:
    Amortization of negative goodwill                                                    --             (8)
    Charges to allowance for cancellations                                           (1,098)        (1,794)
    Provision for cancellations                                                       1,183          1,435
    Gain on sale of other investments                                                  (513)            --
    Provision for uncollectible Owners' Association advances                             --            403
    Cost of sales                                                                     2,334          2,246
    Depreciation                                                                        520            579
    Amortization of interest only receivables                                           135             70
    Repayments on notes receivable, net                                               9,402         10,777
    Additions to notes receivable                                                   (13,905)       (13,643)
    Purchase of land and timeshare interests                                         (1,165)        (2,971)
    Additions to other receivables                                                       --         (1,857)
    Decreases to other receivables                                                       --          3,501
    Changes in operating assets and liabilities:
      Decrease (increase) in restricted cash                                           (103)            31
      Increase in other assets                                                         (724)        (2,566)
      Increase in deferred selling costs                                               (162)          (126)
      Increase (decrease) in accounts payable and accrued liabilities                 1,318         (1,732)
      Increase (decrease) in deposits                                                  (610)           136
      Decrease in accrued income taxes                                                 (514)            --
                                                                                   --------       --------
        Total adjustments                                                            (3,902)        (5,519)
                                                                                   --------       --------
         Net cash  used in operating activities                                      (4,642)        (6,884)
                                                                                   --------       --------
CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of property and equipment                                                   (364)          (921)
  Proceeds from sale and property and equipment                                          --             27
  Proceeds from sale of other investments                                               597             --
  Additions to other investments                                                        (45)          (280)
                                                                                   --------       --------
         Net cash provided by (used in) investing activities                            188         (1,174)
                                                                                   --------       --------
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from borrowings                                                           14,323          7,466
  Reduction of debt                                                                  (9,288)        (4,863)
  Payments on subordinated debt                                                        (101)          (424)
  Increase in subordinated debt                                                          --            159
                                                                                   --------       --------
         Net cash provided by financing activities                                    4,934          2,338
                                                                                   --------       --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                    480         (5,720)
CASH AND CASH EQUIVALENTS--BEGINNING OF PERIOD                                        1,813         10,376
                                                                                   --------       --------
CASH AND CASH EQUIVALENTS--END OF PERIOD                                           $  2,293       $  4,656
                                                                                   ========       ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
  Cash paid during year for:
    Interest, net of amounts capitalized                                           $  1,841       $  1,473
                                                                                   ========       ========
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES
  Reduction of additional paid-in capital due to Spin-off of Mego Mortgage         
    Corporation                                                                    $     --       $(21,735)
  Reduction of retained earnings due to Spin-off of Mego Mortgage Corporation            --        (21,441)
</TABLE>



            See notes to condensed consolidated financial statements.

                                        4
<PAGE>   7

                      MEGO FINANCIAL CORP. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE THREE MONTHS ENDED NOVEMBER 30, 1998 AND 1997
                                   (unaudited)


1. FINANCIAL STATEMENTS

        In the opinion of management, when read in conjunction with the audited
Consolidated Financial Statements for the years ended August 31, 1998 and 1997,
contained in the Form 10-K of Mego Financial Corp. (Mego Financial) filed with
the Securities and Exchange Commission for the year ended August 31, 1998, the
accompanying unaudited Condensed Consolidated Financial Statements contain all
of the information necessary to present fairly the financial position of Mego
Financial and Subsidiaries at November 30, 1998, the results of its operations
for the three months ended November 30, 1998 and 1997, the change in
stockholders' equity for the three months ended November 30, 1998 and the cash
flows for the three months ended November 30, 1998 and 1997. All intercompany
accounts between the parent and its subsidiaries have been eliminated.

        The preparation of financial statements in conformity with generally
accepted accounting principles (GAAP) requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures 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. In the
opinion of management, all material adjustments necessary for the fair
presentation of these statements have been included herein which are normal and
recurring in nature. The results of operations for the three months ended
November 30, 1998 are not necessarily indicative of the results to be expected
for the full year.

2. NATURE OF OPERATIONS

        Mego Financial is a premiere developer of timeshare properties and a
provider of consumer financing to purchase timeshare intervals and land parcels
through its wholly-owned subsidiary, Preferred Equities Corporation (PEC)
established in 1970. PEC is engaged primarily in originating, selling, servicing
and financing consumer receivables generated through timeshare and land sales.
Mego Financial and its subsidiaries are herein individually or collectively
referred to as the Company as the context requires. Mego Financial was
incorporated under the laws of the state of New York in 1954 under the name Mego
Corp. and, in 1992, changed its name to Mego Financial Corp.

        PEC markets and finances timeshare interests and land in select resort
areas. By providing financing to virtually all of its customers, PEC also
originates consumer receivables that it sells and generally services. In
February 1988, Mego Financial acquired PEC, pursuant to an assignment by the
Assignors (Comay Corp., GRI, RER Corp., and H&H Financial, Inc.) of their
contract right to purchase PEC.

