1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

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

              For the year ended December 31, 2002

[ ] 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

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

         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)

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 $23,003. As of March 24,
2003,  there were 4,778,663 shares of the  Registrant's  common stock,  $.01 par
value,  issued and outstanding of which 1,909,825 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  $4,201,615.  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 24,  2003 there were
4,778,663 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                       By-Laws of the Company
10.1                      Credit Agreement between Bank One, Texas, N.A.
                           and the Company
10.2                      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").

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 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  money 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 initially caused and continued to be 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,  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  "Litigation").  In June  2000,  the  Company
received a check in the  amount of  $219,828  which  represented  payment  for a
settlement reached with Norwest Funding, Inc. After trial, on December 4, 2000 a
judgment (the  "Judgment")  was entered (a) against the bank and in favor of the
Company  as  follows:  compensatory  damages in the  amount of  $1,779,520  plus
interest  of  $78,854,  consequential  damages  in the  amount  of  $13,500,000,
<PAGE>
punitive  damages in the amount of  $40,500,000,  for a total of $55,858,374 and
(b) in favor of the Company against American Financial Mortgage Corp. and Thomas
F. Flatley as follows:  compensatory  damages on the contract and  conversion in
the amount of  $1,779,520  plus  interest of $890,443  on the  contract  claims,
attorney's fees in the amount of $1,200,000, for a total of $3,869,963. Although
the  Company  reached  a  settlement  with  Thomas  F.  Flately,  the  remaining
defendants  appealed  this verdict.  In November  2001,  the Company  received a
payment from Thomas Flatley in the amount of $1,000,000.  On March 18, 2002, the
Superior Court in  Pennsylvania  issued its opinion in the appeal  affirming the
lower  courts  judgment  of  $1,779,520  compensatory  damages  and  $13,500,000
consequential  damages against the bank. Accrued interest from the judgment date
is  applicable.  The court  ordered a new trial  solely on the award of punitive
damages in the  amount of  $40,500,000.  Thereafter,  the  remaining  defendants
appealed the Superior  Court's verdict to the  Pennsylvania  Supreme Court.  The
Supreme Court has not decided whether it will hear the appeal.

As a result of the sale,  the  Company  no longer  has any  continuing  business
operation  other than winding up of its  operations  and its  collection  of the
Judgment.  The Company is not seeking to engage in other business ventures until
such time as the Litigation has been fully resolved.  In any event, at such time
as the Company proceeds in seeking to engage in other business  ventures,  there
can be no assurance as to when, or if, an  economically  viable  business can be
acquired or continued successfully.

         Employees

At December 31, 2002 the Company  employed one full-time  employee.  The Company
believes that its relations with its employee is good.

         Item 2.  Property

The  Company  currently  operates  out of an  office  which  it  shares  with an
affiliate  of the  Company.  The  Company  pays  rent,  including  expenses,  of
approximately $3,000 per month.

<PAGE>

         Item 3. Legal Proceedings.

As described in Item 1 above, in connection  with the  Litigation,  the Judgment
was entered against the bank in favor of the Company as follows:

Compensatory  damages  in the  amount of  $1,779,520  plus  interest  of $78,854
Consequential  damages  in the  amount of  $13,500,000  Punitive  damages in the
amount  of  $40,500,000  For a total of  $55,858,374  and in  favor  of  Pioneer
Commercial Funding Corp. against American Financial Mortgage Corp. and Thomas F.
Flatley as follows:

Compensatory  damages on the contract and conversion in the amount of $1,779,520
plus interest of $890,443 on the contract  claims  Attorney's fees in the amount
of $1,200,000 For a total of $3,869,963

Although the Company reached a settlement with Thomas F. Flately,  the remaining
defendants  appealed  the  verdict.  In November  2001,  the Company  received a
payment from Thomas Flatley in the amount of $1,000,000.  On March 18, 2002, the
Superior Court  affirmed the amount of  compensatory  damages and  consequential
damages,  and  ordered a new trial  solely  on the  award of  punitive  damages.
However,  the defendants have petitioned the Pennsylvania  Supreme Court to hear
this matter on appeal.  Until such time as the Supreme Court decides  whether to
hear the appeal, further collection actions are stayed.


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

         Not applicable.


<PAGE>
                                     PART II

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

The Common Stock  issued by the Company in  connection  with its Initial  Public
Offering  is listed  on the  Bulletin  Board  under the  symbol  "PCFC.OB".  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 30, 2001                $  5.50                $  3.00
         June 29, 2001                 $  3.25                $  1.50
         September 28, 2001            $  2.80                $  1.05
         December 31, 2001             $  2.45                $  1.60
         March 31, 2002                $  3.25                $  1.25
         June 30, 2002                 $  3.25                $  1.10
         September 30, 2002            $  2.50                $  0.85
         December 31, 2002             $  2.20                $  0.90

As of December 31, 2002, there were twenty two (22) 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  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,
2002,  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.
<PAGE>

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.

Results of  Operations  for Year Ended  December  31, 2002  Compared to the Year
Ended December 31, 2001.

         Revenues:

The Company's  revenues  decreased  from $84,111 for the year ended December 31,
2001 to  $23,003  for the  year  ended  December  31,  2002.  This  decrease  is
attributable  to the Company's  winding down its mortgage  business.  Processing
fees  decreased  from $5,850 for the year ended  December 31, 2001 to $0 for the
year ended December 31, 2002.

         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, 2002 was  $385,061 as compared to $449,871 for the
year ended December 31, 2001.  This decrease is  attributable to the decrease in
the interest rate during 2002.

         Loan Loss (Recovery) Provision:

The $726 loan loss provision for the year ended December 31, 2002 was due to the
excess of a reserve  for note  receivable  in the  amount of  $82,740  over cash
receipts from loans that were written off in prior years.

The $120,297 loan loss recovery for the year ended  December 31, 2001 was due to
cash receipts from loans that were written off in prior years.

