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

                                    FORM 10-K

         [X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                   For The Fiscal Year Ended December 31, 1998

                                       OR

         [ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                               Commission File No.
                           MICROFINANCIAL INCORPORATED
             (Exact name of Registrant as Specified in its Charter)

                            Massachusetts 04-2962824
      (State or other jurisdiction of (I.R.S. Employer Identification No.)
                         Incorporation or Organization)

                       950 Winter Street Waltham, MA 02451
               (Address of Principal Executive Offices) (zip code)

       Registrant's Telephone Number, Including Area Code: (781) 890-0177

          Securities registered pursuant to Section 12(b) of the Act:
               Title of each class                     Name of each exchange on
                                                           which registered

  Common Shares, $0.01 par value per share            New York Stock Exchange

           Securities registered pursuant to Section 12(g) of the Act:
                                      None
                                (Title of Class)

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

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not 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-K or any amendment to this
Form 10-K. [X]

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant, computed by reference to the closing price of such stock as of March
12, 1999, was approximately $85,060,444.

As of March 12, 1999,  13,313,166  shares of the registrant's  common stock were
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None

<PAGE>
                               Table of Contents

       Description                                                   Page Number


Part I    Item 1    Business............................................3
          Item 2    Properties..........................................7
          Item 3    Legal Proceedings...................................7
          Item 4    Submission of Matters to a Vote of
                     Security Holders...................................7
Part II   Item 5    Market for the Registrant's Common Stock
                     and Related Stockholders Matters...................7
          Item 6    Selected Financial Data............................10
          Item 7    Management's Discussion and Analysis
                     of Financial Condition and Results
                     of Operations.....................................13
          Item 7A   Quantitative and Qualitative Disclosures
                     about Market Risk.................................19
          Item 8    Financial Statements and Supplementary
                     Data..............................................20
          Item 9    Changes in and Disagreements with 
                     Accountants on Accounting
                     and Financial Disclosure..........................20
Part III  Item 10   Directors and Executive Officers of
                     the Registrant....................................20
          Item 11   Executive Compensation.............................23
          Item 12   Security Ownership of Certain Beneficial
                     Owners and Management.............................28
          Item 13   Certain Relationships and Related
                     Transactions......................................30
          Item 14   Exhibits, Financial Statement Schedules
                     and Reports on Form 8-K...........................31
          Signatures...................................................34





                                      -2-
<PAGE>

                                     PART I

ITEM 1.      BUSINESS

General

     MicroFinancial Incorporated  ("MicroFinancial" or the "Company") was formed
as a Massachusetts  corporation on January 27, 1987. The Company, which operates
primarily  through its  wholly-owned  subsidiary,  Leasecomm  Corporation,  is a
specialized  commercial  finance  company  that  leases and rents  "microticket"
equipment and provides other  financing  services in amounts  generally  ranging
from $900 to $2,500, with an average amount financed of approximately $1,400 and
an average lease term of 45 months.  Leasecomm  Corporation  started originating
leases in January 1986. The Company has used proprietary  software in developing
a sophisticated,  risk-adjusted pricing model and automating its credit approval
and collection systems, including a fully-automated  Internet-based application,
credit scoring and approval process.

     The Company targets  owner-operated or other small commercial  enterprises,
with little  business credit history and limited or poor personal credit history
at the owner level. The Company provides financing to these lessees who may have
few other sources of credit.  The Company  primarily leases and rents low-priced
commercial  equipment with limited residual value which is used by these lessees
in their daily operations.  The Company does not market its services directly to
lessees,  but sources leasing  transactions through a nationwide network of over
1,100  independent  sales  organizations  and  other  dealer-based   origination
networks ("Dealers").

     The  majority  of the  Company's  leases are  currently  for  authorization
systems for point-of-sale card-based payments by, for example, debit, credit and
charge cards ("POS authorization  systems").  POS authorization  systems require
the use of a POS terminal capable of reading a cardholder's  account information
from the card's magnetic stripe and combining this  information  with the amount
of the sale  entered via a POS  terminal  keypad.  The  terminal  electronically
transmits  this  information  over a  communications  network to a computer data
center and then displays the returned  authorization or verification response on
the POS terminal.

     The Company  continues to develop other product  lines,  including  leasing
other commercial products and acquiring payment streams from service contracts.

Leasing, Servicing and Financing Programs 

     The Company  originates  leases for products  that  typically  have limited
distribution  channels and high selling costs. The Company  facilitates sales of
such products by making them available to Dealers' customers for a small monthly
lease payment rather than a high initial purchase price.  The Company  primarily
leases and rents low-priced  commercial equipment with limited residual value to
small  merchants.  The Company  purchases or originates  monthly payment streams
without regard to the residual value of the leased product.  The majority of the
Company's  leases are  currently for POS  authorization  systems,  however,  the
Company also leases a wide variety of other equipment including  advertising and
display equipment, coffee machines, paging systems, water coolers and restaurant
equipment.  In  addition,  the  Company  also  acquires  service  contracts  and
opportunistically seeks to enter various other financing markets.

     The Company's  residential  financings  include acquiring service contracts
from Dealers that provide security  monitoring  services and various other types
of residential  finance products.  The Company's  residential  portfolio in past
years  primarily  included  leases of satellite  television  equipment.  Despite
significant  origination  volume in this  market,  the Company  made a strategic
decision  in July  1996  to  de-emphasize  the  satellite  television  equipment
business and has greatly reduced originations of these leases since that time.



                                      -3-
<PAGE>

     The Company  originates and services leases,  contracts and loans in all 50
states of the United States and its territories. As of December 31, 1998, leases
in California,  Florida,  Texas and New York accounted for  approximately 35% of
the Company's  portfolio,  with none of the remaining states accounting for more
than 3% of such total.

Terms of Equipment Leases

     Substantially  all equipment  leases  originated or acquired by the Company
are  non-cancelable.  In a typical  lease  transaction,  the Company  originates
leases  referred to it by the Dealer and buys the underlying  equipment from the
referring Dealer upon funding of an approved application.  Leases are structured
with limited  recourse to the Dealer,  with risk of loss in the event of default
by the lessee residing with the Company in most cases.  The Company performs all
processing, billing and collection functions under its leases.

     During the term of a typical  lease,  the Company is  scheduled  to receive
payments  sufficient,  in the aggregate,  to cover the Company's borrowing costs
and the costs of the  underlying  equipment,  and to provide the Company with an
appropriate  profit.  Throughout the term of the lease, the Company charges late
fees, prepayment penalties,  loss and damage waiver fees and other service fees,
when  applicable,  which  enhance the  profitability  of the lease.  The initial
non-cancelable  term of the  lease  is equal  to or less  than  the  equipment's
estimated economic life. Initial terms of the leases in the Company's  portfolio
generally range from 12 to 48 months,  with an average initial term of 45 months
as of December 31, 1998.

     The terms and conditions of all of the Company's  leases are  substantially
similar. In most cases, the contracts require lessees to: (i) maintain,  service
and  operate  the  equipment  in   accordance   with  the   manufacturer's   and
government-mandated  procedures;  (ii) insure the equipment against property and
casualty loss; (iii) pay all taxes associated with the equipment;  and (iv) make
all scheduled contract payments  regardless of the performance of the equipment.
The Company's standard lease forms provide that in the event of a default by the
lessee,  the Company can require payment of liquidated damages and can seize and
remove the equipment for subsequent  sale,  refinancing or other disposal at its
discretion.   Any  additions,   modifications  or  upgrades  to  the  equipment,
regardless of the source of payment,  are  automatically  incorporated  into and
deemed a part of the equipment financed.

     The Company seeks to protect itself from credit  exposure  relating to poor
quality  Dealers by entering into recourse  agreements  with its Dealers,  under
which the Dealer  agrees to  reimburse  the  Company  for  payment of  defaulted
amounts under certain  circumstances,  primarily defaults within the first month
following  origination and upon evidence of Dealer errors or  misrepresentations
in   originating   a  lease   or   contract.   In  case  of   Dealer   error  or
misrepresentation, the Company will charge-back the Dealer for both the lessee's
delinquent amounts and attorney and court fees.

Residual Interests in Underlying Equipment

     The Company  typically owns a residual interest in the equipment covered by
a lease.  At the end of the lease  term,  the lease  typically  converts  into a
month-to-month rental contract. If the lease does not convert, the lessee either
buys the equipment at a price quoted by the Company or returns the equipment. If
the  equipment is returned,  the Company may place the  equipment  into its used
equipment  rental  and  leasing  program.  The  Company  may also  sell the used
equipment through equipment brokers and remarketers in order to maximize the net
proceeds from such sale.

Service Contracts

     In a typical  transaction  for the  acquisition  of  service  contracts,  a
homeowner  will purchase a security  system and  simultaneously  sign a contract
with the Dealer for the  monitoring of that system for a monthly fee. The Dealer
will then sell the right to payment  under that  contract  to the  Company for a
multiple of the monthly payments.  The Company performs all processing,  billing
and collection functions under these contracts.


                                      -4-
<PAGE>

Dealers

     The Company  provides  financing  to  obligors  under  microticket  leases,
contracts and loans through its Dealers.  Since the Company relies  primarily on
its network of Dealers for its origination  volume,  the Company  considers them
its customers.  The Company had over 1,242 different Dealers  originating 67,080
Company  leases,   contracts  and  loans  in  1998.   E-Commerce  accounted  for
approximately  11.6% of all  originations in 1998. No other Dealer accounted for
more than 10% of the Company's origination volume during such year.

     The Company does not sign exclusive  agreements  with its Dealers.  Dealers
interact with merchants directly and typically market not only POS authorization
systems but also  financing  through the Company and  ancillary  POS  processing
services.

Use of Technology

     The Company's business is operationally intensive, due in part to the small
average amount  financed.  Accordingly,  technology and automated  processes are
critical  in  keeping  servicing  costs to a  minimum  while  providing  quality
customer service.

     The   Company  has   developed   LeasecommDirect(TM),   an   Internet-based
application  processing,  credit  approval and Dealer  information  tool.  Using
LeasecommDirect(TM),  a Dealer can input an application  directly to the Company
via the Internet and obtain almost instantaneous approval automatically over the
Internet through the Company's computer system, all without any contact with any
employee of the Company. The Company also offers  Instalease(R),  a program that
allows a Dealer to submit  applications  by  telephone,  telecopy or e-mail to a
Company  representative,  receive approval,  and complete a sale from a lessee's
location.  By  assisting  the  Dealers  in  providing  timely,   convenient  and
competitive  financing  for their  equipment or service  contracts  and offering
Dealers a variety of value-added services, the Company  simultaneously  promotes
equipment and service  contract sales and the  utilization of the Company as the
finance provider, thus differentiating the Company from its competitors.