        To facilitate its sales of timeshare interests, the Company has entered
into several trust agreements. The trustees administer the collection of the
related notes receivable. The Company has assigned title to certain of its
resort properties in Nevada and its interest in certain related notes receivable
to the trustees.

RECENT EVENTS

        On March 27, 1998, the Company announced that it had entered into a
definitive merger agreement (the Merger Agreement) under which it was to be
acquired by Sycamore Partners, LLC (Sycamore). Sycamore was to be financed by
Blackacre Capital Group, L.P., a real estate investment fund. Under the terms of
the Merger Agreement, the Company's shareholders were to receive a minimum of
$5.71 per share up to an estimated maximum of $5.75 per share. After further
communication and negotiation, on September 9, 1998, the Company announced that,
as a result of breaches by Sycamore, it had terminated the Merger Agreement.
Subsequently, on October 12, 1998, the Company received the $300,000 Liquidated
Damages Payment called for in the Merger Agreement.



                                        5
<PAGE>   8

                      MEGO FINANCIAL CORP. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
              FOR THE THREE MONTHS ENDED NOVEMBER 30, 1998 AND 1997
                                   (unaudited)


        On October 6, 1998, the Company announced that it has retained Friedman,
Billings, Ramsey & Co., Inc. to review strategic alternatives available to the
Company, including potential offers, mergers and financing transactions.

        On December 24, 1998, Finova Capital Corporation (FINOVA) agreed to make
a loan in the amount of $5,662,000 to PEC, guaranteed by the Company with a
maturity date of June 30, 1999. On that date, FINOVA advanced $3,000,000, less
fees, secured by a pledge of the stock of Central Nevada Utilities Company, a
wholly-owned subsidiary of PEC. In consideration of FINOVA making the advance,
Mego Financial granted to FINOVA a warrant for 150,000 shares of common stock of
the Company at a $1.00 per share exercise price, exercisable within a five-year
period commencing January 1, 1999. Another advance of up to $2,662,000 will be
available in January 1999 and additional collateral will be pledged. As a
condition for this advance, a warrant for up to an additional 350,000 shares of
common stock of the Company at a $1.00 per share exercise price will be issued
to Finova.

3. RECENTLY ISSUED ACCOUNTING STANDARDS

        In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" (SFAS 130). SFAS 130 established standards for reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. There are no additional items that would be reported as
Comprehensive Income that are not included in the Company's Statements of
Operations for either of the quarters ended November 30, 1998 and 1997.

4. STOCKHOLDERS' EQUITY

        Mego Financial's stock option plan (Stock Option Plan), which was
amended and restated as of September 16, 1998 upon the approval of Mego
Financial's shareholders, provides for non-qualified and qualified incentive
options to officers, key employees and directors. On September 23, 1998, an
additional 111,000 incentive and non-incentive stock options were granted under
the Stock Option Plan by the Stock Option Committee to employees at $1.00 per
share being the fair value. In addition, the exercise prices of 304,500 of
options issued on September 2, 1997 were revised from $3.125 per share to $1.00
per share.



                                        6
<PAGE>   9

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

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

        The following Management's Discussion and Analysis of Financial
Condition and Results of Operations section contains certain forward-looking
statements and information relating to Mego Financial Corp. (Mego Financial)
(Mego Financial and its subsidiaries are referred to herein collectively as the
Company as the context requires) that are based on the beliefs of management as
well as assumptions made by and information currently available to management.
Such forward-looking statements include, without limitation, the Company's
expectation and estimates as to the Company's business operations, including the
introduction of new timeshare and land sales programs and future financial
performance, including growth in revenues and net income and cash flows. Such
forward-looking statements also include, without limitation, the Company's
expectations and beliefs as to the projected costs and anticipated timetable to
address Year 2000 compliance issues, the adequacy of its plans to address such
issues and the impact on the Company's operations in the event that certain or
all of its plans or the plans of its lenders and other third parties in respect
of such compliance issues prove to be inadequate. In addition, included herein
the words "anticipates," "believes," "estimates," "expects," "plans," "intends"
and similar expressions, as they relate to the Company or its management, are
intended to identify forward-looking statements. Such statements reflect the
current views of the Company's management with respect to future events and are
subject to certain risks, uncertainties and assumptions. In addition, the
Company specifically advises readers that the factors listed under the caption
"Liquidity and Capital Resources" could cause actual results to differ
materially from those expressed in any forward-looking statement. Should one or
more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
described herein as anticipated, believed, estimated or expected.

        The following discussion and analysis should be read in conjunction with
the Condensed Consolidated Financial Statements, including the notes thereto,
contained elsewhere herein and in the Company's Form 10-K for the fiscal year
ended August 31, 1998.

GENERAL

        The business of the Company is primarily the marketing, financing, and
sale of timeshare interests, retail lots and land parcels, and servicing the
related notes receivable. The Company, through its subsidiary Preferred Equities
Corporation (PEC), provides financing to purchasers of its timeshare interests
and land. This financing is generally evidenced by notes secured by deeds of
trust and mortgages as well as non-recourse installment sale contracts. These
notes receivable are generally payable over a period ranging from two to twelve
years, bear interest at rates ranging from 12.5% to 15.5% and generally require
equal monthly payments of principal and interest.

