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

                                   FORM 10-KSB

          [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIE
                              EXCHANGE ACT OF 1934

                      For the year ended December 31, 1999

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

                         Commission file number 0-24940
                                     -------
                        Pioneer Commercial Funding Corp.
                 (Name of small business issuer in its charter)

 New York                                   13-3763437
(State or other jurisdiction
 of incorporation or organization)     (I.R.S. Employer Identification No.)

                One Rockefeller Plaza, Suite 2412, New York, N.Y.  10020
                    (Address of principal executive offices)      (Zip Code)

                    Issuer's telephone number (212) 218-1850
                                 ----- --------

Title of each class                    Name of each exchange on which registered

-------------------                     ----------------------------------

Securities registered under Section 12(g) of the Exchange Act:

 Common Stock                                (Title of Class)
 Warrants                                   (Title of class)


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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


<PAGE>



Check if there is no 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.

State issuer's revenues for its most recent fiscal year $2,089,286.  As of March
29, 2000, there were 2,771,136 shares of the Registrant's common stock, $.01 par
value,  issued and outstanding of which 1,070,045 held by  non-affiliates of the
Issuer.  Based on the closing price for shares of common stock on that date, the
aggregate market value of the common stock held by  non-affiliates of the Issuer
was approximately  $668,778. For purposes of the foregoing calculation only, all
directors and executive officers of the Issuers have been deemed affiliates.

(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Check  whether the issuer has filed all  documents  and  reports  required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the  distribution  of
securities under a plan confirmed by a court.

Yes_____ No _____

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

State the number of shares outstanding of each of the Issuer's classes of common
equity,  as of the  latest  practicable  date.  As of March 29,  2000 there were
2,771,136 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The following exhibits are incorporated by reference to the Registrant's  Annual
Report  on Form  10KSB  filed for the year  ended  December  31,  1999 or to the
Company's Registration Statement on Form SB-2, Registration No. 33-82838 NY.

Exhibit Number Description

3.1 Certificate of Incorporation

3.2 Certificate of Amendment of the Company's Certificate of Incorporation

3.3 Certificate of Amendment of Certificat of Incorporation of the Company

3.4 By-Laws of the Company

10.1 Credit Agreement between Bank One, Texas, N.A. and the Company

10.3 The Company's Non-Qualified Stock Option Plan





<PAGE>
                                     PART I


Item 1. Description of the Business.

General

Pioneer Commercial Funding Corp. ("Pioneer" or the "Company") was engaged in the
business of a mortgage  warehouse lender providing  short-term  (generally 10-90
days per loan)  financing  to small and medium sized  mortgage  bankers who hold
("warehouse")  mortgage loans which they originate  pending the nonrecourse sale
of such loans to  institutional  investor  agencies  in the  secondary  mortgage
market  such as the  Government  National  Mortgage  Association  ("GNMA"),  the
Federal  National  Mortgage  Association  ("FNMA"),  and the  Federal  Home Loan
Mortgage  Corporation  ("FHLMC");  each one  referred to herein as an  "Agency")
and/or  accredited  financial  institutions  such as banks,  thrifts,  insurance
carriers and large mortgage bankers (each one and each Agency referred to herein
as a "Financial Institution").

Pursuant  to an Asset  Purchase  Agreement  dated  July 30,  1999  with  Princap
Mortgage Warehouse, Inc., a California corporation, with its principal office at
23550 Hawthorne Boulevard,  Torrance, California ("PMW") the Company has sold to
PMW all of its  equipment,  furniture  and  other  physical  assets,  all of its
computer operating systems,  for the sum of $800,000.  PMW also had the right to
purchase any or all of the customer  accounts of the Company for an amount equal
to the aggregate  outstanding  principal balance and all accrued but unpaid fees
and interest on such  accounts as of the Closing.  The Company will continue its
collection  activities with respect to those accounts which are not purchased by
PMW. The Company's shareholders approved the sale on September 21, 1999.

Management of the Company  determined  that the Company did not meet the revenue
objectives  for its mortgage  warehouse  lending  business as it was not able to
procure  credit  lines and did not expect  the  Company to be able to meet these
objectives in the foreseeable  future. The Company therefore decided to sell its
hard assets and explore other business opportunities.

The Company  found that the present  comparatively  high cost to it for borrowed
funds and the inability to borrow enough funds to create a sufficient  volume of
loan  transactions  resulted  in rates of  return  and total  returns  that were
unacceptable  in  relation  to the  degree of risk  inherent  in  lending in the
secondary market.

The high  cost to the  Company  for  available  borrowed  mone is due,  in large
measure, to the fact that, unlike its competitors which are, generally,  banking
institutions or their  affiliates,  it was required to borrow funds at the Prime
Rate of interest rather than at LIBOR base. This difference  often meant as much
as a 2% difference in the borrowing rates, thereby having a significant negative
effect on the margins for each loan  transaction.  In addition,  unlike  banking
institutions,  which  could  generally  obtain  borrowed  funds  at up to ten to
fifteen times their capital,  the Company was only able to borrow  approximately
six times its  capital.  This  resulted in less funds  available  to make loans;
therefore,  the volume of  transactions  and the  resulting  revenues  have been
significantly  lower  than  that  which  could  be  achieved  by  the  Company's
competitors.  This problem was  significantly  exacerbated by a situation  which
arose in October  and  November,  1997 in which the  Company  was unable to gain
access to over $1.7  Million of its own funds.  This matter is the subject of an
ongoing litigation in the Philadelphia Court of Common Pleas,

                                                            3

<PAGE>
entitled Pioneer  Commercial  Funding  Corporation and Banc One, Texas,  N.A. v.
American Financial  Mortgage  Corporation,  Thomas F. Flately,  Norwest Funding,
Inc. and Corestates Bank, N.A. (No. 0885, April Term, 1998) in which the Company
has alleged that the defendants  have  wrongfully  diverted  approximately  $1.7
Million belonging to the Company, representing amounts due for loans made by the
Company to a company in the business of originating  residential mortgage loans.
The unavailability of these funds has further  significantly  contributed to the
Company's  inability to generate a  sufficient  volume of loan  transactions  by
decreasing  its  borrowing  abilities,  and the rate at  which it could  borrow,
thereby severely affecting the Company's ability to generate sufficient revenues
to make its business  economically  viable.  The  defendants in this matter have
denied all material allegations of the Company's complaint. The Company makes no
representation  regarding the likelihood of prevailing in this litigation  These
high costs of obtaining funds and the difficulty in obtaining adequate levels of
funding  have  resulted in a much slower  development  for the Company  than was
originally anticipated.

The high cost of borrowed funds and the low volume of transactions  has made the
mortgage  warehouse  lending  business  unattractive  in  relation  to the risks
inherent in this  business.  Since the loans are in the  secondary  market,  the
source  for  recovery  on the loans is  frequently  limited  to the value of the
underlying  property.  This  leads to greater  risk of  recovery  on a loan.  In
addition,  since the Company acts as an intermediary as a warehouse  lender,  it
does not receive all the information  necessary to fully assess the risk of each
loan transaction; therefore, the risk of lending is greater.

Based on these factors,  Management  decided that the Company's  assets would be
more efficiently  utilized in investment in other  businesses;  however no other
businesses have been identified at this time.

As a result of the sale,  the  Company  no longer  has any  continuing  business
operation  other than  winding up of its  operations.  The Company is seeking to
engage in other business ventures,  but there can be no assurance as to when, or
if, an economically  viable business can be acquired or continued  successfully.
Management is diligently seeking other opportunities for the Company.


The Company's Bank One, Texas, N.A. Line of Credit.

As of March 31, 1997, the Company  entered into a one yea credit  agreement (the
"Credit  Agreement")  with Bank One, Texas,  N.A. ("Bank One").  Pursuant to the
Credit  Agreement,  Bank One provided the Company with a  $25,000,000  revolving
line of credit (the "Bank One Credit  Line") and the Company  paid fees  ranging
from $17.50 to $12.50 per loan based on monthly loan volume. In addition,  based
on the type of the loan,  the Company pays interest on advances made by Bank One
at a variable  rate  ranging from 1/8% below to 1/8% above Bank One's prime rate
of  interest  (the "Bank One Prime  Rate").  The Bank One Prime Rate is the rate
quoted  from  time  to time by the  Wall  Street  Journal  as the  base  rate on
corporate  loans at large U.S.  money center  commercial  banks . As  collateral
security  for its  indebtedness  to Bank One under  the  Credit  Agreement,  the
Company has granted to Bank One a security interest in various assets including,
but not limited to, all promissory notes acquired by the Company with respect to
any loan funded by the Company with proceeds of the Bank One Credit Line and all
mortgages or other forms of  collateral  securing the funding of such loans.  On
August  25,1997,  Bank One amended the credit  facility  that it provides to the
Company to $35,000,000.  On September 26,1997 and December 12, 1997 the facility
was increased to  $50,000,000  and  $60,000,000,  respectively.  On February 18,
1999,

                                                            4

<PAGE>
Bank One extended the Stated  Termination  date to April 30, 1999.  In addition,
Bank One amended the total  Principal  Debt of  Borrowings  so that it may never
exceed the lesser of either (a) a  $40,000,000  Commitment or (b) the sum of the
Borrowing  Base plus (i) through and including  February 28, 1999,  $15,000,000,
(ii)  thereafter  through  March 31,  1999,  $10,000,000,  and (iii)  thereafter
through  April 30,  1999,  $5,000,000.  This credit  facility  was  subsequently
extended to September 30, 1999. No further extension has been granted.


The Company's Mortgage Banking Company Customers

During  the  1999  fiscal  year,  the  Company  funded  1972  loans  aggregating
$164,256,735 with the three largest customers, which accounted for 49.2 % of its
total  fundings.  The Company funded 466 loans  aggregating  $28,715,350 for one
customer,  which  accounted  for  17.5% of the  Company's  fundings;  176  loans
aggregating  $28,108,730 for the second  customer,  which accounted for 17.1% of
the Company's  fundings;  and 275 loans aggregating  $23,970,531  funded for the
third customer, which accounted for 14.6% of the Company's fundings.

At December 31, 1999, the Company had no mortgage banking customers.

Mortgage Banking Operations

On April 16, 1997,  the Company  entered  into a joint  venture  agreement  with
Maryland  Financial  Corporation  ("MFC") to form Pioneer Home  Funding,  LLC, a
California  limited  liability  company  ("PHF").  The Company accounts for this
investment on the equity method. The agreement provides that the Company and MFC
would maintain a 80 percent and a 20 percent ownership  interest,  respectively.
An  amendment to the  agreement  was made on October 31,  1997.  This  amendment
provides that the Company would contribute  $40,000 for a 20 percent interest in
PHF. In addition, the Company may from time to time make loans to PHF as needed.
Under this  agreement  the Company  has the option to convert  loans made to PHF
into an 80 percent interest in PHF. For the year ended December 31, 1999 and the
year  ended  December  31,1998  the  Company  has  made  advances  to PHF and is
reflecting a receivable (included in other assets on the balance sheet) totaling
$294,345 and  $275,344,  respectively.  At December  31,  1999,  the Company has
recorded a reserve  aggregating  $294,345  against  this  receivable  due to the
financial condition of PHF.

