<PAGE>   1








                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-KSB

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

              For the fiscal year ended June 30, 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 No. 0-19420
                                 ---------

                            Credit Depot Corporation
                            ------------------------
                 (Name of small business issuer in its charter)

           Delaware                                       58-1909265
-------------------------------                       --------------------
(State or other jurisdiction of                        (I.R.S. Employer
incorporation or organization)                        Identification No.)

700 Wachovia Center, Gainesville, Georgia                    30501
-----------------------------------------                  ----------
(Address of principal executive offices)                   (Zip Code)

Issuer's Telephone Number, including Area Code (770) 531-9927
                                              ---------------

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

      Title of each class            Name of each exchange on which registered
      -------------------            -----------------------------------------
             N/A                                      N/A

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

                          Common Stock $.001 par value
                          ----------------------------
                                (Title of Class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X  No 
                                                             ---   ---
<PAGE>   2

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B 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. [ X ]

Issuer's revenues for its most recent fiscal year: $5,918,460

As of September 30, 1997, 4,072,761 shares of Common Stock, $.001 par value,
were outstanding. The aggregate market value of the common stock held by
non-affiliates of the registrant as of such date was approximately $2,300,000*.

*Excludes 740,336 shares of common stock deemed to be held by officers and
directors, and stockholders whose ownership exceeds five percent of the shares
outstanding at August 31, 1997. Exclusion of shares held by any person should
not be construed to indicate that such person possesses the power, direct or
indirect, to direct or cause the direction of the management or policies of the
registrant, or that such person is controlled by or under common control with
the registrant.


                       DOCUMENTS INCORPORATED BY REFERENCE


Portions of the Registrant's Proxy Statement, to be filed within 120 days after
the end of the Registrant's fiscal year, are incorporated into Part III of this
Annual Report. See Part III hereof and the Exhibit Index hereto.





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<PAGE>   3


                                     PART I

ITEM 1. BUSINESS

GENERAL

     Credit Depot Corporation (the "Company") is a mortgage finance company
engaged in originating, purchasing, servicing, and selling first and second
mortgage loans secured by single family (one to four family) residences made to
credit-impaired individuals who are generally unable to obtain financing from
conventional lending sources. The Company's customers borrow funds generally for
debt consolidation or to refinance first mortgages on the customer's primary
residence. The Company's mortgage loans are at higher interest rates than
conventional mortgage loans, which the Company's customers are willing to incur
because of their inability to obtain financing from conventional sources. While
the typical borrowers from the Company may not have attractive credit histories
due to a pattern of credit weakness, unverifiable income, insufficient credit
history or a previous bankruptcy or insolvency, it is the Company's experience
that these borrowers nevertheless have generally demonstrated an ability to make
payments due under their loans because the loans are secured by first mortgages
on their primary residences, and the Company generally requires that such
borrowers have significant equity in their residences. The Company believes its
underwriting procedures generally enable it to determine which borrowers with
substandard credit histories are likely to meet their mortgage obligations.

       The Company believes that the lending practices of conventional financing
sources (such as commercial banks and savings and loan associations) have made
access to credit more difficult for the Company's target customer base. In
addition, the emergence of secondary mortgage markets has resulted in a reduced
willingness on the part of traditional financing sources to offer mortgages that
depart from the strict underwriting and documentation standards required by
government sponsored enterprises such as the Government National Mortgage
Association ("GNMA") and the Federal National Mortgage Association ("FNMA"). The
Company believes that the tightening of underwriting guidelines from traditional
financing sources has resulted in a large population of creditworthy borrowers
seeking alternative sources of financing.

       Generally, mortgage lenders evaluate a borrower according to four primary
criteria: (i) the ratio of the borrower's debt to his gross income; (ii) the
loan-to-value ratio of the property securing the loan; (iii) the borrower's
credit history; and (iv) the responses to requests for third-party documentation
(such as employment and other verifications and credit references). Based on
these criteria, the Company will evaluate a loan application or loan (if
purchasing a loan from another source) and determine if the criteria fall within
the guidelines of the Company's current loan programs, also known as an
"underwriting matrix". The Company's target customer base traditionally consists
of homeowners with equity of at least 20% in their homes (typically with values
ranging from $35,000 to $200,000), a debt-to-gross-income ratio not exceeding
50% (as compared to approximately 36% for conventional lenders), and stable
employment.


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<PAGE>   4

       During the years ended June 30, 1995, 1996 and 1997 (referred to as
"Fiscal 1995", "Fiscal 1996", and "Fiscal 1997") the Company originated
$29,542,000, $37,035,000, and $79,323,000 of loans, respectively. The average
original principal balance of the loans originated by the Company during Fiscal
1995, 1996, and 1997 was $41,000, $49,000, and $50,000, respectively, with an
average annual interest rate to the Company of approximately 13.0%, 11.5%, and
12.1%, respectively. During Fiscal 1995, 1996, and 1997, approximately 96%, 91%,
and 90%, respectively, of the Company's loans originated for each period had an
original principal balance of between approximately $10,000 and $130,000. During
Fiscal 1995 1996, and 1997, the weighted average loan-to-value ratio at the time
of origination of the Company's loans originated during those periods was
approximately 70%, 74%, and 70%, respectively, and the weighted average
debt-to-gross-income ratio for the Company's borrowers was approximately 35%,
36%, and 35%, respectively.

       Prior to October 1994, substantially all of the mortgage loans originated
by the Company were balloon loans, with periodic payments based generally on a
15-year amortization schedule and a single payment of the remaining balance of
the balloon loan due five years after origination. At June 30, 1997, the Company
was servicing approximately $2,753,000 of balloon loans, either in the Company's
own portfolio or for other entities. In October 1994, the Company changed its
mortgage product line from balloon to self-amortizing mortgages, and also began
to originate somewhat higher quality loans (although the target customers
remained credit-impaired borrowers who are unable to obtain loans from
conventional lenders), which resulted in slightly lower average annual interest
rates and slightly higher loan-to-value ratios. Currently, the loans originated
by the Company are generally for 15- 20- or 30-year terms.

       Since 1993, the Company has expanded the geographic scope of its mortgage
activities from a single office in Gainesville, Georgia, and currently employs
personnel in nine additional states (Florida, Illinois, Indiana, Michigan,
Mississippi, North Carolina, Ohio, South Carolina, and Tennessee) from which
mortgage loans are originated. The Company is also licensed to originate loans
in several other states where it is not required to maintain a physical
presence. The Company originates and processes its loans utilizing a "spoke and
hub" system, wherein sales representatives forward loan applications to one of
four designated regional processing offices, which contain loan processors and
field underwriters. The underwriting department at the corporate headquarters in
Gainesville, Georgia issues final approval and funding of each loan.

       The Company was incorporated in Delaware in 1990 and is the successor by
merger to a corporation organized in 1986. Unless the context otherwise
requires, reference to the "Company" includes the operations of the Company, its
predecessor and its wholly-owned subsidiaries. Also unless otherwise noted, all
dollar figures presented are rounded to the nearest $1,000 and are approximate.
The Company's executive offices are located at Wachovia Center, Suite 700,
Gainesville, Georgia 30501, telephone (770) 531-9927.



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<PAGE>   5

RECENT DEVELOPMENTS

       Subsequent to June 30, 1997, the Company was not in compliance with a
minimum net worth covenant under its warehouse lending arrangement with one of
its warehouse lenders primarily as a result of recurring operating losses. Since
the waiver of this covenant has not been obtained, the right to use this line to
finance originations and purchases of mortgage loans could be restricted or
terminated at the option of the lender.

       The Company's net worth as of June 30, 1997 was $376,838. The Company has
received notification from Nasdaq stating that the Company has failed to
maintain a $1.00 minimum bid price on its common stock and also does not appear
to meet the $2,000,000 minimum in net tangible assets necessary for continued
listing on the Nasdaq SmallCap Market. The Company must respond by October 22,
1997 with a plan and schedule to bring the Company into compliance with these
requirements. In the event that Nasdaq does not accept the Company's plan for
achieving compliance, a formal notice of deficiency would be issued by Nasdaq
specifying a delisting date for the Company's common stock.

       These and other matters raise substantial doubt about the ability of the
Company to continue as a going concern. See Item 6- "Management's Discussion and
Analysis of Financial Condition and Results of Operation", and Note 12 under
Item 7- "Financial Statements", for a more complete discussion of issues
concerning the viability of the Company and management's plans to address those
issues.

LOAN FINANCING

       General. Although the Company's principal product is a non-conforming
residential first mortgage loan with a fixed interest rate and term to maturity,
it does offer a limited variable rate and second mortgage product and other
programs, all of which the Company believes keeps its product line competitive
in the marketplace without sacrificing underwriting guidelines. These loans are
distinct from residential mortgage revolving lines of credit, not offered by the
Company, which are generally secured by a second mortgage and typically carry a
floating interest rate. The proceeds of the loan will usually be used by the
borrower for debt consolidation or to refinance a first mortgage on his
property. The homes used for collateral to secure most of the loans are
single-family owner-occupied. As of June 30, 1997, approximately 11.2% of the
outstanding loans serviced by the Company represent loans where the properties
used as collateral to secure loans are non-owner occupied properties. Costs
incurred by the borrower for loan origination, including origination points and
appraisal, legal and title fees, are often included in the amount financed.



                                       5
<PAGE>   6


The following table summarizes the Company's lending activities during each of
the periods indicated:

<TABLE>
<CAPTION>
                                                                 Fiscal Year Ended
                                                                     June 30,
                                                      -----------------------------------------

                                                         1997            1996           1995
                                                      -----------    -----------    -----------
<S>                                                   <C>            <C>            <C>    
Principal amount of loans originated                  $79,323,000    $37,035,000    $29,542,000

Number of loans originated                                  1,601            757            722
Servicing portfolio:
  Serviced for the Company                            $ 5,205,000    $ 6,617,000    $ 3,610,000
  Serviced for purchasers of loans                      2,027,000      3,575,000      6,359,000
                                                      -----------    -----------    -----------
Total Loans Serviced                                    7,232,000     10,192,000      9,969,000

Loan sale proceeds:
  Loans sold servicing retained                                               --      1,616,000
  Loans sold servicing released - whole                 5,244,000     13,506,000     26,065,000
  Loans sold servicing released - retained interest    77,020,000     19,321,000             --
                                                      -----------    -----------    -----------
Total Sales                                            82,264,000     32,827,000     27,681,000

Gain on sales of loans (1)                              5,181,000      1,697,000      1,327,000
Overall gain on sale percentage (1)                          6.30%          5.17%          4.79%
Interest rate differential on loans sold with                2.70%          2.01%          1.89%
 a retained interest (2)
Premium received on whole loan sales (3)                     0.00%          2.27%          5.09%
</TABLE>

(1)      This is a gross gain on sale from all types of loan sales, and excludes
         any write-down of any asset with a retained interest (see "Sale of
         Mortgage Loan Pools"), which is netted against the gain on sale in the
         financial statements.

(2)      This represents the average difference between the mortgage loan
         interest rate and the interest rate passed on to the purchaser of loans
         sold on a Servicing basis in Fiscal 1995, prior to giving effect to
         normal servicing costs of .5%. For 1996 and 1997, it represents the
         difference between the mortgage loan interest rate and the contractual
         rate paid by the purchaser of loans sold on an Interest-Only basis.
         Neither type of sale involves a cash premium or discount to the Company
         at the time of sale.

(3)      This represents the net cash premium received on loans sold Whole. This
         percentage is calculated on the net proceeds (after premiums paid)
         divided by the principal amount of the loan.

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<PAGE>   7

       Origination. Loan applications are brought to the Company's attention in
its branch offices by referral sources such as mortgage loan brokers,
prospective borrowers, or mortgage companies. Completed loan applications are
transferred to the Company's loan processors who verify certain information
contained in the applications such as employment information and credit history.
The loan processor also makes the arrangements necessary to have the applicant's
real property, offered as security for the loan, appraised by an independent
appraiser.

       The Company's loan processor then reviews the application, the
applicant's credit history (including verifying any senior mortgages on the
applicant's property) and the appraisal, and uses this information to categorize
the application, a process which consists of determining the preliminary
loan-to-value ratio as well as ascertaining the applicant's other obligations.
The loan-to-value ratio is determined by dividing the requested loan amount by
the appraised value of the borrower's property. The Company requires that the
loan-to-value ratio of a property offered as collateral generally not exceed
85%, and, historically, such rate has averaged approximately 71%. The Company
requires that a loan applicant's total monthly debt payments to gross monthly
income generally not exceed 50%, and, historically, such rate has averaged
approximately 36%. If the loan processor concludes that the applicant may be a
suitable candidate for a loan, the loan processor prepares an "in-file" credit
report which provides a computer analysis of the applicant's credit history,
including outstanding indebtedness. Based upon the loan-to-value ratio,
debt-to-gross-income ratio, an analysis of the applicant's creditworthiness and
the appraisal of the applicant's property offered as security for the loan, a
loan committee, consisting of senior credit officers at the Corporate office,
determines whether or not to approve the application.

       In all instances in which borrowers have advised the Company that all or
a portion of the loan will be used to repay outstanding debt, the Company's
closing agent will disburse such funds directly to the borrower's creditors.
Borrowers have a right under federal truth-in-lending laws to rescind their
loans for a period of three days after entering into the loan agreement and
prior to the disbursement of the funds. After the disbursement of loan proceeds,
the Company's closing attorney records the first mortgage security interest in
the county in which the property securing the loan is located, thus perfecting
the Company's interest. The closing attorney obtains, on behalf of the Company,
a title insurance policy insuring perfection of the Company's first lien
position.

       Delinquency Information. Typically, promptly after failure to receive
timely payment, the Company commences collection efforts, and for loans which
become 60 days past due the borrower is verbally notified that the Company may
initiate the foreclosure process. The Company then notifies the borrower via an
attorney's letter of the serious nature of the delinquency but also affords the
borrower an opportunity (generally the minimum amount of time prescribed by
state statute) to bring the loan current. However, if the loan continues to
remain delinquent, the Company engages an attorney to complete the foreclosure
proceedings. The Company arranges for sale at public auction of all collateral
in order to satisfy the unpaid indebtedness to the Company. The proceeds of the
public sale of the foreclosed property are first distributed to the Company (on
behalf of the borrower) in an amount up to the unpaid balance of


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<PAGE>   8

the loan plus accrued interest and expenses associated with the foreclosure.
Additional proceeds, if any, are generally disbursed by the foreclosing attorney
first to any junior lien holder which has filed a claim with the Company and has
been assigned such proceeds and then to the borrower.

       Delinquency information herein gives effect to all mortgage loans
originated by the Company which are either retained in the Company's portfolio
or which have been sold to third parties servicing retained. At June 30, 1997,
the Company held real estate owned reflecting three foreclosed mortgage loans
totaling $89,000. As of June 30, 1997, 21 borrowers have filed for protection
under the federal bankruptcy laws, representing $627,000, or approximately 8.7%
of the principal amount of the Company's servicing portfolio. Of the 21
borrowers who have filed for bankruptcy, 15 are making their scheduled payments
on a timely basis.




                                       8
<PAGE>   9


       The following is a table setting forth certain information with respect
to the aggregate delinquency rates for loans in the Company's loan portfolio and
serviced loan portfolio:

<TABLE>
<CAPTION>
                                                             Fiscal Year Ended
                                                                June 30,
                                             ------------------------------------------------

                                                 1997              1996              1995
                                             --------------   --------------    -------------
<S>                                          <C>              <C>               <C>    
Number of loans                                        199               296              329
Amount of loans                              $   7,232,000    $   10,192,000    $   9,969,000

Delinquency period (1) (3):
   30-59 days                                         3.12%             3.50%            4.38%
   60-89 days                                         2.79%             2.13%            2.30%
   90-119 days                                        0.64%             0.83%            1.40%
   120 days and over                                  7.45%             5.59%            5.00%

Foreclosed properties (2)                             1.21%              .04%             .89%

Amount of loans owned by the Company         $   5,205,000    $    6,617,000    $   3,610,000

Amount of loans serviced for third parties       2,027,000         3,575,000        6,359,000
</TABLE>


(1)      Represents the dollar amount of delinquent loans as a percentage of the
         total "Amount of loans" as of the date indicated.

(2)      Foreclosed property as a percentage of loans serviced and foreclosed
         properties. These amounts reflect foreclosures during the applicable
         period on mortgage loans originated since 1988.

