<PAGE>
 
                                 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 [Fee Required]

                            For the fiscal year ended March 31, 1997
                                                      --------------------------

[_]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934 [No Fee Required]

                            For the transition period from         to  
                                                           -------    ----------

                            Commission file number 
                                                   -----------------------------

                       PIONEER COMMERCIAL FUNDING CORP.
--------------------------------------------------------------------------------
                (Name of small business issuer in its charter)


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

6650 Reseda Blvd., Reseda, California                       91335  
--------------------------------------   ---------------------------------------
   (Address of principal executive                      (Zip Code)
   offices)



Issuer's telephone number  (818)     776-0590
                          ------ ----------------


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

   Title of each class             Name of each exchange on which registered

    Common Stock                              NASDAQ
-----------------------------      ---------------------------------------------

    Warrants                                  NASDAQ
-----------------------------      ---------------------------------------------


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


--------------------------------------------------------------------------------
                               (Title of class)
                   

--------------------------------------------------------------------------------
                               (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 
                                                                   ---      ---

     POTENTIAL PERSONS WHO ARE TO RESPOND TO THE COLLECTION OF INFORMATION
     CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM 
     DISPLAYS A CURRENTLY VALID OMB CONTROL NUMBER.

     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.   $329,425
                                                              ------------  
                                     
     As of June 25, 1997, there were 5,442,272 shares of the Issuer common 
stock, $.01 par value, issued and outstanding of which 2,423,069 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 $4.5 million. 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.

   5,442,272
--------------
<PAGE>
 
                                     PART I
                                     ------


ITEM 1.  DESCRIPTION OF THE BUSINESS.

BACKGROUND

     Pioneer Commercial Funding Corp. ("Pioneer" or the "Company") is a mortgage
warehouse lender providing short-term financing to mortgage bankers who need to
hold the mortgage loans they originate pending the nonrecourse sale of such
loans to institutional investors in the secondary mortgage market.

     The Company was incorporated under the laws of the State of New York in
1994 under the name PCF Acquisition Corp. ("PCF").  The Company's predecessor,
which was incorporated in 1980 under the name Pioneer Commercial Funding Corp.
(the "Predecessor"), emerged from the protection of Chapter 11 of the Bankruptcy
Code in April 1993.  Although the Predecessor was engaged in substantial
business operations from 1980 until January 1990, the nature and extent of the
business that it has conducted since April 1993 are different from the business
which it conducted prior to commencement of such bankruptcy proceedings in
January 1990.

     In November 1994, PCF and the Predecessor consummated a merger (the
"Merger") pursuant to an agreement and plan of merger (the "Merger Plan") which
provided, among other things that (a) the Predecessor would merge with and into
PCF; (b) PCF, as the surviving entity of the merger, would change its name from
PCF to Pioneer Commercial Funding Corp.; (c) upon consummation of the Merger,
the persons who were serving as the directors and officers of the Predecessor
continued to serve in the same capacities as the directors and officers of the
Company; and (d) the Merger would be effected by issuing one share of the
Company's common stock in exchange for and extinguishment of each share of the
Predecessor's common and preferred stock then held by its shareholders. Upon
consummation of the Merger, the Company exchanged, on a share for share basis,
814,126 shares of its Common Stock for the 318,017 shares of the Predecessor's
Class A common stock, the 333,311 shares of the Predecessor's Class B common
stock and the 162,798 shares of the Predecessor's Class A preferred stock which
had been issued and outstanding immediately prior to the Merger.

     In accordance with the Merger Plan, all property, rights, privileges,
powers, contracts, and franchises and every other interest possessed by the
Predecessor in any capacity became the property of the Company, all rights of
creditors and all liens

<PAGE>
 
upon any property of the Predecessor were preserved unimpaired and all debts,
liabilities and duties of the Predecessor attached to the Company and became
enforceable against it to the same extent as if said debts, liabilities, and
duties had been incurred or contracted by the Company.

     In August 1996, the Company consummated its initial public offering (the
"IPO") pursuant to which the Company issued and sold 600,000 shares of its
common stock, par value $.01 per share (the "Common Stock"), and 690,000
warrants (including warrants sold upon exercise of the underwriters' over-
allotment option) exercisable into 690,000 shares of Common Stock at a price to
the public of $5.00 per share and $.10 per warrant, which yielded to the Company
net proceeds of approximately $2 million.  The exercise price of the warrants is
$5.50 per share exercisable during the four year period commencing August 13,
1996 and ending August 12, 2000.   On February 28, 1997, the Company completed a
private placement of securities (the "Private Placement") with eight investors
who invested an aggregate of $4 million in the Company in consideration for 2.2
million shares of Common Stock and $1.8 million principal amount of convertible
promissory notes of the Company (the "Convertible Notes").  The Convertible
Notes were converted into 1.8 million shares of Common Stock on May 9, 1997.

 .    GENERAL

     The Company is a mortgage warehouse lender providing short-term (generally
10-60 days with an average of 21 days per loan) financing to small to 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").

 .    THE COMPANY'S MORTGAGE LENDING OPERATIONS

     The Company provides mortgage warehouse lines of credit for small to medium
sized mortgage bankers who have satisfied the Company's financial, business and
creditworthiness standards. The mortgage loans for which the Company provides
mortgage warehouse lending are primarily used to fund purchases of single family
residences and other owner-occupied residential properties, including one to
four unit properties in which the owner is the occupant of at least one of such
units.

                                       2
<PAGE>
 
     In a mortgage warehouse loan transaction, the Company's mortgage banking
customer will first obtain a funding commitment from a Financial Institution for
a fee, which is usually a fraction of a percent of the commitment amount.  The
Company's customer will then seek to fill the commitment through the submission
of one or more loans to the Financial Institution which conform not only to the
Financial Institution's established loan criteria, but also to the commitment's
rate and delivery date.  These commitments can take three forms: individual
loan, small pool, or standard pool.  An individual loan commitment is an
agreement by a Financial Institution, with a usual term of no longer than two
weeks, to purchase a single whole loan of a specified amount on or before a
specified date (the "Commitment Date") at a specified rate.  A small pool
commitment is an agreement by a Financial Institution, with a usual term of no
longer than three weeks, to purchase an unrestricted number of whole loans of a
specified total amount on or before a specified date at a specified rate.  A
standard pool commitment is an agreement by a Financial Institution, with a
usual term of no longer than 90 days, to purchase an unrestricted number of
whole loans of a specified total amount of no less than $1 million on or before
a specified date at a specified rate.  Generally, the Company's customers do not
possess sufficient capital or bank lines of credit to fully fund loans they
originate during the period of time that transpires between the date on which a
loan is closed and the Commitment Date.  Accordingly, the Company provides its
customer with a line of credit that is collateralized by each loan that the
Company funds for its customer, which enables the customer to hold (warehouse)
the loan for the period of approximately 10 to 60 days that typically occurs
from the closing of the loan until the Commitment Date. During this period, the
Company holds the loan documents (generally, the promissory note and an
assignment of the first deed of trust or mortgage securing the note), and upon
its delivery of the loan documents to the Financial Institution, the Company
receives the full amount of the loan and all other amounts payable to the
mortgage banking company.  The Company applies such funds against amounts due
from its customer to repay the principal of the Company's warehouse loan to the
customer and then remits the excess funds to the customer.

     The Company derives its revenues from both the transaction-based fees that
it charges its customers in connection with the loans it funds on their behalf
and the interest rate spread between the yield paid by the Company to its
financing sources for its borrowed funds, when applicable, and the interest rate
charged by the Company for mortgage loans that it funds on behalf of its
mortgage banking company customers.  During the fiscal years ended March 31,
1996 and 1997 (the "1995 fiscal year" and "1996 fiscal year", respectively),
such interest rate spread was generally 0.50%.  Since April 1, 1997, the
interest rate spread

                                       3
<PAGE>
 
increased to a range of 1.625% to 1.875% based on the type of loan, due to the
lower interest rate that the Company pays on advances made by Bank One compared
to the UMB (as defined below) interest rate.

     Transaction fees are determined pursuant to a schedule based upon the
length of time between the funding of a loan by the Company and reimbursement of
same by the Financial Institution.  During the 1995 and 1996 fiscal years, the
Company's customers were charged an initial fee of $60 to $190 upon funding of a
loan.  If the loan was repaid within 30 days of the funding date, additional
fees were typically not earned by the Company on such loan.  If such loan was
not repaid within said period, the customer paid an additional fee of $150.
Since April 1, 1997, such fee schedule has been revised and the Company's
customers are charged fees which range from $125 to $250 upon funding of a loan
and, in addition, a yearly facility fee ranges from 25 to 37.5 basis points
based on the approved line of credit to such customer.  In the event that the
Company disburses funds to a title company in preparation for closing of a loan
which thereafter does not close, only the initial fee, plus interest for the one
to three days that it normally takes before such funds are returned by the title
company to the Company, are charged by the Company to its customer.

     Generally, the Company's mortgage warehouse loan customers paid interest
for the funds they borrowed during the 1995 and 1996 fiscal years at a rate that
ranged from one quarter of one percentage point to one percentage point over the
UMB Prime Rate (as defined below).

 .    THE COMPANY'S BANK ONE, TEXAS, N.A. LINE OF CREDIT.

     As of March 31, 1997, the Company entered into a one year credit agreement
(the "Credit Agreement") with Bank One, Texas, N.A. ("Bank One").  Pursuant to
the Credit Agreement, Bank One provides the Company with a $25,000,000 revolving
line of credit (the "Bank One Credit Line") and the Company pays fees ranging
from $17.50 to $12.50 per loan based on monthly loan volume.  In addition, based
on the type of the loan, the Company pays interest on advances made by Bank One
at a variable rate ranging from 1/8% below to 1/8% above Bank One's prime rate
of interest (the "Bank One Prime Rate").  The Bank One Prime Rate is the rate
quoted from time to time by the Wall Street Journal as the base rate on
corporate loans at large U.S. money center commercial banks .  As collateral
security for its indebtedness to Bank One under the Credit Agreement, the
Company has granted to Bank One a security interest in various assets including,
but not limited to, all promissory notes acquired by the Company with respect to
any loan funded by the Company with proceeds of the Bank One

                                       4
<PAGE>
 
Credit Line and all mortgages or other forms of collateral securing the funding
of such loans.

 .    THE COMPANY'S UNITED MIZRAHI BANK LINE OF CREDIT.

     During the 1995 and 1996 fiscal years, the Company utilized a revolving
line of credit provided by United Mizrahi Bank ("UMB") under a revolving line of
credit and security agreement between the Company and UMB, as amended (the "UMB
Agreement"), which was increased over the course of the 1995 fiscal year from $1
million to $4 million.  Pursuant to the UMB Agreement, the Company paid a fee of
$30.00 per loan plus interest on advances made under its credit line at one
percent above the highest "prime rate" of interest quoted from time to time by
the Wall Street Journal as the base rate on corporate loans at large U.S. money
center commercial banks (the "UMB Prime Rate").  As collateral security for its
indebtedness to UMB under the UMB Agreement, the Company granted to UMB 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 proceeds of the UMB credit line and all mortgages or other forms of
collateral securing the funding of such loans.  The UMB credit line was paid in
full by the Company in February 1997.