Employees

At December  31, 1999 the Company  employed one  full-time  employee The Company
believes that its relations with its employee is good.

Item 2. Property

On October  17,1997,  the  Company  entered  into a ten year lease to rent 6,846
square feet on the sixteenth floor of an office building at 21700 Oxnard Street,
Woodland Hills,  California.  The monthly base rent during year one through five
is $13,692 and for years six  through  ten is $15,745.  This space was sublet to
PMW through January 31,2000 at the same rental.  The Company is negotiating with
the landlord to relinquish or sublease the space.


                                                            5

<PAGE>
Item 3. Legal Proceedings.

During October 1997 the Company  warehoused  mortgages for a customer who used a
third party conduit, American Financial Mortgage Corporation,  to sell its loans
to an investor,  Norwest Funding,  Inc. The Company provided instructions to the
third  party  conduit  that the funds  were to be wired by the  investor  to the
Company's  bank.  The  investor  mis-wired  approximately  $1.7  Million  to the
conduit's bank,  Corestates  Bank, N.A. the conduit's bank has refused to return
the funds.  The Company  commenced  legal action,  to collect the funds from the
conduit,  the  conduit's  guarantor,  the investor and the conduit's  bank.  The
Company's  lender,  Bank One Texas, N.A. ("Bank One"), has joined the litigation
as a co-plaintiff in support of the Company's position.  In addition the company
has a $5 million  personal  guarantee  from the third  party  conduit's  primary
shareholder and an additional $2 million  guarantee from the customer's  primary
shareholder. Although it is impossible to determine the ultimate outcome of this
matter, management believes that it will recover the funds as well as claims for
destruction of business. The trial is expected to take place in May,2000.


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

None.

                                     PART II

Item 5. Market for Common Stock and Related Stockholder Matters.

The Common  Stock issued by the Company in  connection  wit the IPO is listed on
the Bulletin Board under the symbol "PCFC". The following table sets forth below
the high and low sale prices for the Common Stock for the periods indicated:

Quarter Ended           High         Low

March 31, 1998         $ 2.6875      $ 1.75
June 30, 1998          $ 3.25        $ 1.875
September 30, 1998     $2.4375       $ 1.25
December  31, 1998     $ 2.25        $ .25
March 31, 1999         $ 4.00        $ 0.75
June 30, 1999          $ 2.625       $ 1.00
September  30, 1999    $ 1.937       $ 1.00
December 31, 1999      $0.625        $ 0.50

As of December 31, 1999, there were 23 record holders of the Common Stock.

Dividend Policy and Restrictions on Payment of Dividends.

The Company has never paid cash dividends on its Common Stock. Furthermore,  the
provisions  of  the  plan  of  reorganization  (the  "POR")  pertaining  to  the
Predecessor's emergence from bankruptcy

                                                            6

<PAGE>
prohibit the Company from paying any dividends to its common  shareholders until
the sum of $1,350,000 shall have been paid to the  Predecessor's  pre-bankruptcy
unsecured  creditors.  As of  December  31,  1999,  no payment to the  unsecured
creditors has been made.  Further,  in accordance  with the POR, the Predecessor
became  obligated to pay certain  portions of its net income in  satisfaction of
said payment  obligation to its pre-bankruptcy  creditors.  Upon consummation of
the Merger,  the Company became  obligated,  by operation of law, to comply with
such payment obligation and dividend payment prohibition,  among other operating
restrictions.  The Company  does not  anticipate  paying cash  dividends  on the
Common Stock in the  foreseeable  future as it intends to retain future earnings
to finance the growth of the business.  The payment of future cash  dividends on
the Common  Stock will depend on such  factors as earnings  levels,  anticipated
capital  requirements,  the operating and financial condition of the Company and
other factors deemed relevant by the Board of Directors.

Item 6. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

When used in this Form  10-KSB  and in future  filings by the  Company  with the
Securities  and Exchange  Commission,  the words or phrases "will likely result"
and "the company  expects,"  "will  continue,"  "is  anticipated,"  "estimated,"
"project,"   "outlook"   or  similar   expressions   are  intended  to  identify
"forward-looking  statements." Pioneer Commercial Funding Corp wishes to caution
readers not to place undue reliance on any such forward-looking statements, each
of which speak only as of the date made.  Such statements are subject to certain
risks and  uncertainties  that could cause actual  results to differ  materially
from  historical  earnings and those  presently  anticipated  or projected.  The
Company has no obligation to publicly release the result of any revisions, which
may be made  to any  forward-  looking  statements  to  reflect  anticipated  or
unanticipated  events  or  circumstances   occurring  after  the  date  of  such
statements.

General

The Company commenced active operations on June 14, 1993 following its emergence
from  Chapter  11  bankruptcy  proceedings.  The  Company  did not engage in any
substantial  mortgage warehouse lending activities from the time it emerged from
bankruptcy  through  March 31, 1997.  During the nine months ended  December 31,
1997 the Company  significantly  increased its financing  facility and began the
process of  evaluating  many new customer  relationships.  On March 31, 1997 the
Company entered into a credit  agreement with Bank One. On August 25, 1997, Bank
One amended the credit  facility that it provided to the Company to $35,000,000.
On  September  26,  1997  and  December  12,  1997  the  facility  increased  to
$50,000,000  and  $60,000,000,  respectively.  The line of credit was reduced to
$50,000,000  on  October 1, 1998 and  $40,000,000  on October  30,  1998.  As of
August,  1999 the Company  sold its assets  constituting  its  mortgage  lending
business and as a result, the Company does not have any operations at this time.
The Company is seeking other business opportunities.

As of December 31, 1998,  the Company had 39 customers an had funded 7,569 loans
with an aggregate value of $470 million.

As of December 31, 1999,  the Company had no customers an funded 1972 Loans with
an aggregate value of $164,256,735. The Company is in the process of liquidating
such loans.

                                                            7

<PAGE>
Results of Operation for Year Ended  December 31, 1999 Compared t the Year Ended
December 31, 1998.

                  Revenues: The Company's revenues decreased from $6,414,161 for
the year ended  December 31, 1998 to $2,089,286  for the year ended December 31,
1999. This decrease is  attributable to the Company's  winding down its mortgage
business.  Processing fees decreased from $1,752,390 for the year ended December
31, 1998 to $476,743 for the year ended December 31, 1999.  Part of the decrease
in  loan  volume  is  the  interest  component  of  revenues  (interest  charged
customers).  Interest  revenue  decreased  from  $4,424,386  for the year  ended
December 31, 1998 to $1,553,085 for the year ended December 31, 1998.

Interest and Fee Costs: The Company's direct costs consist of interest and other
charges  that it pays to its  revolving  credit  line  provider.  The  Company's
interest and fee charge for the year ended  December 31, 1999 was  $1,563,837 as
compared to $3,991,137  for the year ended  December 31, 1998.  This decrease is
attributable to the decrease in loan funding volume during 1999.

Loan Loss  Provision:  The  $2,442,899  loan loss  provision  for the year ended
December 31, 1999 and $1,016,450 loan loss provision for the year ended December
31, 1998 were due to the  recognition  of a discount on the sale of loans during
the years  and the  accrual  of a reserve  for  estimated  losses on the  future
disposition  of  loans  held  for  sale,   mortgage   warehouse  loans  and  for
uncollectible  interest and fees receivable.  Management  estimates that certain
other  uncommitted  mortgage  warehouse loans  belonging to customers  described
above may be sold at discounts  significant  enough that those  customers may be
unable  to cover  the  shortage  and pay all of the  accrued  interest  and fees
thereon.  Accordingly,  an estimate for these future  potential  losses has also
been established.

Other Operating  Expenses:  Other operating expenses increased to $2,670,122 for
the year ended December 31, 1999 from $2,597,223 for the year ended December 31,
1998.  Compensation  and benefits  decreased from  $1,055,972 for the year ended
December  31, 1998 to $850,435  for the year ended  December 31, 1999 due to the
reduction of employees after the decision to exit the mortgage  business.  It is
the Company's  intention to dramatically  reduce operating costs during the wind
down of operations.

Depreciation expense decreased from $202,530 for the yea ended December 31, 1998
to $144,508  for the year ended  December  31, 1999 due to the sale of all fixed
assets in 1999  (See  Note A of Notes to  Financial  Statements).  Fixed  assets
decreased from  $1,384,179 to $-0- and net fixed assets  decreased from $732,796
to $-0- at December 31, 1999 from December 31, 1998.

Professional  fees,  which  include  accounting,   legal  fees  and  consulting,
increased to $1,038,257  for the year ended  December 31, 1999 from $322,075 for
the year ended  December 31, 1998  primarily due to the  additional  legal costs
attendant to the  lawsuit,  more fully  described in Item 3, against  Corestates
Bank, N.A., American Financial Mortgage Corporation and Norwest Funding, Inc.

Rent expense  decreased  from  $210,591 for the year ended  December 31, 1998 to
$148,840  for the  year  ended  December  31,  1999 due to the  sublease  of the
Woodland Hills, California office to the acquirer of the Company's fixed assets,
with a $13,692 base monthly rent after September 1999.

                                                            8

<PAGE>
Net Loss:

The Company  incurred a net loss of $4,445,262  including loan loss provision of
$2,442,899,  for the  year  ended  December  31,  1999  compared  to net loss of
$1,158,753  including  loan loss  provision  of  $1,016,450  for the year  ended
December 31, 1998. The exiting of the mortgage business, and increased loan loss
reserves negatively effected the 1999 operations.

Cash Flows:

Operating Activities:  In spite of a $4,445,262 loss for the year ended December
31, 1999, the Company generated $28.6 million of cash from operating  activities
as a result of a reduction in warehouse  mortgages  receivable of $29.9 million.
In the year ended December 31, 1998 the Company  generated  $14.7 million due to
decreases of $12.1 million of mortgage warehouse loans and $3.6 million of loans
held for resale.

Investing Activities: In 1999, the Company invested $113,773 in fixed assets and
subsequently  sold all of its fixed assets and recorded net proceeds on the sale
of $792,638.

Financing  Activities:  In 1999,  $28.7  million  was used t reduce  short  term
borrowings on the Company's line of credit compared to a $16.7 million reduction
in short term line of credit borrowings in 1998. In 1998,  $726,000 and $241,000
was generated by the issuance of subordinated  debt and common stock compared to
the repayment of $100,000 of subordinated debt in 1999.


<PAGE>
Liquidity and Capital Resources:

Bank One has not renewed the  revolving  line of credit with the Company,  which
was previously  extended to September 30, 1999. In 1999,  the Company's  primary
sources of capital, which it employed in its warehouse lending operations,  were
borrowings  under its Bank One line of credit and $1.7  million in  subordinated
debt.