         Other Operating Expenses:

Other operating  expenses  decreased to $717,952 for the year ended December 31,
2002 from  $1,473,492  for the year ended  December 31, 2001.  Compensation  and
benefits  decreased  from  $171,328  for the year  ended  December  31,  2001 to
$125,490 for the year ended December 31, 2002 due to a salary  reduction for two
employees of the Company.
<PAGE>
Professional  fees, which include  accounting,  legal
fees and consulting,  decreased to $412,421 for the year ended December 31, 2002
from  $1,121,901  for the year ended  December  31,  2001  primarily  due to the
winding down of legal costs attendant to the lawsuit,  against  Corestates Bank,
N.A.,  American  Financial Mortgage  Corporation,  Thomas F. Flatley and Norwest
Funding, Inc. more fully described in Item 3.

         Net Loss:

The Company  incurred a net loss of $1,076,269,  for the year ended December 31,
2002 compared to net loss of $716,430 including a loan loss recovery of $120,297
for the year  ended  December  31,  2001.  The loss  for 2001 was  reduced  by a
litigation  settlement  of  $1,000,000  (see  Note F of Notes  to the  Financial
Statements)  and a recovery of loan losses  incurred in prior years instead of a
loan loss provision.

         Cash Flows:

         Operating Activities:

Along with a $1,076,269  loss for the year ended  December 31, 2002, the Company
used $552,926 of cash from operating  activities  primarily  because of the loss
for the year reduced by an increase in accrued interest payable of $372,561.  In
2001 the Company  used  $689,138  of cash from  operating  activities  resulting
mainly from a reduction in accounts  payable and accrued expense  $258,960 along
with a $716,430 loss.

         Investing Activities:

         In 2001, the Company received $8,325 from the sale of securities.

         Financing Activities:

In 2002, the Company  received  $750,000 as proceeds from the issuance of common
stock and  $900,000  from common  stock  subscribed  from two private  placement
offerings.  In 2001,  the Company  used $20,000 to reduce its short term line of
credit.

         Liquidity and Capital Resources:

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 has ceased issuing loans in
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 sold all its operating assets and is
exploring other business opportunities.

In 2002,  the  Company's  primary  sources of capital was $750,000 from the
issuance of common stock and $900,000 from common stock subscribed from two
private placement offerings.  Management of the Company believes that cash on
hand at December 31, 2002 will allow them to continue in business for the next
twelve months.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations
are based upon our financial statements,  which have been prepared in accordance
with accounting  principles  generally accepted in the United States of America.
The preparation of these financial  statements requires us to make estimates and
judgments  that  affect  the  reported  amount of  assets  and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements and the reported amount of revenues and expenses for each period. The
following represents a summary of our critical accounting  policies,  defined as
those  policies that we believe are: (a) the most  important to the portrayal of
our  financial  condition  and  results  of  operations,  and (b)  that  require
management's most difficult  subjective or complex judgments,  often as a result
of the need to make  estimates  about the effects of matters that are inherently
uncertain.
<PAGE>

Income Taxes

As part of the process of preparing our financial statements, we are required to
estimate our income taxes. The process incorporates an assessment of the current
tax exposure  together  with  temporary  differences  resulting  from  different
treatment  of  transactions  for  tax and  financial  statement  purposes.  Such
differences  result in deferred tax assets and  liabilities,  which are included
within the  balance  sheet.  The  recovery  of  deferred  tax assets from future
taxable  income must be assessed and, to the extent that recovery is not likely,
we establish a valuation allowance.  Increases in valuation allowances result in
the recording of additional tax expense.  Further, if our ultimate tax liability
differs  from  the  periodic  tax  provision  reflected  in  the  statements  of
operations, additional tax expense may be recorded.


                                  RISK FACTORS

     In  addition  to the other  information  included  in, or  incorporated  by
     reference into this report, the following risk factors should be considered
     carefully in evaluating the Company and its business.  An investment in the
     Company involves a high degree of risk. The following risk factors are some
     but not all of the factors that are  associated  with an  investment in the
     Company.  Some statements included herein are based on many assumptions and
     are  subject  to risks  and  uncertainties.  Actual  results  could  differ
     materially from the results discussed in the forward looking statements due
     to a number of factors,  including,  but not limited to,  those  identified
     below.

          The Company no longer has any continuing business operations

     The  Company no longer has any  continuing  business  operation  other than
     winding up of its operations. The Company is not seeking to engage in other
     business  ventures  until such time as the  Litigation  has  ended.  In any
     event,  at such time as the Company  proceeds in seeking to engage in other
     business  ventures,  there  can be no  assurance  as to  when,  or  if,  an
     economically viable business can be acquired or continued successfully.

      The recent verdict in favor of the Company was appealed by the defendants.

     Although the Company  reached a settlement  with Thomas F. Flately prior to
     the verdict,  the remaining  defendants appealed the verdict,  and on March
     18, 2002, the Superior Court  affirmed the amount of  compensatory  damages
     and consequential damages, and ordered a new trial on the issue of punitive
     damages.  There  can be no  assurance  that  the  new  trial  will  have as
     favorable an outcome to the Company. Furthermore, there can be no assurance
     that  the  Company  will  be able  to  enforce  the  Judgment  against  the
     defendants.

                        Control by principal stockholder

     Harmony Ventures BV ("Harmony") owns approximately  46.8% of the issued and
     outstanding  shares  of  Common  Stock of the  Company.  As a result of its
     ownership, Harmony will have a major influence in determining the direction
     and policies of the Company,  the election of the directors of the Company,
     the outcome of any other matter submitted to a vote of stockholders, and to
     prevent or cause a change in control of the Company.


                              Market considerations

There can be no  assurance  that the market  price of the Common  Stock will not
decline.

The Company is no longer listed on the NASDAQ stock market and has withdrawn
as a reporting Company under Section 12(g) of the Securities Exchange Act
of 1934.