(3)      From time to time, the Company grants payment extensions or revises
         repayment schedules. The above information does not list as delinquent
         those payments for which extensions have been granted.

       In Fiscal 1995, 1996, and 1997, the Company experienced defaults which
led to the foreclosure of the mortgaged property on 35, 11, and 19 loans,
respectively. As a result of such foreclosures, the Company experienced an
aggregate net loss on those related mortgage loans of $307,000, $130,000, and
$195,000 during Fiscal 1995, 1996, and 1997, respectively.


                                       9
<PAGE>   10

       In a continuing period of economic decline, the rates of delinquencies,
foreclosures and losses on the mortgage loans could be higher than those
heretofore experienced in the mortgage lending industry in general. In addition,
adverse economic conditions (which may or may not affect real estate property
values) may affect the timely payment by borrowers of scheduled payments of
principal and interest on the mortgage loans and, accordingly, the actual rates
of delinquencies, foreclosures and losses with respect to the Company's
portfolio of mortgage loans.

SALE OF MORTGAGE LOANS

       As a fundamental part of its business and financing strategy, the Company
intends to sell all of the loans it originates in the secondary mortgage market
rather than holding such mortgage loans for its own account. Generally, the
Company has sold its loans using one of three sales methods. The first method
involves selling loans to third parties service-released (the Company no longer
services the loan after the sale) with no further obligations or interest in the
loan after the sale. The premium (or discount) on the loan is received (or
deducted) in cash at the time of the sale. This method of loan sale is referred
to as selling loans "Whole". In the second sales method, loans are sold
service-retained (the Company continues to service the loan after the sale),
with a residual interest and obligation. The interest the Company receives is a
percentage of the interest portion of a borrower's loan payment, and the
obligation owed in this case is a commitment by the Company to repurchase the
loan, at the option of the investor who purchased the loan, if it should become
over 90 days past due. The gain on sale recorded using the second sales method
is calculated as the present value of the difference between the interest rate
charged by the Company to a borrower and the interest rate paid to the investor
who purchased the loan less contractual servicing costs, referred to as a
"Service" sale. The third sales method involves selling loans service-released
with a residual interest and obligation. The interest due the Company is the
same as with a Service sale except that there is no deduction to the investor
for servicing costs, and the obligation by the Company in this case is twofold:
1) a commitment to repurchase a loan if the investor should discover an
exception in the loan file as defined in the loan purchase agreement during the
investor's quality control audit, and 2) a "first loss" provision, wherein if
the loan is ever foreclosed upon by the investor and the investor should incur a
loss upon the sale of the property, then the Company is obligated to reimburse
the investor for the amount of loss. This third type of sale is referred to as
an "Interest-Only" sale. An important distinction between the sales methods is
that in a Whole loan sale, the cash premium is received at the time of sale,
whereas in the other two methods the cash premium is received over the life of
the loan as it is collected. See "Certain Accounting Considerations" under Item
7 for a more complete discussion of how the Service and Interest-Only sales are
recorded.

    Prior to Fiscal 1994, the Company sold most of its mortgage loans in groups
or "pools" of loans totaling anywhere from $500,000 to $2,000,000 a pool on a
Service basis to banks, life insurance companies, and other entities. At June
30, 1997, the aggregate balance of loans outstanding subject to the residual
repurchase obligation of the Service sale was $1,967,000, of which $23,000 was
past due by over 90 days and subject to repurchase at the option of the
investor.



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       As loan volumes increased in subsequent years, the Company from time to
time had difficulty accumulating pools of loans with the financing facilities
and/or capital available to it, and would sell loans on a "Flow" basis (groups
of loans totaling less than $500,000) to provide the liquidity needed during the
periods of capital constraints. Loans sold on a Flow basis generally do not
provide as high a margin as loans sold from a larger pool of loans as purchasers
will generally pay a higher premium for a $2,000,000 pool of loans as compared
to a $500,000 pool of loans.

       In March 1996, the Company commenced selling most of its mortgage loans
to a major financial institution on an Interest-Only basis, who in turn placed
the Company's loans (along with loans from other companies) into the
asset-backed securitization market. The agreement with the major financial
institution (referred to as the "Securitizer") allowed the Company to sell its
loans on a Flow basis, but receive higher margins than would typically be
expected for loans sold on a Flow basis. Pursuant to this agreement, the Company
enters into separate commitments in which it commits to sell to the Securitizer
a stated amount of mortgage loans during a stated period. The Securitizer is not
obligated to purchase any mortgage loans from the Company under the agreement.
Through June 30, 1997, the Company had sold approximately $96,292,000 of
mortgage loans to the Securitizer pursuant to this agreement. No requests have
been made by the Securitizer for reimbursement under the first loss provision of
the Interest-Only sale on the $96,292,000 sold. The Company maintains an
allowance for credit losses estimated to cover losses both from loans held by
the Company for its own portfolio and for loans sold with a residual obligation.

       Subsequent to Fiscal 1997, the Company was able to obtain substantial
warehouse lines and therefore the capability to accumulate pools of mortgages.
With this capability, the Company decided in September 1997, primarily for
liquidity reasons, to switch to selling loans on a Whole basis. While the loans
sold under the agreement with the Securitizer generally result in a higher
margin than loans sold Whole, the net cash flow from a Whole loan sale is
generally more favorable than loans sold under the "Interest-Only" method, and
the Company believes at this time the improved cash flow is more critical to the
success of the Company than the higher margin. See "Liquidity and Capital
Resources" under Item 7 herein for a more complete discussion of liquidity
issues. In addition to improving cash flow, selling loans Whole to a variety of
third party purchasers has allowed the Company to expand its product line and
offer certain types of mortgages that were not part of the Securitizer's product
line. Since the Securitizer would not purchase these recently introduced
products, the Company, if it wished to originate such a loan, would have to hold
the loan in its own portfolio until a purchaser was found, requiring the Company
to use its own working capital to hold the loan until sale. However, the Company
does not have a sales contract with any of these third party purchasers, and
therefore the Company has no guarantee that its mortgage loans will be purchased
at a given rate as the premium received on each sale of a pool of loans is
negotiated at the time of sale. The Company does not currently hedge its sales
against changes in interest rates, and does not believe the costs associated
with hedging offset the risk taken by not hedging at this point in time.
However, there can be no assurance that changes in interest rates in the future
will not adversely affect the Company. The Company intends to continue to sell
loans Whole until its cash flow situation has improved to a point where selling
loans by other methods becomes more attractive.


                                       11
<PAGE>   12

BRANCH OFFICES

       In order to expand its loan production, the Company intends to continue
development of a network of branch offices located primarily in the eastern half
of the United States. Until September 1993, the Company originated and serviced
loans only to Georgia residents from a single office located in Gainesville,
Georgia. Since September 1993, the Company has opened and closed offices in
several states, but currently maintains personnel in Florida, Illinois, Indiana,
Michigan, Mississippi, North Carolina, Ohio, South Carolina, and Tennessee, and
is licensed to do business in several other states where it does not maintain a
salesperson. The Company currently maintains four processing centers, each with
a regional manager, account representative, and a staff of loan processors. In
some states, the Company may have one or more additional satellite offices which
normally house a single account representative in an executive suite to focus on
loan applications in a particular area within a state. All branch operations are
overseen by regional managers. From time to time, the Company has closed
unproductive processing or satellite offices, and has opened other offices in a
different location or with new staff to maintain production standards. The
purpose of a branch office is to originate loan production with final
underwriting being approved at the Company's corporate offices. The Company
expects that from the time a branch site is selected and such office opens, it
will take several months before the branch attains desired loan production
levels. The Company incurs expenses in connection with the opening of each
branch office, prior to realizing any revenues. Costs are expensed as incurred.
The Company embarked on a rapid expansion effort in Fiscal 1997 that did not
produce the desired increase in loan originations. Several of the offices opened
during that expansion effort have since been closed, and in some cases new
personnel have been hired to replace those terminated. The Company intends to
continue replacing personnel in offices it previously closed but will not add
"new" branch offices until additional capital is available.

MARKETING

       The Company's marketing department provides training, research,
promotional materials, data base management, media and other support for the
account executives in the branch offices to enable them to target the mortgage
brokerage community at the local level. The officers and employees of the
Company also solicit referrals from personal contacts with banks, mortgage
lending institutions, credit unions, and real estate firms.

CUSTOMERS

       The most likely market for loans financed by the Company has been and
will continue to be credit-impaired homeowners who are unable to obtain loans
from conventional sources. Typical borrowers approved by the Company for loans
are individuals who are generally unable or unwilling to obtain financing from
conventional lending sources due to an established pattern of credit weakness,
unverifiable income, insufficient credit history, or a previous bankruptcy or
insolvency. The inability of these borrowers to obtain conventional financing
makes them willing to pay the higher rates charged by the Company. While the
typical borrowers from the


                                       12
<PAGE>   13

Company may not present attractive credit histories, the Company has found and
believes that these types of individuals nevertheless demonstrate an ability and
desire to preserve their loans in good standing because the loans are secured by
first mortgages on their primary residences. The Company obtained most of its
mortgage applications from mortgage brokers in Fiscal 1997 (as opposed to
soliciting the borrowers directly), and the Company anticipates that mortgage
brokers will remain its most significant source of loan applications in the year
ending June 30, 1998.

COMPETITION

       The Company faces intense competition in connection with the origination,
purchase, and sale of mortgage loans from numerous providers of financial
services. Traditional competitors in the financial services business include
independent mortgage companies, credit unions, thrift institutions, credit card
issuers and finance companies. Many of these companies are substantially larger
and have more capital and other resources than the Company. Competition among
lenders can take many forms including convenience in obtaining a loan, customer
service, size of loans, interest rates and other types of finance or service
charges, duration of loans, the nature of the risks which the lender is willing
to assume and the type of security, if any, required by the lender. The Company
competes, among other ways, through efficient underwriting and the timely
response to applicants.

GOVERNMENT REGULATION

       The Company's operations are subject to extensive regulation, supervision
and licensing by federal, state and local government authorities. Regulated
matters include, without limitation, loan origination, credit activities,
maximum interest rates and finance and other charges (including state usury
laws), disclosure to customers and requirements of the federal
"truth-in-lending" laws, the terms of secured transactions, the collection,
repossession and claims handling procedures utilized by the Company, multiple
qualification and licensing requirements for doing business in various
jurisdictions as mortgage lenders and brokers and other trade practices.

       The Company's operations are subject to regulation by state statutes
governing loan interest rates and terms (i.e. usury statutes) and federal
"truth-in-lending" laws governing disclosure requirements applicable to lenders.
The Company believes it has complied in all material respects in the states in
which it operates with state laws regarding the licensing of mortgage lenders
and mortgage brokers.

       There can be no assurance that restrictive laws, rules and regulations
will not be adopted in the future which could make compliance by the Company
more difficult and expensive and which could further limit or restrict the
amount of interest and charges assessed under loans originated by the Company or
otherwise adversely affect the business and prospects of the Company.


                                       13
<PAGE>   14


       The Company's loan financing activities are subject to the provisions of
Title 1 of the Federal Consumer Credit Protection Act, commonly known as the
Truth-In-Lending Act ("TILA") and Regulation Z promulgated pursuant thereto.
TILA contains disclosure requirements designed to provide consumers with simple
understandable information with respect to the terms and conditions of loans and
credit transactions in order to give them the ability to "shop" credit. TILA
also guarantees consumers a three-day right to cancel certain credit
transactions, including any refinanced mortgage or junior mortgage on a
consumer's primary residence. In September 1994, the Riegle Community
Development and Regulatory Improvement Act of 1994 (the "Riegle Act") was
enacted. Among other things, the Riegle Act makes certain amendments to TILA.
The TILA amendments, which became effective in October 1995, generally apply to
mortgage loans with (i) total points and fees upon origination in excess of
eight percent of the loan amount or (ii) an annual percentage rate of more than
ten percentage points higher than United States Treasury securities of
comparable maturity ("Covered Loans"). A substantial majority of the loans
originated or purchased by the Company are not Covered Loans.

       The TILA amendments impose additional disclosure requirements on lenders
originating Covered Loans and prohibit lenders from originating Covered Loans
that are underwritten solely on the basis of the borrower's home equity without
regard to the borrower's ability to repay the loan. The Company believes that
only a small portion of loans it originated are of the type that, unless
modified, would be prohibited by the TILA amendments. The Company's underwriting
criteria have always taken into consideration the borrower's ability to repay.

       The TILA amendments also prohibit lenders from including prepayment fee
clauses in Covered Loans to borrowers with a debt-to-income ratio in excess of
50% or Covered Loans used to refinance existing loans originated by the same
lender. The Company intends to continue to collect prepayment fees on loans
originated prior to the effectiveness of the TILA amendments and on non-Covered
Loans as well as on Covered Loans in permitted circumstances. Because the TILA
amendments did not become effective until October 1995, the level of prepayment
fee revenue was not affected in 1995, but the level of prepayment fee revenue
may decline in future years. The TILA amendments impose other restrictions on
Covered Loans, including restrictions on balloon payments and negative
amortization features, which the Company does not believe will have a material
impact on its operations.

       The Company is also required to comply with the Equal Credit Opportunity
Act ("ECOA") which prohibits creditors from discriminating against applicants on
the basis of race, color, sex, age or marital status. Regulation B promulgated
under ECOA restricts creditors from obtaining certain types of information from
loan applicants. It also requires certain disclosures by the lender regarding
consumer rights and requires lenders to advise applicants who are turned down
for credit for the reasons therefore. The Fair Credit Reporting Act requires a
lender to provide an individual, whose application for credit was denied as a
result of information obtained from a consumer credit agency, with the name and
address of the reporting agency.



                                       14
<PAGE>   15

       In certain circumstances the Company may acquire properties securing
loans on foreclosure. There is a risk that hazardous wastes may be found on such
properties. In such event, it is possible that the Company could be held liable
for clean-up costs under the Comprehensive Environmental Response Compensation
and Liability Act ("CERCLA") or similar state statutes.

EMPLOYEES

       As of June 30, 1997, the Company had 80 full-time employees in its Credit
Depot offices, and approximately 30 full and part-time employees in its Cash
Back Mortgage subsidiary. The Company considers its relations with its employees
to be satisfactory.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

       Certain statements contained in "Item 1. Business" and "Item 6.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" such as statements concerning the Company's future cash and
financing requirements, the Company's ability to originate and/or acquire
mortgage loans, the Company's ability to enter into securitization transactions
and/or otherwise sell mortgage loans to the third parties and the returns
therefrom and other statements contained herein regarding matters that are not
historical facts are forward looking statements; actual results may differ
materially from those projected in the forward looking statements, which
statements involve risks and uncertainties, including but not limited to, the
following: the Company's ability to obtain future financings; the uncertainties
relating to the Company's ability to participate in securitizations; and market
conditions and other factors relating to the mortgage lending business.
Investors are also directed to the other risks discussed herein and in other
documents filed by the Company with the Commission.


ITEM 2.  DESCRIPTION OF PROPERTIES.

       The Company's principal executive offices are located at 700 Wachovia
Center, Gainesville, Georgia 30501, where it leases approximately 12,650 square
feet of space at a monthly rental of $22,000. The lease for this office expires
in October 1999. The Company also leases office space in each state that it
maintains a branch office. The branch offices range from offices rented in an
executive office suite of approximately 120 square feet to 3,000 square feet
with monthly rents ranging from $350 to $4,000 per office. The Company
anticipates that most of the additional branch offices it plans to open in the
next 12 months will average less than 500 square feet. The Company believes that
its corporate facilities are adequate for the Company's present and anticipated
needs for at least the next 12 months.

ITEM 3.  LEGAL PROCEEDINGS.

       As of the date hereof, the Company is not a party to any material legal
proceedings. The Company from time to time commences foreclosure proceedings
against borrowers who have defaulted on their loans.


                                       15
<PAGE>   16

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.

       None.

                                     PART II

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

         The Company's Common Stock has traded in the Nasdaq SmallCap Market
under the symbol LEND since June 6, 1991. The following table sets forth the
high and low bid prices for the Common Stock as reported by the Nasdaq SmallCap
Market for the periods indicated. The prices set forth below represent quotes
between dealers and do not include commissions, mark-ups or mark-downs, and may
not necessarily represent actual transactions.