PEC

        PEC recognizes revenue primarily from sales of timeshare interests and
land sales in resort areas, gain on sale of receivables and interest income. PEC
periodically sells its consumer receivables while generally retaining the
servicing rights. Revenue from sales of timeshare interests and land is
recognized after the requisite rescission period has expired and at such time as
the purchaser has paid at least 10% of the sales price for sales of timeshare
interests and 20% of the sales price for land sales. Land sales typically meet
these requirements within six to ten months of closing, and sales of timeshare
interests typically meet these requirements at the time of sale. The sales
price, less a provision for cancellation, is recorded as revenue and the
allocated cost related to such net revenue of the timeshare interest or land
parcel is recorded as expense in the year that revenue is recognized. When
revenue related to land sales is recognized, the portion of the sales price
attributable to uncompleted required improvements, if any, is deferred.

        Notes receivable with payment delinquencies of 90 days or more have been
considered in determining the allowance for cancellations. Cancellations occur
when the note receivable is determined to be uncollectible and the related
collateral, if any, has been recovered. Cancellation of a note receivable in the
quarter the revenue is



                                        7
<PAGE>   10

recognized is deemed to not represent a sale and is accounted for as a reversal
of the revenue with an adjustment to cost of sales. Cancellation of a note
receivable subsequent to the quarter the revenue was recognized is charged to
the allowance for cancellations.

        Gain on sale of notes receivable includes the present value of the
differential between contractual interest rates charged to borrowers on notes
receivable sold by PEC and the interest rates to be received by the purchasers
of such notes receivable, after considering the effects of estimated prepayments
and a normal servicing fee. PEC retains certain participations in cash flows
from the sold notes receivable and generally retains the associated servicing
rights. PEC generally sells its notes receivable at par value.

        The present values of expected net cash flows from the sale of notes
receivable are recorded at the time of sale as interest only receivables.
Interest only receivables are amortized as a charge to income, as payments are
received on the retained interest differential over the estimated life of the
underlying notes receivable. Interest only receivables are recorded at the lower
of unamortized cost or estimated fair value. The expected cash flows used to
determine the interest only receivables asset have been reduced for potential
losses under recourse provisions of the sales agreements. Reserve for notes
receivable sold with recourse represents PEC's estimate of the fair value of its
future credit losses to be incurred over the lives of the notes receivable in
connection with the recourse provisions of the sales agreements and is shown
separately as a liability in the Company's Condensed Consolidated Balance
Sheets.

        In discounting cash flows related to notes receivable sales, PEC defers
servicing income at an annual rate of 1% and discounts cash flows on its sales
at the rate it believes a purchaser would require as a rate of return. Earned
servicing income is included under the caption of financial income. The cash
flows were discounted to present value using a discount rate of 15% for the
three months ended November 30, 1998 and 1997. PEC has developed its assumptions
based on experience with its own portfolio, available market data and
consultation with its financial advisors.

        In determining expected cash flows, management considers economic
conditions at the date of sale. In subsequent periods, these estimates may be
revised as necessary using the original discount rate, and any losses arising
from prepayment and loss experience will be recognized as realized.

        Provision for cancellations relating to notes receivable is recorded as
expense in amounts sufficient to maintain the allowance at a level considered
adequate to provide for anticipated losses resulting from customers' failure to
fulfill their obligations under the terms of their notes receivable. PEC records
provision for cancellations at the time revenue is recognized, based on
historical experience and current economic factors. The related allowance for
cancellations represents PEC's estimate of the amount of the future credit
losses to be incurred over the lives of the notes receivable. The allowance for
cancellations is reduced by actual cancellations experienced, including
cancellations related to previously sold notes receivable which were reacquired
pursuant to the recourse obligations discussed herein. Such allowance is also
reduced to establish the separate liability for reserve for notes receivable
sold with recourse. PEC's judgment in determining the adequacy of this allowance
is based upon a periodic review of its portfolio of notes receivable. These
reviews take into consideration changes in the nature and level of the
portfolio, current economic conditions which may affect the purchasers' ability
to pay, changes in collateral values, estimated value of inventory that may be
reacquired and overall portfolio quality. Changes in the allowance as a result
of such reviews are included in the provision for cancellations.

        Fees for servicing notes receivable originated or acquired by PEC and
sold with servicing rights retained are generally based on a stipulated
percentage of the outstanding principal balance of such notes receivable and are
recognized when earned. Interest received on notes receivable sold, less amounts
paid to investors, is reported as



                                        8
<PAGE>   11

financial income. Interest only receivables are amortized systematically to
reduce notes receivable servicing income to an amount representing normal
servicing income and the present value discount. Late charges and other
miscellaneous income are recognized when collected. Costs to service notes
receivable are recorded to expense as incurred. Interest income represents the
interest received on loans held in PEC's portfolio, the accretion of the
discount on the interest only receivables and interest on cash funds.

        Total costs and expenses consist primarily of marketing and sales
expenses, general and administrative expenses, direct costs of sales of
timeshare interests and land, depreciation and amortization and interest
expense. Marketing and sales costs directly attributable to unrecognized sales
are accounted for as deferred selling costs until such time as the sale is
recognized.