The Company is no longer listed on the NASDAQ stock market as a
result of its no longer meeting NASDAQ's listing qualifications.
There can be no assurance that the Company will meet NASDAQ's
requirements in the future so that it may re-apply for listing,
nor can there be assurance that, even if the Company does meet
NASDAQ's listing requirements, the Company will be accepted by
NASDAQ.
<PAGE>

In order to conserve cash the Company has withdrawn as a
reporting company under Section 12(g) of the Securities Exchange
Act of 1934, with the result that the Company will no longer be
required to file annual and quarterly reports with the Securities
and Exchange Commission. The Company will however keep
shareholders apprised of the financial condition and business of
the Company from time to time as management deems necessary and
appropriate. The effect of this withdrawal may affect a
shareholders ability to sell his securities if there are no
current financial information available.

                    The Company has never paid any dividends

The Company has never paid cash dividends on its Common Stock. Furthermore,
the POR pertaining to the Predecessor's emergence from bankruptcy 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, 2001, 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 7.     Financial Statements

         See pages F-1 to F-19

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

         None


<PAGE>

                                    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

M. Albert Nissim...                69                    Chairman, President
                                                         and Director

Boaz Harel.........                39                    Vice Chairman of
                                                         the Board and Director

David W. Sass......                67                    Secretary and Director

     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 and
     became a director in 2002 of that company.  From 1994 to 1995, he served as
     a 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 was a  Co-Managing  Director of Leedan
     International Holdings B.V., a principal shareholder of the Company.

     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 had been the
     Managing Director of Leedan Business Enterprise Ltd. ("Leedan"),  which was
     the beneficial  owner of  approximately  56% 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. until 2001 and since September 1996 until
     2001,  Mr.  Harel  served as the  Chairman  of ICTS - USA,  Inc.,  a former
     indirect subsidiary of Leedan.

     David W. Sass for the past 42 years has been a  practicing  attorney in New
     York City and is currently a senior partner in the law firm of McLaughlin &
     Stern,   LLP,   general  counsel  to  the  Company,   a  Director  of  ICTS
     International  NV since  2002,  a company  engaged in the filed of aviation
     security  services and solutions in high-risk  environments and an honorary
     trustee of Ithaca  College.  He is also a director  of  BarPoint.com,  Inc.
     since 1995, an online and wireless product information and shopping service
     provider.  He became a director of Inksure  Technologies,  Inc. in 2003,  a
     company which develops, markets and sells customized authentication systems
     designed to enhance the security of documents  and branded  products and to
     meet the growing demand for protection from  counterfeiting  and diversion.
     He is also a director of several privately held corporations.


<PAGE>


Item 10.          Executive Compensation.

     The following table sets forth  compensation  awarded to, earned by or paid
     to executives of the Company.  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
                  Principal Position                 Fiscal            Salary($)     Bonus    Other Annual           Securities
                                                                                               Compensation($)       Underlying
                                                                                                                      Options

                  Boaz Harel (1)                      2002              $  22,917
                  Chairman of the Board               2001              $  50,000                                      57,500
                                                      2000              $ 100,000

                  M. Albert Nissim(2                 2002              $  96,000
                  President                          2001              $ 114,000                                       70,000
                                                     2000              $ 114,000

                  David W. Sass                      2002              -0-
                  Secretary                          2001              -0-
                  __________________
</TABLE>

     (1) The Company has a  compensation  plan for Mr. Boaz Harel and/or  Leedan
     Business   Enterprises,   Ltd.  ("Leedan"),   the  Company  which  provided
     management  services to the Company by making Mr.  Harel  available  to the
     Company.  Leedan  was 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  pre-tax income above  $1,000,000  annually.
     Leedan  and Mr.  Harel  determine  how such  compensation  will be  divided
     between them.  The annual salary is currently not being paid.

     (2) 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.  Effective  September 1, 2002,  Mr.  Nissim's  compensation  was
     reduced to $5,000 per month.

                           Compensation of Directors.

     The outside Directors of the Company receive cash  compensation of $300
     per meeting in his or her capacity as a director when there is a
     telephonic meeting and $500 when the Board meets in person.

                          Options Issued to Executives.

     The table below sets forth information regarding option grants to executive
     officers and Directors and former 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                     70,000                      $2.00                       November 8, 2005

David W. Sass                         6,000                      $2.00                       November 8, 2005

Richard Fried                        19,500                      $2.00                       November 8, 2005

Tamar Lieber                         19,500                      $2.00                       November 8, 2005

Joseph Samuels                       12,000                      $2.00                       November 8, 2005

Boaz Harel                           57,500                      $2.00                       November 8, 2005

Lynda Davey                          12,000                      $2.00                       November 8, 2005


<PAGE>


Item 11.    Security Ownership of Certain Beneficial Owners and Management

     The following table sets forth the holdings of the Common Stock as of March
     24,  2003  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.

                                                              Number of Shares                  Percent
                  Name                      Title             of Common Stock
                                                              of Class

                  ICTS International N.V.                       693,183 (1)                        14.5%
                  Biesboch 225
                  1181 JC Amstelveen
                  The Netherlands

                  Lancer Partners L.P.                           365,834 (2)                        7.6%
                  375 Park Avenue, Ste. 2006
                  New York, NY 10166

                  Harmony Ventures BV                         2,191,338(3)                         45.8%
                  c/o FTC Trust
                  2240 BA Wassenaar
                  The Netherlands

                  Rogosin International B.V.                     385,750 (4)                       8%
                  One Rockefeller Plaza,
                  Ste. 2412
                  New York, NY 10020

                  M. Albert Nissim          President and        73,200 (5)                        1.5%
                  One Rockefeller Plaza     Director
                  Suite 2412
                  New York, NY

                  Boaz Harel                                        -0-
                  1 Rockfeller Plaza
                  Suite 2412
                  New York, New York 10020

                  David W. Sass             Secretary and         6,000(6)                           *
                  c/o 260 Madison Avenue    Director
                  18th Floor
                  New York, New York 10016

                  Directors and
                  Executive
                  Officers as a
                  group (3 persons)                              2,868,838 (7)                       60%

     * Less than 1%
</TABLE>

     (1) Includes a 5 year Warrant to purchase 13,000 shares at a price of $2.25
     per share,  a 3 year warrant to purchase  5,883 shares a price of $1.00 per
     share  and  235,300  shares  of  common  stock  owned  by  a  wholly  owned
     subsidiary.