Item 7. Financial Statements

See pages F-1 to F-20


Item 8. Changes in and Disagreements with Accountants o Accounting and Financial
Disclosure.

None



                                    PART III

Item 9. Directors, Executive Officers and Control Persons.

Executive Officers and Directors

The executive officers and directors of the Company are as follows:

Name               Age           Position

Boaz Harel......... 36           Chairman of the Board, Director

M. Albert Nissim... 66           President, Director

David W. Sass...... 64           Secretary

Richard Fried...... 53           Director

Tamar Lieber....... 57           Director

Lynda Davey........ 45           Director

Joseph Samuels..... 69           Director

                                                            12

<PAGE>
Boaz Harel was  appointed to the Board in November  1996 and elected as Chairman
of the Board on July 2, 1997.  From 1991 to 1993,  Mr. Harel was the founder and
managing  director of Mashik  Business  and  Development  Ltd.,  an  engineering
consulting company.  From 1993 to 1997, Mr. Harel has been the Managing Director
of Leedan Business Enterprise Ltd. ("Leedan"),  a publicly-held  Israeli company
which  is the  beneficial  owner of 58% of the  Company's  Common  Stock.  Since
January 1994, Mr. Harel has served as a member of the Supervisory  Board of ICTS
International  N.V.  and since  September  1996,  Mr.  Harel  has  served as the
Chairman of ICTS USA (1994),  Inc., an indirect subsidiary of Leedan. Since 1997
Mr. Harel has been Co-Managing Director of Leedan International Holdings B.V., a
principal shareholder of the Company and an indirect wholly-owned  subsidiary of
Leedan.

M. Albert  Nissim was  appointed as the President of the Company in January 1997
and was elected to the Board on September  25, 1997.  He has served as Secretary
of ICTS  International  N.V.  since January 1996.  Mr. Nissim has also served as
President of ICTS USA (1994),  Inc.  since January  1994.  From 1994 to 1995, he
served as Managing Director of ICTS  International B.V. Mr. Nissim served as the
President of Harel & Partners  from 1991 to 1994.  From 1990 to the present,  he
has been the Vice  President  and a  director  of  Tuffy  Associates  Corp.,  an
automotive repair franchise company  affiliated with Mr. Ezra Harel, the brother
of Boaz Harel. Mr. Nissim is also a Co-Managing Director of Leedan International
Holdings B.V., a principal shareholder of the Company. In April 1997, Mr. Nissim
was  appointed  as one of the  Company's  designees on the Board of Directors of
Pioneer Home Funding, L.L.C., a subsidiary of the Company.

David W. Sass has been a Director  since  April,  1998 and has been a practicing
attorney  in New  York  City for the past 38  years  and is  currently  a senior
partner in the law firm of McLaughlin & Stern,  LLP,  securities  counsel to the
Company.  Mr.  Sass is also a director of Pallet  Management  Systems,  Inc.,  a
company  engaged  in the  manufacture  and  repair of wooden  pallets  and other
packaging  services  and a director of  BarPoint.Com,  Inc. a company  that will
operate a patent  pending  search  engine and  software  technology  that allows
consumers  to search for product  specific  information  on the  Internet  and a
member and Vice  Chairman of the Board of Trustees of Ithaca  College.  Mr. Sass
earned a B.A. from Ithaca College,  a J.D. from Temple  University School of Law
and an L.L.M. (in taxation) from New York University School of Law.

Richard  Fried was  appointed  to the  Predecessor's  Board i February  1994 and
served as Vice- President of the Predecessor. Upon consummation of the Merger in
November  1994,  he became a director of the Company.  Since June 1991 Mr. Fried
has served as  President  of Medical  Systems,  Inc.,  an  application  software
development company, of which he has been a principal shareholder. From February
1993, he has served as President of Montgomery  Associates,  Inc., a corporation
wholly-owned by him, which is engaged in business as an importer-exporter. Since
April  1993,  Mr.  Fried has been a  principal  shareholder,  and has  served as
President,  of Sea Change Systems,  Inc., a software tools development  company.
From April 1993 to May 1994, he was a Branch Manager of LPL Financial  Services,
a stock brokerage firm,  which is an NASD member firm.  Since November 1994, Mr.
Fried  has  been a  controlling  shareholder  and has  served  as  President  of
SMARTpay, Inc., a collection service. From April 1995 he has served as President
of Centennial Systems, Inc., a software distribution,  sales and service firm of
which he is a principal shareholder. Since October 1996, Mr. Fried has been a

                                                            13

<PAGE>
controlling shareholder, and has served as President, of Leeward Software, Inc.,
an  application  software  developer.  From  October  1996 he has also served as
President  of  Windward  Software,   Inc.,  a  materials   management   software
intellectual property company of which he is also a principal shareholder.  From
December 1996 he has served as President of Strategic Reporting Systems, Inc., a
database report generation  software  development and distribution firm of which
he is a  principal  shareholder.  From April  1997,  he has  served as  managing
director  of  HYCOM  USA,  Inc.,  an  international   software  development  and
distribution company, of which he is a principal shareholder.

Tamar  Lieber  was  appointed  to the Board in June  1995.  Ms.  Lieber has been
engaged in practice  as a senior  psychotherapist  at the Center for  Preventive
Psychiatry in White Plains,  New York, a non-for profit  community mental health
clinic, for more than the past five years.

Lynda Davey was elected to the Board on September 25, 1997. Ms. Davey has served
as the President of Avalon Group, Ltd. And Chairman of Avalon Securities,  Ltd.,
private investment banking firms, since April, 1992. From April, 1988 throughout
1991 Ms. Davey was Managing  Director and head of investment  banking at Tribeca
Corporation,   a  New  York  merchant  bank.   Prior  to  1988,  Ms.  Davey  was
Vice-President  of the  Merchandise  and Retail Group in the  corporate  finance
department of Salomon Brothers Inc. Ms. Davey also serves as a director of Tuffy
Associates Corp. And the Center for Design  Innovation of the Fashion  Institute
of Technology. Ms. Davey is a registered architect.

Joseph  Samuels has served as a president and is the sole  shareholder of Fulton
Properties of Calif.  Inc., an investment  corporation  engaged in  acquisition,
development and management of real estate for more than the past five years. Mr.
Samuels has also served as President  and is the sole  shareholder  of Goldsboro
Properties Inc., a real estate holding corporation,  for more than the past five
years.


                                                            14

<PAGE>
Item 10. Executive Compensation.

The  following  table sets forth  compensation  awarded to, earned by or paid to
executives of the Company.  No executive  officer of the Company earned a salary
and bonus of more than $100,000 during the 1999 fiscal year.  During such fiscal
year,  the  Company  did  not  grant  any  restricted   stock  awards  or  stock
appreciation rights to any of its executives.
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>


                                                     Annual Compensation                         Awards
    Name and
 rincipal Position         Fiscal Year      Salary($)         Bonus($)          Other   Annual            Securities
                                                                                Compensation ($)          Underlying
                                                                                                            Option

Boaz Harel*                   1999          $100,000                                                       50,000
Chairman of                   1998(1)       $100,000         $15,000
the Board                     1997(2)       $25,000                                                         7,500


M. Albert Nissim**
President                  1999             $118,385
                           1998(1)          $118,654          $12,000                                      25,000
                           1997(2)          $54,000                                                        45,000

John O'Brien***
Chief Financial
 Officer                   1999             $122,083
                           1998(1)          $58,513

David W. Sass****          1999               $0
Secretary                  1998               $0

</TABLE>

* Commenced as Chairman on July 2, 1997.

** Commenced  service as  President of the Company in the fourth  quarter of the
1996 fiscal year.

*** Commenced  service as Chief  Financial  Officer in the second quarter of the
1998 fiscal year and terminated employment in September, 1999.

****  Commenced  service as Secretary  in the second  quarter of the 1998 fiscal
year.

(1)  For the Year Ending December 31, 1998
(2)  Nine Months ended December 31, 1997


Compensation of Directors.

The Directors of the Company  received cash  compensation of $300 per meeting in
his or her capacity as a director.


                                                       15

<PAGE>
Options Issued to Executives.

The table below sets forth  information  regarding  option  grants to  executive
officers and Directors of the Company.

<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>


                                 Number of                                      Exercise Price
Name                      Options Granted                  Per Share                Expiration Date


M. Albert Nissim(1)        25,000                                 $10.00                October, 2002
                           45,000                                 $ 4.50                February, 2002

Boaz Harel(1)              50,000                                 $4.750                 October, 2002
                            7,500                                 $2.250                 January, 2002

Richard Fried(1)           12,000                                $4.250                 October, 2002
                            7,500                                 $2.250                 January, 2002

Tamar Lieber(1)            12,000                                $ 4.250                October, 2002
                            7,500                                $ 2.250                January, 2002

Lynda Davey(1)             12,000                                $ 4.250                October, 2002

Joseph Samuels(1)          12,000                                $4.250                 October, 2002


</TABLE>

*Former officer and director.

(1) Options vested at the rate of 1/3rd each year.



Employment Agreements.

In July 1997,  the Company  extended  the  Employment  Agreement  with M. Albert
Nissim as President for an indefinite  period, on a part-time basis, at a salary
of $6,000  (amended to $9,500) per month.  The  Agreement  may be  terminated by
either  party on not less than 90 days prior  notice.  On May 12,  1998,  Albert
Nissim's  compensation was increased to $9,500 per month effective April 1, 1998
in consideration of his  contributions to the Company.  In addition,  Mr. Nissim
was awarded a $12,000 bonus payable in the second  quarter in  consideration  of
the Company's performance.



                                                        16

<PAGE>
Boaz and Leedan Agreement

The Company has approved a  compensation  plan for Mr. Boa Harel  and/or  Leedan
Business  Enterprises,  Ltd.  ("Leedan"),  the company which provides management
services to the Company by making Mr. Harel available to the Company.  Leedan is
also a  principal  shareholder  of the  Company.  The  plan  provides  aggregate
remuneration  to Mr.  Harel  and/or  Leedan of $100,000 per annum plus 5% of the
Company's net income  pre-tax above  $1,000,000  annually.  Leedan and Mr. Harel
will determine how such  compensation  will be divided  between them. On May 12,
1998 Boaz Harel was awarded a $15,000  bonus,  payable in the second  quarter in
consideration of the Company's performance.