<TABLE>
<CAPTION>
                                                           Common Stock
                                                           ------------
                                                      High              Low
                                                      ----              ---
<S>                                                  <C>              <C>    
Fiscal 1995
Quarter ended September 30, 1994                     $8.25            $ 6.50
Quarter ended December 31, 1994                       6.00              4.00
Quarter ended March 31, 1995                          5.13              2.50
Quarter ended June 30, 1995                           6.00             3.875

Fiscal 1996
Quarter ended September 30, 1995                      6.50              4.25
Quarter ended December 31, 1995                       7.00              3.00
Quarter ended March 31, 1996                         4.125             2.375
Quarter ended June 30, 1996                          3.875             2.125

Fiscal 1997
Quarter ended September 30, 1996                     4.625              2.50
Quarter ended December 31, 1996                       4.25            2.9375
Quarter ended March 31, 1997                        4.0625             3.375
Quarter ended June 30, 1997                           3.75              1.25
</TABLE>


       As of June 30, 1997, the Company believes that there were in excess of
300 beneficial holders of its Common Stock.

       The Company's Convertible Secured Notes restrict its ability to pay
dividends on its Common Stock.

                                       16
<PAGE>   17

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

This section presents management's discussion and analysis of the consolidated
financial condition and results of operations of the Company for the fiscal
years ended June 30, 1997, 1996, and 1995. The discussion should be read in
conjunction with the Company's consolidated financial statements and
accompanying notes to the consolidated financial statements (see "ITEM 7.
FINANCIAL STATEMENTS"). Also see "Safe Harbor Statement Under the Private
Securities Litigation Reform Act of 1995" under "ITEM 1."

CERTAIN ACCOUNTING CONSIDERATIONS

       A portion of the Company's revenue consists of gain on loans sold by the
Company servicing retained (a Service sale) or with servicing released but
retaining an interest in the mortgage loan (an Interest-Only sale). The gross
gain on a Service sale principally represents the present value of the
difference between the interest rate paid by the borrower and the interest rate
received by the investor who purchased the loans, reduced by a contractual loan
servicing fee. The corresponding asset established to record this gain is the
Servicing Asset. A separate reserve for prepayments is calculated and also
concurrently recorded, which reduces the gross gain on sale. The corresponding
asset established in connection with the gain on an Interest-Only sale is known
as an Interest-Only Strip Receivable. In this type of sale, prepayment
assumptions are included in and effectively reduce the gross gain on sale, so no
separate reserve is recorded for prepayment. In both types of sales, the Company
recognizes the gain on sale of loans in the fiscal year in which such loans are
sold, although cash is received by the Company over the lives of the loans. Both
types of assets are computed in part based upon, and amortized over, the
estimated lives of the loans.

       Because the gain recognized in the year of sale is equal to the present
value of the estimated future cash flows in both types of sales, the amount of
cash actually received over the lives of the loans may exceed the gain
previously recognized at the time the loans were sold. In subsequent years where
such cash exceeds the previously recorded gain, the Company recognizes
additional income and fees to the extent actual cash flows from such loans
exceed the amortization of either type of asset. If actual prepayments with
respect to sold loans occur faster than were projected at the time such loans
were sold, the carrying value of the Servicing Asset or Interest-Only Strip
Receivable would be reduced through a charge to earnings in the period of
adjustment. In Fiscal 1996 and 1997, actual prepayments did exceed those
previously anticipated at the time of the sale for loans sold on a Service
basis. Accordingly, during Fiscal 1997, the Company wrote off a portion of the
value of the Servicing Asset previously recorded to reflect the actual
prepayments incurred and the estimated net realizable value. This write-off was
$39,000 in Fiscal 1997 and $119,000 in Fiscal 1996.


                                       17
<PAGE>   18

       In addition, provisions for credit losses are charged to income in
amounts sufficient to maintain the allowance for credit losses at a level
considered by the Company to be adequate to absorb possible losses of principal
and interest in the existing portfolio, based upon calculations of the
collectibility of loans receivable and prior credit loss experience. The Company
charges loans receivable against the allowance for credit losses when it
believes, based upon a loan-by-loan review, that the collectibility of principal
is unlikely. The Company's exposure to credit loss in the event of
nonperformance by the borrower is represented as the outstanding principal
balance of the respective loans less the value of the collateral obtained, which
value is based upon the Company's current review of the appraisal. While the
Company uses available information to recognize losses on loans, future
additions to the allowance for credit losses may be necessary based upon a
number of factors including changes in economic conditions.



RESULTS OF OPERATIONS

         For Fiscal 1997, the Company realized a net loss of $3,363,000, of
which $3,210,000 was realized in the last six months. The loss in the second
half of Fiscal 1997 was the result of various factors. The Company had a
marginally profitable quarter ending December 31, 1996 and began a rapid
origination expansion program in January 1997, increasing its sales force from
13 persons in December 1996 to 24 persons in April 1997. Total employee
headcount went from 67 to 85 persons during the same period as support personnel
were added for the new salespeople. To help supplement loan originations when a
majority of the sales force were recently hired, the Company executed several
bulk purchases of loans. When these bulk purchase loans were eventually sold,
the profit margins received on them were significantly less than anticipated. A
contributing factor to the reduced margin on the sale of the bulk purchase loans
and other loans sold was the relatively sharp rise in interest rates which
occurred during the Company's third fiscal quarter ending April 30, 1997. The
Company was unable to increase its rates on mortgage loans originated or
purchased by it or increase its loan volumes to offset the reduced margins at
the time of sale. The Company also experienced working capital shortages during
Fiscal 1997. Because the Company had no warehouse lines of credit until the end
of June 1997 and was funding all of its loan production with working capital,
loan production was negatively impacted during these shortages. Many of the
factors resulting in the loss for the quarter ending March 31, 1997, carried
forward into the fourth fiscal quarter. The significant expense of the expansion
effort was not matched by a corresponding increase in revenues. Several of the
less productive offices opened during this expansion were recently closed,
although not in time to positively affect the financial results for the year
ended June 30, 1997. Also, in April 1997, the Company acquired Cash Back
Mortgage Corporation, a telemarketing mortgage broker located in Cleveland,
Ohio. This acquisition has not yet yielded the anticipated financial results and
contributed to the loss for the Company as a whole in Fiscal 1997. As a result
of continued operating losses, the Company requires additional capital to meet
its working capital requirements and to increase its mortgage loan originations.


                                       18
<PAGE>   19

       Subsequent to June 30, 1997, the Company was able to obtain warehouse
lines of credit of sufficient size to house most of the Company's current loan
production, thereby decreasing the need to rely on working capital to perform
this function. The change in sales method to a Whole loan basis has also
provided more cash from loan sales than under the sales agreement with the
Securitizer, allowing the Company, in conjunction with an expense reduction
program, to improve its cash flow. Nevertheless, the Company is still operating
with a negative cash flow and anticipates that it will continue to do so unless
it can restructure its interest and dividend payments. To that end, the Company
has extended an offer to its 10% Convertible Debt Holders and 9% Preferred Stock
holders to exchange their securities for common stock at an exchange rate of
$0.50 and $0.65 per share, respectively, for each dollar of security currently
held by them. This offer is scheduled to expire on October 22, 1997. A
prerequisite for this conversion offer to be accepted by the Company is the
approval by a majority of the common shareholders of a one-for-five reverse
stock split (to allow for, among other items, sufficient number of authorized
shares to be issued in conjunction with the conversion offer). A special
shareholders meeting has been scheduled for October 24, 1997 to vote upon this
issue. The Company intends, subsequent to and largely dependent upon, the
approval of the reverse stock split and conversion of a majority of the
convertible securities to raise additional capital in the private placement of
preferred stock. The Company has obtained a bridge loan to provide working
capital until October 31, 1997, at which time the Company intends to close on
the new financing. There can be no assurance that any of the proposals outlined
above will be approved, accepted, or obtained, or even if they are that the
Company can achieve positive cash flow or positive operating margins. Failure of
the Company to obtain additional financing or make other arrangements for
payment of the bridge loan by October 31, 1997 would probably result in
cessation of the operations of the Company.

FISCAL YEAR ENDED JUNE 30, 1997 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1996

       The Company's net loss was $3,363,000 in Fiscal 1997 as compared to a net
loss of $4,115,000 in Fiscal 1996, representing an improvement in operating
results of 18%. This decrease in net loss was primarily the result of increased
gain on sale, as revenues increased 159% to $3,640,000 and expenses increased
45% to $2,888,000 in Fiscal 1997 from Fiscal 1996. This improvement was not
sufficient, however, to offset the costs of maintaining the Company's loan
production and support operations and the costs of raising capital.

       Finance income and fees for Fiscal 1997 increased 15% to $757,000 in
Fiscal 1997 from Fiscal 1996 as both the amount of Company's average loan
portfolio and interest rate on that portfolio increased. The increase in the
average size of the Company's loan portfolio balance was a result of the
increased loan volume in Fiscal 1997. The average interest rate yield on
mortgage loans originated in Fiscal 1997 increased by 0.52% to 12.05%, compared
to an average of 11.53% in Fiscal 1996, a 4.5% increase. This increase was
primarily a result of the Company purchasing more loans in the "C" and "D"
credit grade as compared to loans originated in Fiscal 1996.




                                       19

<PAGE>   20

       Gains on sales of mortgage loans increased to $5,142,000 for Fiscal 1997
from $1,578,000 during Fiscal 1996 due to the increased volume of loan sales and
the higher margins received on those sales. The Company sold $82,264,000 of
loans in Fiscal 1997 as compared to $37,035,000 in Fiscal 1996. The gain on sale
margin on the loans sold also improved as the average gain on sale percentage
increased from 5.17% to 6.30%, or a 22% improvement in Fiscal 1997 from Fiscal
1996, reflecting the change in sales methods. For most of the first three
quarters of Fiscal 1996, loans were sold on a Whole basis, whereas for all of
Fiscal 1997 loans were sold with a retained interest.

       Salaries and employee benefits increased 53% to $4,194,000 in Fiscal 1997
from $2,734,000 in Fiscal 1996, reflecting the Company's expansion effort. The
number of Company employees increased from 57 to 80 full-time employees, or 40%,
from June 30, 1996 to June 30, 1997, exclusive of the 30 full and part-time
personnel employed by Cash Back Mortgage Corporation acquired in April 1997.

       Legal and professional fees increased 82% to $525,000 in Fiscal 1997 from
Fiscal 1996, with most of the increase in the form of consulting fees.
Consultants were paid primarily in connection with assisting the Company locate
additional financing or warehouse lines.

       Other operating expenses increased by 50% to $2,893,000 in Fiscal 1997
from Fiscal 1996. A substantial portion of the expenses in this category
increased as a result of the 40% increase in number of employees between the
comparable periods. However, increases in certain expenses were incurred in
connection with the loan origination expansion effort undertaken in Fiscal 1997
and not directly attributable to just an increase in the number of employees.
The largest of these types of increases was in Advertising & Promotion expense,
which increased $109,000 from Fiscal 1996 to Fiscal 1997.

       Interest expense and amortization of deferred financing costs increased
20% to $1,444,000 in Fiscal 1997 from Fiscal 1996 as the Company had most of the
$9,000,000 in convertible debt raised during the summer of 1996 outstanding for
Fiscal 1997. In addition, costs incurred with raising this debt also began
amortizing in Fiscal 1997 and increased the expense for this category.


FISCAL YEAR ENDED JUNE 30, 1996 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1995

       The Company's net loss was $4,115,000 in Fiscal 1996 as compared to
$4,791,000 in Fiscal 1995, representing an improvement in operating results of
14%. This decrease in net loss reflected the Company's increase in loan
production coupled with maintaining operating costs relatively constant.
Originations were increased approximately 25% while personnel costs increased
only 0.8%. This improvement was not sufficient, however, to offset the costs of
maintaining the Company's loan production and support operations and the costs
of raising capital. During Fiscal 1996 the Company did not make any significant
reductions in its infrastructure, despite having limited capital, in order to
mitigate the negative impact that such a reduction would have had on the
Company's ability to originate loans once its capital situation.


                                       20
<PAGE>   21

       Mortgage interest rates on loans originated by the Company declined
during Fiscal 1996 in part as the Company's product mix was weighted more
towards higher credit (and thus lower interest rate) loans than in Fiscal 1995,
resulting in a reduced average coupon on loans originated during the period.

       Finance income and fees for Fiscal 1996 increased by $73,000 to $640,000
from Fiscal 1995 primarily as a result of an increase in the Company's average
loan portfolio. The increase in the average size of the Company's loan portfolio
balance was a result of the increased loan volume in Fiscal 1996. The average
interest rate yield on mortgage loans originated in Fiscal 1996 declined by
1.45% to 11.53% compared to an average of 12.98% in Fiscal 1995, a 11.2%
decline. This decline was primarily a result of the Company originating higher
credit grade loans in Fiscal 1996 than in Fiscal 1995.

       Gains on sales of mortgage loans increased to $1,578,000 for Fiscal 1996
from $984,000 during Fiscal 1995 due to the increased volume of loan sales and
the higher margins received on sales made after February 1996 to the
Securitizer. Gains in Fiscal 1995 represent sales of loans primarily sold on a
Whole basis. During Fiscal 1996, the Company sold no loans on a Service basis as
compared with $1,616,000 in Fiscal 1995, and sold $32,827,000 on a servicing
released basis in Fiscal 1996 as compared to $26,100,000 in Fiscal 1995. Many of
the loans sold on a servicing released basis in Fiscal 1996 were sold as part of
Interest-Only sales with a margin significantly higher than the margin on the
Whole loan sales in Fiscal 1995.

       Salaries and employee benefits increased 0.8% to $2,734,000 in Fiscal
1996 from $2,712,000 in Fiscal 1995, reflecting the Company's plan to curtail
its expansion efforts and limit compensation increases until access to adequate
capital could be obtained.

       Provision for credit losses was $185,000 in Fiscal 1996 as compared to a
$535,000 provision in Fiscal 1995. The reduction in provision was the result of
an analysis that demonstrated that nearly all of the credit losses experienced
in Fiscal 1996 and Fiscal 1995 related to loans originated prior to October 1994
at which point in time the Company began instituting a more stringent
underwriting guideline. As the number of loans in the pre-October 1994 category
has decreased due to sales and pay-offs, so has the corresponding provision for
this category of loans.

       Other operating expenses increased by $132,000 to $1,980,000 in Fiscal
1996 from $1,828,000 in Fiscal 1995. Of the $158,000 increase, $128,000 is
attributed to an increase in office space rental. Escalations in the rent for
the Company headquarters in Georgia, combined with one-time payments for closing
office space in Tennessee and North Carolina, accounted for the increase. There
were no other significant increases in other operating expenses.





                                       21
<PAGE>   22

LIQUIDITY AND CAPITAL RESOURCES

       By its nature, the Company's business requires continual access to
short-term and long-term sources of debt and equity capital. The Company's
capital requirements arise principally from loan originations and loan
repurchases, payments of operating and interest expenses, capital expenditures,
and start-up expenses for expansion into new geographic markets. Additionally,
even if the Company is generating net income, a portion of its revenues will
consist of gain on sale of loans wherein cash is not received at the time of
sale, but over the life of the mortgage loans. The Company has never generated a
positive operating cash flow, and therefore has required and expects to continue
to require additional financing to fund expansion and to support its
infrastructure until such time as it can increase the volume of loan sales to a
point wherein the cash received from the premium on those sales is greater than
the total expenses of the Company, including debt service and payment of
preferred dividends. During Fiscal 1997, the Company had losses of $3,363,000,
which were funded primarily out of the proceeds of the convertible debt
placement completed in August 1996 and the preferred stock offering completed in
April 1997 and described below. Lack of substantial warehouse lines of credit,
combined with capital restraints have periodically restricted the Company's
ability to increase the volume of mortgage loans it originates, and have
negatively impacted its ability to accumulate such loans until a sale could be
arranged on more favorable terms. This has resulted in the Company selling loans
simply to preserve cash flow as opposed to seeking the best price for its loans.
With the recent addition of substantial warehouse lines of credit, the Company
is currently in an improved position to accumulate loans to obtain more
favorable pricing terms. However, to the extent that the Company is unable to
obtain periodic infusions of capital or maintain substantial warehouse lines,
the Company could be required to sell mortgage loans on less favorable terms
than it might otherwise be available or curtail lending activities. To date, in
addition to the Company's capital raising efforts, the sources of liquidity have
been (1) sales into secondary markets of the loans the Company originates and
purchases, (2) borrowings under a mortgage warehouse line of credit secured by
its loans, (3) finance income earned on Company owned loans and servicing fees
generated on the loan servicing portfolio, (4) borrowings under a repurchase
line of credit (5) other borrowings (discussed below), and (6) the conversion of
the Excess Servicing Asset and Interest-Only Strip into cash over the lives of
the loans in the servicing portfolio, including an advance against that
conversion described more fully below.