     (2) Includes a 1 year Warrant to purchase 25,000 shares at a price of $3.00
     per share.  Does not include  27,500  shares  owned by Michael  Lauer,  the
     General Partner of Lancer Partners, L.P.

     (3) Harmony Ventures B.V., holds 46.5% of the issued and outstanding Common
     Stock of the Company.  Certain  members of the family of Mr. Boaz Harel,  a
     director  of  the  Company,  collectively,  own  approximately  50%  of the
     outstanding  shares of Harmony  Ventures  BV.  Includes a 1 year Warrant to
     purchase  30,000 shares at a price of $3.00 per share and a 3 year warrrant
     to purchase 19,188 shares at a price of $1.00 per share.

     (4) Includes a 5 year Warrant to purchase  5,750 shares at a price of $2.25
     per share.

     (5) Includes 70,000 options exercisable at $2.00 per share.

     (6) Include 6,000 options exercisable at $2.00 per share.

     (7) Does not include any options or warrants referred to in notes (1), (2),
     (3),  (4),  (5) and (6),  hereof,  but includes the shares owned by Harmony
     Ventures BV.
<PAGE>

Item 12. Certain Relationships and Related Transactions Certain Transactions.

                                    N/A

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 years
     ended December 31, 2002 and 2001

     Balance Sheets as of December 31, 2002 and 2001.

     Statements of Operations for the years ended December 31, 2002 and 2001.

     Statements of Comprehensive  Income (Loss) for the years ended December 31,
     2002 and 2001.

     Statements of  Stockholders'  Equity (Deficit) for the years ended December
     31, 2002 and 2001.

     Statements of Cash Flows for the years ended December 31, 2002 and 2001.

     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

Item 14.  Controls and Procedures

(a) Based on his evaluation as of a date within 90 days of the filing date of
this Annual Report on Form 10-K, the Company's President and Principal
Accounting Officer has concluded that the Company's disclosure controls and
procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Exchange Act)
are effective to ensure that information required to be disclosed by the
Company in reports that it files or submits under the Exchange Act are
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms.

(b)  There were no significant changes in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

<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:_____________________________
                             Name: M. Albert Nissim
                             Title: President

                             Date: March      , 2003

     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:_______________________________
                             Name: M. Albert Nissim
                             Title: President and Chief Financial Officer

                             Date: March , 2003

                       By:________________________________
                             Name: Boaz Harel
                             Title: Director

                             Date: March , 2003

                       By: _______________________________
                            Name: David W. Sass
                            Title: Director & Secretary

                            Date: March , 2003


<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,  2002  and  2001,  and the  related  statements  of
               operations,  changes in stockholders' equity (deficit),  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  auditing  standards
               generally  accepted  in  the  United  States  of  America.  Those
               standards  require  that we plan and  perform the audit to obtain
               reasonable  assurance about whether the financial  statements are
               free of material misstatement.  An audit includes examining, on a
               test basis,  evidence  supporting the amounts and  disclosures in
               the financial  statements.  An audit also includes  assessing the
               accounting  principles  used and  significant  estimates  made by
               management, as well as evaluating the overall financial statement
               presentation.  We believe  that our audits  provide a  reasonable
               basis for our opinion.

               In our  opinion,  the  financial  statements  referred  to  above
               present fairly, in all material respects,  the financial position
               of Pioneer Commercial Funding Corporation as of December 31, 2002
               and 2001,  and the results of its  operations  and its cash flows
               for the years then ended in conformity with accounting principles
               generally accepted in the United States of America.

               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 has ceased
               issuing loans in its' mortgage  warehouse lending  business.  The
               Company has also suffered  recurring  losses from  operations and
               has negative  working capital and net worth.  These factors raise
               substantial  doubt  about  its  ability  to  continue  as a going
               concern.  Management's  plans  regarding  those  matters are also
               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 5, 2003

                                      F-1
<PAGE>
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>


                        PIONEER COMMERCIAL FUNDING CORP.
                                 BALANCE SHEETS
                        AS OF DECEMBER 31, 2002 AND 2001

                                   - ASSETS -

                                                                                      2002                2001
CURRENT ASSETS:
     Cash and cash equivalents                                              $      1,135,198     $         38,124
     Receivable for loans shipped                                                  1,716,969            1,716,969
     Notes receivable - net of reserve                                                72,265              150,504
     Prepaid and other current assets                                                 39,454               66,057

TOTAL CURRENT ASSETS                                                               2,963,886            1,971,654

OTHER ASSETS:
     Investment securities available for sale                                        574,870              442,863
     Notes receivable - net of current portion                                         3,979               76,244
     Other assets                                                                     25,000               25,000

TOTAL ASSETS                                                                $      3,567,735     $      2,515,761


                                         - LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)-

CURRENT LIABILITIES:
     Mortgage warehouse loans payable                                             3,241,010     $      3,241,010
     Accounts payable and accrued expenses                                           41,809               68,134
     Accrued interest and fees                                                      995,994              623,433
     Deferred loan fees                                                              29,000               29,000
     Deferred legal fees                                                             65,395               65,395
     Subordinated debt                                                            1,000,000            1,000,000