     The   Company   has  used   its   proprietary   software   to   develop   a
multi-dimensional  credit scoring model which  generates  pricing of its leases,
contracts and loans  commensurate with the risk assumed.  This software does not
produce a binary "yes or no" decision,  but rather determines the price at which
the lease,  contract or loan can be  profitably  underwritten.  The Company uses
credit scoring in most, but not all, of its extension of credit.

Underwriting

     The nature of the  Company's  business  requires two levels of review,  the
first  focused on the  ultimate  end-user  of the  equipment  or service and the
second focused on the Dealer. The approval process begins with the submission by
telephone,  facsimile or electronic  transmission of a credit application by the
Dealer.   Upon   submission,   the   Company,   either   manually   or   through
LeasecommDirect(TM)  over the  Internet,  conducts  its own  independent  credit
investigation of the lessee through its own proprietary data base and recognized
commercial credit reporting agencies such as Dun & Bradstreet,  TRW, Equifax and
TransUnion.   The  Company's   software   evaluates   this   information   on  a
two-dimensional  scale, examining both credit depth (how much information exists
on an applicant) and credit quality (past payment history).  The Company is thus
able to analyze  both the quality and amount of credit  history  available  with
respect to both obligors and Dealers and to assess the credit risk.  The Company
uses this  information  to  underwrite a broad range of credit risks and provide
financing in situations  where its  competitors may be unwilling to provide such
financing.  The credit  scoring model is complex and  automatically  adjusts for
different transactions.  In situations where the amount financed is over $3,000,
the Company  may go beyond its own data base and  recognized  commercial  credit
reporting  agencies and obtain  information from less readily  available sources
such as banks.  In certain  instances,  the Company  will  require the lessee to
provide verification of employment and salary.


                                      -5-
<PAGE>

     The second  aspect of the credit  decision  involves an  assessment  of the
originating  Dealer.  Dealers  undergo  both an initial  screening  process  and
ongoing  evaluation,  including an examination of Dealer portfolio  performance,
lessee complaints, cases of fraud or misrepresentation, aging studies, number of
applications  and conversion  rates for  applications.  This ongoing  assessment
enables  the  Company  to manage  its  Dealer  relationships,  including  ending
relationships with poor-performing Dealers.

     Upon  credit  approval,  the  Company  requires  receipt  of  signed  lease
documentation on the Company's  standard or other pre-approved lease form before
funding.  Once the equipment is shipped and installed,  the Dealer  invoices the
Company,  and thereafter  the Company  verifies that the lessee has received and
accepted the equipment.  Upon the lessee authorizing  payment to the Dealer, the
lease is forwarded to the Company's  funding and  documentation  department  for
funding, transaction accounting and billing procedures.

Bulk and Portfolio Acquisitions

     In addition to  originating  leases through its Dealer  relationships,  the
Company from time to time has  purchased  lease  portfolios  from  Dealers.  The
Company  purchases  leases from Dealers on an ongoing basis in packages  ranging
from $20,000 to $200,000.  While  certain of these leases  initially do not meet
the Company's underwriting standards, the Company will often purchase the leases
once the lessee  demonstrates a payment  history.  The Company will only acquire
these smaller  lease  portfolios  in  situations  where the company  selling the
portfolio  will  continue  to act as a Dealer  following  the  acquisition.  The
Company also completed the acquisition of three large POS  authorization  system
lease and rental portfolios, two in 1996 and one in 1998. The first acquisition,
completed  in May 1996,  consisted  of over 8,000  rental  contracts  with total
fundings of $1.9 million.  The second  acquisition was for  approximately  8,200
leases in December  1996 with  fundings of $7.9  million.  The Company  acquired
4,841 rental contracts in July 1998 with fundings of $2.8 million.

Servicing and Collections

     The Company performs all servicing  functions on its leases,  contracts and
loans,  including its securitized  leases,  through its automated  servicing and
collection  system.  Servicing   responsibilities   generally  include  billing,
processing  payments,  remitting  payments  to  Dealers  and  investors  in  the
Company's  securitization programs (the  "Securitizations"),  preparing investor
reports,  paying taxes and insurance and performing  collection and  liquidation
functions.

     The Company  differentiates itself from its competitors in the way in which
it pursues delinquent accounts that it believes its competitors would not pursue
due to the costs of collection.  The Company's  automated  lease  administration
system handles application tracking,  invoicing,  payment processing,  automated
collection  queuing,  portfolio  evaluation  and report  writing.  The system is
linked  with bank  accounts  for  payment  processing  and  provides  for direct
withdrawal of lease, contract and loan payments. The Company monitors delinquent
accounts  using its  automated  collection  process.  The Company  uses  several
computerized  processes in its collection  efforts,  including the generation of
daily priority call lists and scrolling for daily delinquent  account servicing,
generation  and mailing of  delinquency  letters,  routing of incoming  calls to
appropriate  employees  with  instant  computerized  access to account  details,
generation of delinquent  account lists eligible for  litigation,  generation of
pleadings and litigation  monitoring.  Collection efforts commence  immediately,
with repeated  reminder  letters and telephone  calls upon payments  becoming 10
days past due, with a lawsuit generally filed if an account is more than 85 days
past due. The Company's collection efforts include one or more of the following:
sending  collection  letters,  making  collection  calls,  reporting  delinquent
accounts to credit reporting agencies and litigating  delinquent  accounts where
necessary and obtaining and enforcing judgments.

Competition

     The microticket leasing and financing industry is highly  competitive.  The
Company  competes for  customers  with a number of national,  regional and local
banks and finance  companies.  The Company's  competitors also include equipment
manufacturers  that lease or finance the sale of their own  products.  While the


                                      -6-
<PAGE>

market for microticket financing has traditionally been fragmented,  the Company
could  also be  faced  with  competition  from  small  or  large-ticket  leasing
companies  that could use their  expertise in those markets to enter and compete
in the microticket  financing market. The Company's  competitors include larger,
more  established  companies,  some of which may possess  substantially  greater
financial,  marketing and  operational  resources than the Company,  including a
lower cost of funds and access to capital  markets and to other funding  sources
which may be unavailable to the Company.

Employees

     As of December 31, 1998, the Company had 248 full-time employees,  of which
51 were engaged in the credit activities and Dealer service, 123 were engaged in
servicing and collection activities, 9 were engaged in marketing activities, and
65 were engaged in general administrative  activities.  Management believes that
its  relationship  with its  employees is good.  No employees of the Company are
members of a collective  bargaining unit in connection with their  employment by
the Company.

ITEM 2.      PROPERTIES

     The Company's  corporate  headquarters and operations center are located in
leased space of 34,851 square feet at 950 Winter Street, Waltham,  Massachusetts
02451.  The lease for this space expires on June 30, 1999.  The Company plans to
renew 21,656 square feet at 950 Winter Street, Waltham,  Massachusetts 02451 for
an  additional  5 years which will  expire on July 31,  2004.  The Company  also
leases  2,933  square feet of office  space for its West Coast office in Newark,
California  under a lease which expires on August 31, 2001. The Company recently
signed a lease for 44,659  square feet of office space in Woburn,  Massachusetts
which  commenced  on December  15, 1998 and expires on December  14,  2003.  The
Company plans to relocate, from corporate headquarters,  its collection,  credit
and  computer  operations  to the  Woburn  location  and plans to  utilize  this
location for any further employee expansion.

ITEM 3.      LEGAL PROCEEDINGS

     The Company and its subsidiaries are frequently  parties to various claims,
lawsuits  and  administrative  proceeding  arising  in the  ordinary  course  of
business.  Although  the  outcome of these  lawsuits  cannot be  predicted  with
certainty,  the Company  does not expect such matters to have  material  adverse
effect on the financial condition or results of operations of the Company. There
are  no  material  pending  legal  proceedings  to  which  the  Company  or  its
subsidiaries or their  respective  properties are a party or were a party during
the fourth quarter of the Company's fiscal year ended December 31, 1998.

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

     No matters were submitted to a vote of the security  holders of the Company
during the fourth quarter of its fiscal year ended December 31, 1998.


                                     PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a)  Market Information

     The Company's common stock, par value $0.01 per share (the "Common Stock"),
is listed on the New York Stock Exchange under the symbol "MFI."

     The  Common  Stock was listed on the New York Stock  Exchange  in  February
1999.  Accordingly,  the high and low sales  price for the Common  Stock on such
exchange for each full quarter in the Company's fiscal years ending December 31,
1997 and 1998 is not available.



                                      -7-
<PAGE>

(b)  Holders

     At March 12, 1999,  there were  approximately  91 stockholders of record of
the Common Stock.

(c)  Dividends

     The Company  paid the  following  quarterly  cash  dividends  on the Common
Stock.  The amounts  indicated  give effect to the  10-for-1  stock split of the
Common Stock effected on June 16, 1997 and the 2-for-1 stock split of the Common
Stock effected on February 10, 1999.

                  Year ended December 31, 1997     Year ended December 31, 1998
First Quarter                $0.025                         $0.030
Second Quarter               $0.030                         $0.035
Third Quarter                $0.030                         $0.035
Fourth Quarter               $0.030                         $0.035

     The Company currently intends to pay dividends in the future. Provisions in
certain  of  the  Company's  credit  facilities  and  agreements  governing  its
subordinated  debt  contain,  and the  terms of any  indebtedness  issued by the
Company in the future are likely to contain, certain restrictions on the payment
of  dividends on the Common  Stock.  The decision as to the amount and timing of
future dividends paid by the Company,  if any, will be made at the discretion of
the Company's  Board of Directors in light of the financial  condition,  capital
requirements,  earnings and prospects of the Company and any restrictions  under
the Company's  credit  facilities or subordinated  debt  agreements,  as well as
other  factors the Board of  Directors  may deem  relevant,  and there can be no
assurance as to the amount and timing of payment of future dividends.

(d)  Recent Sales of Unregistered Securities

     Except as set forth below,  the Company did not sell any equity  securities
which were not registered  under the Securities Act of 1933, as amended,  during
its fiscal year ended December 31, 1998.