        PEC has entered into financing arrangements with certain purchasers of
timeshare interests and land whereby no interest or a 5% interest per annum is
charged on those sales where the aggregate down payment is at least 50% of the
purchase price and the balance is payable in 36 or fewer monthly payments (PEC
has discontinued the 0% arrangement, effective during the quarter ended August
31, 1998). Notes receivable of $5.7 million and $7.3 million at November 30,
1998 and August 31, 1998, respectively, were made under this arrangement.

        Land sales as of November 30, 1998 exclude $13.9 million of sales not
yet recognized under generally accepted accounting principles (GAAP) since the
requisite payment amounts have not yet been received. If ultimately recognized,
revenues from these sales would be reduced by a related provision for
cancellations of $1.9 million, estimated deferred selling costs of $3.9 million
and cost of sales of $2.0 million.

RESULTS OF OPERATIONS

Three Months Ended November 30, 1998 Compared to Three Months Ended November 30,
1997

PEC

        Total revenues for PEC increased 5.0% or $797,000 to $16.8 million
during the three months ended November 30, 1998 from $16.0 million during the
three months ended November 30, 1997. The increase was primarily due to an
increase in land sales, net, to $3.5 million during the three months ended
November 30, 1998 from $3.0 million during the three months ended November 30,
1997 and an increase in interest income to $2.0 million during the three months
ended November 30, 1998 from $1.6 million during the three months ended November
30, 1997.

        Timeshare interest and land sales, net, increased to $12.5 million
during the three months ended November 30, 1998 from $11.9 million during the
three months ended November 30, 1997, an increase of 5.7%.

        Gross sales of timeshare interests were $10 million during the three
months ended November 30, 1998 and November 30, 1997. Net sales of timeshare
interests increased to $9.1 million from $8.8 million, an increase of 2.4%. The
provision for cancellations represented 9.7% and 11.4% of gross sales of
timeshare interests for the three months ended November 30, 1998 and 1997,
respectively. The decrease in the provision for cancellations for timeshare
interests was primarily due to lower cancellation experience during the first
quarter of fiscal 1998 compared to the first quarter of fiscal 1997 and to an
analysis of the required allowances, including the reserve for notes receivable
sold with recourse, as of November 30, 1998. The Preferred Client Services group
was instituted to work with the portfolio and develop better relationships with
customers, thus reducing otherwise potential cancellations. There is a much
greater focus on working with the purchasers and their individual problems
rather than merely demanding repayment of debt.

        Gross sales of land increased to $3.7 million during the three months
ended November 30, 1998 from $3.3 million during the three months ended November
30, 1997, an increase of 11.3%. Net sales of land increased to $3.5 million
during the three months ended November 30, 1998 from $3.0 million during the
three months ended November 30, 1997, an increase of 15.4%, primarily due to
sales at Hartsel Ranch, Colorado in the 1998 period which commenced during the
third quarter of fiscal 1998. The provision for cancellations decreased to 5.6%
of 



                                        9
<PAGE>   12

gross sales of land for the three months ended November 30, 1998 from 8.9% for
the three months ended November 30, 1997. The decrease in the provision for
cancellation for land was primarily due to lower cancellation experience during
the first quarter of fiscal 1998 compared to the first quarter of fiscal 1997
and to an analysis of the required allowances, including the reserve for notes
receivable sold with recourse, as of November 30, 1998.

        A gain on sale of investments of $513,000 was recorded for the three
months ended November 30, 1998. There were no investment sales during the three
months ended November 30, 1997. In October, 1998, PEC sold a vacant parcel of
land containing approximately 40 acres, in Pahrump, NV for $597,000.

        Interest income increased to $2.0 million during the three months ended
November 30, 1998 from $1.5 million for the three months ended November 30,
1997, primarily due to increased average notes receivable balances for the
comparative quarters.

        Financial income decreased to $309,000 during the three months ended
November 30, 1998 from $1 million during the three months ended November 30,
1997, a decrease of 69.6%. The decrease was primarily a result of the
termination by agreement of loan servicing for a company previously affiliated
with Mego Financial.

        As a result of the foregoing, and notwithstanding the decrease in
financial income, total PEC revenues increased to $16.8 million during the three
months ended November 30, 1998 from $16 million during the three months ended
November 30, 1997.

        Total costs and expenses for PEC increased to $17.5 million for the
three months ended November 30, 1998 from $16.6 million for the three months
ended November 30, 1997, an increase of 5.4%. The increase resulted primarily
from an increase in marketing and sales expenses to $8.8 million from $7.8
million, an increase of 13.4%; an increase in direct costs of land sales to
$580,000 from $399,000, an increase of 45.4%; and an increase of $380,000 in
interest expense, an increase of 24.4%, partially offset by a decrease in
general and administrative expenses to $3.2 million from $3.7 million, a
decrease of 13.3%. The increase in marketing and sales expenses resulted
primarily from the expansion of timeshare marketing efforts by PEC and higher
gross sales. The increase in direct costs of land is attributable to increased
sales of higher cost lots sold during the current fiscal quarter compared to the
same quarter last year. The increase in interest expense is due to the increase
in the average outstanding balance of notes and contracts payable. The decrease
in general and administrative expenses is due to the reduction in salaries and
benefits and a decrease in maintenance fees paid by PEC.