Item 11. Security Ownership of Certain Beneficial Owners and Management

The  following  table sets forth the  holdings  of the Commo Stock as of March ,
2000 by each person or entity known to the Company to be the beneficial owner of
more than five percent (5%) of the outstanding shares of Common Stock and by (1)
each director and named executive  officer;  and (2) all directors and executive
officers as a group.
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>


                            Number of Shares          Percent
Name        Title          of Common Stock           of Class

ICTS International N.V.       150,000                 5.4%
Vertrekpassage 226
1118 AV Schiphol Airport
Holland

Lancer Partners L.P.          172,500                6.2%
200 Park Avenue, Ste 3900
New York, NY 10166

Leedan Business
  Enterprise Ltd.             1,188,068(1)           42.9%
("Leedan Business")
8 Shaul Hamelech Blvd.
Tel-Aviv 64733, Israel

Rogosin International B.V.      265,000(3)            9.5%
One Rockefeller Plaza,
Ste. 2412
New York, NY 10020






                                                            17

<PAGE>

                                    Number of Shares               Percent
Name                  Title          of Common Stock               of Class

Boaz Harel               Director      1,188,068(1)(2)              42.9%
1 Rockfeller Plaza
Suite 2412
New York, New York
 0020

M. Albert Nissim         President and      70,000(4)                  *
One Rockefeller Plaza    Director
Suite 2412
New York, NY

Tamar Lieber             Director          169,500(5)               5.8%
160 W. 66th Street
Apt. 49B
New York, NY 10023

Richard Fried            Director          25,523(5)                   *
33 Marian Road
Marblehead, MA 01945

Lynda Davey              Director           12,000(5)                 *
1375 Broadway
5th Floor
New York, NY 10018

Joseph Samuels           Director            12,000(5)                *
321 24th Street
Santa Monica, CA 90402

Directors and
Executive
Officers as a
group (6 persons)                            1,492,091(6)              53.8%

*        Less than 1%
</TABLE>

(1) Leedan  International  Holdings  B.V.,  which together with Leedan Systems &
Properties  Promotion  (1003)  Ltd.  Holds  48.2% of the issued and  outstanding
Common Stock of the Company,  is an indirect  wholly-owned  subsidiary of Leedan
Business.  Certain  members of the family of Mr. Boaz  Harel,  a director of the
Company,  collectively,  own  approximately  57.5% of the outstanding  shares of
Leedan Business.  Mr. Harel, owns approximately 17% of the outstanding shares of
Leedan  Business  and  disclaims  beneficial  ownership  of any  stock of Leedan
Business held by an other member of the Harel family.

(2) Does not  include  three year option for  50,000,  vesting  1/3rd each year,
exercisable  at $4.75  per  share  nor a three  year  option  for  7,500  shares
exercisable at $2.25 per share, vesting 1/3rd each year.

(3) An affiliate to Leedan Business  Enterprises Ltd. Shares were purchased in a
private transaction.

(4) Includes 45,000 shares of Common Stock  exercisable at $4.50 per share which
Mr.  Nissim has the right to acquire  within 60 days from the date  hereof  upon
exercise of an option  held by him and 25,000  option  exercisable  a $10.00 per
share at the rate of 1/3rd per year for three years.

(5) Includes 12,000 shares as part of a 3 year option,  exercisable at $4.25 per
share,  vesting  at the rate of 1/3rd per year for three  years as well as 7,500
shares as part of a three year option exercisable at $2.25 per share, vesting at
the rate of 1/3rd per year.

(6) Does not  include any options  referred  to in notes (2),  (3),  (4) and (5)
hereof.

                                                            18

<PAGE>
Item 12. Certain Relationships and Related Transactions Certain Transactions.

On November  18, 1998 a  settlement  was reached  with a guarantor of a mortgage
banking  customer's  defaulted line of credit.  The guarantor was also a company
stockholder.  Pursuant to the  settlement,  an entity  which is an  affiliate of
Leedan accepted  $530,000 of the  guarantor's  recognized debt to the Company in
exchange for the guarantor's shares in the Company. This entity paid the Company
$176,667 and issued two  installment  notes of $176,667 each with maturity dates
of August 23, 1999 and May 23, 2000, respectively.  These notes bear interest at
a rate of 8.25% per annum and are payable quarterly commencing three months from
the date of issuance which was November 23, 1998.

On November 18,  1998,  a settlement  was reached with a guarantor of a mortgage
banking  customer's  defaulted line of credit.  The guarantor was also a Company
stockholder.  Pursuant to the settlement,  Rogosin  Business  Enterprises  Ltd.,
accepted $530,000 of the guarantor's recognized debt to the Company in trade for
the guarantor's shares in the Company. Furthermore,  pursuant to the settlement,
the  guarantor  issued two  additional  notes in the amount of  $735,102  to the
Company.

Pursuant to the settlement as stated above,  the guaranto  issued to the Company
two  installment  notes in the amounts of $265,103 and  $470,000,  respectively.
These notes bear interest at a rate of 8.25% per annum and are payable quarterly
commencing  three months from  November  18,  1998,  the date of issuance of the
notes. Both notes mature November 18, 2000.

On  September  14,  1998  Joseph  Samuels,  a Director  of the  Company  and two
affiliates of Leedan Business  Enterprises  Ltd. loaned to the Company  $100,000
and $550,000 and $76,000,  respectively. The loan was in connection to the Ninth
Amendment to the Credit  Agreement with Bank One to authorize the infusion of an
aggregate of $726,000 in the form of the  Company's 11%  Subordinated  Debenture
for a term until a new lending facility is in place to replace Bank One.

On April 2,  1997 and April 4,  1997,  the  Company  issued  unsecured  loans of
$400,000 and $600,000,  respectively,  to Rogosin Converters, Inc., an affiliate
of the  Company.  Members of the family of Mr.  Boaz  Harel,  a director  of the
Company,  have an indirect controlling interest in Rogosin Converters,  Inc. The
loans  were  guaranteed  by Leedan  International  B.V.,  a  shareholder  of the
Company.  The  Company  earned  interest  of 12% per annum on the  loans,  which
interest was paid monthly.  The principal and accrued interest on the loans were
paid in full on June 20, 1997.


                                                        19

<PAGE>
Item 13. Exhibits & Reports on Form 8-K

(A) The Following financial statements are included in Part II, Item 7:

            Independent  Auditors' Report by Lazar,  Levine & Felix, LLP for the
            two years ended December 31, 1999

            Balance Sheets as of December 31, 1999 and 1998.

            Statements of Operations for the two years ended December 31, 1999.

            Statements of Comprehensive  Income for the two years ended December
            31, 1999.

            Statements of Stockholders'  Equity for the two years ended December
            31, 1999.

            Statements of Cash Flows for the two years ended December 31, 1999.

            Notes to Financial Statements.

            Schedules are omitted for the reason that they are not required, are
not  applicable,  or the  required  information  is  included  in the  financial
statements or notes thereto.

            (B) Reports on Form 8-K. Not applicable.

            (C)  Exhibits.  The  following  exhibits  are  filed  as part of the
Company's  report.  Where  such  filing is made by  incorporation  by  reference
(I/B/R) to a previously  filed statement or report,  such statement or report is
identified in parenthesis.

            Official Exhibit

Number      Description

[3.1] Certificate of Incorporation of the Company.

[3.2] Certificate of Amendment of the Company's Certificate of Incorporation.

[3.3] Certificate of Amendment of Certificate of Incorporation of the Company.

[3.4] By-Laws of the Company.

[10.1] Credit  Agreement  between Bank One, Texas,  N.A. and the Company,  dated
March 31, 1997.

11 Earnings Per Share

27 Financial Data Schedule


                                                        20

<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors
Pioneer Commercial Funding Corp.


We have audited the accompanying  balance sheets of Pioneer  Commercial  Funding
Corporation (a New York  corporation)  as of December 31, 1999 and 1998, and the
related  statements of operations,  changes in  stockholders'  equity,  and cash
flows  for  the  years  then  ended.   These   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these 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 financial  statements  referred to above present fairly, in
all material  respects,  the financial  position of Pioneer  Commercial  Funding
Corporation  as of December 31, 1999 and 1998, and the results of its operations
and its cash  flows for the years  then  ended,  in  conformity  with  generally
accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note C to the
financial  statements,  the  Company is  winding  down its'  mortgage  warehouse
lending  business.   The  Company  has  also  suffered   recurring  losses  from
operations.  These factors raise substantial doubt about its ability to continue
as a  going  concern.  Management's  plans  regarding  those  matters  also  are
described in Note C. The  financial  statements  do not include any  adjustments
that might result from the outcome of this uncertainty.



                                                     LAZAR LEVINE & FELIX LLP

New York, New York
March 27, 2000

                                      F-1
<PAGE>
                                         PIONEER COMMERCIAL FUNDING CORP.
                                                  BALANCE SHEETS
                                  FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

                                                    - ASSETS -
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                                                                                                        1999                1998
CURRENT ASSETS:
     Cash and cash equivalents                                                                       $  1,979,395       $ 1,503,788
     Mortgage warehouse loans receivable, net of allowance for loan losses                              1,572,550        33,640,202
     Loans held for resale, net of allowance for loan losses                                              236,179           705,479
     Receivable for loans shipped                                                                       1,716,969         1,716,969
     Accrued interest and fee receivable                                                                  208,256           825,340
     Notes receivable-current portion                                                                   1,067,696           176,667
     Prepaid and other current assets                                                                     138,688           180,503

TOAL CURRENT ASSETS                                                                                     6,919,733         38,748,948

FIXED ASSETS:
     Furniture and equipment                                                                              -                 634,376
     Proprietary computer software                                                                        -                 551,114
     Leasehold improvements                                                                                    -            198,689
                                                                                                                          1,384,179
     Less accumulated depreciation and amortization                                                            -            651,383
       Net fixed assets                                                                                        -            732,796

OTHER ASSETS:
     Investment securities available for sale                                                             108,750           318,750
     Notes receivable - noncurrent portion                                                                -                 911,770
     Other assets                                                                                         192,282           475,063
TOTAL ASSETS                                                                                         $  7,220,765       $41,187,327

                                                - LIABILITIES AND STOCKHOLDERS' EQUITY -

CURRENT LIABILITIES:
     Mortgage warehouse loans payable                                                                $  4,721,817       $33,384,925
     Accounts payable and accrued expenses                                                                152,131           213,646
     Accrued interest and fees                                                                            511,349           777,798
     Due to mortgage banking companies                                                                    -                 220,228
     Deferred loan fees                                                                                    29,000            29,000
     Deferred legal fees                                                                                   65,395            65,395
TOTAL CURRENT LIABILITIES                                                                               5,479,692        34,690,992
SUBORDINATED DEBT                                                                                       1,626,000         1,726,000
TOTAL LIABILITIES                                                                                       7,105,692        36,416,992


COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
     Common stock - $.01 par value;  authorized  20,000,000  shares;  2,771,134 shares
      issued and outstanding                                                                               27,712            27,712
     Additional paid-in capital                                                                        14,584,663        14,584,663
     Accumulated deficit                                                                              (14,381,052)       (9,935,790)
     Accumulated other comprehensive income (loss)                                                       (116,250)           93,750
TOTAL STOCKHOLDERS EQUITY                                                                                 115,073         4,770,335

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                           $  7,220,765      $ 41,187,327

   The accompanying notes are an integral part of these financial statements.