<TABLE>
<CAPTION>

                                       No. of Shares of        Aggregate          Exemption
Purchaser              Issuance Date     Common Stock        Consideration         Claimed*

<S>                          <C>             <C>             <C>                <C>
Richard F. Latour     March, 1998            458             $    291.98         Rule 701
Richard F. Latour     March, 1998         21,198               41,336.10         Rule 701
Maureen Curran        March, 1998          7,486               14,597.70         Rule 701
John Plumlee          March, 1998          7,486               14,597.70         Rule 701
J. Gregory Hines      March, 1998          7,486               14,597.70         Rule 701
Stephen Obana         March, 1998          7,486               14,597.70         Rule 701
James Andersen        March, 1998          7,486               14,597.70         Rule 701
Stephen Constantino   March, 1998          3,732                7,277.40         Rule 701
Carol Salvo           March, 1998          7,486               14,597.70         Rule 701
Kerry Frost           March, 1998          3,732                7,277.40         Rule 701
Richard F. Latour     June, 1998           2,762                1,760.78         Rule 701
J. Gregory Hines      September, 1998      1,480                  943.50         Rule 701
Richard F. Latour     September, 1998      3,222                2,054.03         Rule 701
John Plumlee          September, 1998      3,008                5,865.60         Rule 701
Carol Salvo           September, 1998      3,008                5,865.60         Rule 701
Richard F. Latour     December, 1998      12,622               24,612.90         Rule 701
J. Gregory Hines      December, 1998       4,454                8,685.30         Rule 701
Stephen Obana         December, 1998       4,454                8,685.30         Rule 701
John Plumlee          December, 1998       1,446                2,819.70         Rule 701
Carol Salvo           December, 1998       1,446                2,819.70         Rule 701
Stephen Constantino   December, 1998       2,228                4,344.60         Rule 701

*Shares  issued  pursuant to exercises of options under the Company's 1987 Stock
Option Plan.
</TABLE>


                                      -8-
<PAGE>


(e)  Use of Proceeds from Registered Securities

          The Company filed a registration  statement on Form S-1  (registration
statement  number  333-56639)  with the  Securities  and Exchange  Commission to
register  its offering of  4,000,000  shares of Common  Stock (as  amended,  the
"Registration Statement") (the "Offering") which included 600,000 shares offered
by existing  stockholders.  The Registration Statement was declared effective on
February 4, 1999. The Offering  commenced on February 10, 1999 and terminated on
such date after all of the registered  shares of Common Stock had been sold. The
managing  underwriters  for the  Offering  were  Piper  Jaffray  Inc.  and  CIBC
Oppenheimer Corp.

<TABLE>
<CAPTION>

--------------------------------------------------------- -----------------------------------------------------------
             For the account of the Company                      For the account of the selling stockholders
---------------- ------------- ------------- ------------- ------------- --------------- ------------- --------------
                   Aggregate                                               Aggregate
                    price of                   Aggregate                    Offering                     Aggregate
                    Offering                   Offering                     price of                     Offering
     Amount          amount       Amount       price of       Amount         amount         Amount       price of
   registered      registered      sold       amount sold   registered     registered        sold       amount sold
---------------- ------------- ------------- ------------- ------------- --------------- ------------- --------------

<S>  <C>           <C>          <C>           <C>            <C>           <C>              <C>         <C>       
     $3,400,000    $51,000,000  3,400,000     $51,000,000    1,200,000     $9,000,000       600,000     $9,000,000
---------------- ------------- ------------- ------------- ------------- --------------- ------------- --------------
</TABLE>

     The following table sets forth certain expenses  incurred by the Company in
connection  with the  Offering.  None of such  expenses  constituted  direct  or
indirect payments to directors or officers of the Company, to persons owning ten
percent  or more  of any  class  of  equity  securities  of the  Company,  or to
affiliates of the Company.

                     Expense                                       Amount
Underwriting discount and commissions........................... $4,200,000
Finders' Fees...................................................         $0
Other Expenses.................................................. $1,313,891
Total Expenses.................................................. $5,513,891

     The net proceeds of the  Offering to the Company  after  deducting  all the
expenses of the Offering were $45,486,109, which was used to repay indebtedness.
This amount does not include the  $8,370,000  paid to the selling  stockholders.
The  Company  applied  its net  proceeds  of the  Offering  as set  forth in the
following table. None of such proceeds  constituted  direct or indirect payments
to directors officers of the Company or their associates,  to persons owning ten
percent  or more  of any  class  of  equity  securities  of the  Company,  or to
affiliates of the Company.

Construction of plant building and facilities...................         $0
Purchase and installation of machinery and equipment............         $0
Purchase of real estate.........................................         $0
Acquisition of other business(es)...............................         $0
Repayment of indebtedness.......................................$45,486,109
Working capital.................................................         $0
Temporary investment............................................         $0
Other purposes (specify)........................................         $0




                                      -9-
<PAGE>

ITEM 6.    SELECTED FINANCIAL DATA

     The  following  table  sets  forth  selected  consolidated   financial  and
operating data for the Company and its  subsidiaries  for the periods and at the
dates  indicated.  The selected  financial  data were derived from the financial
statements  and  accounting  records of the Company.  The data  presented  below
should  be read in  conjunction  with  the  consolidated  financial  statements,
related notes and other financial information included herein.

<TABLE>
<CAPTION>

                                                               Years Ended December 31,
                                         ------------------------------------------------------------------
                                            1994         1995         1996           1997              1998
                                         ------------------------------------------------------------------

Income Statement Data:
(Dollars in thousands except per share data)
Revenues
    Income on financing leases and loans
<S>                                          <C>         <C>          <C>             <C>            <C>   
                                           $  15,949   $  27,011    $ 38,654       $ 45,634      $  47,341
    Income on service contracts (1)                                        6            501          2,565
    Rental income                              2,058       3,688       8,250         10,809         16,118
    Fee income (2)                             3,840       5,446       8,675         11,236         10,476
                                             --------------------------------------------------------------
    Total revenues                            21,847      36,145      55,585         68,180         76,500
                                             --------------------------------------------------------------

Expenses:
    Selling, general and administrative       4,975        8,485       14,073        17,252          20,061
    Provision for credit losses               8,179       13,388       19,822 (3)    21,713 (3)      19,075
    Depreciation and amortization               827        1,503        2,981         3,787           5,076
    Interest                                  5,009        8,560       10,163        11,890          12,154
                                             --------------------------------------------------------------
    Total expenses                           18,990       31,936       47,039        54,642          56,366
                                             --------------------------------------------------------------

Income before provision for
   income taxes                               2,857        4,209        8,546        13,538          20,134
Net income                                    1,643        2,524        5,080         7,652          11,924
                                             ==============================================================

Net income per common share
    Basic (4)                              $   0.33    $    0.34    $    0.52      $   0.78      $     1.21
    Diluted (5)                                0.19         0.27         0.52          0.76            1.19
Dividends per common share                     0.00         0.06         0.10          0.12            0.14

                                                                 December 31,
                                         ------------------------------------------------------------------
                                            1994         1995         1996           1997              1998
                                         ------------------------------------------------------------------

Balance Sheet Data:
(Dollars in thousands)

Gross investment in leases and loans (6)   $115,286    $ 189,698    $ 247,633      $258,230      $  280,875
Unearned Income                             (33,807)     (60,265)     (76,951)      (73,060)        (74,520)
Allowance for credit losses                  (7,992)     (15,952)     (23,826)      (26,319)        (24,850)
Investment in service contracts (1)              --           --           --         2,145           8,920
       Total Assets                          83,484      126,479      170,192       179,701         210,254
Notes Payable                                57,594       94,900      116,202       116,830         130,421
Subordinated notes payable                   13,436       13,170       27,006        26,382          24,421
     Total liabilities                       77,652      118,568      158,013       160,935         180,771
     Total stockholders' equity               5,750        7,911       12,179        18,766          29,483



                                      -10-
<PAGE>

                                                                  Years Ended December 31,
                                           ----------------------------------------------------------------
                                            1994          1995        1996           1997            1998
                                           ----------------------------------------------------------------

Other Data:
(Dollars in thousands, except statistical data)

Operating Data:
     Total leases and loans originated (7) $ 85,627    $ 134,546    $ 143,200     $ 129,064       $ 153,819
     Total service contracts acquired (8)       ---        3,635        2,431         2,972           8,080
     Dealer fundings (9)                   $ 52,745    $  76,502    $  73,659     $  77,590       $ 105,200
     Average yield on leases and loans (10)    29.9%        30.7%        32.4%         33.9%           35.2%

Cash flows from (used in):

     Operating activities                  $ 26,288       41,959       60,104        77,393          95,973
     Investing activities                   (51,528)     (76,353)     (86,682)      (80,127)       (108,111)
     Financing activities                    27,803       36,155       33,711        (1,789)          9,703
                                          -----------------------------------------------------------------
     Total                                    2,563        1,761        7,133        (4,523)         (2,435)

Selected Ratios:
     Return on average assets                  2.45%       2.40%         3.42%         4.37%           6.12%
     Return on average stockholders'
        equity                                28.73       36.95         50.57         49.46           49.43
     Operating margin (11)                    50.51       48.68         51.04         51.70           51.25

Credit Quality Statistics:
     Net charge-offs                       $  4,961    $  5,428     $  11,948 (12) $ 19,220 (12)   $ 20,544
     Net charge-offs as a percentage of
     average gross investment (13)             5.37%       3.56%         5.46%(12)     7.57%(12)       7.47%
     Provision for credit losses as a
        percentage of average gross
        investment (14)                        8.85         8.78         9.07          8.55            6.93
     Allowance for credit losses as a
        percentage of gross investment (15)    6.93         8.41         9.62         10.14            8.58
</TABLE>

---------- 

(1)  The Company began acquiring  fixed-term  service  contracts in 1995.  Until
     December 1996, the Company treated these fixed-term contracts as leases for
     accounting  purposes.  Accordingly,  income from these service contracts is
     included in income on financing  leases and loans for all periods  prior to
     December  1996 and  investments  in  service  contracts  were  recorded  as
     receivables  due in installments on the balance sheet at December 31, 1996.
     Beginning in December  1996,  the Company  began  acquiring  month-to-month
     service contracts, the income from which is included as a separate category
     in the  Consolidated  Statements of Operations  and the investment in which
     are recorded separately on the balance sheet.

(2)  Includes loss and damage waiver fees and service fees.

(3)  The provision for 1996 includes $5.0 million  resulting from a reduction in
     the time period for charging off the Company's  receivables from 360 to 240
     days.  The provision for 1997 includes a one-time  write-off of securitized
     receivables  of $9.5  million and $5.1 million in  write-offs  of satellite
     television equipment receivables.

(4)  Net income per common share (basic) is calculated based on weighted average
     common shares outstanding of 5,003,880,  7,352,189,  9,682,851,  9,793,140,
     and 9,859,127 for the years ended December 31, 1994,  1995, 1996, 1997, and
     1998, respectively.

(5)  Net income per common  share  (diluted)  is  calculated  based on  weighted
     average  common  shares  outstanding  on  a  diluted  basis  of  8,713,065,
     9,448,206, 9,770,613, 9,925,329 and 10,031,975 for the years ended December
     31, 1994, 1995, 1996, 1997 and 1998, respectively.

(6)  Consists of receivables due in installments,  estimated residual value, and
     loans receivable.




                                      -11-
<PAGE>

----------

(7)  Represents the amount paid to Dealers upon funding of leases and loans plus
     the associated unearned income.

(8)  Represents  the amount  paid to  Dealers  upon the  acquisition  of service
     contracts,    including   both   non-cancelable   service   contracts   and
     month-to-month service contracts.

(9)  Represents the amount paid to Dealers upon funding of leases, contracts and
     loans.

(10) Represents  the  aggregate of the implied  interest  rate on each lease and
     loan  originated  during  the  period  weighted  by the  amount  funded  at
     origination for each such lease and loan.