TOTAL CURRENT LIABILITIES                                                         5,373,208            5,026,972

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY (DEFICIT):
 Common  stock  - $.01  par  value;  authorized  20,000,000  shares;
  3,778,663  and
 3,403,663 shares issued and outstanding for 2002 and 2001, respectively             37,787               34,037
     Additional paid-in capital                                                  17,393,770           16,647,520
     Common stock subscribed                                                        900,000                   -
     Accumulated deficit                                                        (20,011,155)         (18,934,886)
     Accumulated other comprehensive income (loss)                                 (125,875)            (257,882)

TOTAL STOCKHOLDERS' EQUITY (DEFICIT)                                             (1,805,473)          (2,511,211)

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                           $   3,567,735     $      2,515,761



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, 2002 AND 2001


                                                                                      2002                2001
INCOME:
     Interest income                                                               $      23,003      $      78,261
     Processing fees                                                                          -               5,850

TOTAL INCOME                                                                              23,003             84,111

INTEREST AND FEE COSTS:
     Interest expense - warehouse line of credit and subordinated debt                   385,061            449,544
     Bank charges and facility fees                                                           -                 327

TOTAL INTEREST AND FEE COSTS                                                             385,061            449,871

NET INTEREST AND FEE (LOSS)                                                             (362,058)          (365,760)

     Loan loss provisions (recovery)                                                         726           (120,297)
                                                                                        (362,784)          (245,463)
OTHER OPERATING EXPENSES:
     Compensation and benefits                                                           125,490            171,328
     Professional and consulting fees                                                    412,421          1,121,901
     Utilities                                                                            11,819             10,660
     Rent                                                                                 29,215             25,736
     Other                                                                               139,007            143,867

TOTAL OTHER OPERATING EXPENSES                                                           717,952          1,473,492

LOSS FROM OPERATIONS                                                                  (1,080,636)        (1,718,955)

OTHER INCOME AND (EXPENSE):
     Interest income - other                                                               5,594             13,852
     Litigation settlement                                                                -               1,000,000
     Loss from sale of securities                                                             -             (10,425)

TOTAL OTHER INCOME                                                                         5,594          1,003,427

LOSS BEFORE TAXES                                                                     (1,075,142)          (715,528)

     Provision for taxes                                                                   1,127                902

NET LOSS                                                                           $  (1,076,269)     $    (716,430)

BASIC AND DILUTED LOSS PER SHARE OF COMMON STOCK                                   $      (0.29)      $      (0.21)

WEIGHTED AVERAGE NUMBER OF SHARES                                                      3,731,788          3,403,663

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

                                                                  F-3
<PAGE>


                        PIONEER COMMERCIAL FUNDING CORP.
                    STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001



                                                                                                       2002                2001

NET LOSS                                                                                       $   (1,076,269)     $     (716,430)

     Change in unrealized gain (loss) on investment in securities available for sale                  132,007            (141,632)

COMPREHENSIVE NET LOSS                                                                         $     (944,262)     $     (858,062)



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

                                                                  F-4
<PAGE>

                        PIONEER COMMERCIAL FUNDING CORP.
             STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001



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


Balance, December 31, 2000   $34,037        $16,647,520     $        -        $(18,218,456)     $(116,250)     $   (1,653,149)

Change in unrealized loss on
   investment in securities
   for sale                       -                -                 -                  -         (141,632)           (141,632)

Net loss                          -                -                 -            (716,430)             -             (716,430)

Balance, December 31, 2001    34,037       16,647,520                -         (18,934,886)       (257,882)         (2,511,211)

Change in unrealized loss on
   investment in securities
   for sale                       -                -                 -                  -          132,007             132,007

Proceeds from sale of common
   stock                       3,750          746,250                -                  -               -              750,000

Proceeds from common stock
   subscribed                     -                -            900,000                 -               -              900,000

Net loss                          -                -                 -          (1,076,269)             -           (1,076,269)

Balance, December 31, 2002   $37,787       $17,393,770  $        900,000  $     (20,011,155) $     (125,875)     $   (1,805,473)




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

                                                                  F-5
<PAGE>



                                                   PIONEER COMMERCIAL FUNDING CORP.
                                                       STATEMENTS OF CASH FLOWS
                                            FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001


                                                                                                    2002                 2001
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                                                   $ (1,076,269)      $     (716,430)
     Adjustments to reconcile net loss to net cash (used in) operating activities:
        Loan loss reserve and provision for bad debts                                                 -                   (94,021)
        Loss from sale of securities                                                                  -                    10,425
        Note receivable written off                                                                  82,740               367,551
     (Increase) decrease in:
        Mortgage warehouse loans receivable                                                           -                    45,385
        Accrued interest receivable                                                                   -                    (6,900)
        Prepaid expenses                                                                              -                   (15,755)
        Notes receivable                                                                             67,764                40,992
        Other assets                                                                                 26,603                 7,199
     Increase (decrease) in:
        Accrued interest payable                                                                    372,561               (68,624)
        Accounts payable and accrued expenses                                                       (26,325)             (258,960)
          Net cash (used in) operating activities                                                  (552,926)             (689,138)

CASH FLOWS FROM INVESTING ACTIVITIES:
     Net proceeds from sale of securities                                                                 -                 8,325
          Net cash provided by investing activities                                                       -                 8,325

CASH FLOWS FROM FINANCING ACTIVITIES:
     Net (decrease) in borrowings used in operations                                                      -               (20,000)
     Net proceeds from issuance of stock                                                           1,650,000                -
          Net cash provided by (used in) financing activities                                      1,650,000              (20,000)

NET INCREASE (DECREASE) IN CASH                                                                    1,097,074             (700,813)

     Cash and cash equivalents at beginning of year                                                   38,124              738,937

CASH AND CASH EQUIVALENTS AT END OF YEAR                                                         $ 1,135,198       $       38,124

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
     Interest expense                                                                            $    12,500       $      500,000
     Income taxes                                                                                $     1,127       $        1,034

NONCASH FINANCING ACTIVITIES:
     Conversion of mortgage loans receivable to notes receivable                                 $        -        $      185,000




The accompanying notes are an integral part of these financial statements.
                                       F-6

<PAGE>


                        PIONEER COMMERCIAL FUNDING CORP.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001

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.