                                      F-2
<PAGE>
                                         PIONEER COMMERCIAL FUNDING CORP.
                                             STATEMENTS OF OPERATIONS
                                  FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998


                                                                                                        1999                1998
INCOME:
     Interest income                                                                                 $   1,553,085      $ 4,424,386
     Commissions and facility fees                                                                          59,458          237,385
     Processing fees                                                                                       476,743        1,752,390
TOTAL INCOME                                                                                             2,089,286        6,414,161

INTEREST AND FEE COSTS:
     Interest expense - warehouse and lines of credit                                                    1,470,003        3,762,591
     Bank charges and facility fees                                                                         59,228          141,042
     Bank processing fees                                                                                   34,606           87,504

TOTAL INTEREST AND FEES COSTS                                                                            1,563,837         3,991,137

NET INTEREST AND FEE INCOME                                                                                525,449         2,423,024

                                                                                                        (1,917,450)       1,406,574
OTHER OPERATING EXPENSES:
     Compensation and benefits                                                                             850,435        1,055,972
     Depreciation and amortization                                                                         144,508          202,530
     Professional fees                                                                                   1,038,257          322,075
     Loan administration charges                                                                           -                198,756
     Utilities                                                                                              27,954           46,448
     Rent                                                                                                  148,840          210,591
     Repairs and maintenance                                                                                 2,826           13,408
     Other                                                                                                 457,302          547,443

TOTAL OTHER OPERATING EXPENSES                                                                            2,670,122        2,597,223

LOSS FROM OPERATIONS                                                                                     (4,587,572)     (1,190,649)

OTHER INCOME AND (EXPENSE):
     Interest income - other                                                                                53,002           77,799
     Interest expense - other                                                                               (2,749)          (5,099)
     Miscellaneous income                                                                                    2,579               25
     Equity in loss of affiliate                                                                           -                (40,000)
     Gain from sale of fixed assets                                                                         90,577               -

TOTAL OTHER INCOME AND EXPENSE                                                                             143,409           32,725

LOSS BEFORE TAXES                                                                                       (4,444,163)      (1,157,924)

     Provision for taxes                                                                                 1,099                  829

NET LOSS                                                                                               $(4,445,262)     $(1,158,753)


BASIC AND DILUTED LOSS PER SHARE OF COMMON STOCK                                                     $       (1.60)       $   (.42)

WEIGHTED AVERAGE NUMBER OF SHARES                                                                        2,771,134        2,768,260

                                      F-3
<PAGE>
                        PIONEER COMMERCIAL FUNDING CORP.
                       STATEMENTS OF COMPREHENSIVE INCOME
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998



                                                                                                        1999                1998

NET LOSS                                                                                            $   (4,445,262)    $ (1,158,753)

     Change in unrealized gain on investment in securities available for sale                             (210,000)        (713,250)

COMPREHENSIVE NET LOSS                                                                              $   (4,655,262)    $ (1,872,003)







                                      F-4
<PAGE>
                        PIONEER COMMERCIAL FUNDING CORP.
                  STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998


                                                             Additional                                 Other              Total
                                             Common           Paid-In           Accumulated         Comprehensive      Stockholders'
                                             Stock            Capital             Deficit           Income (Loss)          Equity

Balance, December 31, 1997 as
  previously reported                      $  54,423        $   14,316,952    $    (8,777,037)      $    807,000       $  6,401,338

One  for  two   reverse   stock  split       (27,211)               27,211                 -                  -                  -
 effective June 29, 1999

Balance, December 31, 1997                    27,212           14,344,163        (8,777,037)             807,000          6,401,338

Issuance  of  50,000  shares of common          500              240,500           -                     -                  241,000
stock on January 21, 1998 converting
November 26, 1997 options

Change   in    unrealized    gain   on            -                -                 -                  (713,250)          (713,250)
 investment in securities available
 for sale

Net loss                                          -                     -          (1,158,753)                -          (1,158,753)

Balance, December 31, 1998                   27,712           14,584,663           (9,935,790)             93,750          4,770,335

Change   in    unrealized    gain   on            -         -                      -                     (210,000)        (210,000)
 investment in securities for sale

Net loss                                                                           (4,445,262)                -          (4,445,262)

Balance, December 31, 1999                 $  27,712        $   14,584,663    $   (14,381,052)      $   (116,250)      $    115,073



                                      F-5
<PAGE>
                        PIONEER COMMERCIAL FUNDING CORP.
                            STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998


                                                                                                       1999                 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                                                      $   (4,445,262)      $(1,158,753)
     Adjustments  to  reconcile  net  loss  to net  cash
 provided  by  (used  in)  operating activities:
        Depreciation and amortization                                                              144,508                  202,530
        Loan loss reserve and provision for bad debts                                              1,782,719                775,136
        Gain from sale of fixed assets                                                             (90,577)                    -
        Note receivable written off                                                                75,000                      -
        Equity in loss of affiliate                                                                -                         40,000
     (Increase) decrease in:
        Mortgage warehouse loans receivable                                                        29,935,861            12,070,883
        Loans held for resale                                                                      160,300                3,625,170
        Accrued interest receivable                                                                617,084                  105,316
        Prepaid expenses                                                                           41,815                   (80,596)
        Notes receivable                                                                           603,813
        Other assets                                                                               282,781                  (50,064)
     Increase (decrease) in:
        Accrued interest payable                                                                   (61,515)                (269,334)
        Due to mortgage banking companies                                                          (220,228)               (409,193)
        Accounts payable and accrued expenses                                                      (266,449)               (149,223)
          Net cash provided by operating activities                                              28,559,850              14,701,872

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of fixed assets                                                                      (113,773)               (380,537)
     Investment in and advances to joint ventures                                                  -                        (90,869)
     Net proceeds from sale of fixed assets                                                         792,638                   -
          Net cash provided by (used in) investing activities                                       678,865                (471,406)

CASH FLOWS FROM FINANCING ACTIVITIES:
     Net (decrease) in borrowings used in operations                                               (28,663,108)         (16,671,235)
     Increase in deferred expenses                                                                 -                          4,712
     Increase in subordinated debt                                                                 -                        726,000
     Payment of subordinated debt                                                                  (100,000)                   -
     Net proceeds from issuance of stock                                                                    -               241,000
          Net cash (used by) financing activities                                               (28,763,108)            (15,699,523)

NET INCREASE (DECREASE) IN CASH                                                                     475,607             (1,469,057)

    Cash and cash equivalents at the beginning of year                                            1,503,788              2,972,845

CASH AND CASH EQUIVALENTS AT THE END OF YEAR                                                   $  1,979,395             $1,503,788

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
     Interest                                                                                    $ 1,540,309             $4,037,024
     Income taxes                                                                                $     1,099             $      829

NONCASH FINANCING ACTIVITIES:
     Conversion of mortgage loans receivable to notes receivable                                 $   658,072             $1,088,437

The accompanying notes are an integral part of these financial statements.

</TABLE>
                                    F-6
<PAGE>
NOTE A - NATURE OF OPERATIONS:

Pioneer  Commercial  Funding  Corp.  (the  "Company"),  formerly  known  as  PCF
Acquisition  Corp.  ("PCF") is a New York corporation  which merged with Pioneer
Commercial  Funding Corp. (a New York  corporation)  ("Pioneer") on November 23,
1994.  PCF was  organized  and  commenced  operations  on March 8,  1994 for the
express purpose of raising  capital  through an initial public offering  ("IPO")
for the benefit of Pioneer.

In 1997, the Company changed its year end from March 31 to December 31.

Pioneer's Reorganization:

On  April  2,  1993,  Pioneer  emerged  from  Chapter  11 of the  United  States
Bankruptcy  Code  pursuant  to  a  confirmed  First  Amended  Modified  Plan  of
Reorganization  ("POR").  From June 14, 1993, when the Company  commenced active
operations following its emergence from Chapter 11 until fiscal year ended March
31, 1997, it operated with limited  financing  sources and  substantially all of
the  business  conducted  by the Company was with one to four  mortgage  banking
companies.

Operations:

The Company was engaged in the  business  of mortgage  warehouse  lending  which
primarily  consists  of  providing  lines of credit,  in the form of  "warehouse
financing,"  to mortgage  banking  companies to enable them to close real estate
loans  on  single  family,  owner-occupied  dwellings  and  sell  such  loans to
investors in the  secondary  market.  The Company  obtained its funds to provide
such  financing  from  third-party  funding  sources with which it had available
lines of credit and from its own sources.  The Company's  loans  receivable from
the mortgage banking companies are secured by an interest in the underlying real
property  which are then assigned to the  Company's  funding  sources.  Investor
groups who purchase the mortgages  (which  generally occurs within 10 to 45 days
from the time the  Company  makes the loan) remit the  proceeds  directly to the
Company in  satisfaction  of the loan and interest  receivable from the mortgage
banking company.  The Company will  simultaneously  use the funds to pay off its
loan and accrued interest payable to its funding sources.  The Company's primary
sources  of income  from  operations  were  processing  fees  received  from the
mortgage  banking  company for each loan  financed and the interest  rate spread
(usually 1.75%) between the rate at which the Company  borrowed from its funding
source and the rate it charged  the  mortgage  banking  company.  The  Company's
customers fund loans throughout the United States.

The Company's operations were subject to certain risks which are inherent to its
industry.  Its results of  operations  depended  heavily upon the ability of its
mortgage banking customers to originate mortgage loans. This ability was largely
dependent  upon general  economic  conditions in the  geographic  areas that the
Company serves.  Because these general economic conditions fluctuate,  there was
no  assurance  that  prevailing  economic  conditions  would  always  favor  the
Company's  business and  operations.  In addition,  mortgage  banking firms have
historically  experienced  a  wide  range  of  financial  results,  from  highly
profitable  to highly  unprofitable.  These  financial  results were due to many
factors which affect most, if not all, firms in the mortgage banking business at
about the same time. Three of these factors which predominate  were:  changes in
mortgage interest rates, the availability of affordable credit, and the state of
the domestic economy.  These three factors,  among others, affect the demand for
new and used  housing  and thus the  demand for  financing  and  refinancing  of
mortgages. Lastly, although the Company's mortgage banking customers should have
a commitment for each loan from an approved third-party agency ("Agency") before
the Company would extend mortgage  warehouse  financing,  there was no guarantee
that the Agency would,  in fact,  accept the mortgage loan when delivered due to
certain deficiencies in the loan or other unanticipated  circumstances which may
exist.  If for any reason an Agency did not accept the  mortgage  loan,  and the
Company's mortgage banking customer was unable to pay back its obligation to the
Company through other

                                      F-7
<PAGE>
NOTE A - NATURE OF OPERATIONS (Continued):

Operations (Continued):

means,  the Company would find itself the owner of a long-term loan of less than
market value instead of short-term bridge financing receivable.