(11) Represents  income  before  provision  for income taxes and  provision  for
     credit losses as a percentage of total revenues.

(12) Charge-offs  in 1996 and 1997 were  higher  due to  write-offs  related  to
     satellite television equipment lease receivables and due to a change in the
     write-off period from 360 to 240 days in the third quarter of 1996.

(13) Represents net  charge-offs as a percentage of average gross  investment in
     leases and loans and investment in service contracts.

(14) Represents  provision  for credit  losses as a percentage  of average gross
     investment in leases and loans and investment in service contracts.

(15) Represents  allowance for credit losses as a percentage of gross investment
     in leases and loans and investment in service contracts.








                                      -12-
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

     The following discussion includes forward-looking  statements (as such term
is defined in the Private  Securities  Litigation Reform Act of 1995). When used
in this discussion,  the words "believes,"  "anticipates," "expects" and similar
expressions   are  intended  to  identify   forward-looking   statements.   Such
forward-looking  statements  involve known and unknown risks,  uncertainties and
other  important  factors that could cause the actual  results,  performance  or
achievements of the Company,  or industry results, to differ materially from any
future  results,  performance  or  achievements  expressed  or  implied  by such
forward-looking  statements.  Such  risks,  uncertainties  and  other  important
factors include,  among others:  the Company's  dependence on POS  authorization
systems and  expansion  into new  markets;  the  Company's  significant  capital
requirements;   the  risks  of  defaults  on  the  Company's   leases;   adverse
consequences  associated with the Company's  collection policy; risks associated
with economic downturns;  higher interest rates, intense competition,  year 2000
non-compliance,   governmental   regulation,   acquiring  other  portfolios  and
companies,  dependence on key personnel,  effect of sales of substantial amounts
of the Common Stock, control by existing  shareholders and certain anti-takeover
provisions; risks associated with acquisitions;  and other factors many of which
are beyond the Company's control. The Company expressly disclaims any obligation
or undertaking to  disseminate  any updates or revisions to any  forward-looking
statement  contained herein to reflect any change in the Company's  expectations
with regard  thereto or any change in events,  conditions  or  circumstances  on
which any such  statement is based.  In light of these risks and  uncertainties,
there can be no assurance that the forward-looking  information contained herein
will in fact transpire.

Overview

     The Company is a  specialized  commercial  finance  company  that  provides
"microticket"   equipment  leasing  and  other  financing  services  in  amounts
generally  ranging  from $900 to $2,500,  with an  average  amount  financed  of
approximately $1,400. The Company primarily leases POS authorization systems and
other small business equipment to small commercial enterprises.  For years ended
December 31, 1997 and 1998, the Company had fundings to Dealers upon origination
of leases,  contracts and loans ("Dealer  Fundings") of $77.6 million and $105.2
million,  respectively,  and  revenues  of  $68.2  million  and  $76.5  million,
respectively.

     The Company derives the majority of its revenues from leases originated and
held by the Company, payments on service contracts, rental payments from lessees
who  continue to rent the  equipment  beyond the  original  lease term,  and fee
income.  The Company  funds the majority of leases,  contracts and loans through
its revolving  credit and term loan  facilities  (the "Credit  Facilities")  and
on-balance sheet Securitizations,  and to a lesser extent, its subordinated debt
program ("Subordinated Debt") and internally generated funds.

     In a typical lease  transaction,  the Company originates leases through its
network of  independent  Dealers.  Upon approval of a lease  application  by the
Company and  verification  that the lessee has both  received the  equipment and
signed the lease, the Company pays the Dealer the cost of the equipment plus the
Dealer's profit margin. In a typical  transaction for the acquisition of service
contracts,  a homeowner  purchases a security system and simultaneously  signs a
contract  with the Dealer for the  monitoring  of that system for a monthly fee.
Upon credit  approval of the monitoring  application and  verification  with the
homeowner  that the system is installed,  the Company  purchases from the Dealer
the right to the payment stream under that  monitoring  contract at a negotiated
multiple of the monthly payments.




                                      -13-
<PAGE>

     Substantially  all  leases  originated  or  acquired  by  the  Company  are
non-cancelable.  During  the term of the lease,  the  Company  is  scheduled  to
receive payments sufficient,  in the aggregate, to cover the Company's borrowing
costs and the costs of the underlying equipment, and to provide the Company with
an appropriate  profit.  The Company  enhances the  profitability of its leases,
contracts and loans by charging late fees, prepayment penalties, loss and damage
waiver fees and other service fees, when applicable.  The initial non-cancelable
term of the lease is equal to, or less than, the equipment's  estimated economic
life,  and often  provides the Company  with  additional  revenues  based on the
residual  value of the equipment  financed at the end of the initial term of the
lease.  Initial terms of the leases in the Company's  portfolio  generally range
from 12 to 48 months,  with an average  initial term of 45 months as of December
31, 1998.  Substantially  all service and rental  contracts  are  month-to-month
contracts  with an expected  term of seven years for  service  contracts  and 15
months for rental contracts.

Certain Accounting Considerations

     The Company's  lease  contracts are accounted for as financing  leases.  At
origination,  the  Company  records the gross lease  receivable,  the  estimated
residual  value of the leased  equipment,  initial direct costs incurred and the
unearned  lease income.  Unearned  lease income is the amount by which the gross
lease  receivable  plus the  estimated  residual  value  exceeds the cost of the
equipment. Unearned lease income and initial direct costs incurred are amortized
over the related lease term using the interest method.  Amortization of unearned
lease  income  and  initial  direct  costs is  suspended  if, in the  opinion of
management, full payment of the contractual amount due under the lease agreement
is doubtful.  In conjunction  with the  origination  of leases,  the Company may
retain a residual  interest in the underlying  equipment upon termination of the
lease.  The value of such  interests  is estimated at inception of the lease and
evaluated  periodically  for impairment.  Other revenues such as loss and damage
waiver fees, service fees relating to the leases, contracts and loans and rental
revenues are recognized as they are earned.

     The Company's  investments in cancelable  service contracts are recorded at
cost and  amortized  over the  expected  life of the service  period.  Income on
service  contracts from monthly  billings is recognized as the related  services
are provided. The Company periodically evaluates whether events or circumstances
have occurred that may affect the estimated useful life or recoverability of the
investment  in service  contracts.  Rental  equipment  is recorded at  estimated
residual value and depreciated using the  straight-line  method over a period of
twelve  months.  Loans are  reported  at their  outstanding  principal  balance.
Interest income on loans is recognized as it is earned.

     The Company  maintains an allowance for credit losses on its  investment in
leases,  service contracts and loans at an amount that it believes is sufficient
to provide adequate protection against losses in its portfolio. The allowance is
determined  principally  on the basis of the historical  loss  experience of the
Company and the level of recourse  provided by such lease,  service  contract or
loan, if any, and reflects  management's  judgment of additional  loss potential
considering future economic conditions and the nature and characteristics of the
underlying  lease  portfolio.  The Company  determines  the  necessary  periodic
provision for credit losses  taking into account  actual and expected  losses in
the  portfolio  as a whole  and the  relationship  of the  allowance  to the net
investment in leases,  service  contracts and loans.  Such provisions  generally
represent a percentage of funded  amounts of leases,  contracts  and loans.  The
resulting charge is included in the provision for credit losses.




                                      -14-
<PAGE>

     Leases, service contracts,  and loans are charged against the allowance for
credit  losses  and  are  put  on  non-accrual   when  they  are  deemed  to  be
uncollectable.  Generally, the Company deems leases, service contracts and loans
to be  uncollectable  when one of the following occur: (i) the obligor files for
bankruptcy;  (ii) the obligor dies and the equipment is returned;  or (iii) when
an account has become 360 days delinquent. The typical monthly payment under the
Company's  leases is between  $30 and $50 per month.  As a result of these small
monthly  payments,  the  Company's  experience is that lessees will pay past due
amounts later in the process  because of the small amount  necessary to bring an
account  current (at 360 days past due, a lessee will only owe lease payments of
between $360 and $600).

     The Company has developed and regularly updates  proprietary credit scoring
systems  designed to improve  its risk based  pricing.  The Company  uses credit
scoring in most,  but not all, of its  extensions  of credit.  In addition,  the
Company  aggressively  employs  collection  procedures  and a legal  process  to
resolve any credit problems.

Results of Operations

     Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

     Total revenues for the year ended December 31, 1998 were $76.5 million,  an
increase of $8.3 million,  or 12.2%,  from the year ended December 31, 1997, due
primarily to increases of $7.4 million, or 65.5%, in rental and service contract
income and $1.7 million,  or 3.7%, in income on financing  leases and loans over
such amounts in the previous  year's period.  The increase in rental and service
contract  income  came  from an  increase  in the  number of  lessees  that have
continued  renting the equipment beyond the original lease term and the increase
in the number of service contracts in the Company's  portfolio.  The increase in
income on  financing  leases and loans  arose from the  continued  growth in the
Company's lease and loan portfolio.

     Selling,  general and administrative  expenses  increased $2.8 million,  or
16.2%,  for the year  ended  December  31,  1998 as  compared  to the year ended
December 31, 1997.  The increase was  primarily  attributable  to an increase in
personnel,  resulting in a 19.8% increase in employee-related  expenses,  as the
number  of  employees  needed to  maintain  and  manage  the  Company's  growing
portfolio and the general expansion of the Company's operations grew. Management
expects that  salaries and  employee-related  expenses,  marketing  expenses and
other selling,  general and administrative expenses will continue to increase as
the portfolio  grows because of the  requirements  of maintaining  the Company's
microticket portfolio and the Company's focus on collections.

     The Company's  provision for credit losses  decreased $2.6 million from the
year ended  December 31, 1997 to $19.1  million for the year ended  December 31,
1998.  This decrease  resulted from an increase in recoveries  and the Company's
estimate of future losses.

     Depreciation and amortization  expense  increased by $1.3 million,  or 34%,
due to the  increased  number of rental  contracts and the  amortization  of the
investment associated with service contracts.

     Interest expense increased by $264,000, or 2.2%, from $11.9 million for the
year ended  December 31, 1997 to $12.2  million for the year ended  December 31,
1998. This increase resulted from an increase in the average outstanding balance
of the Company's Credit Facilities.

     As a result of the  foregoing,  the Company's net income  increased by $4.3
million,  or 55.8%,  from $7.7  million for the year ended  December 31, 1997 to
$11.9 million for the year ended December 31, 1998.