 .    THE COMPANY'S MORTGAGE BANKING COMPANY CUSTOMERS

     During the fiscal year ended March 31, 1995 (the "1994 fiscal year"), the
Company had three customers; however, 82.5% of its fundings were with one
customer, Premium Mortgage Company ("Premium").

     In the first quarter of the 1995 fiscal year, the Company suspended its
customer relationship with Premium due to Premium's failure to comply with the
Company's underwriting criteria.  During the second and third quarters of the
1995 fiscal year, the Company commenced business operations with three new
customers.  The Company funded 81, 70 and 49 loans with those three customers,
totalling $7,249,533, $9,599,530 and $3,529,393, respectively, which accounted
for 35.4%, 46.8% and 17.2%, respectively, of the Company's warehouse lending
business during the 1995 fiscal year.

     During the 1996 fiscal year, the Company funded 643 loans aggregating $51.4
million with the three largest customers, which accounted for 84% of its total
fundings.  The Company funded 297 loans aggregating $24.7 million for one
customer, which accounted for 40.6% of the Company's fundings; 174 loans
aggregating $12.6 million for the second customer, which accounted for 20.7% of
the Company's fundings; and 172 loans aggregating $14.1 million

                                       5
<PAGE>
 
funded for the third customer, which accounted for 23.2% of the Company's
fundings.

     From April 1 through May 31, 1997, the Company had 21 mortgage banking
company customers, of which 12 were active.  During this period the Company
funded 379 mortgage warehouse loans for an aggregate dollar volume of $28.4
million.

 .    THE MORTGAGE LOAN PROCESS

     In order to be approved as a customer, a mortgage banking company must
satisfy a set of standards that have been established by the Company.

     All of the Company's customers are Financial Institution-approved mortgage
banks that generally originate three categories of mortgage loans which are
purchased by such Financial Institutions, i.e., (i) residential mortgage loans
which either have been insured by the Federal Housing Administration, insured by
the Farmer's Home Administration or guaranteed by the Veteran's Administration
(collectively, "FHA/VA Loans"); (ii) conventional residential mortgage loans,
i.e., non-FHA/VA Loans which comply with the requirements for sale to, or
conversion into, mortgage-backed securities issued by FNMA or FHLMC ("conforming
loans"); and (iii) non-conforming product which includes sub-prime loans.
 
     After a customer has satisfied the Company's application standards, a
credit facility agreement is entered into by the Company and the customer
("Credit Facility Agreement") which specifies, among other things, the maximum
amount which can be borrowed by the customer under the Credit Facility
Agreement, the maximum percentage of any single mortgage loan that will be
advanced, the interest rate and the terms of repayment. All funds advanced by
the Company under a Credit Facility Agreement are collateralized by a security
interest in the note and mortgage or deed of trust, as well as all instruments
and documents comprising the loan documentation on each loan funded by the
Company and a personal guaranty of the principals of the customer.  To insure
completeness, the process of reviewing and determining whether an applicant has
satisfied these standards is fully monitored through the Company's Collateral
Tracking System (the "CTS"), which the Company utilizes to manage the risks
inherent in its business, and prepare, track and confirm the on-time delivery of
all necessary documents to the appropriate Financial Institution.

     Within one day of the CTS's confirmation that all required documentation
has been received and reviewed by the Company's staff, the Company will wire
between 98% to 100% of the proceeds of the loan to the appropriate escrow agent
or title company with

                                       6
<PAGE>
 
instructions to disburse the funds only upon consummation of the loan closing,
or otherwise return the funds to the Company. At the time of closing, the
mortgage banking company funds the balance of the loan.

     On or shortly before expiration of the Commitment Date, the Company
delivers all promissory notes and mortgage instruments comprising the loans to
be purchased pursuant to the Financial Institution's commitment to such
Financial Institution upon payment to the Company of the aggregate principal
amount of the loans being delivered. Upon receipt of such funds from the
Financial Institution or the paying agent, the Company applies such funds
against amounts due from the customer to repay the principal of the Company's
warehouse loan to the customer and then remits the excess funds to the customer.
By limiting the mortgage loans funded to those that conform to Financial
Institution criteria, which define the prevalent standards for the entire
secondary mortgage market, the Company reduces its overall financing risk to
those mortgages which are the most liquid and readily acceptable by secondary
mortgage market lenders. Furthermore the Company obtains sufficient
documentation to ensure that if, for any reason, a Financial Institution refuses
to accept and pay for a loan subsequent to the closing thereof, the Company will
have all of the data and documentation necessary to sell the loan to another
Financial Institution or to a mortgage loan originator or warehouse lender.

     In the 1994, 1995 and 1996 fiscal years, no loan which was approved for
funding by the Company failed to close, and every loan which was closed with the
Company's funds during those periods was sold to a Financial Institution in
accordance with the commitment made by the Financial Institution in advance of
such closing.

 .    THE COLLATERAL TRACKING SYSTEM

     The Company manages the risks inherent in its business and prepares, tracks
and confirms the on-time delivery of all necessary documents to the appropriate
Financial Institution with the CTS, a proprietary set of computer-based
operating software. The CTS, which was developed principally by the Company for
its business and not for resale to other mortgage financing companies, provides
the operating data controls that are used by the Company's staff to run the
business on a day-to-day basis. The CTS programs assist the Company in its
efforts to avoid problems caused by, and the monetary losses that can result
from, frequent short-term processing deadlines, the high volume of loan
transactions and the complex document structures of mortgage loan financing
transactions which are integral parts of the mortgage loan warehouse financing
business. Substantial penalties for delay in delivering loan documents to the
secondary market, which

                                       7
<PAGE>
 
may range from a surcharge of 1% to 2% of the principal amount of a loan in the
case of a delay regarding an individual loan commitment, to a complete rejection
and refusal to purchase an entire pool of loans in the case of a delay in
filling a pool commitment, are an integral part of the mortgage loan warehouse
financing business.  An individual loan surcharge will not have any adverse
effect upon the Company, inasmuch as the amount would be deducted from the
proceeds of the particular loan which the Company would otherwise be obligated
to remit to its mortgage banking customer upon its acceptance and funding by a
Financial Institution.  However, a delay which would cause a Financial
Institution to refuse to purchase a pool could result in a delay in replacing
the rescinded pool commitment with a new pool commitment from another Financial
Institution, or in selling the components of the pool as individual loans.
Although the Company would ultimately be compensated for the delay through
higher fees and interest charged to its customer on the pool of loans in
question, the delay could hinder its ability to timely fund additional loans
submitted by other customers, and thereby adversely affect its ongoing relations
with such other customers as a reliable source of mortgage warehouse financing.
During the 1995 and 1996 fiscal years, none of the individual or pool loans
funded by the Company on behalf of its customers was rejected by reason of a
delay in the delivery thereof to a Financial Institution.

     The CTS keeps track of all amounts funded under its customer's line of
credit, automatically determines whether a sufficient balance remains thereunder
to fund a particular loan and updates the available balance information upon
transfer of funds.  The CTS generates all documentation pertaining to the
transfer of funds to the title company closing a loan, the transmittal and
release of loan documents to a Financial Institution, the receipt of funds in
payment of loans purchased by a Financial Institution, and the distribution of
funds due to the mortgage banking company.

     The CTS programs, which include all phases of the Company's mortgage
financing operations, have been modified and altered over time so that they meet
the Company's evolving business requirements.  CTS was first developed in 1987
by principals of the Predecessor.  In the 1995 and 1996 fiscal years, the
Company invested approximately $4,805 and $14,000, respectively, for development
and modification of the CTS to meet the Company's needs.

 .    STRATEGY.

     The Company has embarked on strategies to meet competitive forces in the
mortgage market.  These strategies include focusing on customers with a broader
product base such as non-conforming

                                       8
<PAGE>
 
loans (loans which are not sold to the Agencies) and home equity loans.

     The Company is seeking acquisitions of complementary businesses such as
mortgage companies and companies that provide specialty financial services
within the mortgage industry.

 .    MORTGAGE BANKING OPERATIONS

     On April 16, 1997, the Company entered into a joint venture agreement with
Maryland Financial Corporation ("MFC") to form Pioneer Home Funding, LLC, a
California limited liability company ("PHF").  The Company and MFC will maintain
80 and 20 percent ownership interests, respectively, in PHF.  As of June 10,
1997, the Company and MFC contributed to PHF $40,000 and $20,000, respectively.
These amounts are anticipated to increase up to $200,000 and $50,000,
respectively. PHF is a mortgage banking company organized for the primary
purposes of originating, acquiring, marketing and selling mortgage loans on
residential properties.  PHF is expected to commence operations in July 1997.

 .    COMPETITION.

     The business of originating and financing the origination of residential
mortgage loans is highly competitive.  In order to obtain qualified residential
mortgage loans from small to medium sized originating mortgage bankers, the
Company competes with national, regional and local commercial banks and mortgage
banking companies who engage in mortgage loan warehouse lending that have longer
operating histories and significantly greater resources than those of the
Company in providing multi-state, computer-based bridge financing of residential
mortgage loans.  In recent years, a declining interest rate environment
favorable to mortgage loan originations has existed.  During the period 1995-
1997, larger, established mortgage banking companies have formed mortgage
warehouse divisions.  The Company believes that as an independent warehouse
lender, it can effectively compete by adjusting to an ever-changing mortgage
market while providing a high-quality service through experienced management and
information provided to the Company's customers through the CTS.

 .    SEASONALITY.

     The mortgage banking industry is generally subject to seasonal trends.
These trends reflect a national pattern of sales and resales of homes, although
refinancing tends to be less seasonal and more closely related to changes in
interest rates.  Sales and resales of homes typically peak during the spring and
summer and decline to lower levels from December through March.

                                       9
<PAGE>
 
 .    REGULATION - MORTGAGE WAREHOUSE LENDING.

     Mortgage loan warehousing is not presently subject to federal regulation.
At the state level, the California Finance Lenders Law went into effect July 1,
1995.  That law imposes licensing obligations on the Company, requires the
filing of annual and periodic reports, establishes maximum interest rates and
repayment terms in certain cases, and provides for fines and imprisonment for
violation of the law.  Other participants in the mortgage warehouse financing
process, such as title companies and appraisers, are regulated by the states in
which they reside and such regulations often determine the scope and approach of
the Company's collateral control monitoring program.  Furthermore, mortgage
banking is a highly regulated industry.  The Company's mortgage banking
customers are subject to the rules and regulations of, and examinations by, the
Federal Housing Administration ("FHA"), the Veterans Administration ("VA"),
GNMA, FNMA, FHLMC and state regulatory authorities with respect to originating,
processing, underwriting, selling, securitizing and servicing residential
mortgage loans. In addition, there are other federal and state statutes and
regulations affecting such activities.