                                      F-7
<PAGE>
                        PIONEER COMMERCIAL FUNDING CORP.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001

NOTE A - NATURE OF OPERATIONS (Continued):

Operations (Continued):

               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 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 accounting  principles  generally accepted in the
               United  States of America,  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 I and M,  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 I).

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, 2002 and 2001,  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.

               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.

               As of December 31, 2002 and 2001, the fair value of cash and cash
               equivalents, notes receivable, obligations under accounts payable
               and debt instruments approximate the carrying value.

Marketable Securities:

               At December 31, 2002 and 2001,  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).

Comprehensive Income:

               In 1997, the Company  adopted  Statement of Financing  Accounting
               Standards No. 130, "Reporting  Comprehensive  Income" (SFAS 130),
               which  established  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.

                                      F-9
<PAGE>

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):

Employee stock options:

The Company follows Statement of Financial  Accounting  Standards No. 123 ("SFAS
No. 123"),  "Accounting for Stock-Based  Compensation." As permitted by SFAS No.
123, the Company elected to follow  Accounting  Principles  Board Opinion No. 25
("APB  No.  25"),  "Accounting  for  Stock  Issued to  Employees,"  and  related
interpretations,  in accounting for employee  stock options.  As opposed to SFAS
No.  123,  which  is a  fair  value-based  method,  APB  No.  25  provides  that
compensation expense related to the Company's employee stock options be measured
based on the  intrinsic  value  of the  stock  option.  SFAS  No.  123  requires
companies that elect to follow APB No. 25 to provide pro forma disclosure of the
impact of applying the fair value method of SFAS No. 123. The Company expects to
continue following the guidance under APB No. 25 for stock-based compensation to
employees (see Note L).

If the Company had elected to recognize compensation expense based upon the fair
value  at the  grant  date  for  awards  under  the  Plan,  consistent  with the
methodology  prescribed  by SFAS No. 123,  then the Company's net loss per share
would be increased to the pro forma amounts indicated below:

                                                                                           2002               2001
Net loss, as reported                                                                $  (1,076,269)     $  (716,430)
Deduct:  Total  stock-based  employee  compensation  expense  determined under fair
  value based method for all awards, net of related tax effects                            210,255              -
Pro forma net loss                                                                   $  (1,286,524)     $  (716,430)
Loss per share:
Basic and diluted - as reported                                                      $       (0.29)     $      (.21)
Basic and diluted - pro forma                                                        $       (0.34)     $      (0.21)

The fair value of the options was estimated using the BlackpScholes model with
the following weighted average assumptions: expected volatility of 230%; risk
free interest rate of 2.35%; and expected lives of 1 to 3 years.

Recent pronouncements:

On May 1, 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44, and 64,  Amendment of FASB Statement No. 13, and Technical  Corrections."
SFAS No. 145 is effective for the  Company's  fiscal year  beginning  January 1,
2003.  This new  standard  will not have any impact on the  Company's  operating
results and financial position.

On July 30, 2002, the FASB issued  Statement of Financial  Accounting  Standards
No. 146,  "Accounting  for Costs  Associated  with Exit or Disposal  Activities"
("SFAS 146"), that is applicable to exit or disposal activities  initiated after
December  31,  2002.  This  standard  requires   companies  to  recognize  costs
associated  with exit or disposal  activities when they are incurred rather than
at the date of a commitment to an exit or disposal plan.  This standard does not
apply where SFAS 144 is applicable.  The adoption of this standard will not
currently impact the Company.

In November 2002, the Auditing  Standards  Board issued SAS 100 which  spercedes
SAS 71,  effective  for interim  periods  within  fiscal years  beginning  after
December 15, 2002. This Standard gives additional  guidance to accountants as to
procedures  to  be  applied  when  performing  a  review  of  interim  financial
statements.

On  December  31,  2002,  the FASB  issued  Statement  of  Financial  Accounting
Standards No. 148,  "Accounting  for  Stock-Based  Compensation - Transition and
Disclosure" ("SFAS 148"), that is applicable to financial  statements issued for
fiscal years ending after December 15, 2002. In addition, interim disclosure

                                      F-10
<PAGE>
provisions are applicable for financial  statements  issued for interim  periods
beginning  after December 15, 2002.  This standard  amends SFAS 123 and provides
guidance to companies electing to voluntarily change to the fair value method of
accounting for stock-based compensation.  In addition, this standard amends SFAS
123 to  require  more  prominent  and more  frequent  disclosures  in  financial
statements  regarding the effects of stock-based  compensation.  The adoption of
this standard will not currently impact the Company's financial statements.

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 has ceased issuing loans in 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  sold all its  operating  assets  and is  exploring  other
business  opportunities.  During the year ended December 31, 2002, the Company's
primary  source of capital was  $750,000  from the  issuance of common stock and
$900,000 from common stock subscribed from two private placement offerings.

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.  These  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.

NOTE D - MORTGAGE WAREHOUSE LOANS RECEIVABLE/PAYABLE:

Loans receivable were 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 were
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 paid  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, which to date has
not been received by the Company.  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.  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, 2002, the Company
continues to owe Bank One  $3,241,010  which bears  interest at the bank's prime
rate plus 4% per annum (which was 8.25% at December 31, 2002).

                                      F-11
<PAGE>

NOTE E - LOANS HELD FOR RESALE

               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,  2001,  the
               balance of these loans have been written down to zero.