                                      -15-
<PAGE>

     Dealer  Fundings  were $105.2  million  during the year ended  December 31,
1998,  an  increase  of $27.6  million,  or 35.6%,  compared  to the year  ended
December 31, 1997.  This increase  primarily  resulted from continued  growth in
leases of  equipment  other  than POS  authorization  systems,  acquisitions  of
service  contracts  and  loans  to  commercial  businesses.  Receivable  due  in
installments,  estimated  residual  values,  loans  receivable and investment in
service  contracts  also increased from $260 million for the year ended December
31, 1997 to $288.7 million for the year ended December 31, 1998, representing an
increase of $28.7 million,  or 11%. Cash collections  increased by $20.8 million
to $139.2 million  during the year ended  December 31, 1998, or 17.6%,  from the
year  ended  December  31,  1997  because  of the  increase  in the  size of the
Company's  overall  portfolio  as well as the  Company's  continued  emphasis on
collections. Unearned income increased $1.4 million, or 1.9%, from $73.1 million
at December 31, 1997 to $74.5  million at December 31, 1998.  This  increase was
due to the increased number of leases originated during 1998.

     Year Ended December 31, 1997 Compared to Year Ended December 31, 1996.

     Total revenues for the year ended December 31, 1997 were $68.2 million,  an
increase of $12.6 million,  or 22.7%, from the year ended December 31, 1996, due
to increases of $7.0 million, or 18.1%, in income on financing leases and loans,
$2.6 million,  or 31.0%,  in rental income and $2.6  million,  or 29.5%,  in fee
income.  The increase in income on leases and loans was  primarily the result of
the continued  growth in the Company's lease  portfolio.  The increase in rental
income is due to the  increased  number of  lessees  who  continued  to rent the
equipment  beyond the  original  lease  term.  The  increase in fee income was a
result of the increase in the overall portfolio serviced by the Company.

     The Company completed two portfolio acquisitions,  one in May 1996 for $1.9
million of rental  contracts  and a second in December  1996 for $7.9 million of
leases.  The income  attributable to these acquired leases and rental  contracts
represented  approximately $2.2 million,  or 4.7%, of total income on leases and
loans and rental income for 1996 and  approximately  $4.4  million,  or 7.8%, of
total income on leases and loans and rental income for 1997.

     Selling,  general and administrative  expenses  increased $3.2 million,  or
22.6%,  for the year  ended  December  31,  1997 as  compared  to the year ended
December 31, 1996. Such increase was primarily attributable to a 20% increase in
the number of employees  needed to maintain and manage the  Company's  increased
portfolio,  the  general  expansion  of the  Company's  operations  and the more
competitive employment environment.

     The Company's  provision for credit  losses  increased by $1.9 million,  or
9.5%, from $19.8 million in 1996 to $21.7 million in 1997. The higher  provision
was due to a one-time write-off of securitized receivables of $9.5 million, $5.1
million in one-time write-offs of satellite television equipment receivables and
growth in the  overall  size of the  Company's  portfolio.  The  Company's  1997
provision  reflected a  cumulative  write-off  of  non-accruing  fully  reserved
receivables in the Company's  securitized  portfolio.  The Company wrote off the
$5.1 million in satellite television  equipment  receivables in 1997 sooner than
its normal 360-day policy because it was the Company's  experience  that certain
characteristics  of consumer  receivables  which were different from  commercial
receivables  would render such  receivables  uncollectable  under the  Company's
normal collection procedures.

     Depreciation and amortization expense increased by $806,000, or 27.0%, from
1996  to  1997  due  to  the  increased  number  of  rental  contracts  and  the
amortization of the investment costs associated with service contracts.

     Interest expense increased by $1.7 million, from $10.2 million for the year
ended  December 31, 1996 to $11.9  million in 1997.  This increase was primarily
due to an increase in the average  outstanding  balances of the Company's Credit
Facilities and Subordinated Debt.



                                      -16-
<PAGE>



     As a result of these  factors,  net income  increased by $2.6  million,  or
50.6%,  from $5.1 million in the year ended December 31, 1996 to $7.7 million in
the year ended December 31, 1997.

     Dealer  Fundings were $77.6 million for the fiscal year ended  December 31,
1997,  an increase of $3.9 million,  or 5.3%,  compared to $73.7 million for the
fiscal year ended December 31, 1996.  The Company  decided in July 1996 to scale
back its Dealer  Fundings of consumer  satellite  television  equipment  leases,
funding to Dealers  only $0.8  million of such  leases in 1997  compared to $4.7
million in 1996.  Excluding  this factor,  the Company had an increase in Dealer
Fundings of $7.8 million,  or 11.3%, over 1996. This increase primarily resulted
from  continued  growth in  leases of  equipment  other  than POS  authorization
systems,  acquisitions of service contracts and loans to commercial  businesses.
Gross  investment in leases and loans also increased from $247.6 million in 1996
to $258.2  million at  December  31,  1997,  representing  an  increase of $10.6
million,  or 4.3%. Cash collections  increased by $31.3 million,  or 35.9%, from
$87.1 million in 1996 to $118.4  million in 1997 due to the increase in the size
of the Company's overall portfolio,  as well as the Company's continued emphasis
on  collections.  Unearned  income  decreased $3.9 million,  or 5.1%, from $77.0
million at  December  31,  1996 to $73.1  million at  December  31,  1997.  This
decrease resulted primarily from increased acquisitions of service contracts and
originations of loans which are accounted for on a cost basis and as a result do
not  have  any  unearned  income  associated  with  them,  as well  as  one-time
write-offs  in  1997  of  approximately   $5.0  million  in  consumer  satellite
television   equipment  lease   receivables  and  $9.5  million  of  securitized
receivables and the corresponding unearned income associated with those leases.

     Year Ended December 31, 1996 Compared to the Year Ended December 31, 1995.

     Total  revenues  for fiscal  year 1996 were $55.6  million,  an increase of
$19.4  million,  or 53.8% over  fiscal  year  1995,  due to  increases  of $11.6
million,  or 43.1%, in income on financing  leases and loans,  $4.6 million,  or
123.9%,  in rental income and $3.2 million,  or 59.3%, in total fee income.  The
increase in income on leases and loans was the result of the continued growth in
the Company's lease  portfolio in 1996,  while the increase in rental income was
due to the increased number of lessees who continue to rent the equipment beyond
the original lease term including as a result of two lease and rental  portfolio
acquisitions  with  fundings  of $1.9  million  in May 1996 and $7.9  million in
December  1996.  The income  attributable  to these  acquired  leases and rental
contracts  represented  approximately $2.2 million,  or 4.7%, of total income on
leases and loans and rental income for 1996. Fee income increased as a result of
the continued growth in the overall portfolio serviced by the Company.

     Selling,  general and  administrative  expenses were $14.1 million in 1996,
representing an increase of 65.9% over such expenses in 1995, due primarily to a
34%  increase  in the  number of  personnel  and the  significant  growth in the
Company's lease portfolio from 1995 to 1996.


     The Company's  provision  for credit losses  increased by $6.4 million from
$13.4  million in 1995 to $19.8 million in 1996.  Approximately  $5.0 million of
the increase was to replenish  the allowance for credit losses due to the change
in the write-off period from 360 days to 240 days in the third quarter of 1996.

     Depreciation and amortization  expense  increased by $1.5 million from $1.5
million in 1995 to $3.0 million in 1996.  This increase was due to the increased
number of rental contracts in the Company's portfolio.

     Interest expense increased by $1.6 million,  or 18.7%, from $8.6 million in
1995 to $10.2 million in 1996. This increase was primarily due to an increase in
the  average  outstanding  balances  of  the  Company's  Credit  Facilities  and
Subordinated Debt.

     As a result of these  factors,  net income  increased by $2.6  million,  or
101.3%,  from $2.5 million for the year ended  December 31, 1995 to $5.1 million
in the year ended December 31, 1996.




                                      -17-
<PAGE>

     Dealer Fundings were $73.7 million in 1996, a decrease of $2.8 million,  or
3.7%, over the $76.5 million funded during 1995. The decrease in Dealer Fundings
in  1996,   excluding  portfolio  purchases,   was  primarily   attributable  to
management's  focus on maintaining  higher rates of return on POS  authorization
systems,  exiting the business of origination of consumer  satellite  television
equipment leases and performing  developmental  work to reposition the Company's
efforts in other  commercial and  residential  markets,  including the design of
more competitive  products,  a  product-specific  sales approach,  and a renewed
focus on service contracts.  Gross investment in leases and loans also increased
from $189.7  million at December  31,  1995,  to $247.6  million at December 31,
1996,  representing  a 30.5%  increase.  Cash collected was $87.1 million during
1996, an increase of $26.5 million,  or 43.7%,  over the $60.6 million collected
in 1995.  This  increase  was due to the  increase in the size of the  Company's
overall portfolio,  as well as the Company's  continued emphasis on collections.
Unearned  income  increased  $16.7  million,  or 27.7%,  from  $60.3  million at
December 31, 1995 to $77.0 million at December 31, 1996. This increase  resulted
from an increase in the size of the Company's lease portfolio.

Liquidity and Capital Resources

     General

     The Company's lease and finance business is capital-intensive  and requires
access to  substantial  short-term  and  long-term  credit  to fund new  leases,
contracts  and loans.  Since  inception,  the Company has funded its  operations
primarily  through  borrowings  under  its  Credit   Facilities,   issuances  of
Subordinated  Debt and its on-balance  sheet  Securitizations.  The Company will
continue to require  significant  additional  capital to maintain and expand its
volume of  leases,  contracts  and loans  funded,  as well as to fund any future
acquisitions of leasing companies or portfolios.

     The  Company's  uses of cash include the  origination  and  acquisition  of
leases,  contracts  and  loans,  payment  of  interest  expenses,  repayment  of
borrowings under its Credit Facilities,  Subordinated Debt and  Securitizations,
payment of  selling,  general  and  administrative  expenses,  income  taxes and
capital expenditures.

     The Company  utilizes its Credit  Facilities  to fund the  origination  and
acquisition  of leases that  satisfy the  eligibility  requirements  established
pursuant to each  facility.  At December 31, 1998,  the Company had an aggregate
maximum of $140 million available for borrowing under two Credit Facilities,  of
which  approximately  $62.7 million was  outstanding as of such date. On January
27, 1999, the Company reduced the amount  available under the Credit  Facilities
to $110 million. The Company also uses its Subordinated Debt program as a source
of funding for potential  acquisitions  of portfolios and leases which otherwise
are not  eligible  for funding  under the Credit  Facilities  and for  potential
portfolio  purchases.  The Company  used the  proceeds  from its initial  public
offering to repay $45,486,109 million owed under the Credit Facilities. To date,
cash  flow from its  portfolio  and other  fees  have been  sufficient  to repay
amounts borrowed under the Credit Facilities and Subordinated Debt.

     The Company  believes that cash flow from its operations,  the net proceeds
to the Company of the Offering and amounts available under its Credit Facilities
will be sufficient to fund the Company's  operations for the foreseeable future.
Although  the  Company is not  currently  involved  in  negotiations  and has no
current  commitments  or  agreements  with respect to any  acquisitions,  to the
extent  that  the  Company  successfully  consummates  acquisitions,  it  may be
necessary to finance such  acquisitions  through the issuance of additional debt
or equity securities, the incurrence of indebtedness or a combination of both.