 .    EMPLOYEES

     During the 1994 fiscal year, the Company had two full-time employees and
one part-time employee. During the 1995 and 1996 fiscal years, the Company had
one full-time and three part-time employees and temporary staff based on the
Company's needs. Since May 1997, the Company has employed seven full time
employees. None of the employees of the Company is represented by a labor union
or is subject to a collective bargaining agreement. The Company believes that
its relations with its employees are good.

ITEM 2.  PROPERTY

     The Company maintains its office at 6650 Reseda Boulevard, Reseda,
California which is occupied pursuant to a five year lease which commenced on
November 1, 1996 and provides for the payment of rent in the amount of $2,178
per month.

ITEM 3.  LEGAL PROCEEDINGS.

     The Company is not currently engaged in or, to its knowledge, threatened
with, any material legal proceedings.

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

     None.

                                       10
<PAGE>
 
                                 PART II
                                 -------


ITEM 5.  MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS.

     The Common Stock issued by the Company in connection with the IPO has been
listed on the Nasdaq SmallCap Market since August 14, 1996 under the symbol
"PCFC".  The following table sets forth below the high and low sale prices for
the Common Stock for the periods indicated:

<TABLE>
<CAPTION>
 
     Quarter Ended                 High     Low
     -------------                ------   ------
     <S>                          <C>      <C>
     September 30, 1996           $4.875   $2.375
     December 31, 1996            $ 2.75   $ 1.38
     March 31, 1997               $ 3.00   $ 0.78
</TABLE>

     As of March 31, 1997, there were approximately 500 beneficial 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 March
31, 1997, no payment to the unsecured creditors has been made.  Further, in
accordance with the POR, the Predecessor became obligated to pay certain
portions of its net income in satisfaction of said payment obligation to its
pre-bankruptcy creditors.  Upon consummation of the Merger, the Company became
obligated, by operation of law, to comply with such payment obligation and
dividend payment prohibition, among other operating restrictions.  The Company
does not anticipate paying cash dividends on the Common Stock in the foreseeable
future as it intends to retain future earnings to finance the growth of the
business.  The payment of future cash dividends on the Common Stock will depend
on such factors as earnings levels, anticipated capital requirements, the
operating and financial condition of the Company and other factors deemed
relevant by the Board of Directors.

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

     Certain matters addressed in this Annual Report may constitute "forward-
looking statements" within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the

                                       11
<PAGE>
 
Securities and Exchange Act of 1934, as amended.  Such forward-looking
statements are subject to a variety of risks and uncertainties that could cause
actual results to differ materially from those anticipated by the Company's
management.  The Private Securities Litigation Reform Act of 1995 (the "Act")
provides certain "safe harbor" provisions for forward-looking statements.  All
forward-looking statements made in this Annual Report are made pursuant to the
Act.

GENERAL.

     As of June 14, 1993, when the Company commenced active operations following
its emergence from Chapter 11 bankruptcy proceedings, it had an available credit
line of $1 million from one source, UMB. The Company's lines of available credit
from UMB were subsequently increased to an aggregate of $4 million as of March
31, 1996 and were utilized by the Company through February 1997. As of March 31,
1997 the Company entered into the Credit Agreement with Bank One, which provides
for a $25 million line of credit.

     As a result of the death of Uri Lieber, the Company's former Chairman and
Chief Executive Officer, in April 1995, the Company did not engage in any
substantial mortgage warehouse lending activities from April 1995 through August
1995. During the period from August 1995 through November 1995, the Company
developed customer relationships with three new mortgage banking companies, and
from August 1995 through March 1996 the Company generated approximately $20.4
million in mortgage warehouse lending volume from those new customers.  During
the 1996 fiscal year, the three largest customers generated $51.4 million in
warehouse loan volume, a 152% increase over the 1995 fiscal year.  In September
1996, the Company obtained a fourth customer.

     During each of the twelve month periods ended March 31, 1995, 1996 and
1997, the Company operated with a limited number of customers and funding
sources.  However, since April 1, 1997, the Company has developed several new
customer relationships and is in the process of evaluating the creditworthiness
of many others.  Management believes that the diversity and breadth of the
Company's current customers and its expanded financing sources make it unlikely
that any one event, such as the loss of any individual customer or a decline in
business conditions in a particular market, would have a severe impact on the
Company's operating results.

     During the 1995 and 1996 fiscal years, the Company incurred net losses of
$479,803 and $1,232,213, respectively.  With respect to the 1995 fiscal year,
such losses were partly attributable to non-cash expenses, primarily
depreciation, amortization, debt discount expenses and deferred consulting

                                       12
<PAGE>
 
agreement expenses totaling $164,000.  With respect to the 1996 fiscal year,
such losses were partly attributable to $614,459 of non-operating expenses, of
which $285,931 represent one-time only costs incurred in connection with a
proposed secondary public offering not consummated and the balance was
attributable to other costs of financing-related efforts. As further described
below, losses were also attributable to the inability of the Company to generate
a sufficient volume of loan transactions with its customers to offset such
expenses.

Results of Operations for Year Ended March 31, 1997 Compared with Year Ended
March 31, 1996

     REVENUES:  The Company's revenues increased in the 1996 fiscal year by 239%
from $97,190 in the 1995 fiscal year to $329,425 in the 1996 fiscal year.  This
increase was attributable to an increase in loans funded by the Company from 201
loans with an aggregate dollar value of $20.5 million in the 1995 fiscal year to
764 loans with an aggregate dollar value of $60.9 million in the 1996 fiscal
year.  Due to increased loan volume, the interest component of revenues
increased by 239% from $76,957 in the 1995 fiscal year to $260,550 in the 1996
fiscal year and processing fees increased by 295% from $15,733 in the 1995
fiscal year to $62,178 in the 1996 fiscal year.

     DIRECT COSTS:  The Company's direct costs consist of interest and other
charges which it was required to pay to its revolving credit line providers and
to its pre-IPO bridge financing ("Bridge Financing") lenders.  The Company's
direct costs increased by 60% from $174,640 in the 1995 fiscal year to $279,756
in the 1996 fiscal year, primarily due to the increase in loan funding volume.
During the 1995 fiscal year, the Company's interest expense and other bank
charges paid to revolving line of credit lenders amounted to $95,409.  During
this period the Company financed a total of 201 loans aggregating $20.5 million
in weighted average principal amounts of $101,996 for an average duration of 15
days per borrowing, including 153 loans funded through bank borrowings
aggregating $16.5 million in weighted average principal amounts of $108,601 for
an average duration of 15 days.  During the 1996 fiscal year, the Company's
interest expense and other bank charges paid to revolving line of credit lenders
aggregated $237,371.  During this period the Company financed a total of 764
loans aggregating $60.9 million in weighted average principal amounts of $79,713
for an average duration of 17 days per borrowing, including 483 loans funded
through bank borrowings aggregating $39.4 million in weighted average principal
amounts of $81,605 for an average duration of 17 days.  The reduction in the
average loan size is primarily due to the increase in loans funded in the 1996
fiscal year by two new customers which funded loans for lower priced homes.  The
increase in the bank interest and related charges is primarily

                                       13
<PAGE>
 
due to a three-fold increase in the Company's use of its revolving credit
facility in the 1996 fiscal year versus the 1995 fiscal year.

     Interest expense on the Bridge Financing was reduced by 46.5% from $79,231
in the 1995 fiscal year to $42,385 in 1996 fiscal year.  Such interest expense
consisted of interest payable of $21,163 in the 1995 fiscal year and no interest
payable in the 1996 fiscal year; debt discount amortization of $55,244 in the
1995 fiscal year and $37,500 in the 1996 fiscal year and deferred issuance cost
amortization of $2,824 and $4,885 in the 1995 and 1996 fiscal years,
respectively.  In the fourth quarter of 1995 fiscal year, the Company paid
$122,492 in full satisfaction of its indebtedness to two of the Bridge Financing
lenders and, upon the closing of the IPO in August 1996, the Company paid
$128,356 in full satisfaction of its obligation to the two remaining Bridge
Financing lenders.

     OPERATING EXPENSES:  Operating expenses increased from $433,709 in the 1995
fiscal year to $702,801 during the 1996 fiscal year.  Operating expenses
included $134,555 of salaries and benefits paid to executives and other staff,
and $101,300 of depreciation and amortization, the primary component of which is
$92,312 attributable to the CTS, compared to $188,882 of salaries and benefits
to executives, former executives and others and $112,064 depreciation and
amortization expense in the 1996 fiscal year.  Accounting and legal fees in the
1995 fiscal year amounted to $114,382 compared to $192,074 in the 1996 fiscal
year.  This increase of accounting and legal fee expenses is due to the expanded
reporting requirements of the Company as a publicly held corporation.

     It is anticipated that aggregate operating expenses will increase as staff
and office space are increased to manage the greater number of mortgage
warehouse loan transactions that management believes the Company will be
processing as a result of the recent increase of credit lines available to the
Company.

     NET LOSS:  Net loss from operations increased from $511,158 in the 1995
fiscal year to $653,132 in the 1996 fiscal year due to the limited nature of the
lending capital which was available to the Company and the inability to attract
customers due to the limited credit facility available to the Company during the
1995 and 1996 fiscal years.  Net loss increased from $479,803 in the 1995 fiscal
year to $1,232,213 in the 1996 fiscal year, primarily due to non-operating
expenses incurred during the 1996 fiscal year of $614,459 of which $285,931 were
one-time only costs incurred in connection with a proposed secondary public
offering not consummated and the balance was attributable to other financing-
related efforts.  Management believes that the Company's $25 million line of
credit obtained from Bank One,

                                       14
<PAGE>
 
effective March 31, 1997, will allow the Company to increase its customer base
and loan volume for the current fiscal year.

     Based upon ongoing discussions with mortgage banking companies who have
recently filed applications with the Company to become customers and the 21
mortgage banking companies which have become customers during the period from
April 1 through May 31, 1997, management believes that the revenue stream from
loan processing fees and interest charges will increase.  From April 1 through
May 31, 1997, the Company has funded 379 loans for an aggregate dollar amount of
$28.4 million compared to 129 loans for an aggregate dollar amount of $11.3 
million for the equivalent period in the 1996 fiscal year.