        As a percentage of gross sales of timeshare interests and land,
marketing and sales expenses relating thereto increased to 65.1% during the
three months ended November 30, 1998 from 58.6% during the three months ended
November 30, 1997, and cost of sales increased to 17.0% during the three months
ended November 30, 1998 from 16.9% during the three months ended November 30,
1997. Sales prices of timeshare interests are typically lower than those of
land, while selling costs per sale, other than commissions, are approximately
the same in amount for timeshare interests and land; accordingly, PEC generally
realizes lower profit margins from sales of timeshare interests than from sales
of land. Subsequent to November 30, 1998 the Company has restructured its
marketing and sales programs, which restructuring has included the closing of
unprofitable sales locations, the elimination of certain marketing programs and
the layoff of related personnel.

        Interest expense of PEC increased to $1.9 million during the three
months ended November 30, 1998 from $1.6 million during the three months ended
November 30, 1997, an increase of 24.4%. The increase is a result of an increase
in the average outstanding balance of notes and contracts payable during the
three months ended November 30, 1998 compared to the three months ended November
30, 1997.

        A pre-tax loss of $719,000 was recorded by PEC during the three months
ended November 30, 1998 compared to pre-tax loss of $612,000 during the three
months ended November 30, 1997. The increase in the pre-tax loss is primarily
due to the increases in direct cost of land sales, interest expense and
marketing and sales expense, together with a decrease in financial income,
partially offset by the a decrease in general and administrative expenses.



                                       10
<PAGE>   13
        No income tax provision or benefit for PEC was recorded for the three
months ended November 30, 1998 and 1997, since, as part of an arrangement
between PEC and the Company regarding payment of taxes, PEC generally does not
recognize a tax benefit for periods in which it records a loss.

        As a result of the foregoing, PEC reported a net loss of $719,000 during
the three months ended November 30, 1998 compared to a net loss of $612,000
during the three months ended November 30, 1997.

COMPANY (consolidated)

        Loss before income taxes decreased $244,000 to a loss of $1.1 million
during the three months ended November 30, 1998 from a loss of $1.4 million
during the three months ended November 30, 1997. The reduction in loss is
attributable to the decrease in Company-only expenses.

        On a consolidated basis, the decrease in the pre-tax loss is largely due
to the increases in land sales and interest income, the gain on sale of
investments and by the decreases in general and administrative expenses, offset
by the decrease in financial income. Total costs and expenses during the three
months ended November 30, 1998 were $18.0 million, an increase of 3.1% over
$17.5 million during the three months ended November 30, 1997. Marketing and
sales expenses increased 13.4% for the three months ended November 30, 1998
compared to the three months ended November 30, 1997 due primarily to the
expansion of timeshare marketing efforts by PEC and higher gross sales. Also,
see prior discussion for PEC.

        An income tax benefit of $381,000 was recorded for the three months
ended November 30, 1998, and was based on the statutory rate. For the three
months ended November 30, 1997, there was no provision as the facts and
circumstances related to the Company's income tax liability reserves were under
extensive review and analysis, which was subsequently completed during fiscal
1997.

        Net loss applicable to common stock was $740,000 during the three months
ended November 30, 1998 compared to net loss applicable to common stock of $1.4
million during the three months ended November 30, 1997, due primarily to an
income tax benefit of $381,000 recognized during the three months ended November
30, 1998 compared to no income tax benefit recognized during the three months
ended November 30, 1997. See prior discussion for PEC.

LIQUIDITY AND CAPITAL RESOURCES

        Cash and cash equivalents for the Company was $2.3 million at November
30, 1998 compared to $1.8 million at August 31, 1998. On December 24, 1998,
FINOVA agreed to make a loan in the amount of $5.7 million to PEC, guaranteed by
the Company with a maturity date of June 30, 1999. On that date, FINOVA advanced
$3.0 million, less fees, secured by a pledge of the stock of Central Nevada
Utilities Company, a wholly-owned subsidiary of PEC. In consideration of FINOVA
making the advance, the Company granted FINOVA a warrant for 150,000 shares of
common stock of the Company at a $1.00 per share exercise price, exercisable
within a five-year period commencing January 1, 1999. Another advance up to
$2,662,000 will be available in January 1999 and additional collateral will be
pledged. As a condition for this advance, a warrant for up to an additional
350,000 shares of common stock of the Company at a $1.00 per share exercise
price will be issued to Finova.

        The Company has recently experienced cash flow pressures and has taken
the following steps to alleviate this situation. In addition to the short-term
funding from FINOVA discussed above, subsequent to November 30, 1998, the
Company reduced its work force by 180 employees, resulting in an estimated
savings of $4.85 million of salaries and related benefits on an annualized
basis. Also, certain unprofitable sales office locations have been closed and
PEC plans to sell certain non-producing properties which are not deemed to be
part of the core business. While the Company believes these actions will improve
its cash flow and help return it to profitability, there can be no assurance
that these efforts will be successful.