         In July 1994, the Company completed the placement of $5,550,000 of 8%
Senior Subordinated Convertible Notes due 2004 (the "8% Notes"). In October
1995, the Company agreed to certain conditions as a prerequisite for obtaining a
waiver for technical covenant violations contained in the indenture relating to
the 8% Notes. When these conditions were not met at December 31, 1995, the
maturity date of 8% Notes was accelerated to March 30, 1996. The Company repaid
$3,250,000 of the 8% Notes in June 1996 ($2,250,000 of which was paid out of the
proceeds of the sale of the 8% Notes described below) and the remaining
$2,300,000 of 8% Notes was exchanged for loans under a secured warehouse lending
facility more fully described below.



                                       22
<PAGE>   23

       In 1995, the Company completed an offering of $3,000,000 of convertible
mortgage participations and warrants to purchase common stock to be used solely
for the purpose of originating and acquiring mortgage loans. The borrowings bore
an interest rate of 10% per annum, payable monthly, secured by underlying
mortgage loans. The proceeds from the sale of any assigned mortgage loans were
used to originate new mortgage loans in which the lenders will have
participations. In October 1995, $2,500,000 of the borrowings were converted by
the lenders of these participations into Preferred Stock and warrants as part of
a placement of $6,400,000 of 9% Convertible Preferred Stock (the 9% Preferred
Stock) and warrants to purchase common stock. Of the remaining $500,000 of
participations, $400,000 of the lenders converted their participations to common
stock and lenders representing $100,000 of participations were repaid during
Fiscal 1997. Of the original holders of the $6,400,000 of 9% Preferred Stock,
one holder converted $100,000 into common stock during Fiscal 1997. Dividends on
the 9% Preferred Stock are cumulative and payable in cash on a quarterly basis.
The dividends for the quarter ending June 30, 1997 were not paid as a result of
capital constraints.

       In January 1996, the Company obtained a $1,050,000 term loan at a 10%
interest rate secured by certain mortgage loans of the Company. The loan was
scheduled to mature in February 1997, and had an outstanding $925,000 principal
balance at June 30, 1996. This loan was repaid in August 1996. In February 1996,
the Company sold $500,000 of convertible mortgage participations on similar
terms to the $3,000,000 of participations sold in June 1995 described above,
which mature in February 1998.

       The Company completed the sale of $9,000,000 of 10% Convertible Secured
Notes (the "10% Notes") in August 1996, resulting in net proceeds to the Company
after expenses of approximately $8,000,000. $3,250,000 of the proceeds were used
to repay the 8% Notes described above. The 10% Notes are partially secured by
essentially all otherwise unpledged assets of the Company and are convertible
into Common Stock. During Fiscal 1997, holders representing $860,000 of the 10%
Notes converted their notes into common stock.

       In November 1996, the Company entered into an agreement with the
Securitizer wherein the Company can receive advances on the Company's portion of
the interest-only strip collected from the borrower over the life of the loan.
This advance is repaid over 36 months and bears an interest rate set at the time
the loans underlying the interest-only strip receivable were sold to the
securitizer. The advance and the interest charge associated with it are deducted
from the monthly collections of interest due to the Company by the Securitizer.
At June 30, 1997, the Company had been advanced $2,101,000 net of repayments
under this agreement.

       In March 1997, the Company obtained a total of $550,000 in warehouse
lines of credit bearing an interest rate of 12% and expiring in one year. These
lines have recently become unnecessary with the addition of the warehouse lines
described below and are in the process of being retired.



                                       23
<PAGE>   24

       In April 1997, the Company placed $1,674,000 or 16,740 shares of a Series
B 11% Redeemable Convertible Preferred Stock (the "11% Preferred Stock),
convertible into common stock, resulting in net proceeds to the Company of
approximately $1,498,000. Purchasers of the 11% Preferred Stock received
warrants to purchase 669,000 shares of common stock at $2.50 per share. Both the
11% Preferred Stock and the warrants associated with them contain anti-dilution
provisions. Dividends are payable quarterly in cash or in preferred stock until
July 1998, when a penalty for paying dividends in stock becomes effective. The
Company paid the June 30, 1997 dividends in preferred stock.

       In June 1997, the Company obtained a revolving warehouse line of credit
for $3,000,000. This line was subsequently increased, and a second line was
obtained in July 1997, bringing the total warehouse line capacity to $13,500,000
by August 1997 for these two lines. The Company is in technical default under
one of the lines and will need to obtain a waiver of default or correct the
default condition to maintain that line.

       In July and August 1997, the Company received a total of $850,000 in a
private placement of convertible debt, intended to be a loan until the Company
can complete a new financing of preferred stock (the loan being referred to as a
"Bridge Loan"). The Bridge Loan is due October 31, 1997. The holders were issued
warrants to purchase 2,875,000 shares of Common Stock at an exercise price of
$.40 per share, subject to certain anti-dilution adjustments.


                                       24
<PAGE>   25
     The Company intends to raise additional capital in the form of preferred
stock to meet its working capital needs and to repay the Bridge Loan. The
Company believes that in order to attract additional investment at this time
that, among other changes, its interest and dividend payment burden must be
reduced. To accomplish this, an offering circular has been sent to the 9%
Preferred Stock holders and the 10% Note holders to convert their securities
into common stock at a limited time reduced conversion rate of $0.65 and $.50
per share, respectively. If a significant number of the holders accept the
offer, then the Company will not have enough authorized shares to fulfill the
offer. To insure enough available authorized shares, the Company has issued a
special proxy statement to its common shareholders requesting approval of a
one-for-five reverse stock split. The conversion offer expires on October 22,
1997, and the special shareholders meeting to vote upon the reverse stock split
is scheduled for October 24, 1997. The Company believes it has sufficient
capital to maintain normal operations through October 1997, but will require
additional financing to repay the Bridge Loan and provide working capital beyond
October 1997. It is the Company's goal, if the conversion offer receives
significant acceptance and the reverse stock split is approved and additional
financing is obtained, to minimize then reverse negative cash flow from the
combination of reduced cash expenditures (including interest and cash dividends
retired on the conversion offer as well as reducing overhead expenses) and
improved cash flow on sales of loans from the change in sales methods discussed
under "Sales of Mortgages". By generating a positive operating cash flow, the
Company would have the ability to make its remaining debt and preferred dividend
payments and avoid or delay the need for further financing in the fiscal year
ending June 30, 1998, excluding warehouse lines of credit needed to accommodate
increased loan volume. However, the potential achievement of positive cash flow
is based upon several significant assumptions, including, among others,
significant acceptance of the conversion offer, a reduction in cash
expenditures, and an increase in loan origination volume, as to which there can
be no assurance.  The Company believes that obtaining additional financing would
be very difficult given the Company's financial condition, and the Company
believes that achieving a positive cash flow without acceptance of the
conversion offer would be extremely difficult. Even if the Company is successful
in obtaining additional financing, there can be no assurance that the Company
would be able to generate a positive cash flow. In the event that the Company is
unable to achieve positive cash flow, obtain additional financing, or make
arrangements to satisfy the Bridge Loan, the Company could be required to scale
back or cease its operations. See "Going Concern" at the end of this section.


FLUCTUATIONS IN INTEREST RATES AND OTHER FACTORS

       Although the Company's customers are generally not interest rate
sensitive in determining to utilize the mortgage loan programs offered by the
Company, the primary assets and liabilities of the Company are interest rate
sensitive. Profitability is directly affected by the level of and fluctuations
in interest rates and is dependent upon the Company's ability to earn a spread
between the earnings on its assets and the costs of its liabilities.
Additionally, the value and potential maturity of the Company's assets and the
cost and duration of its liabilities are affected by changes in interest rates.
While the Company monitors the interest rate environment, there can be no
assurance that the profitability and/or liquidity of the Company would not be
adversely affected during any period of unexpected volatility in the interest
rate environment. A significant reduction in interest rates also could decrease
the size of the loan servicing portfolio by increasing the level of loan
prepayments.


                                       25
<PAGE>   26

       The collateral for the mortgage loans originated and owned by the Company
are secured by residential real estate. An overall decline in the residential
real estate market or the condition of particular properties, together with
other related factors, could adversely affect the values of the properties
securing the Company's mortgage loans. Therefore, in a continuing period of
economic decline, the rates of delinquencies, foreclosures and losses on
mortgage loans could be higher than those heretofore experienced by the Company
and in the mortgage lending industry in general. In addition, adverse economic
conditions (which may or may not affect real property values) may affect the
timely payment by borrowers of scheduled payments of principal and interest on
mortgage loans.

GOING CONCERN

The Company had an accumulated deficit of $16,063,375 at June 30, 1997, and has
incurred losses in every year since 1992. The Company has been unable to
generate a sufficient amount of gain on sale of its mortgage loans to offset its
operating and other expenses, and has been unable to achieve an appropriate
return. The Company also has experienced significant operating cash flow
deficiencies from time to time, including the Fiscal 1997 year.

The Company has approximately $1,260,000 in debt that will be due within the
next twelve months. Subsequent to June 30, 1997, the Company was not in
compliance with a minimum net worth covenant on one of its warehouse lines of
credit and had not obtained a waiver of this convenient. As such, the warehouse
lender could restrict or eliminate use of the line of credit. At June 30, 1997,
the Company's net worth was $376,838. The Company received notification from
Nasdaq that the Company has failed to maintain a $1.00 minimum bid price on its
common stock and appears to have not maintained a minimum net worth of
$2,000,000, both requirements for continued listing on the Nasdaq SmallCap
Market. Nasdaq has given the Company until October 22, 1997 to respond with a
plan to meet the requirements. If Nasdaq does not accept the Company's plan, a
formal notice of deficiency will be issued specifying a delisting date for the
Company's common stock. As such, there can be no assurance that the Company will
continue to be listed on the Nasdaq SmallCap Market. Also, there can be no
assurance that the Company will be able to obtain sufficient additional capital
or, even if such capital is obtained, that the Company could generate positive
operating gains or positive cash flow. Failure of the Company to improve its
operating cash flow and obtain additional financing as needed would result in
the curtailment or cessation of the Company's lending activities.





                                       26
<PAGE>   27

Management's Plans

The Company is currently in the process of extending a conversion offer to the
holders of the 10% convertible secured notes and the Series "A" 9% convertible
preferred stock in order to reduce interest expense and cash dividends as part
of a plan to achieve positive operating cash flow and continue as a going
concern. The conversion will also make the Company's balance sheet more
attractive for the additional investment necessary for the Company to continue
as a going concern. Since the Company does not have sufficient authorized shares
to permit it to issue common stock pursuant to the conversion offer, the Company
has called a special meeting of the common shareholders to approve a
one-for-five reverse stock split. Besides creating enough authorized shares to
issue for the conversion offer by reducing the number of shares outstanding, the
Company believes the reverse split could cause the bid price of the Company's 
common stock to exceed $1.00. The Company also believes substantial acceptance 
of the conversion offer could give the Company a net worth in excess of 
$2,000,000. If the common stock price should remain over $1.00 and the net 
worth over $2,000,000, the Company believes it will meet the requirements for 
continued listing on the Nasdaq SmallCap Market.

If the reverse stock split is approved and the conversion offer is accepted by a
significant number of the respective security holders, the Company plans to
offer a private placement of up to $4,000,000 of Series "B" 11% convertible
preferred stock. The Company intends to repay the Bridge Loan with the proceeds
of this offering. The offering, if successful, would provide the Company with
additional capital and improve the net worth of the Company. The Company
estimates that the combination of a successful offering, maintaining the current
level of warehouse lines of credit, and generating a positive cash flow from
operations would allow lending operations to continue throughout the year ending
June 30, 1998. However, there can be no assurance that any of the actions
mentioned above will occur, or even if they do that the condition of the Company
will substantially improve.

ITEM 7. FINANCIAL STATEMENTS.

         The following consolidated financial statements of Credit Depot
Corporation are included in Item 8: (See page F-1)

       Consolidated balance sheets - June 30, 1997 and 1996.
       Consolidated statements of operations - Year ended June 30, 1997, 1996
       and 1995. 
       Consolidated statements of stockholders' equity - Year ended
       June 30, 1997, 1996 and 1995. 
       Consolidated statements of cash flows - Year ended June 30, 1997, 1996 
       and 1995. 
       Notes to consolidated financial statements - June 30, 1997.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURES.

       None.


                                       27
<PAGE>   28

                                    PART III

ITEM 9.       DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
              COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.


DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

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

<TABLE>
<CAPTION>
Name                                 Age      Position
----                                 ---      --------
<S>                                  <C>      <C>    
Craig J. Brunet                      49       Chairman of the Board

Gerald F. Sullivan                   56       President, Chief Executive Officer and Director

Ralph. J. DeBee, Jr.                 39       Vice President and Chief Operating Officer

Charles D. Farrahar                  36       Vice President and Chief Financial Officer

John C. Thomas                       44       Director and Treasurer

Samuel R. Dunlap, Jr.                48       Director

Joel C. Williams, Jr.                54       Director

Samuel S. Hemingway                  45       Director

Carlos Munoz                         60       Director
</TABLE>


        CRAIG J.("C.J.") BRUNET was appointed Chairman of the Board in April
1996 and has been a director of the Company since January 1993. In addition, Mr.
Brunet is a member of the Board of Intelnet International, a privately held
management and integration company and President of the Lewisberg Group, a
financial and management consulting firm. Prior to becoming Chairman of Credit
Depot, Mr. Brunet served for three years as CEO and President of First Pacific
Networks; Senior Vice President of Entergy Corporation, a multi-state regional
electric utility holding company; Director of Strategic Planning for AT&T as
well as responsibilities in finance, marketing and personnel over his 15 year
career with AT&T; and Chairman of the Electric Power Research Institute
Strategic Planning Committee from 1989 to 1991. Mr. Brunet is a Vietnam Veteran,
flying 225 combat missions for the U.S. Army as an air observer and twice
receiving the Purple Heart. He holds a bachelor of science degree in marketing
from the University of Southwestern Louisiana and has received executive
education from the Harvard-Kennedy School of Government, Wharton, M.I.T.,
Stanford, and Aspen Institute.


                                       28
<PAGE>   29

       GERALD F. SULLIVAN has been the Chief Operating Officer of the Company
since May 1991 and a Director, President and Chief Executive Officer since July
1991. From October 1989 to June 1991 he served as President and a Director of
Bank Atlanta. From April 1988 through June 1989, he served as President and
Director of the Habersham Federal Savings Bank and the Habersham Group, Inc., a
bank and investment company located in Atlanta, Georgia. From January 1986 to
December 1986, he served as President and a Director of the Graphics Research
Corporation, a computer graphics software development company located in
Atlanta, Georgia. From June 1984 to January 1986, he served as President and a
Director of The System Works, Inc., a software firm in Atlanta, Georgia engaged
in the sale of maintenance planning and control software systems. From June 1980
to June 1984, Mr. Sullivan served as Chief Operating Officer and Executive Vice
President for Glasrock Products, Inc., a publicly-held company engaged in the
medical home care field.

       RALPH J. DEBEE, JR. joined the Company in August 1996 as Chief Loan
Officer and was promoted to Chief Operating Officer in May 1997. From 1988 to
1996, Mr. DeBee was the Senior Vice-President of Equicredit Corporation, a large
sub-prime mortgage lender based in Jacksonville, Florida. Prior to joining
Equicredit, from 1984 to 1988, Mr. DeBee ran his own mortgage company,
originating and brokering loans to non-conventional lenders. From 1979 to 1984,
he managed the Jacksonville office of Great Western Financial Service.

       CHARLES D. FARRAHAR, a certified public accountant, has been Chief
Financial Officer and Vice-President since April 1996, and was the Controller
since joining the Company in February 1994. Mr. Farrahar was the Chief
Accountant of Law Engineering, a national civil engineering firm, from April
1987 to February 1994. Prior to 1987, Mr. Farrahar held various managerial
accounting positions in both the public and private accounting sectors.