     CASH FLOWS FROM OPERATIONS:  The Company generated negative cash flow from
operations of approximately $2.8 million for the 1995 fiscal year and a positive
cash flow from operations of $50,000 for the 1996 fiscal year. For the 1995
fiscal year, approximately $2.6 million of such negative cash flow was generated
by an increase in warehouse loan receivables and the balance of the negative
cash flow from operations of $253,000 was primarily a result of the Company's
inability to generate a sufficient level of loan volume from its customers,
which was further negatively impacted by the limited funds available to the
Company for use in its mortgage warehouse activities. The positive cash flow for
the 1996 fiscal year was primarily the result of a $1.1 million reduction in
warehouse loan receivables. Without such reduction in loan receivables there
would have been negative cash flow from operations of approximately $1.0 million
which was primarily a result of the Company's inability to generate a sufficient
level of loan volume from its customers, which was further negatively impacted
by the limited funds available to the Company for use in its mortgage warehouse
activities. In an effort to generate positive cash flow from operations,
effective March 31, 1997, the Company obtained a $25 million credit facility
from Bank One Texas, N.A. Management believes that such credit facility will
allow the Company to produce profits and maintain positive cash flow from
operations.

     REALIZABILITY OF LONG-LIVED ASSETS:  Management evaluated the realizability
of its long-lived assets (primarily furniture and equipment and proprietary
computer software) having a net book value of $186,796 on March 31, 1997 in
accordance with the provisions of Statement of Financial Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of."  Based on such evaluation, and taking into consideration the
positive cash flows and earnings that management believes the Company will be
able to generate in future periods, as further discussed above under "Cash Flows
from Operations," management does not believe that there is an impairment of its
long-lived assets at March 31, 1997.

                                       15
<PAGE>
 
     LIQUIDITY AND CAPITAL RESOURCES:  As of March 31, 1997, Bank One made
available to the Company a $25 million revolving line of credit.  The Company's
primary sources of capital which it employs in its warehouse lending operations
are borrowings under its Bank One revolving line of credit and its net equity
capital funds of approximately $5 million (after giving effect to $4 million of
funds received by the Company in February 1997 as proceeds of the Private
Placement).  Management believes that such capital will enable the Company to
increase its customer base and thereby create a greater demand for and volume of
loans to be funded, which, in turn, is anticipated to generate sufficient
revenues from such expanded operations to maintain liquidity and generate
positive cash flow.

                                       16
<PAGE>


ITEM 7.  FINANCIAL STATEMENTS

 
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
                    ----------------------------------------


To the Board of Directors of
Pioneer Commercial Funding Corp.:

We have audited the accompanying balance sheet of Pioneer Commercial Funding
Corp. (a New York corporation) (the "Company") as of March 31, 1997, and the
related statements of operations, changes in stockholders' equity and cash flows
for each of the two years in the period ended March 31, 1997.  These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Pioneer Commercial Funding
Corp. as of March 31, 1997, and the results of its operations and its cash flows
for each of the two years in the period ended March 31, 1997 in conformity with
generally accepted accounting principles.



                                                             ARTHUR ANDERSEN LLP


Los Angeles, California
June 25, 1997

                                      17
<PAGE>
 
                       PIONEER COMMERCIAL FUNDING CORP.
                                 BALANCE SHEET
                                MARCH 31, 1997



<TABLE>
<CAPTION>


                                    ASSETS
<S>                                                                    <C> 
Current Assets:
  Cash and cash equivalents                                             $ 2,704,078  
  Mortgage warehouse loan receivables                                     2,456,154  
  Accrued interest and fee receivable                                        27,824  
  Prepaid and other assets                                                   33,798  
                                                                        -----------  
         Total Current Assets                                             5,221,854  
                                                                        -----------  
                                                                                     
Fixed Assets:                                                                        
  Furniture and equipment                                                   106,640  
  Proprietary computer software                                             483,410  
  Leasehold Improvements                                                     10,846  
                                                                        -----------  
                                                                            600,896  
  Less accumulated depreciation and amortization                            414,100  
                                                                        -----------  
       Net Fixed Assets                                                     186,796  
                                                                        -----------  
                                                                                     
Other assets                                                                 25,000  
                                                                        -----------  
       Total Assets                                                     $ 5,433,650  
                                                                        ===========   

                     LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Accounts payable & accrued expenses                                   $   235,360  
  Due to mortgage banking companies                                          85,546  
  Deferred legal fees                                                        57,149  
                                                                        -----------  
       Total Current Liabilities                                            378,055  
                                                                        -----------  
                                                                                     
Convertible note payable                                                  1,800,000  
                                                                        -----------  
       Total Liabilities                                                  2,178,055  
                                                                        -----------   

Stockholders' Equity:
  Common stock-$.01 par value; authorized 5,000,000 shares;
     3,642,272 shares issued and outstanding at March 31, 1997               36,423  
  Additional paid-in capital                                             12,525,952 
  Accumulated deficit                                                    (9,306,780)
                                                                        -----------
       Total Stockholders' Equity                                         3,255,595  
                                                                        -----------   
       Total Liabilities and Stockholders' Equity                       $ 5,433,650
                                                                        ===========
</TABLE> 

      The accompanying notes are an integral part of this balance sheet.
                                      
                                      18

<PAGE>
 
                       PIONEER COMMERICAL FUNDING CORP.
                           STATEMENTS OF OPERATIONS
                     FOR THE TWELVE MONTHS ENDED MARCH 31,

<TABLE>
<CAPTION>

                                                      1997       1996
                                                  -----------  ---------
<S>                                                <C>         <C>
INCOME:
Interest income................................   $   260,550  $  76,957
Commissions and fees...........................         6,697      4,500
Processing fees................................        62,178     15,733
                                                  -----------  ---------

         Total income..........................       329,425     97,190
                                                  -----------  ---------
DIRECT COSTS:
Interest expense - warehouse and
  revolving lines of credit....................       207,105     81,104
Interest expense - bridge financing............        42,385     79,231
Bank charges & fees............................        17,786      9,711
Bank processing fees...........................        12,480      4,593
                                                  -----------  ---------
       Total direct costs......................       279,756    174,639
                                                  -----------  ---------
INCOME/LOSS BEFORE OPERATING EXPENSES..........        49,669    (77,449)
OPERATING EXPENSES.............................       702,801    433,709
                                                  -----------  ---------
       Loss from operations....................      (653,132)  (511,158)
                                                  -----------  ---------
OTHER INCOME (EXPENSE)
Interest income - other........................        24,459     24,570
Interest expense - other.......................        (4,712)    (4,712)
Miscellaneous income...........................        18,800     12,685
Non-operating expense..........................      (614,459)        -
                                                  -----------  ---------
       Total other income (expense)............      (575,912)    32,543
                                                  -----------  ---------
LOSS BEFORE INCOME TAXES.......................    (1,229,044)  (478,615)
PROVISION FOR INCOME TAXES.....................         3,169      1,188
                                                  -----------  ---------
       Net loss................................   $(1,232,213) $(479,803)
                                                  ===========  =========

LOSS PER SHARE OF COMMON STOCK.................        ($0.88)    ($0.58)
                                                  ===========  =========

WEIGHTED AVERAGE NUMBER OF SHARES..............     1,403,460    826,644
                                                  ===========  =========

</TABLE>

       The accompanying notes are an integral part of these statements.
                                      
                                      19
<PAGE>
 
                       PIONEER COMMERCIAL FUNDING CORP.
                 STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
              FOR THE TWELVE MONTHS ENDED MARCH 31, 1997 AND 1996

<TABLE>
<CAPTION>

                                                      Additional                      Total
                                           Common       Paid-in     Accumulated    Stockholders'
                                            Stock       Capital        Deficit        Equity
                                           -------   ------------   ------------   ------------
<S>                                        <C>
BALANCE March 31, 1995...................  $ 8,250    $ 8,548,734    $(7,594,764)   $  962,220
 Issuance of 10,000 shares of the
    Company's common stock
    in connection with the bridge
    financing............................      100         49,900             -         50,000
 Net loss for the period.................       -              -        (479,803)     (479,803)
                                           -------    -----------    -----------    -----------
BALANCE March 31, 1996...................    8,350      8,598,634     (8,074,567)      532,417
 Issuance of 7,272 common
    shares in connection with
    bridge financing.....................       73            (73)            -             -
 Issuance of 600,000  shares of
    common stock and warrants............    6,000      1,972,295             -      1,978,295
 Issuance of 2,200,000 shares of
    common stock.........................   22,000      1,955,096             -      1,977,096
 Net loss for the period.................       -              -      (1,232,213)   (1,232,213)
                                           -------    -----------    -----------    ----------
BALANCE March 31, 1997...................  $36,423    $12,525,952    $(9,306,780)   $3,255,595
                                           =======    ===========    ===========    ==========
</TABLE>


       The accompanying notes are an integral part of these statements. 

                                      20
<PAGE>
 
                       PIONEER COMMERCIAL FUNDING CORP.
                           STATEMENTS OF CASH FLOWS
                     FOR THE TWELVE MONTHS ENDED MARCH 31,


<TABLE>
<CAPTION>

                                                                                     1997             1996   
                                                                                ----------         --------- 
<S>                                                                             <C>                <C>       
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                        
Net loss                                                                       $(1,232,213)      $  (479,803)
                                                                               -----------       ----------- 
Adjustments to reconcile net loss to net cash used in operating activities:                                  
Depreciation and amortization                                                      149,565           164,080 
(Increase) decrease in --                                                                                    
Mortgage warehouse loan receivables                                              1,056,621        (2,579,116)
   Accrued interest receivable                                                       2,183           (10,866)
   Prepaid expenses                                                                 (7,710)           (6,654)
   Other assets                                                                    (25,000)           -         
Increase (decrease) in --                                                                                    
  Accrued interest payable                                                         (43,564)           (1,543)
  Due to mortgage banking companies                                                 64,628           (15,054)
  Accounts payable & accrued expenses                                               85,295            96,921 
                                                                               -----------       ----------- 
                                                                                 1,282,018        (2,352,232)
                                                                               -----------       ----------- 
Net cash provided by (used in) operating  activities                                49,805        (2,832,035)
                                                                               -----------       ----------- 
                                                                                                             
CASH FLOWS FROM INVESTING ACTIVITIES:                                                                        
Purchase of Fixed Assets                                                           (80,871)           (4,805)
                                                                               -----------       ----------- 
Net cash provided by (used in) investing activities                                (80,871)           (4,805)
                                                                               -----------       ----------- 
                                                                                                             
CASH FLOWS FROM FINANCING ACTIVITIES:                                                                        
Net increase (decrease) in borrowings used in operations,                                                     
   net of issuance costs                                                        (3,254,235)        2,680,185 
Decrease in revolving line of credit and bridge financing                         (179,400)            -         
Increase in deferred costs of equity offering                                       -               (182,570)
Increase in convertible note                                                     1,800,000             -         
Net proceeds from issuance of stock                                              4,270,430             -         
                                                                               -----------       ----------- 
Net cash provided by financing activities                                        2,636,795         2,497,615 
                                                                               -----------       ----------- 
                                                                                                             
Net increase (decrease) in cash                                                  2,605,729          (339,225)
                                                                                                             
CASH AND CASH EQUIVALENTS -                                                                                  
  at the beginning of the period                                                    98,349           437,574 
                                                                               -----------       ----------- 
CASH AND CASH EQUIVALENTS -                                                                                  
  at the end of the period                                                     $ 2,704,078       $    98,349 
                                                                               ===========       =========== 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                                            
  Interest paid                                                                $   218,365       $    98,911 
                                                                               ===========       =========== 
NON CASH FINANCING ACTIVITIES                                                                                
Cost of equity offering paid in prior years                                    $   315,039                   
                                                                               ===========                   
</TABLE> 

       The accompanying notes are an integral part of these statements.
                                      
                                      21

<PAGE>
 
                        PIONEER COMMERCIAL FUNDING CORP.
                        --------------------------------


                         NOTES TO FINANCIAL STATEMENTS
                         -----------------------------

                                 MARCH 31, 1997
                                 --------------



1.  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.