In September  1999, the Company  pursuant to an Asset Purchase  Agreement  dated
July 30, 1999 with Princap Mortgage Warehouse,  Inc. ("PMW"), sold to PMW all of
its  equipment,  furniture  and  other  physical  assets  and all  its  computer
operating systems for the sum of $800,000. As a result of this sale, the Company
moved its  operations  to New York and no  longer  has any  continuing  business
operations  other  than  winding up its  operations  which  includes  collection
activities with respect to outstanding loans.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Use of Estimates:

The  accompanying  financial  statements,  which are prepared in conformity with
generally accepted accounting  principles,  require the use of estimates made by
management.  The most  significant  estimates  with  regard  to these  financial
statements  relate  to the  valuation  allowance  for  estimated  losses  on the
disposition  of stale loans and  uncollectable  interest and fees,  for deferred
income  taxes and the  estimated  obligations  due under the POR,  as more fully
described in Notes M and P,  respectively.  Actual results may differ from those
assumed in management's estimates.

Cash and Cash Equivalents:

Cash  equivalents  include time  deposits  and highly  liquid  investments  with
original maturities of three months or less.

Income Taxes:

The Company  utilizes SFAS 109  "Accounting for Income Taxes" which requires use
of the  asset and  liability  approach  of  providing  for  income  taxes.  This
statement  requires  recognition of deferred tax  liabilities and assets for the
expected  future  tax  consequences  of events  that have been  included  in the
financial statements or tax returns.  Under this method deferred tax liabilities
and  assets  are  determined  based on the  differences  between  the  financial
statement  and tax basis of assets and  liabilities  using  enacted tax rates in
effect for the year in which the  differences  are  expected to  reverse.  Under
Statement 109, the effect on deferred tax assets and  liabilities of a change in
tax rates is recognized in income in the period that includes the enactment date
(see also Note K).

Revenue Recognition:

The Company recognizes revenue at the time a mortgage loan receivable is funded.
Interest income is recorded on the accrual basis in accordance with the terms of
the customer loan and security agreement.

Loan Fees:

Loan  processing  fees are  capitalized  and  recognized as an adjustment of the
yield of the related loan in accordance with SFAS No. 91.

                                      F-8
<PAGE>
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):

Basic and Diluted Earnings (Loss) Per Share of Common Stock:

Net earnings or loss per share is  calculated in  accordance  with  Statement of
Financial  Standards No. 128, Earnings Per Share ("SFAS 128"),  which superseded
APB  Opinion No. 15.  Basic net  earnings  per share is based upon the  weighted
average number of common shares outstanding. Diluted earnings per share is based
on the assumption that all stock options and warrants were exercised.

For the years ended  December 31, 1999 and 1998, the exercise price exceeded the
average sale price for most options and  warrants,  and the impact of conversion
of the  warrants  and  options  would  have  been  antidilutive  or  immaterial.
Therefore,  the options and warrants were not  considered in the  calculation of
earnings (loss) per common share.

Concentration of Credit Risk/Fair Value:

Financial  instruments that potentially  subject the Company to concentration of
credit risk consist principally of cash investments and mortgage warehouse loans
receivable.

The  Company  maintains,  at times,  deposits  in  federally  insured  financial
institutions  in excess of federally  insured  limits.  Management  monitors the
soundness  of these  financial  institutions  and  feels the  Company's  risk is
negligible.

Management  believes that concentrations of credit risk with respect to mortgage
warehouse loans receivable are limited due to the underlying  assignment of note
and  deed of  trust  on  residential  real  estate  collateral  for  each  loan,
guarantees  by  mortgage  banking   customer   principals,   security   deposits
approximating  10% of each  customer's  line of credit  and UCC  filings  on the
assets of the Company's mortgage banking customers.

As of December 31, 1999 and 1998,  the fair value of cash and cash  equivalents,
receivables, obligations under accounts payable and debt instruments approximate
the carrying value.

Marketable Securities:

At December 31, 1999 and 1998,  marketable  securities have been  categorized as
available for sale and, as a result, are stated at fair value in accordance with
Statement of Financial Standards No. 115, "Accounting for Certain Investments in
Debt and  Equity  Securities".  Unrealized  gains and  losses  are  included  in
shareholders' equity as other comprehensive income (loss).

Fixed Assets:

Fixed assets (which were sold during 1999) were  recorded at cost.  Depreciation
of fixed assets was provided on a straight-line basis as follows:

    Furniture and equipment                          3 - 10 years
    Proprietary computer software                         5 years

                                      F-9
<PAGE>
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):

Fixed Assets (Continued):

Maintenance  and repairs are expensed as incurred.  Leasehold  improvements  are
amortized over the useful life of the asset or the lease,  whichever is shorter.
Proprietary  computer software consisted of a set of computer programs that were
developed internally by the Company for the use in its business and were not for
resale to the other mortgage finance companies (see also Note A).

Depreciation and amortization  expense for the years ended December 31, 1999 and
1998 aggregated $144,508 and $202,350, respectively.

Advertising Costs:

Advertising costs,  which are included in general and  administrative  expenses,
are  expensed  as  incurred.  For the years  ended  December  31, 1999 and 1998,
advertising costs aggregated $3,338 and $45,593, respectively.

Comprehensive Income:

In 1997, the Company  adopted  Statement of Financing  Accounting  Standards No.
130,  "Reporting  Comprehensive  Income" (SFAS 130), which establishes new rules
for the reporting and display of other comprehensive  income and its components.
SFAS 130 requires unrealized gains or losses on the Company's available-for-sale
securities to be included in other comprehensive income.

Segments of an Enterprise and Related Information:

In 1998, the Company adopted Financial  Accounting Standards Board Statement No.
131,  "Disclosures  about  Segments of an Enterprise  and Related  Information",
which establishes standards for reporting on operating segments. The Company has
determined  that no  operating  segment  outside  of its core  business  met the
quantitative  thresholds  for  separate  reporting.   Accordingly,  no  separate
information has been reported.

Reclassifications:

Certain  reclassifications  have been made to  conform  prior  years data to the
current format.

NOTE C - GOING CONCERN UNCERTAINTY:

The  accompanying  financial  statements  have been prepared in accordance  with
generally accepted accounting principles, which contemplates continuation of the
Company as a going  concern.  However,  the Company is winding down its mortgage
warehouse lending business,  has sustained substantial operating losses over the
last two  years and has used  substantial  amounts  of  working  capital  in its
operations.  Management of the Company  determined that the Company did not meet
the revenue  objectives for its mortgage  warehouse lending business and did not
expect  the  Company  to be able to meet  these  objectives  in the  foreseeable
future.  The Company therefore decided to sell all its operating assets and will
explore other business opportunities.

In view of these matters,  realization of the assets of the Company is dependent
upon the Company's ability to meet its financing requirements and the success of
future operations.  The financial statements do not include adjustments relating
to  the   recoverability  and  classification  of  recorded  asset  amounts  and
classification  of  liabilities  that might be  necessary  should the Company be
unable to continue in existence.

                                      F-10
<PAGE>
NOTE D - MORTGAGE WAREHOUSE LOANS RECEIVABLE/PAYABLE:

Loans receivable are generally due within sixty days from the date funded,  with
an average outstanding period of 33 days and interest payable ranging from prime
plus 1.75% to prime plus 2.0%.  Similarly,  all of the related loans payable are
due within the same time frame. During the fiscal year ended March 31, 1997, the
Company  obtained a $25 million  revolving line of credit pursuant to a security
agreement  between the Company  and Bank One,  Texas,  N.A.  ("Bank  One").  The
Company pays  interest on advances at the "prime rate" of interest,  quoted from
time to time by the Wall Street  Journal plus or minus  one-eighth of a percent.
As collateral  security for its  indebtedness to Bank One the Company granted to
Bank One a security  interest in various assets  including,  but not limited to,
all promissory  notes acquired by the Company with respect to any loan funded by
it with  moneys  advanced  under its Bank One credit line and all  mortgages  or
other forms of collateral  security  obtained by the Company in connection  with
the funding of such loans.  On August 25,  September  26 and  December 12, 1997,
Bank One amended the credit  facility to provide the Company  with  $35,000,000,
$50,000,000  and  $60,000,000,  respectively.  Effective  June 30,  1998  Leedan
Business Enterprise Ltd. ("Leedan"),  a 49% owner of the Company, entered into a
Capital  Maintenance  Agreement  with Bank One  wherein  Leedan  agreed to cause
capital  contributions or subordinated  debt advances,  up to $2 million,  to be
made to the  Company in order to  maintain  an  adjusted  Company net worth of a
least $8 million,  upon official  written  request by Bank One.  This  agreement
continues  in effect until the Company has paid its  obligation  to Bank One and
Bank One  terminates  its commitment to supply the Company credit (See also Note
N). On September 1 and September 15, 1998,  Bank One amended the credit facility
to decrease the borrowing limit to $55,000,000 and $50,000,000 respectively. The
credit  facility  expired  on October  30,  1998,  whereupon  Bank One agreed to
continue  funding the Company's  loans until the facility was renewed or another
lender  replaced  Bank One. On February  18,  1999,  Bank One renewed the credit
facility with a borrowing  limit of  $40,000,000  through  April 30, 1999.  This
credit  facility was  subsequently  extended to September 30, 1999 and as of the
date of these financial  statements,  no additional  renewal was granted by Bank
One. At December 31, 1999, the Company continues to owe Bank One $4,721,817.

For the years ended  December 31, 1999 and 1998, the weighted  average  interest
rate on loans  receivable  was  9.65%  and  10.23%,  respectively,  and on loans
payable was 7.88% and 8.36%,  respectively.  Loans receivable are collateralized
by a security  interest in the  underlying  real property which the Company then
assigns to its funding sources as security for the loans payable.

NOTE E - LOANS HELD FOR RESALE

In 1997,  the Company in accordance  with its loan and security  agreement  took
possession from a customer in the process of liquidating  under Chapter 7 of the
Bankruptcy  Code, 37 loans it funded having an aggregate  value of $4.5 million.
The Company had a perfected  interest in the loans and sold 32 of the loans at a
net  discount of  $72,070.  The five loans  unsold at December  31, 1998 with an
original loan amount of $698,116,  together with  holdback  receivables  on sold
loans of $180,945, were held at net realizable value which included a reserve of
$173,582.  These loans were subsequently sold during the year ended December 31,
1999.

In September  1999,  the Company used a portion of the proceeds from the sale of
fixed  assets (see Note A) and  acquired 36 stale loans for  $574,774  from Bank
One. At December  31,  1999,  the  balance of these loans are  reflected  in the
financial  statements  at  net  realizable  value  aggregating  $236,179,  which
includes a reserve of $309,000.