       JOHN C. THOMAS, JR. has been Treasurer and a Vice President of the
Company since April 1996, and was the Chief Financial Officer and a Vice
President of the Company from February 1995 to April 1996 and from August 1990
to March 1993. Mr. Thomas was a Director to Tapistron International, Inc., a
publicly held manufacturer and textile technology company and was the Chief
Financial Officer of Tapistron from August 1991 until rejoining the Company in
February 1995. Mr. Thomas was a Director of Golf Training Systems, a publicly
held distributor of golf teaching aids, from August 1994 to January 1996. He has
also been the Chief Financial Officer of EntreMed, Inc., a publicly-held
pharmaceutical research and development company, since August 1991, and Pretty
Good Privacy, Inc., a privately held encryption software company, since June
1996. Prior to joining Credit Depot Corporation, Mr. Thomas has held the chief
financial officer's position for various start up companies, the following which
have become publicly-held entities, including CytRx Corporation, a
pharmaceutical research company; Biopool International, Inc. (formerly
CytRx-Biopool, Ltd.), a company engaged in the development and sale of
diagnostic test kits; and Medicis Pharmaceutical Company, a dermatologic
pharmaceutical company.


                                       29
<PAGE>   30

         SAMUEL R. DUNLAP, JR. has been a Director of the Company since December
1986 and served as a Vice President from October 1990 through June 1993 at which
time he became an Executive Advisor. Mr. Dunlap is (i) a Director to First
Pacific Networks, Inc., a publicly-held telecommunications company, (ii) an
Executive Advisor and a Director of EntreMed, Inc., a privately held
pharmaceutical research and development company, (iii) Chairman of Dunlap &
Partners Ltd., a financing consulting firm in Atlanta, Georgia, and (iv) is an
Executive Advisor and Director of MEDigital, a privately held medical technology
company. From June 1993 to November 1995, he served as an advisor to Golf
Training Systems, a publicly-held distributor of golf teaching aids, and was a
director of this company from August 1994 to December 1995. From August 1991
until February 1994, he served as Vice President and a Director of Tapistron
International, Inc., a publicly-held manufacturing and textile technology
company. From April 1986 until December 1988, he served as Executive Vice
President of CytRx Corporation, a publicly-held pharmaceutical company, and as a
Director of CytRx from August 1986 until November 1988. From January 1987 until
November 1988, Mr. Dunlap was Chairman of the Board of Directors of Biopool
International, Inc. (formerly CytRx Biopool Ltd.), a publicly-held company
engaged in the sale of diagnostic test kits. From January 1985 to October 1987,
Mr. Dunlap was President and a Director of Development Southeast, Inc., which is
a management consulting and real estate development firm. Mr. Dunlap has spent
more than 10 years in the commercial banking field and was Executive Vice
President of Elan Pharmaceutical Research Corp., a publicly-held company, from
August 1982 to December 1983 and President and a director of such entity from
January 1984 to January 1985.

         JOEL C. WILLIAMS, JR. has been a Director of the Company since August
1990. Since 1978, Mr. Williams has been Vice President-Corporate Affairs of
Savannah Foods & Industries, Inc., a publicly-held conglomerate. He served as
Assistant to the President of such company from July 1971 until October 1978.
From January 1970 until March 1971, Mr. Williams served as Legal Counsel and
Legislative Aide to the late Senator Richard B. Russell of Georgia.

         SAMUEL SCOTT HEMINGWAY has been a Director of the Company since October
1990. Mr. Hemingway is, and has been since January 1995, Managing Director of
Credit Card Network, an Internet based provider of financial services and
co-owner of Ocean PC, a manufacturer of personal computers for marine
applications. From April 1992 to December 1994, he served as the President and
Chief Executive Officer of Salem Mortgage Services, Inc., a Georgia corporation,
involved in the purchase and management of banking assets. From 1982 until April
1992, Mr. Hemingway was Vice President-Corporate Division at Barclays Bank PLC.
From 1978 until 1982, Mr. Hemingway was employed by Manufacturers Hanover Trust
Company, where he served as Assistant Secretary, Representative and Assistant
Vice President of the National Division, and Assistant to the Office of the
Chairman. Mr. Hemingway served as a director of CytRx from August 1986 through
1992 and serves as a trustee to Trinity-Pawling School in New York.


                                       30
<PAGE>   31


       CARLOS MUNOZ has been a Director of the Company since October 1996. Mr.
Munoz is, and has been, since April 1995 the Executive Vice President and Chief
Credit Officer of Dime Bancorp and Dime Savings Bank of New York, where he also
is chairman of the Bank's Risk Management Committee. From June 1982 to March
1995, Mr. Munoz served as Senior Vice President and a member of the Credit
Policy Committee of Citibank, N.A., responsible for credit oversight of part or
all of Citibank's worldwide consumer banking activities as well as the private
banking and global finance areas in Latin America. Prior to June 1982, Mr. Munoz
held various positions with Citibank since joining the bank in 1959. Mr. Munoz
is a graduate of Columbia College and is President of the Columbia College
Alumni Association and a member of the College Board of Visitors. He also holds
a Master's Degree in Economics from Columbia University. He is a member of the
Advisory Council of the Credit Research Center of Purdue University, a Trustee
of the Episcopal Diocese of New York and Vice President of the Episcopal Mission
Society

       The information relating to compliance with Section 16(a) of the Exchange
Act will be set forth in the Company's proxy statement to be filed with the
Securities and Exchange Commission on or before October 28, 1997, and is
incorporated herein by reference.


ITEM 10. EXECUTIVE COMPENSATION

       The information required under this item will be set forth in the
Company's proxy statement to be filed with the Securities and Exchange
Commission on or before October 28, 1997 and is incorporated herein by
reference.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

       The information required under this item will be set forth in the
Company's proxy statement to be filed with the Securities and Exchange
Commission on or before October 28, 1997 and is incorporated herein by
reference.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

       The information required under this item will be set forth in the
Company's proxy statement to be filed with the Securities and Exchange
Commission on or before October 28, 1997 and is incorporated herein by
reference.



                                       31

<PAGE>   32

                                   PART IV

<TABLE>
<S>      <C>
ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  1.       Financial Statements. An index to the Consolidated Financial        
              Statements appears on page F-1.                                     
                                                                                  
     2.       Schedules. All financial statement schedules are omitted            
              because they are not applicable, not required under the             
              instructions or all the information is set forth in the             
              financial statements or notes thereto.                              
     3. Exhibits.                                                                                             
     3.1        Certificate of Incorporation of the Registrant, as amended (1)                                
     3.2        Certificate of Merger of Equithrift, Inc., a Georgia corporation, with and into               
                the Registrant (1)                                                                            
     3.3        By-Laws of the Registrant (1)                                                                 
     3.4        Certificate of Designation of 9% Cumulative Convertible Preferred Stock (10)                  
     3.5        Certificate of Amendment of the Certificate of Incorporation (11)                             
     3.6        Certificate of Designation for Series B Preferred Stock (12)                                  
     4.1        Indenture dated as of July 27, 1994 between the Company and SouthTrust                        
                Bank of Alabama, N.A., as Trustee (2)                                                         
     4.2        Form of Purchase Agreement between the Company and the Purchasers dated                       
                as of July 27, 1994 (2)                                                                       
     4.3        First Supplement to Indenture dated February 1, 1995 (9)                                      
     4.4        Second Supplement to Indenture dated March 31, 1995 (9)                                       
     4.5        Registration Rights Agreement between the Company and The Robinson-                           
                Humphrey Company, Inc., dated as of July 27, 1994 (2)                                         
     4.6        Redeemable Warrant to Purchase Common Stock issued to Robinson-                               
                Humphrey dated January 25, 1995 (9)                                                           
     4.7        Form of Convertible Mortgage Participation Purchase Agreement (9)                             
     4.8        Form of Warrant issued to purchasers of Convertible Mortgage Participations                   
                (9)                                                                                           
     4.9        Specimen Common Stock certificate (1)                                                         
     4.10       Form of Warrant issued to Placement Agent in connection with Preferred Stock                  
                Offering (10)                                                                                 
     4.11       Loan Agreement for 10% Convertible Secured Notes due 2001 (10)                                
     4.12       Form of Warrant issued to Placement Agent in connection with 10%                              
                Convertible Notes Offering (10)                                                               
     4.13       Form of Warrant issued to purchasers of  Series B Preferred Stock (12)                        
     4.14       Form of Warrant issued to Placement Agent in connection with Series B                         
                Preferred Stock Offering (12)                                                                 
     4.15       Purchase Agreement and accompanying exhibits for convertible loan due                         
                October 31, 1997                                                                              
     4.16       Form of Warrant issued to purchasers of convertible loan due October 31, 1997                 
     10.1       1990 Stock Option Plan (1)                                                                    
</TABLE>


                                       32
<PAGE>   33

<TABLE>
<CAPTION>
<S>        <C>    
         10.4       Employment Agreement with Gerald F. Sullivan (3)                                           
         10.5       Specimen Loan Documents (1)                                                                
         10.6       Agreement by Guarantors (1)                                                                
         10.7       Loan and Credit Agreement dated June 16, 1993 between the Company and                      
                    TransAmerica Consumer Receivable Funding, Inc. (4)                                         
         10.8       Lease for Registrant's facility (4)                                                        
         10.9       Lease of Registrant's additional facility space. (9)                                       
         10.10      1993 Stock Option Plan (5)                                                                 
         10.11      1993 Stock Option Plan, as amended (6)                                                     
         10.12      1993 Stock Option Plan, as amended (7)                                                     
         10.13      Sales Agreement with Greenwich Capital Financial Products dated October 4,                 
                    1994 (8)                                                                                   
         10.14      Repurchase Agreement between Greenwich Capital Financial Products and                      
                    Registrant dated February 1, 1995. (9)                                                     
         10.15      Consulting Agreement with Thieme Consulting (9)                                            
         10.16      Purchase and Sale Agreement with Access Financial Lending Corp. (10)                       
         10.17      Repricing agreement with Heiko Thieme on certain securities (10)                           
         10.18      Warehouse Lending Agreement with NewSouth Equities, et.al. (10)                            
         10.19      Addendum to Warehouse Lending Agreement with NewSouth Equities, et.al.                     
                    (10)                                                                                       
         10.20      Promissory Note to NewSouth Equities, et. al. (10)                                         
         10.21      Forward Commitment and Offset Agreement (11)                                               
         10.22      Acquisition Agreement for Cash Back Mortgage Corporation                                   
         21.1       List of Subsidiaries                                                                       
         23.1       Consent of Independent Auditors                                                            
         27.0       Financial Data Schedule (for SEC use only).                                                
</TABLE>

(b)      Reports on Form 8-K.

         The Company filed one report on Form 8-K during the three month period
         ended June 30, 1997, on May 2, 1997. This report described 1) the
         placement of $1,674,000 of Series B Preferred Stock and 2) the
         acquisition of Cash Back Mortgage Corporation. 

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

(1)      These exhibits were filed as exhibits to the Company's Registration
         Statement on Form S-1 (File No. 33-37416) and are incorporated herein.
(2)      These exhibits were filed as exhibits to the Company's report on Form
         8-K, filed with respect to a reported event dated July 27, 1994 and are
         incorporated herein.
(3)      This report was filed as an exhibit to the Company's report on Form
         10-Q for the quarterly period ended March 31, 1992 and is incorporated
         herein.
(4)      These exhibits were filed as exhibits to the Company's report on Form
         10-KSB for the fiscal year ended June 30, 1993 and are incorporated
         herein.
(5)      This exhibit was filed as an exhibit to the Company's proxy statement
         dated February 22, 1993, filed on February 23, 1993, and is
         incorporated herein by reference.
(6)      This exhibit was filed as an exhibit to the Company's proxy statement
         dated December 7,


                                       33
<PAGE>   34

         1993 filed and is incorporated herein by reference.
(7)      This exhibit was filed as an exhibit to the Company's proxy statement
         dated March 21, 1995 and is incorporated herein by reference.
(8)      This exhibit was filed as an exhibit to the Company's report on Form
         8-K, filed with respect to a reported event dated November 18, 1994 and
         is incorporated herein.
(9)      This agreement was filed as an exhibit to the Company's report on Form
         10-KSB for the fiscal year ended June 30, 1995, and is incorporated
         herein by reference.
(10)     This exhibit was filed as an exhibit to the Company's report on Form
         10-KSB for the fiscal year ended June 30, 1996, and is incorporated
         herein by reference.
(11)     This exhibit was filed as an exhibit to the Company's report on Form
         10-Q for the quarterly period ended December 31, 1996 and is
         incorporated herein by reference.
(12)     This exhibit was filed as an exhibit to the Company's report on Form
         10-Q for the quarterly period ended March 31, 1997 and is incorporated
         herein by reference.



                                       34
<PAGE>   35


                                   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, this 10th day of October, 1997.

                                     CREDIT DEPOT CORPORATION
                                     
                                     By: /s/ Gerald F. Sullivan
                                         -------------------------------
                                           Gerald F. Sullivan, President

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


<TABLE>
<CAPTION>

       Signature                                Title                                         Date
       ---------                                -----                                         ----
<S>                                 <C>                                                 <C>    

/s/ Gerald F. Sullivan              President, Chief Executive                          October 10, 1997
--------------------------          Officer and Director  
Gerald F. Sullivan                                                
                            
                            
/s/ Craig J. Brunet                 Chairman of the Board                               October 10, 1997
-------------------------- 
Craig J. Brunet


/s/ Charles D. Farrahar             Chief Financial Officer                             October 10, 1997
 -------------------------          and Vice President
Charles D. Farrahar                                           

/s/ John C. Thomas, Jr.             Director and Treasurer                              October 10, 1997
-------------------------- 
 John C.Thomas

/s/ Samuel R. Dunlap, Jr.           Director                                            October 10, 1997
-------------------------- 
Samuel R. Dunlap, Jr.


/s/ Joel C. Williams, Jr.           Director                                            October 10, 1997
-------------------------- 
Joel C. Williams, Jr.


/s/ Samuel S. Hemingway             Director                                            October 10, 1997
-------------------------- 
Samuel S. Hemingway

/s/ Carlos Munoz                    Director                                            October 10, 1997
-------------------------- 
Carlos Munoz
</TABLE>



                                      35
<PAGE>   36
 
                            CREDIT DEPOT CORPORATION
 
                          AUDITED FINANCIAL STATEMENTS
                    YEARS ENDED JUNE 30, 1997, 1996 AND 1995
 
                                    CONTENTS
 
<TABLE>
<S>                                                           <C>
Report of Independent Auditors..............................   F-2
Consolidated Balance Sheets.................................   F-3
Consolidated Statements of Operations.......................   F-4
Consolidated Statements of Stockholders' Equity.............   F-5
Consolidated Statements of Cash Flows.......................   F-6
Notes to Consolidated Financial Statements..................   F-7
</TABLE>
 
                                       F-1
<PAGE>   37
 
                         REPORT OF INDEPENDENT AUDITORS
 
The Board of Directors and Stockholders
Credit Depot Corporation
 
     We have audited the accompanying consolidated balance sheets of Credit
Depot Corporation and subsidiaries (the "Company") as of June 30, 1997 and 1996
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended June 30, 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 consolidated financial position of Credit Depot
Corporation and subsidiaries at June 30, 1997 and 1996 and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended June 30, 1996, in conformity with generally accepted accounting
principles.
 
     The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As more fully described in Note 12,
the Company has incurred significant recurring operating losses and significant
operating cash flow deficiencies, has significant amounts of debt maturing
within the next fiscal year, and has a significant accumulated deficit. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are described in
Note 12. The consolidated financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
outcome of this uncertainty.
 