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").  As of June 14, 1993, when the Company commenced active
operations following its emergence from Chapter 11, it operated with limited
financing sources.  In addition, substantially all of the business conducted by
the Company during the fiscal years ended March 31, 1994, 1995 and 1996 was with
one to four mortgage banking companies.

Operations
----------

The Company is 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 obtains its funds from third-
party funding sources through lines of credit and from its own sources.  The
Company's loan receivables 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 60 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
are processing fees received from its mortgage banking customer for each loan
financed and the interest rate spread between the rate at which the Company
borrowed from its  funding source and the rate it charges its customer.  The
Company's customers fund loans throughout the United States with concentrations
in California, Pennsylvania, Arizona and Colorado.

                                      22
<PAGE>
 
The Company's operations are subject to certain risks which are inherent to its
industry.  Its results of operations depend heavily upon the ability of its
mortgage banking customers to originate mortgage loans.  This ability is largely
dependent upon general economic conditions in the geographic areas that the
Company serves.  Because these general economic conditions fluctuate, there can
be no assurance that prevailing economic conditions will 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 are 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 are: 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 must have
a commitment for each loan from an approved third-party agency (the "Agency")
before the Company will extend mortgage warehouse financing, there is no
guarantee that the Agency will, in fact, accept the mortgage loan when delivered
due to certain deficiencies in the loan or other unanticipated circumstances
which may exist.  If for any reason an Agency does not accept the mortgage loan,
and the Company's mortgage banking customer is unable to pay back its obligation
to the Company through other means, the Company could find itself the owner of a
long-term loan of less than market value instead of a short-term bridge
financing receivable.

During the twelve month periods ended March 31, 1997, and 1996, the Company
operated with a limited number of customers and funding sources.  As of April 1,
1997, the Company had significantly increased its funds available from financing
sources and its own sources.  In addition, the Company had developed several new
customer relationships and was in the process of evaluating the creditworthiness
of many others.  In management's opinion, the diversity and breadth of the
Company's current customers and its expanded financing sources adequately
mitigate the risk that the Company will be severely impacted in the near term as
a result of the Company's customer base, competition, sources of supply, or
composition of its markets.  Management believes it is unlikely that any one
event, such as loss of any individual customer, or decline in business
conditions in a particular market would have a severe impact on the Company's
operating results and that the Company will continue to operate in the normal
course.


2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    ------------------------------------------

Use of Estimates
----------------

The accompanying financial statements, which are prepared in conformity with
generally accepted accounting principles, require the use of estimates made by
management.  The most significant estimates with regard to these financial
statements relate to the valuation allowance for deferred income taxes and the
estimated obligations due under the POR, as more fully described in Notes 5 and
10, 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.

                                      23
<PAGE>
 
Other Assets
------------

Effective April 25, 1996, a one year certificate of deposit in the amount of
$25,000 was pledged in order for the Company to receive a California Lender Bond
as a California Financial Lender, to be renewed annually at the discretion of
the insurance carrier.  The certificate of deposit is included in other assets
in the accompanying financial statements.

Fixed Assets
------------

Depreciation expense is computed generally on a straight-line basis over the
estimated useful life of the asset.  Leasehold improvements are amortized over
the estimated life of the asset or the term of the lease, whichever is shorter.
The ranges of estimated useful lives used in computing depreciation and
amortization are as follows:
<TABLE>
<CAPTION>
 
 
                                      Years
                                     -------   
 
      <S>                            <C>
      Furniture and equipment        3 to 10
      Autos and trucks                  5
      Leasehold improvements         3 to 10
      Proprietary computer software     5
</TABLE>

Proprietary computer software consists of a set of computer programs that were
developed internally by the Company for use in its business and are not for
resale to other mortgage finance companies.

Income Taxes
------------

The Company accounts for income taxes under Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes."  Under SFAS No. 109,
deferred income taxes are provided for at the statutory rates on the difference
between financial statement basis and tax basis of assets and liabilities and
are classified in the balance sheets as current or noncurrent consistent with
the assets and liabilities which give rise to such deferred income taxes.

Deferred Costs of Equity Offering and Debt Issuance
---------------------------------------------------

Certain costs associated with the IPO were paid by the Company and deferred as
of March 31, 1996. Upon the successful completion of the IPO, these costs were
written off as a non-operating expense or shown as a direct reduction to
additional paid-in capital as appropriate.

Loss Per Share of Common Stock
------------------------------

The loss per share of common stock was computed using the net loss for the year,
divided by the weighted average number of shares outstanding during the period
(adjusted for the reverse stock split effective in June 1996).  Weighted average
shares outstanding are further adjusted for the impact of shares issued and
warrants issued and options granted for which the exercise price is less than
the average share price.

                                      24
<PAGE>
 
For the twelve month periods ended March 31, 1997, and 1996, the average share
price exceeded the exercisable price for all options and warrants, and the
impact of conversion of the warrants and options would have been anti-dilutive.
Therefore, the options and warrants were not considered in the calculation of
loss per common share.

The Company will adopt Statement of Accounting Standards ("SFAS") No. 128,
"Earnings Per Share" during the next fiscal period.  SFAS No. 128 more clearly
defines basic and diluted earnings per share and a reconciliation of numerators
and denominators used in the computations.  Management has determined that the
adoption of SFAS No. 128 will not have an impact on the results of the
operations or financial position of the Company.

Reclassifications
-----------------

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

3.  MORTGAGE WAREHOUSE LOAN RECEIVABLES/PAYABLE
    -------------------------------------------

Loan receivables are generally due within sixty days from the date funded, with
an average outstanding period of seventeen days and interest payable at prime
plus 1.5%.  Similarly, all of the related loans payable are due within the same
time frame with interest payable at prime plus 1%.  The Company's available line
of credit was $4 million as of March 31, 1996.

As of September 1, 1996, the $4 million line of credit was renewed for one year
with a 1 percent renewal fee amortized over the life of the loan.  As of March
31, 1997, the line was terminated and the Company was refunded the unamortized
portion of the renewal fee and all unexercised options immediately expired.

As of 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 will pay 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.

For the years ended March 31, 1997 and 1996, the weighted average interest rate
on loans receivable was 9.66% and 9.93%, respectively, and on loans payable was
9.25% and 9.53%, respectively.  Loans receivable are collateralized by a
security interest in the underlying real property which the Company then assigns
to its funding sources as security for the loans payable.

4.  BRIDGE FINANCING
    ----------------

In March 1994, the Company entered into a loan arrangement with various
individuals (original bridge financiers) to provide $200,000 in additional funds
to be used in the ordinary course of the Company's warehouse lending operations
and to defray certain expenses of the anticipated IPO.  The loans bore interest
at a rate of 12% and were due at the earlier of the successful completion of the
IPO or August 31, 1995.  As an inducement to make these loans, the Company
issued 22,727 shares of its common stock to the original bridge financiers.  The
original 22,727 shares issued and the additional 7,272 shares 

                                      25
<PAGE>
 
issued in fiscal 1997 discussed below were assigned a $5.00 per share value
(which is equal to the price that these shares were offered at in the IPO)
resulting in a $150,000 discount to the debt. The discount was amortized to
interest expense over the term of the debt agreements resulting in an effective
interest rate of 248%.

On August 31, 1995, the bridge loans matured but were not paid by the Company.
On January 16, 1996, the Company paid off in full loans outstanding to two of
the bridge financiers.  On February 1, 1996, the Company entered into agreements
with the remaining two bridge financiers (the remaining bridge financiers) with
aggregate outstanding loans to the Company as of such date totaling $123,708
(which includes $23,708 of unpaid accrued interest), whereby the maturity date
of the bridge loan obligations was extended to the earlier of three days
following the consummation of the IPO or December 31, 1996.

The Company received waivers from all of the original bridge financiers for any
defaults which may have occurred as a result of the Company's failure to pay off
its debt obligations on their original maturity date of August 31, 1995.  In
consideration for the waivers received and in order to adjust the number of
shares given to the original bridge financiers for the impact of the June 1996
reverse stock split which reduced their number of shares owned from 30,000 to
22,727 shares, the Company issued to the original bridge financiers an
additional 7,272 shares of common stock in June 1996.  In addition, the Company
issued 10,000 more post-split shares to the remaining bridge financiers in
consideration for extending the maturity on their debt in February 1996.  A
value of $5.00 per share was assigned to these shares on the date of the debt
modification resulting in a $50,000 discount to the debt.  Such discount is
being amortized to interest expense over the remaining term of the modified debt
agreements resulting in an effective interest rate of 133% for the period from
February 1, 1996 through December 31, 1996. Upon successful completion of the
IPO on August 12, 1996, all outstanding principal and interest related to the
above agreements was paid in full.

5.  INCOME TAXES
    ------------

The Company recorded losses from operations for the twelve month periods ended
March 31, 1997 and 1996 for both financial reporting and Federal income tax
purposes and provided $3,169, and $1,188, respectively, for income taxes, which
represents provisions for minimum state taxes.

Deferred taxes consist primarily of net operating loss carryforwards ("NOL's")
for tax purposes which can be off-set against future taxable income.  As of
March 31, 1997, the Company's NOL is $2.0 million, which expires in varying
amounts between 2000 and 2011.  Approximately $1.3 million of the NOL is limited
to use (approximately $100,000 per year) due to a change in ownership in
November 1994 resulting from the merger between Pioneer and PCF.

The realization of the future tax benefits from deferred tax assets is dependent
upon the Company generating sufficient future taxable income.  Accordingly, a
100% valuation allowance has been established against the net deferred tax
asset.

6.  DUE TO MORTGAGE BANKING COMPANIES
    ---------------------------------

The Company generally will only finance up to 98% of the total loan amount
closed by the mortgage banking company.  Upon sale of the loan to the investor
group, proceeds for 100% of the loan amount are remitted to the Company by the
investor.  The Company holds such funds until receipt of amounts due from the
mortgage banking company for fees and accrued interest on the 98% financed.