                                       11
<PAGE>   14

PEC

        PEC's cash requirements arise from the acquisition of timeshare
properties and land, payments of operating expenses, payments of principal and
interest on debt obligations, and payments of marketing and sales expenses in
connection with sales of timeshare interests and land. Marketing and sales
expenses payable by PEC in connection with sales of timeshare interests and land
typically exceed the down payments received at the time of sale, as a result of
which PEC generates a cash shortfall. This cash shortfall and PEC's other cash
requirements are funded primarily through sales and hypothecations of
receivables, PEC's lines of credit in the aggregate amount of $137.5 million and
cash flows from operations. At November 30, 1998, no commitments existed for
material capital expenditures.

        At November 30, 1998, PEC had arrangements with 5 institutional lenders
under 6 agreements for the financing of receivables in connection with sales of
timeshare interests and land and the acquisition of timeshare properties and
land, which provide for 6 lines of credit of up to an aggregate of $137.5
million. Such lines of credit are secured by timeshare and land receivables and
mortgages. At November 30, 1998, an aggregate of $82.8 million was outstanding
under such lines of credit, and $54.7 million was available for borrowing. Under
the terms of these lines of credit, PEC may borrow 70% to 90% of the balances of
the pledged timeshare and land receivables. PEC is required to comply with
certain covenants under these agreements, which, among other things, require PEC
to meet certain minimum tangible net worth requirements. The most stringent of
such requirements provides that PEC maintain a minimum tangible net worth of $25
million. At November 30, 1998, PEC's net worth was $26.6 million. Necessary
waivers of compliance with certain covenants related to these agreements have
been received. Summarized lines of credit information and accompanying notes
relating to these six lines of credit outstanding at November 30, 1998, consist
of the following (thousands of dollars):



                                       12
<PAGE>   15

<TABLE>
<CAPTION>
   BORROWING        
   AMOUNT AT         MAXIMUM        
  NOVEMBER 30,      BORROWING         REVOLVING
      1998            AMOUNT     EXPIRATION DATE (f)     MATURITY DATE          INTEREST RATE
---------------    ------------  ---------------------  ---------------    ---------------------

<S>                <C>           <C>                    <C>                <C>  
      $ 50,287        75,000     (a) May 15, 2000         Various          Prime   +  2.0-2.25%
         3,434        15,000     (b) January 31, 1999     Various          Prime   +  2.0%
        11,833        15,000     (c) February 28, 1999    Various          LIBOR   +  4.0-4.25%
         6,307        15,000     (c) May 1, 1999          Various          LIBOR   +  4.0-4.25%
         4,436        10,000     (d) August 1, 2000       August 1, 2003   Prime   +  2.0-2.25%
         6,503         7,500     (e) January 31, 1999     Various          Prime   +  2.0-3.00%
</TABLE>
---------------                

(a)     Restrictions include PEC's requirement to maintain a minimum tangible
        net worth of $20 million with such amount increasing each fiscal quarter
        after August 31, 1997 by an amount equal to 50% of PEC's consolidated
        net income for each quarter up to a maximum requirement of $25 million.
        At November 30, 1998, $32.8 million was outstanding related to
        financings at prime +2%, of which $24.4 million of loans secured by land
        receivables mature May 15, 2010 and $8.4 million of loans secured by
        timeshare receivables mature May 15, 2007. The outstanding borrowing
        amount includes $.8 million in acquisition and development (A&D)
        financing maturing May 20, 1999, $6.4 million maturing July 1, 2003 for
        the financing of corporate office buildings, both of which are
        amortizing loans, and a real estate loan with an outstanding balance of
        $1.2 million maturing March 20, 1999 all bearing interest at prime +
        2.25%. The remaining A&D loans, receivables loans and a resort lobby
        loan outstanding of $9.0 million are at prime +2% and mature at various
        dates through February 28, 2001.

(b)     Restrictions include PEC's requirement to maintain a minimum tangible
        net worth of $25 million during the life of the loan. These credit lines
        include available financing for A&D and receivables. At November 30,
        1998, $1.2 million was outstanding under the A&D loan maturing September
        1, 1999, and $2.2 million maturing June 1, 2002 was outstanding under
        the receivables loan. Management has obtained a verbal commitment from
        the lender that this revolving line of credit will be extended for a
        period of 18 months on substantially the same terms.

(c)     Restrictions include PEC's requirement to maintain a minimum tangible
        net worth of $17 million during the life of the loan. These credit lines
        include available financings for A&D and receivables. At November 30,
        1998, $4.4 million was outstanding under the A&D loans which have
        maturity dates of December 31, 2000 and June 30, 2001, and bears
        interest at the 90 day London Interbank Offering Rate (LIBOR) + 4.25%.
        The available receivable financings, of which $7.4 million was
        outstanding at November 30, 1998, is at 90 day LIBOR + 4% and has
        maturity dates of June 5, 2005 and August 5, 2005.

(d)     Restrictions include PEC's requirement to maintain a minimum tangible
        net worth of $25 million. This credit line is for the purpose of
        financing receivables and costs of remodeling.