August 29, 1997
 


                                                  /s/ Ernst & Young, LLP






                                     F-2

<PAGE>   38
 
                            CREDIT DEPOT CORPORATION
 
                          CONSOLIDATED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                                        JUNE 30,
                                                              ----------------------------
                                                                  1997            1996
                                                              ------------    ------------
<S>                                                           <C>             <C>
                                          ASSETS
Loans receivable (Notes 2 and 4):
  Consumer, collateralized by real estate...................  $  5,517,002    $  6,958,903
  Allowance for credit losses...............................      (260,484)       (250,260)
                                                              ------------    ------------
Net loans receivable........................................     5,256,518       6,708,640
Cash........................................................     1,332,934       1,681,433
Cash subject to withdrawal restrictions (Note 7)............       203,318          25,887
Property and equipment (Note 2).............................       524,695         493,560
Real estate held for sale...................................        89,021          42,397
Other assets:
  Receivable due from related parties (net of a reserve of
     $200,000 and $-- for 1997 and 1996, respectively)......        17,398         222,209
  Prepaid expenses and other assets.........................       269,750         345,064
  Servicing asset (Note 5)..................................        77,007         193,038
  Interest-only strips receivable (Note 5)..................     7,268,930       1,317,075
  Accrued interest receivable...............................        35,503         113,577
  Deferred financing costs..................................     1,338,822         957,158
  Goodwill..................................................       910,825              --
                                                              ------------    ------------
          Total assets......................................  $ 17,324,721    $ 12,100,041
                                                              ============    ============
 
                           LIABILITIES AND STOCKHOLDERS' EQUITY
Convertible notes (Note 7)..................................  $ 10,440,000    $  8,500,000
Warehouse line of credit (Note 7)...........................     3,356,386              --
Advance on interest-only strips receivable (Note 7).........     2,100,651              --
Other borrowings (Note 7)...................................       500,000       1,925,000
Accounts payable............................................       291,235          54,393
Accrued liabilities.........................................        85,340         329,322
Dividends payable...........................................       174,271         144,000
                                                              ------------    ------------
Total liabilities...........................................    16,947,883      10,952,715
Commitments (Note 9)
Stockholders' equity (Notes 3 and 11):
  Series "A" Preferred stock, $.001 par value; 2,000,000
     shares authorized, 315,000 and 320,000 shares issued at
     June 30, 1997 and 1996.................................           315             320
  Series "B" Preferred Stock, $.001 par value; 60,000 shares
     authorized, 16,740 shares issued at June 30, 1997......            17              --
  Common stock, $.001 par value; 15,000,000 shares
     authorized, 4,072,761 and 3,378,761 shares issued and
     outstanding at June 30, 1997 and 1996..................         4,073           3,379
  Additional paid-in capital................................    16,435,808      13,242,231
  Accumulated deficit.......................................   (16,063,375)    (12,098,604)
                                                              ------------    ------------
          Total stockholders' equity........................       376,838       1,147,326
                                                              ------------    ------------
          Total liabilities and stockholders' equity........  $ 17,324,721    $ 12,100,041
                                                              ============    ============
</TABLE>
 
                            See accompanying notes.
 
                                       F-3
<PAGE>   39
 
                            CREDIT DEPOT CORPORATION
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                                 YEAR ENDED JUNE 30,
                                                      -----------------------------------------
                                                         1997           1996           1995
                                                      -----------    -----------    -----------
<S>                                                   <C>            <C>            <C>
Revenues:
  Finance income and fees earned....................  $   756,847    $   640,390    $   566,648
  Gain on sale of receivables.......................    5,141,695      1,578,088        898,546
  Other.............................................       19,918         60,421        113,148
                                                      -----------    -----------    -----------
                                                        5,918,460      2,278,899      1,578,342
Expenses:
  Salaries and employee benefits....................    4,194,149      2,733,814      2,711,812
  Legal and professional fees.......................      525,333        288,012        347,041
  Other operating expenses..........................    2,893,121      1,980,443      1,828,387
  Provision for credit losses (Note 4)..............      225,231        185,000        534,899
  Interest expense and amortization of financing
     costs..........................................    1,443,625      1,206,450        947,141
                                                      -----------    -----------    -----------
                                                        9,281,459      6,393,719      6,369,280
                                                      -----------    -----------    -----------
Loss before provision for income taxes..............   (3,362,999)    (4,114,820)    (4,790,938)
Provision for income taxes (Note 8).................           --             --             --
Net loss............................................  $(3,362,999)   $(4,114,820)   $(4,790,938)
                                                      -----------    -----------    -----------
Preferred dividends.................................      601,772        415,677             --
                                                      -----------    -----------    -----------
Net loss attributable to common shareholders........  $(3,964,771)   $(4,530,497)   $(4,790,938)
                                                      ===========    ===========    ===========
Net loss per share of common stock (Note 2).........  $     (1.07)   $     (1.34)   $     (1.42)
                                                      ===========    ===========    ===========
Weighted average shares outstanding.................    3,701,574      3,378,761      3,380,386
                                                      ===========    ===========    ===========
</TABLE>
 
                            See accompanying notes.
 
                                       F-4
<PAGE>   40
 
                            CREDIT DEPOT CORPORATION
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
                                      PREFERRED STOCK
                             ----------------------------------
                                SERIES "A"        SERIES "B"         COMMON STOCK      ADDITIONAL                       TOTAL
                             ----------------   ---------------   ------------------     PAID-IN     ACCUMULATED    STOCKHOLDERS'
                             SHARES    AMOUNT   SHARES   AMOUNT    SHARES     AMOUNT     CAPITAL       DEFICIT         EQUITY
                             -------   ------   ------   ------   ---------   ------   -----------   ------------   -------------
<S>                          <C>       <C>      <C>      <C>      <C>         <C>      <C>           <C>            <C>
Balance at July 1, 1994....       --    $ --       --     $--     3,378,761   $3,379   $ 7,788,382   $(2,777,169)    $ 5,014,592
  Net loss.................       --      --       --      --            --      --             --    (4,790,938)     (4,790,938)
                             -------    ----    ------    ---     ---------   ------   -----------   ------------    -----------
Balance at June 30, 1995...       --      --       --      --     3,378,761    3,379     7,788,382    (7,568,107)        223,654
  Issuance of preferred
    stock..................  320,000     320       --      --            --      --      5,453,849            --       5,454,169
  Dividends declared on
    preferred stock........       --      --       --      --            --      --             --      (415,677)       (415,677)
  Net loss.................       --      --       --      --            --      --             --    (4,114,820)     (4,114,820)
                             -------    ----    ------    ---     ---------   ------   -----------   ------------    -----------
Balance at June 30, 1996...  320,000     320       --      --     3,378,761    3,379    13,242,231   (12,098,604)      1,147,326
  Issuance of preferred                        
    stock..................       --      --    16,740     17            --      --      1,412,266            --       1,412,283
  Dividends declared on
    preferred stock........       --      --       --      --            --      --             --      (601,772)       (601,772)
  Conversion of preferred
    stock..................   (5,000)     (5)      --      --        40,000       40           (35)           --              --
  Conversion of convertible
    loan participation.....       --      --       --      --       160,000      160       399,840            --         400,000
  Conversion of convertible
    debt...................       --      --       --      --       344,000      344       838,656            --         839,000
  Issuance of common
    stock..................       --      --       --      --       150,000      150       542,850            --         543,000
  Net loss.................       --      --       --      --            --      --             --    (3,362,999)     (3,362,999)
                             -------    ----    ------    ---     ---------   ------   -----------   ------------    -----------
Balance at June 30, 1997...  315,000    $315    16,740    $17     4,072,761   $4,073   $16,435,808   $(16,063,375)   $   376,838
                             =======    ====    ======    ===     =========   ======   ===========   ============    ===========
</TABLE>
 
                            See accompanying notes.
 
                                       F-5
<PAGE>   41
 
                            CREDIT DEPOT CORPORATION
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                               YEAR ENDED JUNE 30,
                                                   --------------------------------------------
                                                       1997            1996            1995
                                                   ------------    ------------    ------------
<S>                                                <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.........................................  $ (3,362,999)   $ (4,114,820)   $ (4,790,938)
Adjustments to reconcile net loss to cash used in
  operating activities:
  Provision for credit losses....................       225,231         185,000         534,899
  Depreciation and amortization..................       393,983         672,673         401,184
  Changes in operating assets and liabilities:
     Cash subject to withdrawal restrictions.....      (177,431)        (25,887)             --
     Due from related parties....................       204,811         (22,515)       (171,846)
     Prepaid expenses and other..................        95,148          12,558         353,429
     Deferred financing costs....................      (600,964)        191,004        (759,050)
     Loans originated............................   (79,322,866)    (37,035,070)    (29,541,542)
     Loans repurchased...........................    (3,115,846)     (1,061,976)     (1,620,140)
     Deferred fee income.........................            --          (8,672)         (9,716)
     Servicing asset.............................       116,031         218,864         618,308
     Interest-only strips receivable.............    (5,951,855)     (1,317,075)             --
     Proceeds from loans sold -- servicing
       retained..................................            --              --       1,616,359
     Proceeds from loans sold -- servicing
       released..................................    82,263,716      32,827,220      26,064,652
     Principal collections on loans not sold.....     1,401,890       1,801,102       2,483,118
     Accounts payable and accrued liabilities....      (530,725)        (25,571)         11,992
                                                   ------------    ------------    ------------
Net cash used in operating activities............    (8,361,876)     (7,703,165)     (4,809,291)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment...............      (177,538)        (94,933)       (220,294)
Disposal of property and equipment...............            --          37,599              --
Purchase of assets and liabilities, net of cash
  received.......................................       (25,905)             --              --
                                                   ------------    ------------    ------------
Net cash used in investing activities............      (203,443)        (57,334)       (220,294)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from preferred stock issuance.......     1,412,283       2,954,169              --
Dividends on preferred stock.....................      (427,500)       (415,677)             --
Proceeds from warehouse line of credit...........     3,356,386              --      25,511,084
Payments on warehouse line of credit.............            --              --     (26,632,640)
Proceeds from issuance of convertible notes......     2,800,000       7,570,000       5,550,000
Payment on issuance of convertible notes.........            --      (5,550,000)             --
Proceeds from other borrowings...................     2,100,651       3,250,000       1,300,000
Payment on other borrowings......................    (1,025,000)       (125,000)             --
                                                   ------------    ------------    ------------
Net cash provided by financing activities........     8,216,820       7,683,492       5,728,444
                                                   ------------    ------------    ------------
Net (decrease) increase in cash..................      (348,499)        (77,007)        698,859
Cash at beginning of period......................     1,681,433       1,758,440       1,059,581
                                                   ------------    ------------    ------------
Cash at end of period............................  $  1,332,934    $  1,681,433    $  1,758,440
                                                   ============    ============    ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for interest.........  $  1,194,232    $    654,877    $    680,556
                                                   ============    ============    ============
Conversion of loans receivable to real estate
  held for sale..................................  $    645,202    $    491,667    $    969,489
                                                   ============    ============    ============
</TABLE>
 
                            See accompanying notes.
 
                                       F-6
<PAGE>   42
 
                            CREDIT DEPOT CORPORATION
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 1997
 
1.  BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
 
     Credit Depot Corporation ("CDC" or the "Company") was organized in August
1990 under the name of NBL Corporation. Concurrent with its formation, NBL was
merged with the business of Equithrift, Inc. (the "Predecessor Company") and its
name changed to Credit Depot Corporation. CDC expanded operations in the fiscal
year ended June 30, 1994 ("Fiscal 1994") into South Carolina, North Carolina,
Ohio, Florida and Tennessee through the creation of wholly owned subsidiaries.
Prior to Fiscal 1994, the Company operated solely in Georgia. During the year
ended June 30, 1996, CDC expanded operations into Missouri and Kentucky. During
the year ended June 30, 1997, the Company expanded operations into Illinois,
Michigan, Mississippi and Indiana and discontinued branch operations in Missouri
and Kentucky. Reference herein to the "Company" includes CDC and its wholly
owned subsidiaries.
 
     CDC is a mortgage finance company which provides residential first mortgage
loans through its branch offices. The Company's borrowers are generally unable
or unwilling to obtain financing from conventional lending sources due to an
established pattern of credit weakness, unverifiable income, insufficient credit
history, or a previous bankruptcy or insolvency. The Company is subject to
competition from other financial institutions.
 
     On April 1, 1997, the Company acquired Cash Back Mortgage Corporation
("Cash Back") through a newly-organized wholly owned subsidiary of the Company,
Cash Back Acquisition Corporation. Cash Back is a mortgage finance company which
provides residential first mortgage loans generally to individuals in Ohio. The
Company acquired substantially all of the assets and liabilities of Cash Back in
exchange for 150,000 shares of common stock in the Company at the date of
acquisition. An additional 600,000 shares of common stock in the Company are
currently held in escrow for future distribution in accordance with the purchase
agreement to the shareholders of Cash Back. Additional consideration is based
solely on the achievement of various performance targets by Cash Back. The
acquisition of Cash Back was accounted for as a purchase. The results of three
months of operations of Cash Back are included in the consolidated financial
statements. In conjunction with this transaction, goodwill of $910,825 was
recorded. This amount is being amortized on a straight-line basis over 15 years.
Goodwill is measured periodically for impairment and any impairment is
recognized as a charge to current period earnings.
 
     During fiscal year 1997, the Company sold the majority of its loan
production to a major loan securitizer for inclusion in asset securitizations.
 
     The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles. All significant intercompany balances
and transactions have been eliminated in consolidation. In preparing the
consolidated financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of the
date of the balance sheet and revenues and expenses for the period. Material
estimates that are particularly susceptible to significant change in the
near-term relate to the determination of the allowance for credit losses and
valuation of the interest-only strips receivable. In connection with the
determination of the allowance for credit losses, management considers
independent appraisals previously obtained for all properties while prepayment
experience, both Company and industry, is used as the basis for estimating
future prepayment rates in valuing the interest-only strips receivable.
Additionally, the ultimate collectibility of the Company's loans receivable are
susceptible to changes in market conditions.
 
                                       F-7
<PAGE>   43
 
                            CREDIT DEPOT CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
REVENUE RECOGNITION
 
     Interest income on loans receivable is recognized over the term of the
loans using methods which generally result in level rates of return on principal
amounts outstanding. Loans receivable are generally placed on nonaccrual status
when full payment of principal or interest is in doubt.
 
     Gain on sale of receivables principally represents the present value of the
differential between the interest rates charged by the Company and the interest
rates passed on to the purchaser of the receivables, after considering the
effects of estimated prepayments and in the case of loans sold with servicing
retained, contractually specified servicing fees. Gains on the sale of loans
receivable are recorded on the settlement date generally using the specific
identification method. Gains on the sale of a portion of a loan are based on the
relative fair market value of the loan portion sold as compared to that portion
retained.
 
     Finance income includes servicing fees and interest income on loans
retained by the Company. The servicing asset is carried at the lower of
amortized cost or fair value. Interest-only strips receivable are carried at
fair value.
 
     The fair value of the interest-only strip receivable is analyzed quarterly
by the Company on a dissaggregated basis to determine whether prepayment and
default experience has an impact on this fair value. Expected cash flows of the
underlying loans sold are reviewed based upon current economic conditions and
are revised as necessary using the original discount rate used in calculating
the gain on sale. The interest-only strip receivable is classified as a trading
security. Accordingly, unrealized gains and losses are recorded in income.
 
LOAN RECEIVABLES
 
     All loans receivable are considered to be held for sale and are carried at
the lower of aggregate cost or market values. Market value is determined by
outstanding commitments from investors or current investor yield requirements.
There was no allowance for market losses on loans receivable held for sale at
June 30, 1997 and 1996.
 
CREDIT LOSSES
 
     Provisions for credit losses are charged to income in amounts sufficient to
maintain the allowance at a level considered adequate by management to absorb
possible losses of principal and interest in the existing portfolio, based on
calculations of the collectibility of loans receivable and prior credit loss
experience. Loans receivable are charged against the allowance for credit
losses, based on a loan-by-loan review, when management believes that the
collectibility of the principal is unlikely. The Company's exposure to credit
loss in the event of nonperformance by the borrower is represented by the
outstanding principal balance of the respective loans less the value of
collateral obtained. The amount of collateral obtained is based on management's
credit evaluation pursuant to the Company's lending and underwriting policies.
 
     While management uses available information to recognize losses on loans,
future additions to the allowance may be necessary based on changes in economic
conditions.
 
FAIR VALUE OF FINANCIAL INSTRUMENTS
 
     Loans receivable are recorded on the balance sheet at an amount that
approximates fair market value. The servicing asset is periodically evaluated
for impairment and, as such, are recorded at values that approximate fair market
value. Interest-only strips receivable are recorded at fair value. The carrying
value of fixed rate debt is a reasonable estimate of fair value due to the
relatively stable rate environment during the fiscal year and the time period in
which the debt was originated.
 
                                       F-8
<PAGE>   44
 
                            CREDIT DEPOT CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
PROPERTY AND EQUIPMENT
 
     Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are provided on a straight-line
basis over the estimated useful lives of furniture and equipment (five years) or
the term of the related lease.
 