                                      26
<PAGE>
 
7.  DEFERRED LEGAL FEES
    -------------------

Deferred legal fees are a consequence of the POR and are payable in four annual
installments which began on April 16, 1994.  The Company has not paid the April
1996 and 1997 installments totaling $57,149 as of March 31, 1997.

8. STOCKHOLDERS' EQUITY AND INITIAL PUBLIC OFFERING
   ------------------------------------------------

Reverse Stock Split
-------------------

Effective June 1996, the Board of Directors of the Company authorized a .758 for
1 reverse stock split of all of its then outstanding common stock.  All share
and per share amounts in these financial statements have been restated to give
effect to the reverse stock split as if it had occurred on the first day of each
period presented.

Share Voting Agreements
-----------------------

On October 25, 1994, in connection with a stock purchase agreement with an
unrelated third party, Pioneer issued an additional 176,136 shares of its Class
B common stock for $500,000 (which were exchanged for 176,136 common shares of
PCF upon the consummation of the merger).  The agreement gives the third party
the right to acquire additional shares, if, in future periods, additional shares
are issued to other parties so that this third party's percentage ownership in
the Company does not fall below 20% of the total outstanding common shares.  In
connection with this stock purchase transaction, the unrelated third party
entered into a share voting agreement with certain existing shareholders of the
Company, who after the merger, own greater than 50% of the Company in the
aggregate.  The share voting agreement requires that all parties to the
agreement will vote on all matters subject to shareholder approval in a
consistent fashion.  The agreement was terminated upon the successful completion
of the stock offering discussed below.

Initial Public Offering
-----------------------

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

                                      27
<PAGE>
 
same as those discussed above except that such options are nontransferable. The
warrants are exercisable into 690,000 shares of Common Stock at a price of $5.50
per share August 12, 2000.

Private Placement
-----------------

On February 28, 1997, the Company completed a private placement of securities
(the "Private Placement") with eight investors who invested an aggregate of $4
million in the Company in consideration for 2.2 million shares of Common Stock
and $1.8 million principal amount of convertible promissory notes of the Company
(the "Convertible Notes").  The Convertible Notes were converted into 1.8
million shares of common stock on May 9, 1997.

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 March
31, 1997, 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 10 for further discussion of restrictions under the POR).

9.  STOCK OPTION PLANS
    ------------------

The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation."   Accordingly, no compensation costs
has been recognized for the Company's Non-Qualified Stock Option Plan (the
"Plan").  The Company has calculated pro-forma financial results based on the
estimate of the fair value of its stock options at grant date, as required under
SFAS No. 123, and noted that the impact on the net loss for the fiscal year
ended March 31, 1997 was not material.

The Plan which was adopted on August 1, 1994, provides 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 Company has issued additional options outside the Plan at the discretion of
its Board of Directors ("BOD").

The following table summarizes information related to shares under option and
shares available for grant under the Plan and separate actions of the BOD:
<TABLE>
<CAPTION>
 
                                                                     1997       1996
                                                                   --------   --------
 
<S>                                                                <C>        <C>
Options outstanding at beginning of year                            235,166      7,892
Options granted during the year                                     112,879    227,274
Options relinquished during the year                                      -          -
                                                                   --------   --------
Options outstanding at end of year                                  348,045    235,166
                                                                   ========   ========
 
Per share price of outstanding options issued in prior year           $5.00      $5.00
 
Per share price of outstanding options issued in current year      $1.99 to      $5.00
                                                                     $5.00
 
</TABLE>
                                     
                                      28
<PAGE>
 
10.  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 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.

For the fiscal years ended March 31, 1997 and 1996, 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.

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.

As of March 31, 1997, 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 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.

As of March 31, 1997, the Company was in compliance with the above restrictions.

Consulting Contract
-------------------

In September 1996, the Company entered into a two year consulting contract with
Boru Enterprises to assist the Company in its relationships with investment
bankers, analysts and other members of the financial community.  Under terms of
the agreement the Company paid the consultant $100,000 in 

                                      29
<PAGE>
 
advance. In February 1997, the contract was terminated by the Company and the
entire contract was expensed to non-operating expense for the fiscal year ended
March 31, 1997.

Employment Contracts
--------------------

In March 1995, the Company entered into a two-year employment agreement with its
Chief Financial Officer ("CFO") which provided for a base annual salary of
$100,000 and $90,000 for the fiscal years ending March 31, 1997 and 1996,
respectively.  This contract was subsequently extended through March 31, 1998 at
a base salary of $100,000.   In addition, the Company must reimburse the CFO
certain business-related expenses, provide for the use of a Company automobile
and pay the premiums for life and long-term disability insurance.  In the event
of termination in connection with a change in control, the CFO is entitled to
the balance of the amount due under this agreement plus an additional $100,000.

The agreement also provides for the granting to the CFO an option to purchase
75,758 shares of the Company's common stock at an exercise price of $5.00 per
share and a second grant on May 1, 1996 to purchase an additional 37,879 shares
at the market price of the common stock estimated at that date to be $5.00 per
share.  Both options are immediately exercisable and expire five years from the
date of grant.

In June 1995, the Company entered into employment contracts with its Chief
Executive Officer ("CEO") and President providing for an annual salary of
$55,000 for each individual commencing after the completion of the IPO.  For the
period from June 1995 through the completion of the IPO on August 12, 1996 these
officers were each granted an option to purchase 75,758 shares at an exercise
price of $5.00 per share in lieu of salaries.  See Note 9 for a summary of stock
options awarded by the Company.

Investment in Trans Lending Corporation
---------------------------------------

On December 23, 1996, prior management of the Company signed a Stock Purchase
Agreement (the "Agreement") to acquire 500 shares of Trans Lending Corporation
("Trans Lending") common Stock for $100,000 and 200 shares of Trans Lending's
non-voting, non-dividend paying preferred stock for $200,000.  Trans Lending was
formed to originate consumer automobile financing transactions for non-prime
borrowers by acquiring contracts from franchised and independent car dealers.
As of March 31, 1997 the Company had paid $100,000 to Trans Lending pursuant to
the Agreement.

Several conditions precedent to closing the transaction, pursuant to the
Agreement, had not been completed as of March 31, 1997, including delivery of
the share certificates evidencing Pioneer's ownership of 500 fully paid and
nonassessable shares of common stock.  Management does not intend to remit the
$200,000 for the preferred stock in Trans Lending, nor do they believe they are
liable for the obligations or operating performance of Trans Lending.
Additionally, management is of the opinion that the Agreement is not binding or
enforceable.  The Company has written-off their $100,000 investment in Trans
Lending at March 31, 1997.

Lease Obligation
----------------

The Company leases its office space under an operating lease expiring October
31, 2001.  The current lease calls for CPI increases in years 2 through 5 with a
minimum of 3% and a maximum of 5%.

Future minimum lease commitments as of March 31, 1997 are as follows, for the
fiscal years ending March 31, :

                                      30
<PAGE>
 
<TABLE>
<CAPTION>
 
                    <S>                     <C>                   
                    1998                   $ 26,136
                    1999                     26,136
                    2000                     26,136
                    2001                     26,136
                    2002                     15,246
                                           --------
                    
                                           $119,790
                                           ========
 
</TABLE> 

11.  OPERATING  AND NON-OPERATING EXPENSES  
     ------------------------------------- 
 
Operating and non-operating expenses consisted of the following
 for the years ended March 31, 1997 and
 1996:
<TABLE> 
<CAPTION> 
                                             1997            1996
                                          ----------       --------

<S>                                       <C>              <C> 
Salaries and benefits                     $  188,822       $134,555
Depreciation and amortization                112,065        101,300
Professional fees                            191,513        114,382
Utilities                                     26,928         19,782
Rent                                          17,662         11,609
Repairs and maintenance                        5,608          4,616
Other                                        160,203         47,465
                                          ----------       --------
Operating expenses                           702,801        433,709
Non-operating expenses                       614,459              -
                                          ----------       --------
                                          $1,317,260       $433,709
                                          ==========       ========
 
</TABLE>

The Company's non-operating expenses for the fiscal year ended March 31, 1997
represent one time only costs incurred in connection with a proposed, but not
consummated, second offering of the Company's common stock and other financing
related efforts in fiscal 1997.

12.  RELATED PARTY TRANSACTIONS
     --------------------------

For the years ended March 31, 1997 and 1996, certain family members of an
executive officer and a member of the BOD of the Company were engaged to perform
various accounting and consulting services for the Company.  Such individuals
were compensated approximately $15,481 and $3,106 for these services in 1997 and
1996, respectively.

13. SUBSEQUENT EVENTS
    -----------------

On April 2, 1997 and April 4, 1997 the Company issued unsecured loans of
$400,000 and $600,000, respectively to Rogosin Converters, Inc. an affiliate of
the Company. The loans were guaranteed by Leedan International, B.V., a
shareholder of the Company with a substantial net worth.  The Company earned 12%
interest per annum on the loans which was paid monthly.  Management determined
that this would yield a better return than investing the otherwise idle cash in
other investment alternatives, such as 

                                      31
<PAGE>
 
Treasury bills or commercial paper. The loans were approved by the BOD of the
Company. All unpaid principal and interest owing on the loans was paid in full
on June 20, 1997.

On April 16, 1997 the Company entered into a joint venture agreement with
Maryland Financial Corporation ("MFC") to form Pioneer Home Funding, LLC, a
California Limited Liability Company, ("PHF").  The Company and MFC will
maintain 80% and 20% ownership interests, respectively, in PHF.  The Company and
MFC have contributed $40,000 and $20,000, respectively, as of June 10, 1997.
These amounts are anticipated to increase up to $200,000 and $50,000,
respectively.  PHF is a mortgage banking company organized for the primary
purpose of originating, acquiring, marketing and selling mortgage loans on
residential properties.  PHF will focus  on various lending markets including
the subprime market.  All loans originated or acquired by PHF will be sold
servicing released.  PHF is expected to commence operations in July 1997.

On May 9, 1997, the Company increased its authorized shares of common stock by
15 million to 20 million shares.  With these newly available shares, the Company
immediately converted its outstanding Convertible Notes into 1.8 million shares
of common stock.

On June 25, 1997, the Company has filed a form 8-K with the Securities and
Exchange Commission ("SEC") to change its fiscal year end from March 31 to
December 31 as of December 31, 1997. No response has been received from the SEC
as of the date of this filing.

                                      32
<PAGE>
 
ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE.

     None.


                                    PART III
                                    --------


ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS.