                                      F-12
<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  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.  In June 2000, the
Company received a check in the amount of $219,828 which represented payment for
a settlement reached with Norwest Funding, Inc. After trial, on December 4, 2000
a judgment  was  entered  (a)  against  the bank and in favor of the  Company as
follows:  compensatory  damages in the amount of  $1,779,520  plus  interest  of
$78,854, consequential damages in the amount of $13,500,000, punitive damages in
the amount of  $40,500,000,  for a total of $55,858,374  and (b) in favor of the
Company  against  American  Financial  Mortgage  Corp.  and Thomas F. Flatley as
follows:  compensatory  damages on the contract and  conversion in the amount of
$1,779,520 plus interest of $890,443 on the contract claims,  attorney's fees in
the amount of  $1,200,000,  for a total of  $3,869,963.  In November  2001,  the
Company settled its litigation  against Thomas F. Flatley for  $1,000,000.  This
amount has been  recorded as other income in the  statement of  operations.  The
other  defendants  have appealed the judgment.  On March 18, 2002,  the Superior
Court in  Pennsylvania  issued its  opinion in the  appeal  affirming  the lower
courts judgment of $1,779,520 compensatory damages and $13,500,000 consequential
damages against the bank. Accrued interest from judgment date is applicable. The
court ordered a new trial solely on the award of punitive  damages in the amount
of  $40,500,000.  Thereafter,  the  remaining  defendants  appealed the Superior
Court's  verdict to the  Pennsylvania  Supreme Court.  The Supreme Court has not
decided  whether it will hear this  appeal.No  assurance  can be given as to the
ultimate outcome of this litigation. The Company has only reflected the original
$1.7 million receivable on its balance sheet.

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,
2002 and 2001 at $4.50 and $2.60 per share,  respectively  (before  the  reverse
stock split), resulting in an unrealized gain of $132,007 and an unrealized loss
of $141,632 in 2002 and 2001, respectively.


On February  23,  2001,  the Company  signed an  agreement  with FFIR to convert
warehouse loans, accrued interest and fees receivable in the aggregate amount of
$494,496  into 164,832  restricted  shares of FFIR.  These shares were valued at
$3.00 per share.

At December 31, 2002 and 2001, these shares were valued as required by Financial
Accounting   Standards  Board   Statement  No.  115,   "Accounting  for  Certain
Investments in Debt and Equity Securities."  Fidelity First Mortgage,  which was
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.  The  following  is a
summary of investment in securities available for sale.

                                                         2002             2001
Cost                                               $   700,745   $       700,745
Accumulated other comprehensive loss                  (125,875)         (257,882)
                                                   _____________   _____________
                                                  $   574,870   $       442,863
                                                  ============  ================


                                  F-13
<PAGE>

NOTE H - NOTES RECEIVABLE:

               2002 2001 On November 18,  1998, a settlement  was reached with a
               guarantor  of a mortgage  banking  customer's  defaulted  line of
               credit.  Pursuant to the settlement,  the guarantor 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.  Due to the  default of these                    2002         2001
               notes,  the Company  recorded a 100% reserve  against the amounts                _________        _________
               due.                                                                              $ 735,103      $ 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 matured June 29, 2000.  Due to the
               default of these  notes,  the  Company  recorded  a 100%  reserve
               against the amounts due.                                                             82,740        82,740

               In April 2001,  the  Company  received a  promissory  note in the
               amount  of  $185,000  plus  interest  at 10% per  annum  as final
               settlement for unpaid warehouse loans and interest  receivable in
               the  aggregate  amount of  $263,996.  The Company had  previously
               booked a loan loss reserve of $234,637 against these  outstanding
               receivables. This note is payable $5,000 upon signing; $7,000 per
               month during the periods  June 1, 2001  through  October 1, 2001,
               February  1, 2002  through  October  1,  2002,  February  1, 2003
               through  October 1, 2003 and $4,000 per month  during the periods
               November  1, 2001  through  January  1,  2002,  November  1, 2002
               through  January 1, 2003 and November 1, 2003 through  January 1,
               2004, net of reserve.                                                                76,244         144,008
                                                                                                   894,087         961,851

Less:  reserve                                                                                    (817,843)       (735,103)
                                                                                                    76,244         226,748

Less:  current portion                                                                              72,265         150,504

                                                                                                  $  3,979   $      76,244
                                      F-14                                                        =========  ==============

<PAGE>

NOTE I - INCOME TAXES:

The components of the provision for income taxes are as follows:

                                                                                         2002                    2001
                                                                                         ____                    _____
                       Current:
                          Federal                                                    $      -                $      -
                          State                                                          1,127                     902
                                                                                         1,127                     902
                       Deferred:
                          Federal                                                           -                       -
                          State                                                             -                       -
                       Provision for income taxes                                    $   1,127               $     902
                                                                                     ==========                 =======

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

                                                                                        2002                    2001


                     Net operating losses                                           $  7,004,000            $  6,664,000
                     Valuation allowances                                             (7,004,000)             (6,664,000)
                                                                                    $         -             $         -
                                                                                        =========               =========

At December 31, 2002, the Company had net operating  loss (NOL's)  carryforwards
available for income tax purposes of  approximately  $20.6  million  expiring in
varying amounts through 2022.  Approximately $1 million of the NOL's are limited
in use pursuant to a change in ownership in November 1994.


NOTE J - DEFERRED LEGAL FEES:

Deferred legal fees are a consequence of the POR (see Note M) 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, 2002.


NOTE K - STOCKHOLDERS' EQUITY:

Common Stock:

In December  2002,  the Company  received  $900,000  from the sale of  1,000,000
shares of common stock in a private placement offering (see Note O).

On February  15, 2002,  the Company  issued  375,000  shares of common stock for
$750,000 in a private placement offering.


                                      F-15
<PAGE>

NOTE K - STOCKHOLDERS' EQUITY (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 30,000  Warrants  outstanding  (7,500 per unit for 4 units) expired on
December 31, 2002.  The  subordinated  debt carries an interest  rate of 10% per
annum and matures on November 25, 2002.  The debt holder has agreed to not
request payment of this debt until the Bank One line of credit is replaced.
The  Company's  stock price on November 26, 1997 was $2.875.