     Property and equipment are as follows:
 
<TABLE>
<CAPTION>
                                                                    JUNE 30,
                                                              ---------------------
                                                                 1997        1996
                                                              ----------   --------
<S>                                                           <C>          <C>
Furniture and equipment.....................................  $1,138,407   $854,390
Leasehold improvements......................................      64,679     63,495
                                                              ----------   --------
                                                               1,203,086    917,885
Less accumulated depreciation and amortization..............     678,391    424,325
                                                              ----------   --------
                                                              $  524,695   $493,560
                                                              ==========   ========
</TABLE>
 
INCOME TAXES
 
     The Company accounts for income taxes using the liability method. Under
this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
 
LOSS PER SHARE
 
     Loss per share amounts for all periods presented have been computed using
the weighted average number of common and, when dilutive, common equivalent
shares (stock options and warrants) outstanding.
 
RECLASSIFICATIONS
 
     Certain reclassifications of prior years' amounts have been made to conform
to the current year presentation.
 
STOCK OPTIONS
 
     The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for its employee stock options. Under APB 25,
because the exercise price of the Company's stock options equals the market
price of the underlying stock on the date of grant, no compensation expense is
recognized.
 
RECENT ACCOUNTING PRONOUNCEMENTS
 
     During the year ended June 30, 1997, the Company adopted the requirements
of FASB Statement No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities." This new standard requires
application of a financial components approach that focuses on control and
recognition of financial assets and liabilities upon execution of a transfer of
such instruments. FASB Statement No. 125 is required to be applied to transfers
of assets occurring after January 1, 1997. The effect of adopting the new
standard was not material.
 
     In February 1997, the Financial Accounting Standards Board issued FASB
Statement No. 128, "Earnings Per Share." This new standard establishes standards
for computing and presenting earnings per share (EPS) and applies to entities
with publicly held common stock. FASB Statement No. 128 simplifies the standards
for computing earnings per share previously found in APB Opinion No. 15 and
makes them
 
                                       F-9
<PAGE>   45
 
                            CREDIT DEPOT CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
comparable to international EPS standards. It replaces the presentation of
primary EPS with a presentation of basic EPS. It also requires dual presentation
of basic and diluted EPS on the face of the statement of earnings for all
entities with complex capital structures and requires a reconciliation of the
numerator and denominator of the diluted EPS computation. FASB Statement No. 128
is effective for financial statements issued for periods ending after December
15, 1997, and earlier application is not permitted.
 
     In June 1997, the Financial Accounting Standards Board issued FASB
Statement No. 130, "Reporting Comprehensive Income," which is effective for
annual and interim periods ending after December 15, 1997. This statement
requires that all items that are required to be recognized under accounting
standards as comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements.
 
     In June 1997, the Financial Accounting Standards Board issued FASB
Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information," which is effective for annual and interim periods ending after
December 15, 1997. This statement establishes standards for the method that
public entities use to report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographical areas and major customers.
 
3.  COMMON STOCK TRANSACTIONS
 
     In June 1993, the market price of the Company's Common Stock attained the
market price required to permit the Company to redeem the warrants issued as
part of the initial public offering units at $.01. The warrant holders had the
option of receiving $.01 per warrant or exercising the warrant to purchase
common stock at $5.50 per share. Warrant holders converted 259,225 warrants at
the $5.50 exercise price prior to June 30, 1993, net of expenses of
approximately $145,000. In the first quarter of 1994, 539,475 additional
warrants were exercised at the $5.50 option price, net of expenses of
approximately $119,000. The remaining 6,300 warrants were redeemed by the
Company.
 
     As partial consideration for successfully obtaining a $6,000,000 warehouse
line of credit, the Company granted warrants to purchase 200,000 shares of
common stock exercisable through May 31, 2003 at $9.00 per share to certain
intermediaries. This warehouse line of credit matured on June 16, 1995 and was
not renewed.
 
     As partial consideration related to obtaining a $3,000,000 financing
arrangement discussed in Note 7, the Company granted warrants to purchase
201,389 shares of common stock exercisable through August 12, 2000 at $2.50 per
share to an underwriter.
 
     As partial consideration for successfully obtaining $5,550,000 in
convertible notes, as discussed in Note 7, the Company granted warrants to
purchase 92,500 shares of common stock exercisable through January 25, 2000 at
$7.25 per share to an investment banker.
 
     As partial consideration for successfully obtaining a $2,300,000 warehouse
lending agreement, as discussed in Note 7, the Company granted warrants to
purchase 920,000 shares of common stock exercisable through June 30, 2001 at
$2.50 per share, subject to certain anit-dilution adjustments.
 
     As partial consideration for successfully obtaining a financing agreement
with Greenwich Capital, as discussed in Note 7, the Company granted warrants to
purchase 300,000 shares of common stock at a price of $5.25 per share
exercisable at the option of the lender at any time on or prior to November 8,
2000.
 
     As partial consideration for successfully obtaining $6,400,000 in Series
"A" Convertible Preferred Stock, as discussed in Note 7, the Company granted
warrants to an underwriter to purchase up to 146,250 shares of common stock at a
price of $2.50 per share, subject to certain anti-dilution adjustments,
exercisable at the option of the underwriter at anytime on or prior to October
10, 1999.
 
                                      F-10
<PAGE>   46
 
                            CREDIT DEPOT CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     As partial consideration for obtaining $9,000,000 in 10% convertible
secured notes, as discussed in Note 7, the Company granted warrants to purchase
540,000 shares of common stock exercisable through August 12, 2000 at $2.50 per
share, subject to certain anti-dilution adjustments, to the underwriter.
 
     As partial consideration for obtaining $1,674,000 in 11% Series "B"
Convertible Redeemable Preferred stock, as discussed in Note 7, the Company
granted warrants to purchase 669,600 shares of common stock exercisable through
April 21, 2002 at $2.50 per share, subject to certain anti-dilution adjustments,
to the underwriter.
 
     As partial consideration for obtaining two warehouse lines-of-credit
totaling $550,000, as discussed in Note 6, the Company granted warrants to
purchase 18,000 shares of common stock exercisable through March 25, 1999 at
$3.25 per share to an agent.
 
     As partial consideration for services in connection with investor
relations, the Company granted warrants to purchase 150,000 shares of common
stock exercisable through November 1, 2001 at $2.50 per share.
 
     As partial consideration for consulting services, the Company granted
warrants to purchase 40,000 and 35,000 shares of common stock exercisable
through December 19, 1997 and January 15, 2001 at $5.25 and $4.00 per share,
respectively.
 
4.  LOANS RECEIVABLE
 
     Prior to June 30, 1994, sales of loans were generally made with the
provision that the Company would repurchase at the request of the investor any
loan that becomes past due by over 90 days or in accordance with those
circumstances which may occur from time to time as outlined in the respective
sale agreements. Investors may not request or demand repurchase without cause as
defined in the respective sale agreement. The balance subject to repurchase
under these agreements included in the Company's servicing portfolio is
$1,967,000. Loans sold during 1996 and 1997 to a major loan securitizer are
subject to limited recourse provisions. At June 30, 1997, the aggregate balance
of loans originated by the Company subject to limited repurchase provisions was
approximately $82,483,000, of which none was past due over 90 days and subject
to repurchase at the option of the investor. These loans were sold servicing
released with an interest-only strip retained on the loans. At June 30, 1997 the
Company's servicing portfolio totaled approximately $7,232,000 including
approximately $5,205,000 of Company-owned loans receivable.
 
     It is the Company's experience that a substantial portion of the Company's
loan portfolio generally is sold, repaid or foreclosed upon before contractual
maturity dates. Additionally, the Company may extend the maturity of a loan
receivable for past due payments.
 
     At June 30, 1997, there were loans receivable with an aggregate principal
balance of approximately $379,000 for which the accrual of interest had been
suspended. Borrowers with loans totaling approximately $626,965 were paying
under a court-approved bankruptcy plan at June 30, 1997. Of this amount, 6
borrowers representing $203,418 aggregate principal balance were delinquent per
the terms of the bankruptcy plan.
 
                                      F-11
<PAGE>   47
 
                            CREDIT DEPOT CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Changes in the allowance for credit losses were as follows:
 
<TABLE>
<S>                                                           <C>
Balance as of June 30, 1995.................................  $ 184,794
  Provision for credit losses...............................    185,000
  Charge-offs...............................................   (171,584)
  Recoveries................................................     52,050
                                                              ---------
Balance as of June 30, 1996.................................    250,260
  Provision for credit losses...............................    225,231
  Charge-offs...............................................   (235,657)
  Recoveries................................................     20,650
                                                              ---------
Balance as of June 30, 1997.................................  $ 260,484
                                                              =========
</TABLE>
 
     The allowance for credit losses includes a provision for credit losses that
may be incurred as a result of the obligation to repurchase certain loans sold.
This reserve is included in the allowance for credit losses since it has been
the Company's practice to repurchase loans sold to investors under continuing
servicing agreements prior to foreclosure. The resulting gain or loss on the
foreclosed property is recognized on the books of the Company.
 
5.  SERVICING ASSET AND INTEREST-ONLY STRIPS RECEIVABLE
 
     The servicing asset represents the unamortized balance of previously
recognized servicing rights and excess servicing receivables This amount is
amortized over the estimated lives of the underlying receivables sold. The
carrying value of the servicing asset at June 30, 1997, 1996, and 1995
approximates fair value.
 
     The activity in the servicing asset is summarized as follows:
 
<TABLE>
<CAPTION>
                                                           YEAR ENDED JUNE 30,
                                                    ----------------------------------
                                                      1997        1996         1995
                                                    --------    --------    ----------
<S>                                                 <C>         <C>         <C>
Balance, beginning of year........................  $193,038    $411,902    $1,030,210
Additions from sales of loans receivable..........        --          --       257,321
Unscheduled amortization..........................   (81,421)   (118,765)     (605,118)
Scheduled amortization............................   (34,610)   (100,099)     (270,511)
                                                    --------    --------    ----------
Balance, end of year..............................  $ 77,007    $193,038    $  411,902
                                                    ========    ========    ==========
</TABLE>
 
     The interest-only strips receivable represents the unamortized balance of
the present value of the interest rate differential between the rate charged to
the borrower and the contractual rate paid by the Company to the investor for
the pool of loans after taking into consideration the Company's estimate for any
early prepayments and bad debt expense resulting from the sale of loans
servicing released. This amount is amortized in relation to the related cash
flows over the estimated lives of the underlying receivables sold. Discount
rates of 12% and 9% were used to compute the interest-only strips receivable at
June 30, 1997 and 1996, respectively. The carrying value of the interest-only
strips receivable at year-end approximates fair value.
 
     The activity in the interest-only strips receivable account is summarized
as follows:
 
<TABLE>
<CAPTION>
                                                                YEAR ENDED JUNE 30,
                                                             -------------------------
                                                                1997           1996
                                                             -----------    ----------
<S>                                                          <C>            <C>
Balance, beginning of year.................................  $ 1,317,075    $       --
Additions from sales of loans receivable...................    7,162,973     1,384,843
Scheduled amortization.....................................   (1,211,118)      (67,768)
                                                             -----------    ----------
Balance, end of year.......................................  $ 7,268,930    $1,317,075
                                                             ===========    ==========
</TABLE>
 
                                      F-12
<PAGE>   48
 
                            CREDIT DEPOT CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     In fiscal 1997 and 1996, the Company recognized approximately $40,000 and
$119,000, respectively, in expenses related to the write down of the servicing
asset resulting from unanticipated prepayments. These prepayments are primarily
a result of certain competitors targeting the higher interest rate loans
serviced by the Company (and primarily originated subject to underwriting
practices prior to fiscal 1994) and refinancing such loans at lower interest
rates.
 
6.  MORTGAGE WAREHOUSE LINE-OF-CREDIT
 
     On June 11, 1997, the Company obtained a $3,000,000 mortgage warehouse
line-of-credit from a mortgage warehouse lender. The Company utilizes this
line-of-credit for the purpose of financing the origination of single family
residential mortgage loans. This line bears interest at prime plus 2% payable
monthly and the Company generally has an available borrowing base equivalent to
the lesser of $3,000,000 or 95% of the original mortgage amount or the
commitment price on the related take-out commitment of eligible mortgage loans
as defined under the agreement. The maturity date of the line is the earlier of
(1) the 90th day after funding of each note or (2) the date on which funds are
received from the take-out investor for purchase of the eligible mortgage loan
securing such note. As of June 30, 1997, the outstanding balance was $2,806,386.
 
     On March 25, 1997 and March 31, 1997, the Company obtained warehouse
lines-of-credit in the amounts of $450,000 and $100,000, respectively, from
individuals. The Company utilitizes the lines-of-credit for the purpose of
financing the origination of single family residential mortgage loans. The lines
bear an interest rate of 12% and mature one year from the date of origination.
In connection with this agreement, the Company issued warrants to purchase
15,000 shares of common stock at $3.25 exercisable at the option of the lenders
at any time on or prior to March 25, 1999.
 
7.  CONVERTIBLE NOTES AND OTHER BORROWINGS
 
     On July 27, 1994 the Company completed a private placement offering of 8%
notes due 2004, convertible into common shares of the Company at $5 per share.
Interest on the notes is payable each July 1 and January 1. The gross proceeds
of the offering totaled $5,550,000. Approximately $545,000 in expenses related
to the offering were deferred and are being amortized over the term of the
notes. The private placement resulted in net proceeds to the Company of
approximately $5,005,000. The notes are subordinate to any warehouse
lines-of-credit up to $50 million and the Company is required to comply with
various restrictive covenants. During fiscal year 1996, all outstanding
principal and interest due per the agreement was paid in full. One lender
accepted a warehouse lending agreement in lieu of cash in the amount of
$2,300,000. The borrowings, which accrue interest at the rate of 10% per annum
payable quarterly, are secured by the underlying mortgage loans. The Company
must provide loans to secure the promissory note in an amount equivalent to 110%
of the principal amount of the note. In the event of a shortfall in collateral,
the Company is required to pledge cash in a segregated account. At June 30, 1997
and 1996, the Company had pledged $203,318 and $25,887, respectively, in cash to
secure the note. Such agreement expires on April 30, 2001. In addition, as
discussed in Note 3, the Company has issued warrants to the lender for the
purchase of up to 920,000 shares of the Company's $.001 par value common stock
at a price of $2.50 per share exercisable at the option of the lender at any
time on or prior to June 30, 2001.
 
     On June 16, 1995, the Company entered into an agreement for the placement
of up to $3,000,000 in available borrowings to be used expressly for the purpose
of originating and acquiring mortgage loans. In connection with this agreement,
warrants to purchase 27,779 shares of common stock at $2.50 per share were
issued to the lenders which are exercisable at the option of the lenders at any
time on or prior to June 16, 1999. This agreement expired on June 16, 1997.
During fiscal year 1996, $2,500,000 of the borrowings were converted into Series
"A" 9% Non-voting Convertible Preferred Stock. At June 30, 1997 and 1996, $-0-
and $500,000 was outstanding under this agreement. An additional $500,000 in
borrowings was obtained through a similar agreement. These borrowings are
convertible into 9% Convertible Preferred Stock at $2.50 per share.
 
                                      F-13
<PAGE>   49
 
                            CREDIT DEPOT CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
In connection with this agreement, warrants to purchase 100,000 shares of common
stock at $2.50 per share were issued to the lender which are exercisable at the
option of the lender at any time on or prior to February 22, 2000. The
borrowings, which accrue interest at the rate of 10% per annum payable monthly,
are secured by the underlying mortgage loans. The agreement contains a default
interest of 16% which accrues to the extent such borrowings are not repaid on or
prior to the maturity date. At June 30, 1997, $500,000 was outstanding under
this agreement. Such agreement matures on February 22, 1998. The Company has
pledged loans receivable as collateral related to these borrowings.
 
     In conjunction with a separate agreement with Greenwich Capital, dated
February 1, 1995, the Company from time-to-time received advances from Greenwich
Capital equivalent to 95% during fiscal year 1996 and 90% during fiscal year
1995 of the principal amount of mortgage loans associated with such advances.
The Company pays interest to Greenwich at prime plus 1% and has the option to
repurchase such mortgages, or repay such advances, within one year of the date
of the advance. During 1996 and 1995, the Company was advanced approximately
$7,628,000 and $10,600,000 in connection with this agreement. The maximum amount
outstanding under such agreement during 1996 and 1995 was approximately
$7,628,000 and $5,600,000. No amounts were outstanding at June 30, 1995 and the
agreement had expired as of June 30, 1996. In connection with this agreement, as
discussed in Note 3, the Company has issued warrants to the lender for the
purchase of up to 300,000 shares of common stock at a price of $5.25 per share
exercisable at the option of the lender at any time on or prior to November 8,
2000.
 