Recently Issued Accounting Pronouncements

     See Note B of the notes to the consolidated  financial  statements included
herein  for  a  discussion   of  the  impact  of  recently   issued   accounting
pronouncements.

Year 2000

     Many  computer  programs and  microprocessors  were  designed and developed
without  consideration  of the impact of the  transition  to the year 2000. As a
result,  these  programs and  microprocessors  may not be able to  differentiate
between  the year  "1900" and  "2000";  the year 2000 may be  recognized  as the
two-digit  number  "00".  If not  corrected,  this could cause  difficulties  in
obtaining accurate system data and support.


                                      -18-
<PAGE>

     The Company has designed and purchased  numerous computer systems since its
inception.  The Company's owned software and hardware is substantially Year 2000
compliant. The costs associated with such compliance will not be material to the
Company's  liquidity or results of operations.  The Company  believes,  based on
written  and verbal  advice  from its  vendors,  that its  critical  third party
software  is  generally  Year 2000  compliant,  with minor  issues,  and will be
capable of functioning  after December 31, 1999.  However,  the Company does and
will continue to interconnect  certain  portions of its network and systems with
other companies' networks and systems,  certain of which may not be as Year 2000
compliant as those  installed by the  Company.  While the Company has  discussed
these matters with,  and/or  obtained  written  certifications  from, such other
companies as to their Year 2000  compliance,  there can be no assurance that any
potential impact  associated with  incompatible  systems after December 31, 1999
would not have a material  adverse effect on the Company's  business,  financial
condition or results of operations.

ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market-Rate-Sensitive Instruments and Risk Management

     The following  discussion  about the Company's risk  management  activities
includes  "forward-looking  statements"  that  involve  risk and  uncertainties.
Actual   results   could  differ   materially   from  those   projected  in  the
forward-looking statements.

     This analysis  presents the hypothetical  loss in earnings,  cash flows, or
fair value of the financial  instrument and derivative  instruments  held by the
Company at December 31, 1998,  that are sensitive to changes in interest  rates.
The Company  uses  interest-rate  swaps to manage the primary  market  exposures
associated with underlying liabilities and anticipated transactions. The Company
uses these  instruments to reduce risk by creating  offsetting market exposures.
The instruments held by the Company are not held for trading purposes.

     In the normal course of  operations,  the Company also faces risks that are
either nonfinancial or  nonquantifiable.  Such risks principally include country
risk,  credit risk, and legal risk, and are not represented in the analysis that
follows.

Interest Rate Risk Management

     This analysis  presents the hypothetical  loss in earnings of the financial
instruments and derivative  instruments held by the Company at December 31, 1998
that are  sensitive  to changes in  interest  rates.  The  Company  enters  into
interest  rate swaps to reduce  exposure  to  interest-rate  risk  connected  to
existing  liabilities.  The Company does not hold or issue derivative  financial
instruments for trading purposes.

     Because the  Company's  net-earnings  exposure  under the combined debt and
interest-rate  swap was to 90-day LIBOR,  the  hypothetical  loss was modeled by
calculating the 10 percent  adverse change in 90-day LIBOR and then  multiplying
it by the face amount of the debt (which equaled the face amount of the interest
rate swap).

     The implicit yield to the Company on all of its leases, contracts and loans
is on a fixed interest rate basis due to the leases,  contracts and loans having
scheduled  payments that are fixed at the time of origination of the lease. When
the Company  originates  or acquires  leases,  contracts  and loans it bases its
pricing in part on the "spread" it expects to achieve between the implicit yield
rate to the Company on each lease and the  effective  interest  cost it will pay
when it finances such leases, contracts and loans through its Credit Facilities.
Increases  in interest  rates  during the term of each  lease,  contract or loan
could  narrow or  eliminate  the  spread,  or result in a negative  spread.  The
Company has adopted a policy  designed to protect itself  against  interest rate
volatility during the term of each lease, contract or loan.





                                      -19-
<PAGE>

     Given the relatively short average life of the Company's leases,  contracts
and loans,  the  Company's  goal is to  maintain  a blend of fixed and  variable
interest rate  obligations.  As of December 31, 1998, the Company's  outstanding
fixed rate indebtedness,  including indebtedness outstanding under the Company's
Securitizations   and   indebtedness   subject  to  the  swap  described  below,
represented 60.4% of the Company's outstanding  indebtedness.  In July 1997, the
Company  entered into an interest rate swap  arrangement  with one of its banks.
This  arrangement,  which expires in July 2000,  has a notional  amount of $17.5
million  which  represented  9.5%  of  the  Company's  fixed  rate  indebtedness
outstanding at December 31, 1998. The interest rate  associated with the swap is
capped at 6.6%. During the term of the swap, the Company has agreed to match the
swap  amount  with  90-day  LIBOR  loans.  If at any time the 90-day  LIBOR rate
exceeds the swap cap of 6.6%,  the bank would pay the  Company  the  difference.
Through  December  31,  1998,  the  Company  had  entered  into LIBOR loans with
interest  rates ranging from 7.1938% to 7.4103%.  This  arrangement  effectively
changes the  Company's  floating  interest  rate  exposure on the $17.5  million
notional amount to a fixed rate of 8.45%.

     The  aggregate  hypothetical  loss in  earnings  on an annual  basis on all
financial instruments and derivative instruments that would have resulted from a
hypothetical increase of 10 percent in 90-day LIBOR, sustained for one month, is
estimated to be $32,200.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Included in Exhibit 99 incorporated by reference herein.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     Not applicable.

                                    PART III

ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Name                Age           Position

Peter R. Bleyleben       45   President, Chief Executive Officer and Director

Brian E. Boyle(1)(2)     50   Director

Torrence C. Harder(1)(2) 55   Director

Jeffrey P. Parker        55   Director

Alan J. Zakon(1)(2)      63   Director

Richard F. Latour        45   Executive Vice President, Chief Operating Officer,
                              Chief Financial Officer, Treasurer, Clerk and
                              Secretary

J. Gregory Hines         38   Vice President, Funding

John Plumlee             47   Vice President, MIS

Carol A. Salvo           32   Vice President, Legal

(1) Member of Audit Committee
(2) Member of Compensation Committee

     Set forth below is a brief  description  of the business  experience of the
directors and executive officers of the Company.





                                      -20-
<PAGE>

     Peter R.  Bleyleben has served as President,  Chief  Executive  Officer and
Director of the Company or its predecessor  since June 1987.  Before joining the
Company,  Dr. Bleyleben was Vice President and Director of the Boston Consulting
Group,  Inc.  ("BCG") in Boston.  During his more than eight years with BCG, Dr.
Bleyleben  focused  his  professional   strategic  consulting  practice  on  the
financial services and telecommunications  industries. Prior to joining BCG, Dr.
Bleyleben earned an M.B.A. with distinction and honors from the Harvard Business
School,  an  M.B.A.  and a  Ph.D.  in  Business  Administration  and  Economics,
respectively,  from the Vienna Business School in Vienna,  Austria and a B.S. in
Computer Science from the Vienna Institute of Technology.

     Brian E. Boyle,  the Chief  Executive  Officer of the Company  from 1985 to
1987 and Chairman of the Board of Directors  from 1985 to 1995,  has served as a
Director of the Company or its predecessor  since 1985. He is currently the Vice
Chairman and a Director of Boston Communications Group, Inc. ("Communications"),
a Boston-based  provider of switch-based  call processing to the global wireless
industry. Prior to joining Communications,  Dr. Boyle was the Chairman and Chief
Executive Officer of Credit Technologies,  Inc., a Massachusetts-based  provider
of credit decision and customer acquisition  software,  from 1989 to 1993. He is
also a Director of Saville Systems, a global telecommunications billing software
company,  with its United States headquarters in Burlington,  Massachusetts,  as
well as of several private  companies.  Dr. Boyle earned his A.B. in Mathematics
and  Economics  from Amherst  College and a B.S. in Electrical  Engineering  and
Computer  Science,  an  M.S.  in  Operations  Research,  an E.E.  in  Electrical
Engineering and Computer  Science and a Ph.D. in Operations  Research,  all from
the Massachusetts Institute of Technology.

     Torrence C.  Harder has served as a Director of the Company  since 1986 and
has served as Chairman of the Compensation Committee since 1997. He has been the
President  and  Director  of  Harder  Management  Company,  Inc.,  a  registered
investment  advisory firm, since its establishment in 1971. He has also been the
President  and Director of  Entrepreneurial  Ventures,  Inc., a venture  capital
investment  firm,  since its  founding  in 1986.  Mr.  Harder is a  Director  of
Lightbridge,  Inc., a wireless industry software services provider,  Dent-A-Med,
Inc., RentGrow,  Inc., GWA Information  Systems,  Inc., Trade Credit Corporation
and UpToDate in  Medicine,  Inc. Mr.  Harder  earned an M.B.A.  from the Wharton
School  of the  University  of  Pennsylvania,  and a  B.A.  with  honors  in the
Philosophy of Economic Thought from Cornell University.

     Jeffrey P. Parker has served as a Director of the Company since 1992. He is
the  founder  and has  served  since  1997 as the  Chief  Executive  Officer  of
CCBN.COM,  a world wide web information  services company based in Boston. He is
also the founder and has served since 1991 as the  managing  director of Private
Equity Investments,  a venture capital firm focusing on start-up and early stage
companies.  Mr.  Parker  is  a  Director  of  Boston  Treasury  Systems,  FaxNet
Corporation,  Pacific Sun Industries,  Vintage Partners and XcelleNet,  Inc. Mr.
Parker  earned  a B.A.,  an M.A.  in  Engineering  and an  M.B.A.  from  Cornell
University.

     Alan J. Zakon has served as a Director  of the  Company  since 1988 and has
served as Chairman of the Audit  Committee  since 1997.  Since 1995, he has been
the Vice  Chairman  and a Director,  and since  November  1997,  Chairman of the
Executive Committee, of Autotote Corporation, a New York-based global gaming and
simulcasting   company.   He  served  as  Managing  Director  of  Bankers  Trust
Corporation  from 1989 to 1995 where he was  Chairman  of the  Strategic  Policy
Committee.  Dr.  Zakon is a Director of  Arkansas-Best  Freight  Corporation,  a
nationwide  commercial  transportation  and trucking company.  Dr. Zakon holds a
B.A. from Harvard University,  an M.S. in Industrial  Management from the Sloane
School at the Massachusetts Institute of Technology and a Ph.D. in Economics and
Finance from the University of California at Los Angeles.



                                      -21-
<PAGE>

     Richard F. Latour has served as Executive Vice  President,  Chief Operating
Officer, Chief Financial Officer,  Treasurer, Clerk and Secretary of the Company
since 1995.  From 1986 to 1995,  Mr.  Latour was Vice  President  of Finance and
Chief Financial Officer of the Company. Prior to joining the Company, Mr. Latour
was  Vice  President,   Finance  for  TRAK,   Incorporated,   an   international
manufacturer and distributor of consumer products,  where he was responsible for
all financial and related administrative functions.