 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, 2002, 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 M for further discussion of restrictions under the POR).

NOTE L - STOCK OPTION PLANS AND WARRANTS:

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.

                                      F-16
<PAGE>

NOTE L - STOCK OPTION PLANS AND WARRANTS (Continued):

Stock option plans (Continued):

The Company has issued additional  options outside the Plan at the discretion of
its Board of Directors ("BOD"). During the year ended December 31, 2002, 196,500
options  were  granted for a three year term and an exercise  price of $2.00 per
share.

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

Weighed average fair value of options granted during the year is as follows:

                                                                                                 Weighted Average
                                                                                  Options         Exercise Price
   Outstanding, December 31, 2000                                                   190,500    $        4.96
   Weighted average fair value of options granted during 2000                                  0
      Granted                                                                            -                 -
      Exercised                                                                          -                 -
      Canceled                                                                      (67,500)            3.75
   Outstanding, December 31, 2001                                                   123,000             5.62
   Weighted average fair value of options granted during 2001                                              -
      Granted                                                                       196,500             2.00
      Canceled/expired                                                             (123,000)            5.62
   Outstanding, December 31, 2002                                                   196,500             2.00
   Weighted average fair value of options granted during 2002                                           2.00
   Options exercisable:
      December 31, 2001                                                             123,000    5.62
      December 31, 2002                                                             196,500             2.00


The exercise price for options outstanding as of December 31, 2002 is $2.00. The
weighted-average  remaining  contractual  life of these options is approximately
2.7 years. Outstanding options at December 31, 2002 were held by 7 individuals.

Warrants:

On September 30, 2000, the Company issued 104,630  warrants to purchase  104,630
shares of common stock at $3.00 per share to the parties who acquired  shares in
a private  placement  in  September  2000,  and to the  holders of the loans and
accrued  interest that were converted  into common stock.  The fair value of the
warrants was estimated using the Black-Scholes model with the following weighted
average  assumptions:  expected  volatility of 100%;  risk free interest rate of
5.30%;  and  expected  lives of 1 to 3 years.  Accordingly,  for the year  ended
December 31, 2000, compensation expense aggregating $171,594 was recorded. These
warrants expired on December 31, 2002, unexercised.

In February  2002,  the Company  issued  warrants to purchase  18,750  shares of
common stock at an exercise price of $2.25 per share to the parties who acquired
shares in the private placement. These warrants expire on February 1, 2005.

                                      F-17
<PAGE>
NOTE M - 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,  2002 and 2001 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 2001 or 2002.

As of December  31,  2002,  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.

Lease Obligation:

The Company was the  lessee of 6,846  square  feet of office  space  located in
Woodland  Hills,  California  through  October of 2007. The Company vacated this
office space in September 1999. The monthly base rent through  September 2002 is
$13,692  and for years six  through  ten is  $15,745.  Although  the Company has
vacated the office space,  a written  release was not obtained from the landlord
even  though  the  office  space  was  subsequently  rented to  another  tenant.
Management is of the opinion that any liability under the lease  terminated when
the premises was vacated and when a $150,000  certificate  of deposit  which was
security  for a letter of credit in favor of the  landlord  was  claimed  by the
landlord  for  unpaid  rent.  Accordingly,  no  accrual  has been  made in these
financial statements for any potential liability under this lease.

                                      F-18

<PAGE>
NOTE M - COMMITMENTS AND CONTINGENCIES (Continued):

Lease Obligation (Continued):

The Company rents office space on a month to month basis from a  shareholder  of
the Company for approximately $3,000 per month.

Rent expenses for the years ended December 31, 2002 and 2001 aggregated  $29,215
and $25,726, respectively.

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 notice.  Effective
September 1, 2002, Mr. Nissim's compensation was reduced to $5,000 per month.

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.  Effective January
1, 2001,  remuneration  was reduced to $4,167 per month and  effective  June 16,
2002 remuneration was reduced to $0.


NOTE N - LITIGATION:

The Company instituted an action against an individual (a former shareholder) in
connection  with his default of two promissory  notes in the amounts of $470,000
and $265,000, respectively. The individual is seeking to avoid responsibility on
the  notes on the  grounds  that he  executed  the  notes  and an  agreement  to
relinquish his stockholdings for other amounts due without a full  understanding
of the  possible  verdict in the case the Company  brought  against Corestates
Bank N.A. (see Note F). The Company is of the opinion that there is no merit
to this action as full information had been provided to such individual prior to
execution of the notes.


NOTE O - SUBSEQUENT EVENT:

     (i) In January  2003,  subsequent  to the balance  sheet date,  the Company
     issued  1,000,000  shares of the Company's common stock for the $900,000 of
     proceeds received in December 2002 from a private placement  offering.  The
     Company also issued  25,001  warrants to purchase  25,001  shares of common
     stock at $1.00 per share to the parties who acquired  shares in the private
     placement.  These warrants are exercisable on January 6, 2003 and expire on
     January 6, 2006.

     (ii)  Effective  February 20, 2003,  the Company is no longer listed on the
     NASDAQ stock market as a result of its' no longer meeting  NASDAQ's listing
     qualifications.  There  can be no  assurance  that the  Company  will  meet
     NASDAQ's  requirements  in the future so that it may  re-apply for listing,
     nor can there be assurance  that,  even if the Company  does meet  NASDAQ's
     listing  requirements,  the Company will be accepted by NASDAQ. In order to
     conserve  cash the  Company has  withdrawn  as a  reporting  company  under
     Section 12(g) of the Securities  Exchange Act of 1934, with the result that
     the Company will no longer be required to file annual and quarterly reports
     with the Securities and Exchange Commission.  The Company will however keep
     shareholders  apprised  of the  financial  condition  and  business  of the
     Company from time to time as management  deems  necessary and  appropriate.
     The effect of this withdrawal may affect a shareholders ability to sell his
     securities if there are no current financial information available.


</TABLE>

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