     On October 10, 1995, the Company issued 250 units at an offering price of
$20,000 per unit, each unit consisting of 1,000 shares of Series "A" 9%
Non-voting Convertible Preferred Stock and warrants to purchase 2,500 shares of
common stock at $2.50 per share, subject to certain adjustments, in exchange for
the conversion of $2,500,000 of other borrowings and $2,500,000 in cash. An
additional 70 units of the preferred stock were issued for cash in the amount of
$1,400,000. These warrants are exercisable at the option of the holder at any
time on or prior to October 10, 1999. Dividends on the 9% Convertible Preferred
Stock are cumulative from the date of issuance and payable on a quarterly basis
commencing on December 31, 1995. Shares of the preferred stock, totaling an
initial investment of $100,000 in preferred stock, were converted during the
year ended June 30, 1997 into 40,000 shares of common stock at $2.50 per share.
 
     On January 18, 1996, the Company entered into an agreement to borrow
$1,050,000 from a third party lender. The loan is collateralized by mortgage
loans and bears interest at a rate of 12% per annum. The loan matured on
February 18, 1997. At June 30, 1997 and 1996, there was $-0- and $925,000
outstanding under this agreement, respectively.
 
     On May 24, 1996, the Company commenced a $9,000,000 10% convertible secured
note offering. The notes are partially secured by essentially all otherwise
unpledged assets of the Company. The notes are convertible into 3,600,000 shares
of common stock at an exercise price of $2.50 per share and impose limitations
on the payments of dividends to common stockholders. In August 1996, the Company
became fully subscribed to the maximum offering amount of $9,000,000. The notes
mature on June 30, 2001. During 1997, $860,000 of the notes, net of were
converted by the debt holders into 344,000 shares of common stock of the Company
at $2.50 per share. This amount was netted against filing fees in the amount of
$21,000.
 
     On November 12, 1996, the Company entered into an agreement with a major
loan securitizer by where the Company receives advances on the interest-only
strips receivable on the loans sold to be placed in securitizations, as
discussed in Note 5. The lender has the right to offset all sums owed to them by
the Company against the amounts owed by the Company under the loan sales
agreement. The interest rate on the advances is the 30-day LIBOR plus 400 basis
points. In the event of a default, the interest rate increases to the 30-day
LIBOR plus 700 basis points. The 30-day LIBOR rate at June 30, 1997 was 5.69%.
Each advance is repaid over a 36-month period from the day the loan sale
commitment that it pertains to is filled. As of June 30, 1997, $2,100,651 was
outstanding under this agreement.
 
                                      F-14
<PAGE>   50
 
                            CREDIT DEPOT CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     On March 24, 1997, the Company issued 16,740 shares of Series "B" 11%
Non-voting Convertible Redeemable Preferred Stock at an offering price of $100
per share and warrants to purchase 669,600 shares of common stock at $2.50 per
share, subject to certain adjustments exercisable at the option of the
stockholders at any time on or prior to April 12, 2000. Dividends on the 11%
Convertible Redeemable Preferred Stock are cumulative from the date of issuance
and payable on a quarterly basis commencing on July 1, 1997. Through July 1,
1998, dividends are payable, at the Company's option, either in cash or in
shares of preferred stock valued at the lessor of (1) the conversion price per
share or (2) the average closing bid price of the Company's common stock on the
Nasdaq SmallCap Market for the twenty consecutive trading day period ending five
days prior to the dividend record date. Thereafter, dividends are payable in
cash. The Company has the right at any time more than 913 days after the final
closing date to redeem for cash all or a portion of the outstanding shares of
this preferred stock at the original purchase price of $100 per share plus all
accrued and unpaid dividends.
 
     The aggregate maturities for long-term debt are as follows:
 
<TABLE>
<S>                                                           <C>
1998........................................................  $ 1,257,646
1999........................................................      757,646
2000........................................................      585,359
2001........................................................   10,440,000
2002 and thereafter.........................................           --
                                                              -----------
                                                              $13,040,651
                                                              ===========
</TABLE>
 
8.  INCOME TAXES
 
     Income tax expense (benefit) differs from the amount computed by applying
the graduated statutory federal income tax rates for the following reasons:
 
<TABLE>
<CAPTION>
                                                            YEAR ENDED JUNE 30,
                                                  ---------------------------------------
                                                     1997          1996          1995
                                                  -----------   -----------   -----------
<S>                                               <C>           <C>           <C>
Income tax expense (benefit) at statutory
  federal income tax rate applied to income
  (loss) before income taxes....................  $(1,143,420)  $(1,540,369)  $(1,628,919)
State income tax, net of federal income tax
  benefit.......................................     (110,979)     (149,506)     (158,070)
Tax benefit not currently recognizable..........    1,254,399     1,689,875     1,786,989
                                                  -----------   -----------   -----------
                                                  $        --   $        --   $        --
                                                  ===========   ===========   ===========
</TABLE>
 
                                      F-15
<PAGE>   51
 
                            CREDIT DEPOT CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Deferred income taxes reflect the impact of temporary differences between
the amount of assets and liabilities recognized for financial reporting purposes
and such amounts recognized for income tax purposes. The primary sources of
these differences are the differing methods utilized for recognition of gains
associated with loan sales, accelerated tax depreciation, and the allowance for
credit losses. Significant components of the Company's deferred tax liabilities
and assets are as follows:
 
<TABLE>
<CAPTION>
                                                                      JUNE 30,
                                                              -------------------------
                                                                 1997          1996
                                                              -----------   -----------
<S>                                                           <C>           <C>
Deferred tax liabilities:
  Interest-only strips receivable basis differences.........  $(2,711,000)  $  (491,000)
  Other, net................................................      (39,000)      (37,000)
                                                              -----------   -----------
          Total deferred tax liabilities....................   (2,750,000)     (528,000)
Deferred tax assets:
  Allowance for credit losses...............................       97,000        93,000
  Other reserves............................................       15,000        33,000
  Other, net................................................       71,000        62,000
  Net operating loss carryforwards -- state.................      876,000       672,000
  Net operating loss carryforwards -- Federal...............    5,475,000     4,200,000
                                                              -----------   -----------
          Total deferred tax assets.........................    6,534,000     5,060,000
Valuation allowance for deferred tax assets.................   (3,784,000)   (4,532,000)
                                                              -----------   -----------
Net deferred tax assets.....................................    2,750,000       528,000
                                                              -----------   -----------
Net deferred tax assets (liabilities).......................  $        --   $        --
                                                              ===========   ===========
</TABLE>
 
     At June 30, 1997, the Company had net operating loss carryforwards for
Federal and state income tax purposes available to offset future taxable income
of approximately $14,600,000 expiring from 2009 through 2012.
 
9.  COMMITMENTS
 
     The Company leases space for its corporate and branch offices in Georgia,
Indiana, Ohio, South Carolina, North Carolina, Kentucky, Missouri, Florida, and
Tennessee. Future lease payments under all such operating lease agreements are
as follows:
 
<TABLE>
<S>                                                           <C>
1998........................................................  $390,124
1999........................................................   324,228
2000........................................................   105,704
2001 and thereafter.........................................        --
                                                              --------
                                                              $838,056
                                                              ========
</TABLE>
 
     Rental expense totaled $516,435, $480,779 and $353,185 for the years ended
June 30, 1997, 1996 and 1995, respectively.
 
10.  OTHER RELATED PARTY TRANSACTIONS
 
     During the year ended June 30, 1996, the Company advanced $100,000 to a
stockholder and director, due on September 15, 1996. On August 11, 1997, the
maturity date was extended to August 20, 1998. The note bears interest at 8% and
is payable at maturity. The borrower was not a director of the Company as of
June 30, 1997. A reserve has been recorded for the advance in the full amount of
the outstanding balance.
 
                                      F-16
<PAGE>   52
 
                            CREDIT DEPOT CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     During the year ended June 30, 1995, the board approved an advance in the
amount of $100,000 to a director. This loan bears interest at 11% and all
interest and principal is due and payable on May 20, 1996. During the year ended
June 30, 1996, the maturity date was extended to May 20, 1997. As of June 30,
1997, the advance remained outstanding. A reserve has been recorded for the
advance in the full amount of the outstanding balance.
 
11.  STOCK OPTION PLAN
 
     In October 1990, the Company adopted the 1990 Stock Option Plan (the "1990
Plan") under which 250,000 shares of the Company's common stock are reserved for
issuance, pursuant to which officers, directors and key employees are eligible
to receive incentive and/or non-qualified stock options. In March 1992, the
Company amended the 1990 Plan and increased the number of shares reserved from
250,000 to 400,000 shares.
 
     In January 1993, subject to stockholder approval which was obtained in May
1993, the Company adopted the 1993 Stock Option Plan (the "1993 Plan") under
which 250,000 shares of the Company's common stock are reserved for issuance
similar to the 1990 Plan. Subsequently, the Company has amended the 1993 Plan
and increased the number of shares reserved to 1,200,000 shares. The 1990 Plan
and the 1993 Plan (collectively, the "Plans") are administered by a committee of
the Board of Directors. The option prices underlying all such agreements are
based upon the fair value of the stock on the date of grant.
 
     On July 25, 1996, each option outstanding under the Plans, including
options held by directors and executive officers of the Company, with an
exercise price exceeding $4.00 was canceled and reissued with an exercise price
equal to $3.50 per share, compared to the then current market price of $2.75 per
share. Options to purchase 1,151,000 shares of common stock at exercise prices
ranging from $4.25 to $10.00 per share, with a weighted average exercise price
of $6.11 were repriced. All other terms and conditions of these options remained
the same.
 
     In 1997, options for the purchase of 265,500 shares were granted to
employees and directors of the Company at a per share price ranging from $2.75
to $4.00. In 1996, options for the purchase of 265,500 shares were granted to
employees and directors of the Company at a per share price of $3.50 to $4.25.
At June 30, 1997, there were a total of 1,357,000 options outstanding with
exercise prices ranging from $2.75 to $8.00. No options were exercised during
1996 or 1997; however, 1,107,125 options outstanding are vested and exercisable
at June 30, 1997.
 
     Pro forma information regarding net income and earnings per share is
required by FASB Statement No. 123, "Accounting for Stock-Based Compensation",
and has been determined as if the Company had accounted for its stock options
under the fair value method of that Statement. The fair value in these options
was estimated at the date of grant using the "minimum value" method allowed by
the Statement. Pro forma net loss and net loss per share were $(3,858,651) and
$(1.21) and $(4,582,052) and $(1.48) for the years ended June 30, 1997 and 1996,
respectively. The weighted average fair value of options granted during the
years ended June 30, 1997 and 1996 was $486,290 and $722,774.
 
     At June 30, 1997, 1,107,125 shares under the Plans had vested but had not
been exercised.
 
                                      F-17
<PAGE>   53
 
                            CREDIT DEPOT CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The following table reflects changes in the stock options issued under the
Plans:
 
<TABLE>
<CAPTION>
                                                                           APPROXIMATE
                                                                           PRICE RANGE
                                                               SHARES       PER SHARE
                                                              ---------    -----------
<S>                                                           <C>          <C>
Options outstanding at July 1, 1994.........................    891,500       $4-10
  Granted...................................................    402,500        5
  Exercised.................................................         --       --
  Canceled..................................................    (84,500)       6-10
                                                              ---------       -----
Options outstanding at June 30, 1995........................  1,209,500        4-10
  Granted...................................................    194,000        4-6
  Exercised.................................................         --       --
  Canceled..................................................    (88,500)       5-7
                                                              ---------       -----
Options outstanding at June 30, 1996........................  1,315,000        4-8
  Granted...................................................    265,500        2-4
  Exercised.................................................         --       --
  Canceled..................................................   (223,500)       2-4
                                                              ---------       -----
Options outstanding at June 30, 1997........................  1,357,000       $2-8
                                                              =========       =====
</TABLE>
 
12.  GOING CONCERN
 
     During the fiscal year ended June 30, 1997, the Company incurred losses of
$3,362,999 compared to losses of $4,114,820 for the year ended June 30, 1996. In
addition, as of June 30, 1997, the Company had an accumulated deficit of
$16,063,375. Although the Company had modest earnings for its 1992 fiscal year,
it has incurred losses during all of its other years since 1991. In view of its
geographic expansion and the increased size of its corporate infrastructure in
connection therewith, the Company has been unable to generate sufficient gain on
sales of its mortgage loans in either individual sales, bulk sales or through
securitization to provide sufficient revenues to achieve appropriate returns.
 
     The Company has experienced significant operating cash flow deficiencies
over the past year. By its nature, the Company's business requires continual
access to short-term and long-term sources of debt and equity capital. The
Company's capital requirements arise principally from loan originations and loan
repurchases, payments of operating and interest expenses, capital expenditures,
and start-up expenses for new geographic markets. To date, in addition to the
Company's capital raising efforts, the sources of liquidity have been (1) sales
of the loans it originates and purchases into secondary markets, (2) borrowings
under its mortgage warehouse line of credit secured by its loans, in most cases
until such loans are sold and the lender can be repaid, (3) finance income and
fees generated by the loan servicing portfolio, and (4) the conversion of the
servicing asset and interest-only strips receivable into cash over the lives of
the loans sold.
 
     The Company has approximately $1,260,000 in debt that will be due within
the next twelve months. In addition, subsequent to June 30, 1997, the Company
was not in compliance with a minimum net worth covenant under its warehouse
lending arrangement with one of its warehouse lenders primarily as a result of
recurring operating losses. Since waiver of this covenant has not been obtained,
the right to use this line to finance originations and purchases of mortgage
loans could be restricted or terminated at the option of the lender.
 
     The Company's net worth as of June 30, 1997 was $376,838. The Company has
received notification from Nasdaq stating that the Company has failed to
maintain a $1.00 minimum bid price on its common stock and
 
                                      F-18
<PAGE>   54
 
                            CREDIT DEPOT CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
also does not appear to meet the $2,000,000 minimum in net tangible assets
necessary for continued listing on the Nasdaq Small Cap Market. The Company must
respond by October 22, 1997 with a plan and schedule to bring the Company into
compliance with these requirements. In the event the Company is not in
compliance by October 22, 1997 or Nasdaq does not accept the Company's plan for
achieving compliance, a formal notice of deficiency would be issued by Nasdaq
specifying a delisting date for the Company's common stock.
 
     There can be no assurance that the Company will be able to obtain necessary
financing or additional capital in the future or that the Company will continue
to be listed on the Nasdaq Small Cap Market. To the extent that the Company
experiences cash shortages in the future, it may be required to sell off
mortgage loans on less favorable terms than it might otherwise be able to
obtain. There can be no assurance that the Company will be able to obtain, on
acceptable terms, additional funds under lines of credit, or otherwise, when
needed, in which event the Company would be required to curtail its lending
activities and could be unable to comply with the terms of covenants contained
in the agreements relating to its outstanding indebtedness.
 
MANAGEMENT'S PLANS
 
     The Company is currently in the process of extending a conversion offer to
the holders of the 10% convertible secured notes and the Series "A" 9%
Non-voting Convertible Preferred Stock in order to enable the Company to raise
additional capital to meet its operating expenses and to continue as a going
concern. The Company does not have sufficient authorized common stock to permit
it to issue the shares of common stock pursuant to the conversion offer. As a
means of increasing the number of shares of authorized common stock available
for issuance by the Company, the board of directors has approved, subject to
stockholder approval, a proposal to amend the certificate of incorporation to
effect a five-for-one reverse stock split. The board of directors believes that
the reverse stock split, by decreasing the number of shares outstanding, should
increase the bid price per common stock, and is necessary in order to permit the
company to meet the requirements for continued listing on the Nasdaq Small Cap
Market.
 
     In addition, the Company plans to execute a private placement up to
$3,000,000 of Series "B" 11% Non-voting Convertible Redeemable Preferred Stock,
convertible into common stock at $.40 per share. This offering, if executed,
will serve to provide additional cash flow and improve the net worth of the
Company. In connection therewith, the conversion price of the 16,740 currently
outstanding shares of the Series "B" 11% Non-voting Convertible Redeemable
Preferred Stock will also be adjusted to $.40 per share.
 
     There can be no assurances that the conversion offer or the private
placement will be successful or that the successful completion of those actions
will substantially improve the condition of the Company.
 
                                      F-19