EXECUTIVE OFFICERS AND DIRECTORS

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

<TABLE> 
<CAPTION> 
            Name          Age                Position
            ----          ---                --------
     <S>                  <C>   <C> 
     M. Albert Nissim...  63    President

     Glenda S. Klein....  53    Director, Senior Vice President,
                                Secretary, Treasurer and Chief Financial Officer

     Richard Fried......  51    Director

     Boaz Harel.........  34    Director

     Tamar Lieber.......  55    Director

     Mark Roth..........  35    Director
</TABLE> 

     Glenda S. Klein has served as a director of the Predecessor since 1993, and
was appointed to serve as the Predecessor's Treasurer and Chief Financial
Officer in 1994.  She assumed the same directorial and official positions with
the Company upon consummation of the Merger in November 1994.  In 1993 Ms. Klein
and her husband filed a petition pursuant Chapter 7 of the Bankruptcy Code.
After receiving a discharge in bankruptcy, they reopened the bankruptcy
proceedings and converted same to a case under Chapter 11 of the Bankruptcy
Code.  In April 1995, Ms. Klein and her husband deposited $100,000 into the
Bankruptcy Court for the purpose of paying in full, with interest, any of the
creditors of their bankrupt estate who had filed claims against them in said
proceedings.  In October 1995, such proceedings were closed.  In April 1997 Ms.
Klein was appointed as one of the Company's designees on the Board of Directors
of Pioneer Home Funding, L.L.C., a subsidiary of the Company.

                                      33
<PAGE>
 
     Richard Fried was appointed to the Predecessor's Board in February 1994 and
served as Vice-President of the Predecessor.  Upon consummation of the Merger in
November 1994, he became a director of the Company.  Since June 1991 Mr. Fried
has served as President of Medical Systems, Inc., an application software
development company, of which he has been a principal shareholder.  From
February 1993, he has served as President of Montgomery Associates, Inc., a
corporation wholly-owned by him, which is engaged in business as an importer-
exporter.  Since April 1993, Mr. Fried has been a principal shareholder, and has
served as President, of Sea Change Systems, Inc., a software tools development
company.  From April 1993 to May 1994, he was a Branch Manager of LPL Financial
Services, a stock brokerage firm, which is an NASD member firm.  Since November
1994, Mr. Fried has been a controlling shareholder and has served as President
of SMARTpay, Inc., a collection service.  From April 1995 he has served as
President of Centennial Systems, Inc., a software distribution, sales and
service firm of which he is a principal shareholder.  Since October 1996, Mr.
Fried has been a controlling shareholder, and has served as President, of
Leeward Software, Inc., an application software developer.  From October 1996 he
has also served as President of Windward Software, Inc., a materials management
software intellectual property company of which he is also a principal
shareholder.  From December 1996 he has served as President of Strategic
Reporting Systems, Inc., a database report generation software development and
distribution firm of which he is a principal shareholder.  From April 1997, he
has served as managing director of HYCOM USA, Inc., an international software
development and distribution company, of which he is a principal shareholder.

     Boaz Harel was appointed to the Board in November 1996.  From 1991 to 1993,
Mr. Harel was the founder and managing director of Mashik Business and
Development Ltd., an engineering consulting company.  Since 1993, Mr. Harel has
been the Managing Director of Leedan Business Enterprise Ltd. ("Leedan"), a
publicly-held Israeli company which is the beneficial owner of 49% of the
Company's Common Stock.  Since January 1994, Mr. Harel has served as a member of
the Supervisory Board of ICTS International N.V. and since September 1996, Mr.
Harel has served as the Chairman of ICTS USA (1994), Inc., an indirect
subsidiary of Leedan.  Since 1997 Mr. Harel has been Co-Managing Director of
Leedan International Holdings B.V., a principal shareholder of the Company and
an indirect wholly-owned subsidiary of Leedan.

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

                                      34
<PAGE>
 
     Mark Roth was appointed to the Board in November 1996 as designee of
National Securities Corporation ("National"), the underwriter of the Company's
IPO.  Mr. Roth is an attorney who engaged in the private practice of law between
March 1992 and September 1995.  In 1992, Mr. Roth began representing National
and since October 1995 Mr. Roth has served as General Counsel of National and
continues to serve in that capacity.  Since February 1997 he has also served as
Secretary of National.  Mr. Roth also serves as Secretary and General Counsel of
Olympic Cascade Financial Corporation, a publicly traded financial holding
company and a parent of National.

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

     On January 9, 1997, Messrs. Arthur Goldberg and Elie Housman, the Company's
Chief Executive Officer and Chief Operating Officer, respectively, were removed
from their respective offices by the Board of Directors following disagreements
between the Board of Directors and those two officers with respect to the
Company's financing efforts and investment strategies.  On January 20, 1997,
Messrs. Goldberg and Housman resigned from their positions as directors of the
Company.

 .    COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
 
     On February 28, 1997, as a result of the completion of the Private
Placement, Leedan International Holdings B.V. ("Leedan") became the holder of
38% of the Common Stock and Leedan Business Enterprise Ltd. ("Leedan Business"),
an indirect parent corporation of Leedan became the beneficial holder of 42% of
the Common Stock. Prior to the Private Placement, Leedan Business was the
beneficial holder of more than 10% of the Common Stock. The Company did not
receive a Form 3 on behalf of Leedan Business or a Form 3 on behalf of Leedan
until June 25, 1997.

                                      35
<PAGE>
 
     M. Albert Nissim was appointed as the President of the Company on January
9, 1997.  A Form 3 was not filed on behalf of Mr. Nissim until March 10, 1997.

ITEM 10.  EXECUTIVE COMPENSATION.

     The following table sets forth compensation awarded to, earned by or paid
to executives of the Company and to Uri Lieber and Arthur Goldberg in their
former capacities as Chief Executive Officers of the Company.  No executive
officer of the Company earned a salary and bonus of more than $100,000 during
any one of the 1994, 1995 and 1996 fiscal years. During such fiscal years the
Company did not grant any restricted stock awards or stock appreciation rights
to any of its executives.

<TABLE>
<CAPTION>

====================================================================================================
NAME AND PRINCIPAL POSITION                       ANNUAL COMPENSATION                    AWARDS
---------------------------------------------------------------------------------------------------- 
                                                                            OTHER       
                                 FISCAL YEAR                               ANNUAL       SECURITIES
                                    ENDED                                COMPENSA-      UNDERLYING
                                  MARCH 31      SALARY($)    BONUS($)     TION ($)       OPTIONS
----------------------------------------------------------------------------------------------------
<S>                              <C>           <C>           <C>        <C>             <C>
M. Albert Nissim*                    1997      $ 14,385                                      90,000
President                                                                               
---------------------------------------------------------------------------------------------------- 
Glenda S. Klein,                     1997      $ 98,998                                     172,879
Senior Vice President                                                                   
----------------------------------------------------------------------------------------------------
                                     1996      $ 90,000      $10,000                         75,758
----------------------------------------------------------------------------------------------------
                                     1995      $ 56,017                                 
---------------------------------------------------------------------------------------------------- 
Uri Lieber, Former CEO               1995      $ 97,139(1)        --        $8,003(2)            --
----------------------------------------------------------------------------------------------------
Arthur Goldberg, Former CEO          1997            --(3)        --            --           75,758
===================================================================================================
</TABLE>

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

(1) Represents compensation paid to Mrs. Lieber on behalf of Uri Lieber under
his employment agreement with the Company.

(2) Represents the premiums paid by the Company with respect to term life
insurance owned by Mr. Lieber and payable to his designated beneficiary.

(3) The Company has been accruing a compensation obligation of $18,333 to Mr.
Arthur Goldberg, a former Chief Executive Officer.

                                      36
<PAGE>
 
 .    COMPENSATION OF DIRECTORS.

     None of the directors of the Company has been compensated in his or her
     capacity as a director.

 .    OPTIONS ISSUED TO EXECUTIVES.

     In consideration of the services rendered by Messrs. Goldberg and Housman,
in lieu of payment of salaries, between June 1995 and the closing of the IPO,
the Company issued five year options to each of them to purchase 75,758 shares
of Common Stock at an exercise price of $5.00 per share. Such options were not
issued pursuant to the Company's Incentive Stock Option Plan. The table below
sets forth information regarding option grants in 1996 fiscal year to executive
officers of the Company.

<TABLE>
<CAPTION>
 
===============================================================================================================  
                                                    INDIVIDUAL GRANTS
--------------------------------------------------------------------------------------------------------------- 
                        NO. OF SECURITIES        % OF TOTAL OPTIONS
                        UNDERLYING OPTIONS       GRANTED TO EMPLOYEE     EXERCISE PRICE
     NAME                   GRANTED              IN 1996 FISCAL YEAR       PER SHARE      EXPIRATION DATE
---------------------------------------------------------------------------------------------------------------
<S>                     <C>                      <C>                    <C>               <C>
M. Albert Nissim             90,000                     100                 $2.50         February, 2000
---------------------------------------------------------------------------------------------------------------
Glenda Klein                248,637                      93.6           $1.99 - $5.00     August, 2001
--------------------------------------------------------------------------------------------------------------- 
Arthur Goldberg*             75,758                     100                 $5.00         August, 2001
---------------------------------------------------------------------------------------------------------------
Elie Housman*                75,758                     100                 $5.00         August, 2001
===============================================================================================================
</TABLE>

*Former officer and director.

 .  EMPLOYMENT AGREEMENTS.

     In January 1997, the Company appointed M. Albert Nissim as President for a
six-month term on a part-time basis, at a salary of $6,000 per month.  The
employment arrangement has been extended by the Company, effective July 9, 1997,
for a two-year period, unless earlier terminated by either party on not less
than 90 days prior notice.

     In March 1995, the Company entered into an employment agreement with Glenda
S. Klein, pursuant to which the Company agreed to employ Ms. Klein as its Senior
Vice President, Secretary, Treasurer and Chief Financial Officer through March
31, 1997. The agreement was extended for one additional year on the same terms
and conditions. The agreement provides for base compensation of $90,000 per
annum for the first year, $100,000 per annum for the second year and $100,000
for the additional year. The agreement further provides for the grant of

                                      37
<PAGE>
 
a five-year option to purchase 75,758 shares of Common Stock of the Company
exercisable at a price of $5.00 per share and the grant of a second five-year
option on May 1, 1996, entitling her to purchase 37,879 shares of Common Stock
of the Company at a price of $5.00 per share; obligates the Company to pay the
premiums with respect to a term life insurance policy payable to Ms. Klein's
designated beneficiary in the aggregate amount of $750,000 during the first year
of the term and $1,000,000 during the second year and the extension year of the
term; obligates the Company to pay the premiums with respect to a long-term
disability policy in an amount sufficient to cover the salary payable to Ms.
Klein pursuant to the employment agreement; and obligates the Company, in the
event of the termination of Ms. Klein's employment in connection with a change
in control of the Company, to pay as severance the balance of the salary payable
under the employment agreement plus an additional $100,000 and to continue
medical coverage for the balance of the term.


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth the holdings of the Common Stock as of June
25, 1997 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.