(e)     Restrictions include PEC's requirement to maintain a minimum tangible
        net worth of $15 million. This credit line is for the purpose of
        financing receivables of which $2.5 million was outstanding at November
        30, 1998 in respect to receivable debt, and a real estate loan of $4.0
        million with a maturity date of August 31, 1999. The maturity date for
        the receivables debt is May 31, 2002. Management has obtained a verbal
        commitment from the lender that this revolving line of credit will be
        extended for a period of 18 months on substantially the same terms.

(f)     Revolving expiration dates represent the expiration of the revolving
        features of the lines of credit, at which time the credit lines become
        loans with fixed maturities. The Company is presently negotiating for
        extension of the revolving periods expiring in 1999.

        A schedule of the cash shortfall arising from recognized and
unrecognized sales for the periods indicated is set forth below (thousands of
dollars):



                                       13
<PAGE>   16

<TABLE>
<CAPTION>
                                                 FOR THE THREE MONTHS ENDED
                                                        NOVEMBER 30,
                                                ----------------------------
                                                    1998           1997
                                                ------------- --------------
<S>                                             <C>           <C>    
Marketing and sales expenses attributable to
  recognized and unrecognized sales               $ 8,996       $ 7,915
Less:  Down payments                               (2,732)       (3,116)
                                                  -------       -------
Cash shortfall                                    $ 6,264       $ 4,799
                                                  =======       =======
</TABLE>

        During the three months ended November 30, 1998 and November 30, 1997,
PEC did not sell any notes receivable.

        PEC sells notes receivable subject to recourse provisions as contained
in each agreement. PEC is obligated under these agreements to replace or
repurchase accounts that become over 90 days delinquent or are otherwise subject
to replacement or repurchase in either cash or receivables generally at the
option of the purchaser. At November 30, 1998, PEC was contingently liable to
replace or repurchase notes receivable sold with recourse totaling $67.8
million. The repurchase provisions provide for substitution of receivables as
recourse for $49.9 million of sold notes receivable and cash payments for
repurchase relating to $17.9 million of sold notes receivable. At November 30,
1998 and 1997, the undiscounted amounts of the recourse obligations on such
notes receivable were $7.2 million and $7.9 million, respectively. PEC
periodically reviews the adequacy of this liability. These reviews take into
consideration changes in the nature and level of the portfolio, current and
future economic conditions which may affect the obligors' ability to pay,
changes in collateral values, estimated value of inventory that may be
reacquired and overall portfolio quality.

        The components of the Company's debt, including lines of credit consist
of the following (thousands of dollars):

<TABLE>
<CAPTION>
                                                      NOVEMBER 30,    AUGUST 31,
                                                         1998           1998
                                                     -------------  ------------
<S>                                                  <C>            <C>    
Notes collateralized by receivables                     $47,610      $42,793
Mortgages collateralized by real estate properties       37,698       37,393
Installment contracts and other notes payable             1,713        1,800
                                                        -------      -------
        Total                                           $87,021      $81,986
                                                        =======      =======
</TABLE>

FINANCIAL CONDITION

November 30, 1998 Compared to August 31, 1998

        Cash and cash equivalents increased 26.5% to $2.3 million at November
30, 1998 from $1.8 million at August 31, 1998.

        Notes receivable, net, increased 9.2% to $52.2 million at November 30,
1998 from $47.8 million at August 31, 1998 primarily as a result of new
receivables added exceeding reductions while no receivable sales occurred during
the three months ended November 30, 1998.

        Changes in the aggregate of the allowance for cancellations, excluding
discounts, and the reserve for notes receivable sold with recourse for the three
months ended November 30, 1998 consists of the following (thousands of dollars):



                                       14
<PAGE>   17

<TABLE>
<S>                                                               <C>         
Balance at beginning of period                                    $18,488
  Provision for cancellations                                       1,183
  Amounts charged to allowance for cancellations and
    reserve for notes receivable sold with recourse                (1,085)
                                                                  -------
Balance at end of period                                          $18,586
                                                                  =======
</TABLE>

        The allowance for cancellations and the reserve for notes receivable
sold with recourse consisted of the following at these dates (thousands of
dollars):

<TABLE>
<CAPTION>
                                                        NOVEMBER 30,      AUGUST 31,
                                                           1998              1998
                                                       -------------     -----------
<S>                                                    <C>               <C>    
Allowance for cancellations, excluding discounts          $12,578          $11,868
Reserve for notes receivable sold with recourse             6,008            6,620
                                                          -------          -------
  Total                                                   $18,586          $18,488
                                                          =======          =======
</TABLE>

        Timeshare and land sales, net, increased to $12.5 million for the three
months ended November 30, 1998 from $11.9 million for the three months ended
November 30, 1997.

        Statement of Financial Accounting Standard (SFAS) No. 125 (SFAS 125)
requires the reclassification of excess servicing rights as interest only
receivables which are carried at fair market value. Interest only receivables
decreased 4.0% to $3.2 million at November 30, 1998 from $3.4 million at August
31, 1998 due to normal amortization.