     J. Gregory Hines has served as Vice President, Funding since 1993. From the
time he joined the Company in 1992 until 1993, Mr. Hines served as funds manager
of the Company.  Prior to joining the Company,  Mr. Hines was an assistant  vice
president in the Equipment Finance Division at the Bank of New England, N.A. and
Fleet National Bank.

     John Plumlee has served as Vice President,  MIS, of the Company since 1990.
Prior to joining the Company,  Mr. Plumlee was Vice President of M.M.C., Inc., a
firm focusing on the delivery of software services to local governments.

     Carol A. Salvo has served as Vice  President,  Legal,  of the Company since
1996.  From 1992 to 1995,  Ms.  Salvo  served as  Litigation  Supervisor  of the
Company.  From 1995 to 1996,  Ms. Salvo  served as Director of Legal  Collection
Services of the Company.  Prior to joining the  Company,  Ms. Salvo was a junior
accountant with InfoPlus Inc.

     The  directors of the Company have been  divided,  with respect to the time
for which they  severally hold office,  into three  classes,  as nearly equal in
number as possible,  with the term of office of the first class to expire at the
1999 annual meeting of the  stockholders  of the Company,  the term of office of
the second class to expire at the 2000 annual meeting of the stockholders of the
Company  and the term of office of the third  class to expire at the 2001 annual
meeting of the  stockholders  of the Company,  with each director to hold office
until his or her  successor  shall have been duly elected and qualified or until
his  or  her  earlier  removal  or  resignation.   At  each  annual  meeting  of
stockholders of the Company,  commencing with the 1999 annual meeting, directors
elected to succeed those  directors whose terms then expire shall be elected for
a term of  office  to  expire at the  third  succeeding  annual  meeting  of the
stockholders  of the  Company  after  their  election.  In  accordance  with the
foregoing,  Peter  Bleyleben's  term as a director of the Company expires at the
2001 annual  meeting of the  stockholders  of the Company,  Brian Boyle and Alan
Zakon's  respective  terms as directors of the Company expire at the 2000 annual
meeting of the  stockholders  of the  Company  and  Torrence  Harder and Jeffrey
Parker's  respective terms as directors of the Company expire at the 1999 annual
meeting of the stockholders of the Company.




                                      -22-

<PAGE>

ITEM 11.     EXECUTIVE COMPENSATION

     The  following  table sets forth the  compensation  of the Chief  Executive
Officer and the four most highly  compensated  executive  officers for the years
ended  December  31,  1998,  1997 and 1996  (the  "Named  Executive  Officers").
Determination of the most highly  compensated  executive  officers is based upon
compensation  for the Company's fiscal year ended December 31, 1998 and does not
necessarily  reflect  the most highly  compensated  executive  officers  for the
Company's fiscal years ended December 31, 1997 and 1996.
<TABLE>
<CAPTION>

                         Summary Compensation Table (1)

                                                              Annual Compensation
                                                          -------------------------
Name and Principal Position                  Year         Salary           Bonus (2)     All Other Compensation
                                             ----         ------           --------      ----------------------

<S>                                         <C>        <C>                <C>              <C>
Peter R. Bleyleben....................       1998       $250,888           $364,000        $   65,245 (3)
President, Chief Executive Officer           1997        218,798            276,730            71,072
and Director                                 1996        187,837            214,073            73,674
Richard F. Latour....................        1998        198,446            244,568            45,690 (4)
Executive Vice President, Chief              1997        169,495            153,755 (5)        49,680
Operating Officer, Chief Financial           1996        134,535             43,000            44,381
Officer, Treasurer, Clerk and Secretary
J. Gregory Hines.....................        1998        106,951             42,095             4,281 (6)
Vice President, Funding                      1997         87,348             26,950             3,206
                                             1996         79,853             10,320             2,256
John Plumlee.........................        1998        141,351             44,533            21,191 (7)
Vice President, MIS                          1997        124,624             29,769            20,687
                                             1996        108,657             14,346            18,603
Carol Salvo..........................        1998         84,677             34,734             4,022 (8)
Vice President, Legal                        1997         66,368             15,781             2,170
                                             1996         47,190              3,817             1,502
</TABLE>

(1)  Columns  required  by the  rules  and  regulations  of the  Securities  and
     Exchange Commission that contain no entries have been omitted.

(2)  Bonuses are paid over a  three-year  period,  with  one-third  payable each
     year. The remaining  two-thirds is subject to  discretionary  review by the
     Company and, therefore, does not vest to the employee. The bonus amount set
     forth for each fiscal year thus  represents  the amount  actually  paid for
     such fiscal year, plus amounts relating to the prior two fiscal years.



                                      -23-
<PAGE>

(3)  Amounts for Dr. Bleyleben  include:  (a) contributions by the Company under
     the Company's 401(k) retirement/profit  sharing plan in 1998 ($4,000), 1997
     ($4,470) and 1996 ($4,500);  (b) split dollar life insurance  premiums paid
     by the Company in 1998 ($54,156), 1997 ($62,461) and 1996 ($60,515) (in the
     event of the death of Dr.  Bleyleben,  the  Company is entitled to the cash
     value under such plan with the  beneficiary  receiving  the life  insurance
     portion thereof);  (c) executive  disability insurance policy premiums paid
     by the Company in 1998 ($7,089),  1997 ($3,546) and  1996($3,546);  and (d)
     the benefit to the executive of interest-free  loans from the Company based
     on the  applicable  federal  rate in effect on the date of issuance of each
     such loan, in 1997 ($595) and 1996 ($5,113).

(4)  Amounts for Mr. Latour include:  (a) contributions by the Company under the
     Company's  401(k)  retirement/profit  sharing plan in 1998  ($4,000),  1997
     ($4,500) and 1996 ($4,435);  (b) split dollar life insurance  premiums paid
     by the Company in 1998 ($34,917), 1997 ($40,501) and 1996 ($35,067) (in the
     event of the death of Mr. Latour, the Company is entitled to the cash value
     under such plan with the beneficiary  receiving the life insurance  portion
     thereof);  (c) executive  disability  insurance policy premiums paid by the
     Company in 1998  ($3,028),  1997  ($1,586) and 1996  ($2,460);  and (d) the
     benefit to the executive of  interest-free  loans from the Company based on
     the applicable  federal rate in effect on the date of issuance of each such
     loan, in 1998 ($3,745), 1997 ($3,093) and 1996 ($2,419).

(5)  Does not include  $179,745 which related to bonuses  awarded in prior years
     and deferred until 1997 at Mr. Latour's option.

(6)  Amounts for Mr. Hines include:  (a)  contributions by the Company under the
     Company's  401(k)  retirement/profit  sharing plan in 1998  ($2,738),  1997
     ($2,273) and 1996 ($1,963);  (b) term life  insurance  premiums paid by the
     Company in 1998 ($84), 1997 ($84) and 1996 ($76); (c) executive  disability
     insurance  policy premiums paid by the Company in 1998 ($602),  1997 ($434)
     and 1996  ($217);  and (d) the benefit to the  executive  of  interest-free
     loans from the Company  based on the  applicable  federal rate in effect on
     the date of issuance of each such loan, in 1998 ($857) and 1997 ($415).

(7)  Amounts for Mr. Plumlee include: (a) contributions by the Company under the
     Company's  401(k)  retirement/profit  sharing plan in 1998  ($3,870),  1997
     ($3,722) and 1996 ($2,991);  (b) split dollar life insurance  premiums paid
     by the Company in 1998 ($15,000), 1997 ($15,113) and 1996 ($15,104) (in the
     event of the death of Mr.  Plumlee,  the  Company is  entitled  to the cash
     value under such plan with the  beneficiary  receiving  the life  insurance
     portion thereof);  (c) executive  disability insurance policy premiums paid
     by the Company in 1998 ($1,016), 1997 ($1,016) and 1996 ($508); and (d) the
     benefit to the executive of  interest-free  loans from the Company based on
     the applicable  federal rate in effect on the date of issuance of each such
     loan, in 1998 ($1,305) and 1997 ($836).

(8)  Amounts for Ms. Salvo include:  (a)  contributions by the Company under the
     Company's  401(k)  retirement/profit  sharing plan in 1998  ($2,597),  1997
     ($1,686) and 1996 ($1,447);  (b) term life  insurance  premiums paid by the
     Company in 1998 ($84), 1997 ($69) and 1996 ($55); (c) executive  disability
     insurance  policy premiums paid by the Company in 1998 ($485);  and (d) the
     benefit to the executive of  interest-free  loans from the Company based on
     the applicable  federal rate in effect on the date of issuance of each such
     loan, in 1998 ($857) and 1997 ($415).



                                      -24-
<PAGE>

     The Board of Directors of the Company is comprised of five  Directors,  one
of whom, Peter Bleyleben,  is a salaried employee of the Company who receives no
additional  compensation for services rendered as a Director. The members of the
Company's Board of Directors who are not employees of the Company ("Non-Employee
Directors")  received  compensation under the Company's Board of Directors Stock
Unit Compensation Plan (the "Stock Unit Plan") for their service on the Board of
Directors.  Directors  also are  reimbursed  for  out-of-state  travel  expenses
incurred in connection with attendance at meetings of the Board of Directors and
committees thereof. In addition,  the Company pays for health care insurance for
each Non-Employee Director.

     The Company  adopted the Stock Unit Plan in February  1997.  The Stock Unit
Plan was  terminated  effective as of February  10,  1999.  Under the Stock Unit
Plan,  Non-Employee  Directors  who  did not  serve  as  committee  chairpersons
received up to $30,000 per year,  payable  $3,750 per meeting in cash and $3,750
per meeting in stock units (the "Stock Units").  Committee chairpersons received
up to  $35,000  per year,  payable  $4,375  per  meeting  in cash and $4,375 per
meeting  in Stock  Units.  Under the  Stock  Unit  Plan,  the  Company  paid the
participant  the  cash  amount   currently  and  credited  Stock  Units  in  the
appropriate  amounts  to a  deferred  fee  account  on the date of the  Board of
Directors or Committee meeting.  Each Stock Unit in the deferred fee account was
valued at the time each such  credit was made at the  then-current  value of the
Common  Stock,  as that value was  determined  from time to time by the Board of
Directors.  The number of Stock Units credited to each  Non-Employee  Director's
deferred fee account and the value  placed on each Stock Unit was  appropriately
adjusted in the event of a stock  dividend,  stock split or other similar change
affecting the Common Stock.

     As of December 31, 1998, Dr. Boyle,  Mr.  Harder,  Mr. Parker and Dr. Zakon
had 3,665.75,  4,276.71,  3,665.75 and 4,276.71 Stock Units in their  respective
accounts.

     Since the Stock Unit Plan has been terminated,  each Non-Employee  Director
will receive a cash payment, in equal quarterly  installments  starting with the
second quarter of 1999, in an amount equal to the number of Stock Units in their
respective accounts multiplied by $13.95.