                                      38
<PAGE>
 
<TABLE>
<CAPTION>
                                                     COMMON STOCK
                                     ---------------------------------------------
 NAME AND ADDRESS                    NUMBER OF SHARES           PERCENT OF CLASS
OF BENEFICIAL OWNER                  BENEFICIALLY OWNED         BENEFICIALLY OWNED
-------------------                  ------------------         ------------------
<S>                                  <C>                        <C> 
Leedan Business Enterprise Ltd.               2,676,136/1/              49.2%
("Leedan Business")
8 Shaul Hamelech Blvd.
Tel-Aviv 64733, Israel
 
Jay Botchman                                    530,000                  9.7%
1500 E. Tropicana Avenue
Suite 100
Las Vegas, Nevada  89113
 
Michael Lauer                                   600,000/2/                11%
200 Park Avenue
Suite 3900
New York, New York  10166
 
Tamar Lieber                                    322,122                  5.9%
160 West 66th Street
New York, New York  10022
</TABLE>
----------
/1/  Leedan International Holdings B.V., which together with Leedan Systems &
     Properties Promotion (1993) Ltd. holds 49.2% of the issued and outstanding
     Common Stock of the Company, is an indirect wholly-owned subsidiary of
     Leedan Business. Certain members of the family of Mr. Boaz Harel, a
     director of the Company, collectively own approximately 57.5% of the
     outstanding shares of Leedan Business. Mr. Harel owns approximately 17% of
     the outstanding shares of Leedan Business and disclaims beneficial
     ownership of any stock of Leedan Business held by any other member of the
     Harel family.

/2/  Mr. Lauer owns shares of the Company and is the investment manager with
     authority to vote and dispose securities owned by three entities that he
     manages. The shares of the Company owned by Mr. Lauer directly and by the
     entities he manages total more than 5% of the outstanding shares of Common
     Stock of the Company.

                                      39
<PAGE>
 
     The following table sets forth the holdings of the Common Stock as of June
25, 1997 by (1) each director and named executive officer; and (2) all directors
and executive officers as a group.

<TABLE>
<CAPTION>
                                              NUMBER OF SHARES            PERCENT
NAME                  TITLE                    OF COMMON STOCK            OF CLASS
----                  -----                   ----------------          ------------
<S>                   <C>                     <C>                       <C>
Glenda Klein          Director and                     217,546/3/           3.8%
                      Senior Vice
                      President, Secretary,
                      Treasurer and Chief
                      Financial Officer
 
Tamar Lieber          Director                         322,122              5.9%
 
Richard Fried         Director                          12,046          Less than 1%
 
M. Albert Nissim      President                         30,000/4/       Less than 1%
 
Directors and                                          581,714/3/          10.3%
Executive
Officers as a
group (6 persons)
</TABLE>
__________
/3/  Includes 168,637 shares of Common Stock which Ms. Klein has the right to
     acquire within 60 days from the date hereof upon exercise of an option
     held by her.

/4/  Includes 30,000 shares of Common Stock which Mr. Nissim has the right to
     acquire within 60 days from the date hereof upon exercise of an option 
     held by him.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 .    CERTAIN TRANSACTIONS.

     In November 1995, the Company borrowed $35,000 from Glenda Klein and
$38,000 from Tamar Lieber. Each of such loans earned interest at the prime rate
published from time to time by the Wall Street Journal plus 1/4% per annum
pursuant to a revolving credit and security agreement which provided that
advances under such lines were secured by the mortgage liens created as a result
of the loans funded with such advances. Mrs. Klein was paid a fee of $588.17 to
cover the penalties she incurred from the early redemption of certificates of
deposit which were used to provide such loan funds. All such loans were paid in
full in the 1996 fiscal year.

 .    THE COMPANY'S ACQUISITION OF TRANS LENDING CORPORATION

     On December 23, 1996, the Company signed a Stock Purchase Agreement (the
"Agreement") to acquire 500 shares of common stock of Trans Lending Corporation
("Trans Lending") for $100,000 and

                                      40
<PAGE>
 
200 shares of Trans Lending's non-voting, non-dividend paying preferred stock
for $200,000.  Trans Lending represented to the Company that it was formed to
originate consumer automobile financing transactions for non-prime borrowers by
acquiring contracts from franchised and independent car dealers.

     Alan Mann, Arthur's Goldberg's son-in-law, owned 25% of the outstanding
common stock of Trans Lending at the time of the transaction.  Arthur Goldberg
was the Chief Executive Officer and Chairman of the Company at the time of the
transaction.  The transaction has not been completed; Trans Lending has not
delivered any stock certificates to the Company and the Company has not paid the
full amount agreed upon.  As of March 31, 1997, the Company had paid $100,000 to
Trans Lending pursuant to the Agreement.  However, several conditions precedent
to the closing of the transaction pursuant to the Agreement had not been
completed as of March 31, 1997, including delivery of the share certificates
evidencing Pioneer's ownership of 500 shares of common stock of Trans Lending.
Management of the Company does not intend to remit the $200,000 for the
preferred stock of Trans Lending, nor does it believe that the Company is liable
for the obligations or operations of Trans Lending.  As of March 31, 1997, the
Company wrote-off its investment of $100,000 in Trans Lending and is presently
considering whether to pursue legal action against Trans Lending and/or its
principals for the loss of its investment.

 .    LOAN TO ROGOSIN

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

                                      41
<PAGE>
 
ITEM 13.  EXHIBITS & REPORTS ON FORM 8-K


<TABLE> 
<CAPTION> 

Exhibit
Number         Description
-------        -----------
<S>            <C> 
3.1            Certificate of Incorporation of the Company (incorporated by 
               reference to Exhibit 3.1 to the Company's Registration Statement on Form SB-2, 
               dated December 27, 1996)

3.2            Certificate of Amendment of the Company's Certificate of 
               Incorporation (incorporated by reference to Exhibit 3.3 to the
               Company's Registration Statement on Form SB-2, dated December 27,
               1996)

3.3            Certificate of Amendment of Certificate of Incorporation of the 
               Company

3.4            By-Laws of the Company (incorporated by reference to Exhibit 3.2
               to the Company's Registration Statement on Form SB-2 dated
               December 27, 1996)

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

10.2           Revolving Line of Credit and Security Agreement between UMB Bank
               and Trust Company and the Company, as amended (incorporated by
               reference to Exhibit 10.1 to the Company's Registration Statement
               on Form SB-2 dated December 27, 1996)

10.3           Employment Agreement for Glenda S. Klein dated April 1, 1995
               (incorporated by reference to Exhibit 10.2 to the Company's
               Registration Statement on Form SB-2 dated December 27, 1996)

10.4           The Company's Non-Qualified Stock Option Plan (incorporated by
               reference to Exhibit 4.1 to the Company's Registration Statement
               on Form SB-2 dated December 27, 1996)
 
10.5           Stock Purchase Agreement between the Company and Trans Lending
               Corporation, dated December 23, 1996 (incorporated by reference
               to Exhibit 10.3 to the Company's Registration Statement on Form
               SB-2 dated December 27, 1996)

11             Statement regarding computation of per share earnings: set forth
               in note 2 on page F-8 of the Financial Statements in Item 7 of 
               this Report

21             List of subsidiaries


27             Financial Data Schedule, submitted only in electronic format


 .              REPORTS ON FORM 8-K

               During the fourth quarter of the 1996 fiscal year, the Company 
               filed three reports on Form 8-K as set forth below:

               1.   On January 23, 1997 in response to "Item 5-Other Matters"
                    in connection with the replacement and resignation of
                    certain executive officers and directors of the Company.

               2.   On February 7, 1997 in response to "Item 5-Other Matters"
                    in connection with the Company's Private Placement.

               3.   On March 5, 1997 in response to "Item 1-Change in Control
                    of the Registrant" in connection with the change in
                    control of the Company as a result of the completion of the
                    Private Placement.

</TABLE> 

                                      42
<PAGE>
 
                                   SIGNATURES

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

                                           PIONEER COMMERCIAL FUNDING CORP.


                                           By: /s/ M. Albert Nissim
                                              ________________________________
                                           Name:  M. Albert Nissim
                                           Title: President
 
                                           Date: June 25, 1997
                                                ________________________________

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



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

                                           Date: June 25, 1997
                                                _______________________________



                                           By: /s/ Glenda Klein
                                              ________________________________
                                           Name:  Glenda Klein
                                           Title: Senior Vice President, Chief
                                                  Financial Officer, Secretary,
                                                    Treasurer and Director

                                           Date: June 26, 1997
                                                _______________________________



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

                                           Date: June 26, 1997
                                                _______________________________



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

                                           Date: June 25, 1997
                                                _______________________________

                                      43
<PAGE>
 
                                           By: /s/ Tamar Lieber
                                              ________________________________
                                           Name:  Tamar Lieber
                                           Title: Director

                                           Date: June 26, 1997
                                                ______________________________



                                           By: /s/ Mark Roth
                                              ________________________________
                                           Name:  Mark Roth
                                           Title: Director

                                           Date: June 27, 1997
                                                ______________________________

                                      44
<PAGE>
 
 
                                 EXHIBIT INDEX
                                 -------------
<TABLE> 
<CAPTION> 


Exhibit
Number         Description
-------        -----------
<S>            <C> 
3.1            Certificate of Incorporation of the Company (incorporated by 
               reference to Exhibit 3.1 to the Company's Registration Statement on Form SB-2, 
               dated December 27, 1996)

3.2            Certificate of Amendment of the Company's Certificate of 
               Incorporation (incorporated by reference to Exhibit 3.3 to the
               Company's Registration Statement on Form SB-2, dated December 27,
               1996)

3.3            Certificate of Amendment of Certificate of Incorporation of the 
               Company

3.4            By-Laws of the Company (incorporated by reference to Exhibit 3.2
               to the Company's Registration Statement on Form SB-2 dated
               December 27, 1996)

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

10.2           Revolving Line of Credit and Security Agreement between UMB Bank
               and Trust Company and the Company, as amended (incorporated by
               reference to Exhibit 10.1 to the Company's Registration Statement
               on Form SB-2 dated December 27, 1996)

10.3           Employment Agreement for Glenda S. Klein dated April 1, 1995
               (incorporated by reference to Exhibit 10.2 to the Company's
               Registration Statement on Form SB-2 dated December 27, 1996)

10.4           The Company's Non-Qualified Stock Option Plan (incorporated by
               reference to Exhibit 4.1 to the Company's Registration Statement
               on Form SB-2 dated December 27, 1996)
 
10.5           Stock Purchase Agreement between the Company and Trans Lending
               Corporation, dated December 23, 1996 (incorporated by reference
               to Exhibit 10.3 to the Company's Registration Statement on Form
               SB-2 dated December 27, 1996)

11             Statement regarding computation of per share earnings: set forth
               in note 2 on page F-8 of the Financial Statements in Item 7 of 
               this Report

21             List of subsidiaries


27             Financial Data Schedule, submitted only in electronic format


</TABLE> 

                                      45