                                      F-11
<PAGE>
NOTE F - RECEIVABLE FOR LOANS SHIPPED:

During  October 1997, the Company  warehoused  $1.7 million in mortgages for the
same  customer as  described  in Note E above,  who used a third party  conduit,
American  Financial  Mortgage  Corporation,  to sell its  loans to an  investor,
Norwest  Funding,  Inc.  The Company  provided  instructions  to the third party
conduit that the funds were to be wired by the investor to the  Company's  bank.
The investor miswired the funds to the conduit's bank, Corestates Bank, N.A. The
conduit's bank has refused to return the funds.  The Company is taking  actions,
including  legal  action,  to collect the funds from the conduit,  the conduit's
guarantor,  the investor and the conduit's bank. The Company's lender,  Bank One
Texas, N.A. ("Bank One"), has joined the litigation as a co-plaintiff in support
of the Company's  position.  In addition,  the Company has a $5 million personal
guarantee from the third party conduit's  primary  shareholder and an additional
$2 million  guarantee from the customer's  primary  shareholder.  Although it is
impossible  to  assess  with  accuracy  the  ultimate  outcome  of this  matter,
management  and  their  attorneys  believe  that the  Company's  claims  in this
litigation  have merit and that the Company will be  successful in the assertion
of those claims against the defendants.


NOTE G - INVESTMENT SECURITIES AVAILABLE FOR SALE:

On July 7,  1997,  the  Company  purchased  300,000  shares at $.75 per share of
Fidelity First Mortgage Corp., NASDAQ (FFIR) for a total investment of $225,000.
On May 6, 1999,  management  of FFIR  approved a 1 for 50 reverse  stock  split,
reducing the Company's  number of shares to 6,000. In November 1999, the Company
received 1,250 restricted bonus FFIR shares.  FFIR shares closed on December 31,
1999  and  1998 at $15  and  $1.06  per  share  (before  reverse  stock  split),
respectively,  resulting  in an  unrealized  loss of  $210,000  in  1999  and an
unrealized loss of $713,250 in 1998.  Fidelity First  Mortgage,  which is also a
customer of the Company, is based in Columbia, Maryland and funds conforming and
non-conforming  single  family  residential  mortgages  in  Maryland,  Virginia,
Delaware,  Florida,  North and South  Carolina.  At December  31, 1999 and 1998,
mortgage  warehouse  loans  receivable  from this customer  amounted to $-0- and
$1,633,457, respectively and net accrued interest receivable amounted to $14,868
and $47,970 for 1999 and 1998, respectively.





                                      F-12
<PAGE>
NOTE H - NOTES RECEIVABLE:
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

On November 18,  1998,  a settlement  was reached with a guarantor of a mortgage
banking  customer's  defaulted line of credit.  The guarantor was also a company
stockholder.  Pursuant to the  settlement,  an entity  which is an  affiliate of
Leedan (see Note D) accepted $530,000 of the guarantor's  recognized debt to the
Company in exchange for the guarantor's shares in the Company.  This entity paid
the Company  $176,667  and issued two  installment  notes of $176,667  each with
maturity  dates of August 23, 1999 and May 23, 2000,  respectively.  These notes
bear interest at a rate of 8.25% per annum and are payable quarterly  commencing
three months from the date of issuance which was November 23, 1998.                      $ 176,667

Pursuant to the  settlement  as stated above,  the guarantor  also issued to the
Company  two  installment  notes  in  the  amounts  of  $265,103  and  $470,000,
respectively.  These  notes bear  interest  at a rate of 8.25% per annum and are
payable  quarterly  commencing  three months from November 18, 1998, the date of
issuance of the notes. Both notes mature November 18, 2000.                                735,103

On March 29, 1999, a settlement was reached with two clients and their guarantor
wherein the  remaining  loans on each  client's  line and  interest and fees due
through  October 31, 1998 were replaced with a note from each client  guaranteed
by the client's guarantor in the amounts of $453,430 and $204,640, respectively,
each payable in sixteen monthly  installments plus interest at an annual rate of
10%. Both notes mature June 29, 2000.                                                      155,926
                                                                                        -----------
                                                                                        $1,067,696
                                                                                        ==========
NOTE I - INVESTMENT IN AND ADVANCES TO PIONEER HOME FUNDING:

On April 16, 1997,  the Company  entered  into a joint  venture  agreement  with
Maryland  Financial  Corporation  ("MFC") to form Pioneer Home  Funding,  LLC, a
California  Limited Liability  Company,  ("PHF").  The Company accounts for this
investment on the equity method. The agreement provides that the Company and MFC
would  maintain  80% and  20%  ownership  interests,  respectively,  in PHF.  An
amendment to the agreement was made on October 31, 1997. This amendment provides
that the Company would  contribute  $40,000 for a 20 percent interest in PHF. In
addition, the Company may from time to time, at its option, make loans to PHF as
needed. Under this agreement the Company has the option to convert loans made to
PHF into an 80% interest in PHF. As of December  31, 1999 and 1998,  the Company
has advanced as a loan receivable $294,345 and $275,344,  respectively (which is
included in other assets on the balance  sheet).  At December 31, 1999 and 1998,
the  Company  has  recorded  a  reserve   aggregating   $294,345  and  $110,000,
respectively, against this receivable due to the financial condition of PHF.

NOTE J - OTHER ASSETS:

The following items are also included in other assets on the Company's financial
statements:

1.  Effective April 25, 1996, a one year certificate of deposit in the amount of
    $25,000 was pledged in order for the Company to receive a California  Lender
    Bond as a  California  Financial  Lender.  The  certificate  of deposit  was
    renewed as of April 25, 1999 and is renewable  annually at the discretion of
    the insurance carrier.


                                      F-13
</TABLE>

<PAGE>
NOTE J - OTHER ASSETS (Continued):

2.  As a result of the  signing  of a ten (10) year  lease for  office  space at
    21700 Oxnard Street, Suite 1650, Woodland Hills, California,  on October 17,
    1997,  the Company  delivered an  unconditional,  irrevocable  and renewable
    Letter of Credit (LC), in the amount of $150,000,  in favor of the Landlord.
    The LC is secured by a $150,000  Certificate of Deposit which is included in
    Other Assets on the Company's financial statements (See Note P).

NOTE K - INCOME TAXES:

The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                                                                                        1999                    1998

                       Current:
                          Federal                                                    $      -                $      -
                          State                                                          1,099                     829
                                                                                         1,099                     829
                       Deferred:
                          Federal                                                           -                       -
                          State                                                             -                       -
                       Provision for income taxes                                    $   1,099               $     829

The tax effects of temporary  differences  that give rise to deferred tax assets
are presented below:

                                                                                        1999                    1998


                     Net operating losses                                           $  2,230,000            $   680,000
                     Valuation allowances                                             (2,230,000)              (680,000)
                                                                                    $         -             $        -


At December 31, 1999, the Company had net operating  loss (NOL's)  carryforwards
available  for income tax purposes of  approximately  $5.6  million  expiring in
varying amounts through 2013.  Approximately $1 million of the NOL's are limited
in use pursuant to a change in ownership in November 1994.
</TABLE>

NOTE L - DUE TO MORTGAGE BANKING COMPANIES:

The Company generally finances up to 100% of the total loan amount closed by the
mortgage banking company.  Upon sale of the loan to the investor group, proceeds
for 100% of the loan amount plus premiums or less  discounts are remitted to the
Company by the investor.  The Company, from time to time, holds such funds until
receipt of amounts due from the  mortgage  banking  company for fees and accrued
interest.

                                      F-14
<PAGE>
NOTE M - DEFERRED LEGAL FEES:

Deferred legal fees are a consequence of the POR (see Note P) and are payable in
four annual installments which began on April 16, 1994. The Company has not paid
the April 1996, 1997 and 1998  installments  aggregating  $65,395 as of December
31, 1999.


NOTE N - STOCKHOLDERS' EQUITY AND INITIAL PUBLIC OFFERING:

Common Stock:

At the annual  meeting of the  stockholders  on June 29, 1999,  a reverse  stock
split of 1 for 2 was approved. The date of record for the reverse split was June
29, 1999.

Initial Public Offering:

In August 1996,  the Company  consummated  its IPO pursuant to which the Company
issued and sold  600,000  shares of its common  stock,  par value $.01 per share
(the  "Common  Stock"),  and  690,000  warrants  (including  warrants  sold upon
exercise of the underwriters' over-allotment option) to the public at a price of
$5.00 per share and $.10 per warrant,  which yielded to the Company net proceeds
of approximately  $2 million.  The warrants give the owner the right to purchase
an  additional  share of  common  stock at a price of $5.50 for a period of four
years commencing after the completion of the IPO (the "Exercise  Period").  Such
warrants will be immediately tradable separate from the common stock. Commencing
two years after the  completion  of the IPO and through the end of the  exercise
period,  the warrants may be redeemed by the Company upon 30 days written notice
at a price of $.05 per warrant,  provided that (1) the closing sale price of the
Company's  common stock shall not be less than $7.50 per share for any period 20
days subsequent to the issuance of the written  notice,  or (2) that the warrant
holders  have not  exercised  their  warrants at any time prior to the period 30
days after the issuance of the written notice. In addition,  the underwriter was
issued  the right  for a period  of four  years  commencing  one year  after the
completion of the IPO to purchase,  in tandem,  60,000 shares of common stock of
the Company and 60,000  common stock  purchase  warrants at a price of $6.12 for
each  combined  share and  warrant.  The terms of the  warrants  acquired by the
managing  underwriter  were the same as those  discussed  above except that such
options are nontransferable. The warrants are exercisable into 690,000 shares of
Common Stock at a price of $5.50 per share August 12, 2000.

Private Placement:

 On February 28, 1997, the Company  completed a private  placement of securities
 (the "Private  Placement") with eight investors who invested an aggregate of $4
 million in the Company in consideration  for 2.2 million shares of Common Stock
 and $1.8  million  principal  amount  of  convertible  promissory  notes of the
 Company (the  "Convertible  Notes").  On May 9, 1997, the Company increased its
 authorized  shares of common  stock by 15 million to 20  million  shares.  With
 these newly available shares, the Company immediately converted the outstanding
 Convertible Notes into 1.8 million shares of common stock.


                                      F-15
<PAGE>
NOTE N - STOCKHOLDERS' EQUITY AND INITIAL PUBLIC OFFERING (Continued):

Subordinated Debt:

On November 26, 1997, the Company issued $1,000,000 in subordinated debt as part
of a $4 million private placement.  The private placement provided for a minimum
purchase of $250,000 (1 unit) with each unit obtaining 7,500 Warrants that allow
for the purchase of 7,500 shares.  The exercise  price of the shares is equal to
the  price of the  Company's  stock as of the date of issue of the  subordinated
debt. The Company has 30,000 Warrants  outstanding (7,500 per unit for 4 units).
The  subordinated  debt carries an interest rate of 10% per annum and matures on
November 25, 2002. The Company's stock price on November 26, 1997 was $2.875. On
September  11,  1998 three  subordinated  debt  advances  pursuant to the Leedan
Capital  Maintenance  Agreement  (Note  D)  were  made to the  Company  totaling
$726,000,  secured by notes.  The notes are due when a replacement  for the Bank
One lending facility is in place, with interest paid quarterly at 11% per annum.
During the first quarter of 1999 $100,000 of debt was repaid.