        Notes and contracts payable increased 6.1% to $87.0 million at November
30, 1998 from $82.0 million at August 31, 1998 due to decreased paydowns of debt
with proceeds from receivable sales and borrowings on newly generated
receivables during the three months ended November 30, 1998.

        Reserve for notes receivable sold with recourse decreased 9.2% to $6.0
million at November 30, 1998 from $6.6 million at August 31, 1998 due to
paydowns on existing sold loans and no receivable sales occurring during the
period. Recourse to PEC on sales of notes receivable is governed by the
agreements between the purchasers and PEC.

        Accrued income taxes decreased 11.5% to $4.0 million at November 30,
1998 from $4.5 million at August 31, 1998. The changes in certain income tax
liability reserves are a result of facts and circumstances determined in an
extensive review and analysis of the Company's federal income tax liability
completed during fiscal 1997.

        Stockholders' equity decreased 3.6% to $19.9 million at November 30,
1998 from $20.7 million at August 31, 1998.



YEAR 2000 COMPLIANCE

        The status of the Year 2000 compliance issue is substantially the same
as reported in the Company's 1998 Form 10-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        There was no material change for the quarter ended November 30, 1998 in
the information about the Company's "Quantitative and Qualitative Disclosures
About Market Risk" as disclosed in Form 10-K for the fiscal year ended August
31, 1998.



                                       15
<PAGE>   18

PART II  OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

        Except as hereinafter set forth, there has been no material change in
the status of the litigation reported in the Company's Annual Report on Form
10-K for the year ended August 31, 1998.

        As previously reported in the Company's 1998 Form 10-K, on August 27,
1998, an action was filed by Robert and Jocelyn Henry, husband and wife
individually and on behalf of all others similarly situated. On December 17,
1998, counsel for the plaintiffs filed an amended class action complaint which
was served on PEC on December 21, 1998. The amended complaint added a defendant
and two plaintiffs, and in addition to the allegations set forth in the above
referenced Form 10-K, alleges a pattern of fraud in PEC's general lot sales
program including the inability to deliver utility services. The Company
believes it has substantial defenses to the Amended Complaint. Although the
Company presently cannot predict the outcome of this matter, it does not believe
that this matter will have a material adverse affect on the Company's or PEC's
business or financial condition.

        In the general course of business the Company, at various times, has
been named in other lawsuits. The Company believes that it has meritorious
defenses to these lawsuits and that resolution of these matters will not have a
material adverse affect on the business or financial condition of the Company.

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

(a) The Annual Meeting of Shareholders ("Meeting") of the Company was held on
    September 16, 1998.

(b) Not applicable because:

        (i) Proxies for the Meeting were solicited pursuant to Regulation 14
under the Securities Exchange Act of 1934.

        (ii) There was no solicitation in opposition to management's nominees as
listed in the Company's proxy statement dated August 25, 1998; and

        (iii) All such nominees were elected.

(c) The matters voted on at the Meeting consisted of the following:

        (i) The election of six members to the Company's Board of Directors. The
name of each nominee for election and the number of shares voted for and against
such nominee, are set forth below:

<TABLE>
<CAPTION>
-----------------------    -------------    --------------
       NAME                     FOR              AGAINST
-----------------------    -------------    --------------
<S>                           <C>                <C>    
Robert Nederlander            16,849,183         142,979
Jerome J. Cohen               16,849,108         143,054
Herbert B. Hirsch             16,849,193         142,969
Eugene I. Schuster            16,849,293         142,869
Wilbur L. Ross, Jr            16,849,283         142,879
John E. McConnaughy, Jr       16,849,283         142,879
</TABLE>
 


                                       16
<PAGE>   19

        (ii) A proposal to approve the Company's Amended and Restated Stock
Option Plan. 16,107,114 shares were voted in favor of such proposal, 880,227
shares were voted against the proposal and 4,821 shares abstained from voting on
such proposal.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>
       EXHIBIT                                        
       NUMBER                         DESCRIPTION
       -------                        -----------
<S>               <C>                                                              
        10.150    Amended and Restated and Consolidated Loan and Security
                  Agreement between Finova and PEC & Mego Financial dated
                  December 23, 1998.

        10.151    Common Stock Purchase Warrant issued by Mego Financial to
                  Finova Capital Corporation dated December 23, 1998.

        27.1      Financial Data Schedule (for SEC use only).

</TABLE>

No reports on Form 8-K were filed during the period.



                                       17
<PAGE>   20

                                    SIGNATURE


Pursuant to the requirements 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.


                                        MEGO FINANCIAL CORP.


                                        By: /s/ Charles G. Baltuskonis
                                           -------------------------------------
                                           Charles G. Baltuskonis
                                           Vice President and Chief Accounting
                                           Officer






Date: January 14, 1999



                                       18
<PAGE>   21

                                    SIGNATURE


Pursuant to the requirements 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.


                                        MEGO FINANCIAL CORP.


                                        By:
                                            ------------------------------------
                                            Charles G. Baltuskonis
                                            Vice President and Chief Accounting
                                            Officer






Date: January ___, 1999



                                       20