 Dividend Restriction:

 The holders of the  Company's  common  stock are  entitled to one vote for each
 share held of record on all matters  submitted to a vote of  stockholders.  The
 common  stockholders  are entitled to receive  ratably such dividends as may be
 declared  by the  Board of  Directors  out of funds  legally  available.  As of
 December  31,  1999,  in  management's  opinion,  it is  not  anticipated  that
 dividends will be paid on common stock in the foreseeable  future as certain of
 the debt  instruments  to which the  Company is a party to prohibit or restrict
 the payment of dividends  (see Note P for further  discussion  of  restrictions
 under the POR).

NOTE O - STOCK OPTION PLANS:

The  Company  has  adopted  the  disclosure-only  provisions  of SFAS  No.  123,
"Accounting for Stock-Based  Compensation."  Accordingly,  no compensation costs
have been  recognized  for the  Company's  Non-Qualified  Stock Option Plan (the
"Plan").

The Plan (previously known as PCF Acquisition Corp.  Non-qualified  Stock Option
Plan) was adopted on August 1, 1994, and provided for the issuance of options to
purchase up to 151,515  shares of the Company's  common stock to persons who are
at the time of grant, employees of, or consultants to, the Company. The Plan was
modified on November 4, 1994, in  anticipation of the then  forthcoming  merger,
with and into Pioneer Commercial  Funding Corp. The modification  provided for a
maximum of 200,000 shares of stock that may be optioned or sold under the Plan.

In 1997, the Company  adopted the 1997 Omnibus Stock  Incentive Plan under which
it was authorized to issue non-qualified stock options, incentive stock options,
and warrants to key employees, directors and selected advisors to purchase up to
an aggregate of 500,000  shares of the stock of the Company.  The options have a
term of five years and  generally  become  fully  vested by the end of the third
year.

The Company has issued additional  options outside the Plan at the discretion of
its Board of Directors ("BOD").

The following table  summarizes  information  related to shares under option and
shares available for grant under the Plan and separate actions of the BOD.


                                      F-16
<PAGE>
NOTE O - STOCK OPTION PLANS (Continued):

Weighed  average fair value of options  granted  during the year (adjusted for 1
for 2 reverse stock split) is as follows:
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                                                              December    31,   1999    December    31, 1998


                                                          Weighted                      Weighted
                                                           Average                      Average
                                                          Exercise                      Exercise
                                           Shares           Price          Shares        Price

     Options outstanding
     beginning                              208,500         $4.90          412,523        $6.47
   Granted                                   -                 -            -               -
   Exercised                                 -                 -            -               -
   Canceled                                      -             -           204,023         8.08

   Options outstanding ending               208,500         $4.90          208,500        $4.90
                                         ============= ================ ============= =============

The following information applies to options outstanding at December 31, 1999

                                                    Options Outstanding                           Options Exercisable


                                                  Weighted Average
                                                      Remaining
                                                  Contractual Life     Weighted Average
   Range of exercise prices  Number Outstanding        (Years)          Exercise Price    Number Exercisable

      $1.00 - $2.25                 22,500              2.25                 $2.25               22,500
      $2.26 - $4.50                111,000              2.50                 $4.35              111,000
      $4.51 - $10.00                75,000              2.75                 $6.50               75,000
                                   208,500              2.57                 $4.90              208,500
   ------------------------- =================== -------------------- ------------------- =================== --------------------

No options were granted during the years ended December 31, 1999 and 1998.

</TABLE>
                                      F-17
<PAGE>
NOTE P - COMMITMENTS AND CONTINGENCIES:

Plan of Reorganization:

Under  the POR,  the  Company  is  contingently  liable  to its  pre-Chapter  11
unsecured creditors,  for such creditors' pro rata shares of noninterest-bearing
notes (the "Notes") totaling $1,350,000. Commencing with the close of the fiscal
year ending March 31, 1996, and for all succeeding years thereafter,  until full
aggregate  payment of $1,350,000 is made under the Notes, each Note holder shall
receive a cash  distribution  equal to such Creditors'  pro-rata share of twenty
percent of the Net Income Available for Note Payments, if the Net Income for any
such year exceeds $1,300,000.

In addition to the Notes, approximately $50,000 in professional fees incurred in
connection  with the POR were  deferred  and will only be paid to the extent the
Notes are paid in full.

For the years ended  December  31,  1999 and 1998 the Company had not  generated
income that resulted in payment on the Notes. Accordingly, no liability has been
reflected in the Company's  balance sheet for the Notes or the professional fees
for 1998 or 1999.

As of December  31,  1999,  the Company  was unable to  determine  whether it is
probable  that it will  generate  income in future  years which would  result in
payments on the Notes.  As such, no future  liability has been  reflected in the
Company's balance sheet for the Notes or the professional fees.

In accordance with the POR, certain operating restrictions have been placed upon
the  Company  until the time that all amounts due on the Notes have been paid in
full. These restrictions include:

-    Incurring  new debt in  excess  of  $25,000,  except  for  secured  lending
     required  in  the  ordinary  course  of  the  Company's   mortgage  lending
     operations.

-        Expending  more than  $25,000 in the  aggregate  in a calendar  year to
         purchase or lease capital assets, except to replace existing assets.

-    Expending  more than $320,000  annually in the aggregate to the officers of
     the Company and placing limitations on salary increases.

- Merging or consolidating with another business.

-    Declaring  dividends on any class of common  stock,  except that,  if there
     should be a public  offering of the  securities of the Company,  and, if at
     the  option of the  Company,  fifty  percent of the  proceeds  in excess of
     $5,000,000  from such  offering  are utilized for the payment of the Notes,
     then such dividend restriction shall be deemed waived.

In 1998 and 1999 the  Company  has made  expenditures  of more than  $25,000  to
purchase and lease capital assets in connection with its move to new facilities.
Management  believed  that  these  expenditures  were  necessary  to expand  the
Company's mortgage  operations,  and is not aware of any financial impact on the
Company under the restrictions of the POR because of these expenditures.

                                      F-18
<PAGE>
NOTE P - COMMITMENTS AND CONTINGENCIES (Continued):

Lease Obligation:

The Company  leases 6,846 square feet of office space  through  October of 2007.
The  monthly  base rent  through  September  2002 is  $13,692  and for years six
through ten is $15,745.  The Asset Purchase agreement (see Note A) also provides
for the purchaser to rent this space for four months commencing  October 1, 1999
at $13,873 per month.

The Company  continues to be  obligated  under a previous  office lease  through
October 31, 2001.  This lease calls for monthly rent of $2,178 and CPI increases
with a minimum of 3% and a maximum of 5%  annually.  The  Company  sublets  this
space for $1,410 per month subject to three one year leases.

Rent expenses (net of rental  income) for the years ended  December 31, 1999 and
1998 aggregated $148,840 and $210,591, respectively.

At December 31, 1999, future minimum rental are as follows:

Fiscal Year Ended December 31,

                           2000                                   $    190,440
                           2001                                        188,262
                           2002                                        164,304
                           2003                                        188,950
                           2004                                        188,950
                           Thereafter                                  535,360
                                                                    $  1,456,266

Commitments to Extend Credit Facilities:

At  December  31,  1998  the  Company  had made  approximately  $80  million  in
commitments  to  extend  credit  facilities  to  it  current  customers.   These
commitments  generally have fixed expiration dates or other termination  clauses
and may require payment of a fee.  Because many of the  commitments  will not be
fully drawn upon,  the total  commitment  amounts do not  necessarily  represent
future cash  requirements.  There were no such  commitments made at December 31,
1999.

Employment Agreement:

In July 1997,  the Company  extended  the  Employment  Agreement  with M. Albert
Nissim as President for an indefinite  period,  at a salary of $6,000 per month.
Effective April 1, 1998, Mr. Nissim's  compensation  was increased to $9,500 per
month.  In  addition,  he was  awarded a $12,000  bonus.  The  Agreement  may be
terminated by either party on not less than 90 days prior to notice.


                                      F-19
<PAGE>
NOTE P - COMMITMENTS AND CONTINGENCIES (Continued):

Other Agreement:

The Company has approved a  compensation  plan for a director  and/or Leedan the
company  which  provides  management  services to the Company.  Leedan is also a
principal  shareholder of the Company. The plan provides aggregate  remuneration
to the director and/or Leedan of $100,000 per annum plus 5% of the Company's net
income  (pre-tax)  above  $1,000,000  annually.  Leedan  and the  director  will
determine how such compensation will be divided between them.

NOTE Q - ECONOMIC DEPENDENCY:

During the year ended  December 31, 1999,  the Company  funded 466, 176, 275 and
279 loans aggregating  approximately $28.7 million,  $28.1 million,  $24 million
and $23.1 million, respectively to four customers. At December 31, 1999 mortgage
warehouse loans receivable from these customers amounted to $662,000, $-0-, $-0-
and $-0-, respectively.

During the 1998 fiscal year,  the Company  funded 893 and 813 loans  aggregating
approximately $76.6 million and $53 million,  respectively, to two customers. At
December 31, 1998  mortgage  warehouse  loans  receivable  from these  customers
amounted to $8,393,600 and $3,036,283, respectively.

NOTE R - RELATED PARTY TRANSACTIONS:

For the year  ended  December  31,  1998  certain  family  members of a previous
executive officer and a member of the BOD of the Company were engaged to perform
various  accounting and consulting  services for the Company.  Such  individuals
were compensated  approximately $16,166 for these services. (See also Notes H, I
and Q for other related party transactions.)


                                      F-20
<PAGE>

                                                    SIGNATURES

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

                                            PIONEER COMMERCIAL FUNDING CORP.


                                            By:  /s/ M. Albert Nissim
                                            Name:  M. Albert Nissim
                                            Title: President

                                            Date: March 31, 2000

                  In  accordance  with the  Exchange  Act,  this report has been
signed below by the  following  persons on behalf of the  registrant  and in the
capacities and on the dates indicated.


                                            By:   /s/ M. Albert Nissim
                                            Name:  M. Albert Nissim
                                            Title: President and Chief
                                                    Financial Officer

                                            Date:   March 31, 2000

                                            By:    /s/ Richard Fried
                                            Name:  Richard Fried
                                            Title: Director

                                            Date:  March 31, 2000



                                            By:   /s/ Boaz Harel
                                            Name:  Boaz Harel
                                            Title: Director

                                            Date:  March 31, 2000


                                            By:   /s/ Tamar Lieber
                                            Name:  Tamar Lieber
                                            Title: Director

                                            Date:  March 31, 2000



                                            By:  /s/ Lynda Davey
                                            Name: Lynda Davey
                                            Title: Director

                                            Date: March 31, 2000


                                            By:  /s/ Joseph Samuels
                                            Name: Joseph Samuels
                                            Title: Director

                                            Date: March 31, 2000