     There were no stock options  awarded in 1998 under the Company's 1987 Stock
Option Plan or the 1998 Equity Incentive Plan. The following table indicates the
aggregate  option  exercises in 1998 by the Named Executive  Officers and fiscal
year-end option values:


                                      -25-
<PAGE>

<TABLE>
<CAPTION>

                 AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1998
                        AND FISCAL YEAR-END OPTION VALUES

                                                               Number of Securities                Value of Unexercised
                                                          Underlying Unexercised Options      In-The-Money Options at Fiscal
                                                                at Fiscal Year-End                     Year-End(1)
                                                          --------------------------------    -------------------------------
                            Shares
                         Acquired On
                           Exercise       Value
Name                                      Realized(1)     Exercisable      Unexercisable      Exercisable     Unexercisable
                         -------------    -----------     -------------    ---------------    ------------    ---------------
<S>                         <C>           <C>                <C>                <C>            <C>                <C>
Peter R. Bleyleben..              0             $0                 0                  0              $0                 $0
Richard F. Latour...         40,262        354,244                 0             38,778               0            395,835
J. Gregory Hines....         13,420        116,842                 0             14,920               0            153,719
John Plumlee........         11,940         96,982                 0             12,000               0            120,552
Carol Salvo.........         11,940         96,982                 0             12,000               0            120,552

</TABLE>

(1)  The amounts in these columns are calculated  using the  difference  between
     the fair market value of the  Company's  Common Stock at exercise or at the
     end of the  Company's  1998 fiscal year, as the case may be, and the option
     exercise prices. The Board of Directors determines the fair market value of
     the Company's  Common Stock in connection with the Stock Unit Plan based on
     a formula which values the Company at a multiple  (determined  by reference
     to an index of publicly traded companies) of the Company's most recent four
     quarters net income,  multiplied by a discount  factor to take into account
     the illiquidity of the Common Stock. The most recent value as so determined
     by the Board of Directors was used in such calculations.

     The  Company  pays  annual  bonuses and makes  profit  sharing  payments as
determined  by the  Compensation  Committee  of the  Board of  Directors.  These
payments are made under  informal  arrangements  and are based on an  employee's
performance during the prior fiscal year.  Historically,  the Board of Directors
has determined  annual bonus and profit sharing  payments for Dr.  Bleyleben and
Mr. Latour.  The Board of Directors  also  establishes a pool to be allocated by
Dr.  Bleyleben and Mr. Latour on an annual basis among senior  executives of the
Company.  Each employee is paid one-third of his or her bonus and profit sharing
at the time such amount is determined. The remaining two-thirds is paid over the
next two years in the discretion of the Board of Directors or Dr.  Bleyleben and
Mr. Latour based on Company and employee performance.

     The Company has entered into Employment  Agreements with Dr.  Bleyleben and
Mr.  Latour  for a  three-year  period  commencing  June 12,  1998,  subject  to
automatic  successive  one-year renewals unless terminated pursuant to the terms
thereof.  In the event of a  termination  of the  Employment  Agreements  by the
Company  without  cause,  or by Dr.  Bleyleben or Mr. Latour for specified  good
reason, the Employment  Agreements provide for three years of severance payments
to Dr.  Bleyleben and Mr.  Latour,  respectively,  on the basis of their highest
base salary during the employment  period.  In addition,  Dr.  Bleyleben and Mr.
Latour would also be entitled to a prorated  payment of base salary and bonus to
the date of  termination,  and the  acceleration  of deferred  compensation  and
accrued but unpaid  amounts  under the  Company's  bonus and/or  profit  sharing
plans. Dr. Bleyleben's and Mr. Latour's current base salaries, respectively, are
$260,000 and $210,000.  The bonus for the current fiscal year will be determined
by the  Board of  Directors.  If,  in  connection  with a  payment  under  their
Employment Agreement,  either Dr. Bleyleben or Mr. Latour shall incur any excise



                                      -26-
<PAGE>

tax  liability  on the  receipt of  "excess  parachute  payments"  as defined in
Section 280G of the Internal  Revenue Code of 1986, as amended,  the  Employment
Agreements  provide  for  gross-up  payments  to  return  them to the  after-tax
position they would have been in if no excise tax had been  imposed.  As used in
each  Employment  Agreement,  "for  good  reason"  means the  assignment  to the
executive  of duties  inconsistent  with the  executive's  position,  authority,
duties or  responsibilities;  the  failure by the Company to pay the agreed base
salary and  provide the  executive  with  benefits;  moving the  executive  to a
location outside of the metropolitan Boston, Massachusetts area; and the failure
by the  Company  to require a  successor  to assume  all  obligations  under the
Employment Agreement.

     The Company has also entered into separate employment  agreements with each
of the  remaining  Named  Executive  Officers  which are  designed to provide an
incentive to each  executive to remain with the Company  pending and following a
Change in Control (as defined below).  Each employment  agreement has an initial
term of one year following a Change in Control,  with automatic  extensions upon
the expiration of the initial  one-year term for successive  one-month  periods.
Pursuant to each employment agreement, the executive will be entitled to receive
an annual  base salary of not less than twelve  times the highest  monthly  base
salary paid or payable to the executive  within the twelve months  preceding the
Change in Control. If the employment  agreement is terminated by the Board other
than for cause,  death or  disability,  or is  terminated  by the  executive for
specified good reason, the Company shall pay to the executive in a cash lump sum
within 30 days after the date of  termination,  the  aggregate of the  following
amounts: (i) the executive's annual base salary through the date of termination;
(ii) a special  bonus in the  amount of  $575,000,  $600,000  and  $585,000  for
Messrs.  Hines  and  Plumlee  and  Ms.  Salvo,  respectively;  (iii)  any  other
compensation  previously  deferred by the  executive,  together with any accrued
interest or earnings thereon; and (iv) any accrued vacation pay.

     "Change in Control" means (i) the acquisition by any individual,  entity or
group  (within  the meaning of Section  13(d)(3)  or 14(d)(2) of the  Securities
Exchange Act of 1934, as amended (the "Exchange  Act")) of beneficial  ownership
(within the meaning of Rule 13d-3  promulgated under the Exchange Act) of 50% or
more of either  the then  outstanding  shares of  Common  Stock or the  combined
voting power of the then outstanding  voting  securities of the Company entitled
to vote generally in the election of directors;  (ii) individuals who, as of the
date of the  Company's  1998  Equity  Incentive  Plan  constitute  the  Board of
Directors,  cease for any reason to  constitute at least a majority of the Board
of  Directors  except with respect to any director who was approved by a vote of
at least a majority of the  directors  then  comprising  the Board of Directors;
(iii) approval by the shareholders of the Company of a reorganization, merger or
consolidation,  in each case, unless,  following such reorganization,  merger or
consolidation,  more than 60% of the then  outstanding  shares  of Common  Stock
continues to be owned by the  shareholders  who were the  beneficial  holders of
such stock prior to such  transaction;  or (iv) approval by the  shareholders of
the Company of a complete  liquidation or dissolution of the Company or the sale
or other disposition of all or substantially all of the assets of the Company.





                                      -27-
<PAGE>

ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL  OWNERS  AND MANAGEMENT

     The  following  table  sets  forth  information  as of March 12,  1998 with
respect to the beneficial  ownership of Common Stock of each person known by the
Company to be the beneficial owner of more than 5% of the 13,332,776 outstanding
shares of Common Stock,  each director and executive  officer of the Company and
all  directors  and executive  officers of the Company (not  including  treasury
stock) as a group.  Each person named has sole voting and investment  power with
respect to the shares indicated,  except as otherwise stated in the notes to the
table.

<TABLE>
<CAPTION>

                                              Number of Shares        Percentage Outstanding 
Name and Address of Beneficial Owner        Beneficially Owned (1)        of Common Stock
<S>                                            <C>                       <C>
Peter R. Bleyleben (2)                         1,555,410                    11.66%
66 Norfolk Road
Chestnut Hill, Massachusetts  02464

Brian E. Boyle (3)                             2,041,450                    15.31%
11 Whispering Lane
Weston, Massachusetts  02493

Torrence C. Harder (4)                         2,108,402                    15.81%
Walden Woods
657 Sudbury Road
Concord, Massachusetts  01742-4321

Jeffrey P. Parker (5)                            340,840                     2.56%
253 Meadowbrook Road
Weston, Massachusetts  02493

Alan J. Zakon                                     40,000                        *
31 Pumpkin Cay Road, Apartment A
Key Largo, Florida  33037

Richard F. Latour                                306,772                     2.30%
29 Cherubs Way
Hampstead, New Hampshire  03841

J. Gregory Hines                                  25,080                        *
14 Tory Treasure Lane
Sharon, Massachusetts  02067

John Plumlee                                      30,275                        *
97 By-Pass 28
Derry, New Hampshire  03038

Carol Salvo                                       18,000                        *
164 Albemarle Road
Norwood, Massachusetts  02062

All directors and executive officers
  as a group                                   6,466,229                     48.50%
  (9 persons)
*Less than 1%
</TABLE>

----------

(1)  Unless otherwise indicated in the footnotes, each of the stockholders named
     in this table has sole  voting  and  investment  power with  respect to the
     shares of Common  Stock shown as  beneficially  owned by such  stockholder,
     except to the extent that  authority is shared by spouses under  applicable
     law.

(2)  Includes 19,600 shares of Common Stock owned by Dr.  Bleyleben's mother for
     which Dr. Bleyleben disclaims beneficial ownership.

(3)  Includes  636,750 shares of Common Stock owned by Dr. Boyle's former spouse
     over which Dr. Boyle retains voting control,  for which Dr. Boyle disclaims
     beneficial ownership.


                                      -28-
<PAGE>

(4)  Includes  92,200  shares of  Common  Stock  held in trust for Mr.  Harder's
     daughter,  Lauren E. Harder,  over which Mr. Harder retains sole voting and
     investment  power as the sole  trustee and for which Mr.  Harder  disclaims
     beneficial  ownership;  92,200 shares of Common Stock held in trust for Mr.
     Harder's daughter, Ashley J. Harder, over which Mr. Harder maintains voting
     and investment power as the sole trustee and for which Mr. Harder disclaims
     beneficial   ownership;   346,372   shares   of  Common   Stock   owned  by
     Entrepreneurial  Ventures, Inc. over which Mr. Harder retains shared voting
     and  investment  power through his ownership in, and positions as President
     and Director  of,  Entrepreneurial  Ventures,  Inc.;  and 34,046  shares of
     Common  Stock owned by  Lightbridge,  Inc.  over which Mr.  Harder  retains
     shared voting and  investment  power through his ownership in, and position
     as  Director  of,  Lightbridge,   Inc.,  for  which  Mr.  Harder  disclaims
     beneficial ownership.

(5)  Owned by The  Parker  Family  Limited  Partnership  over  which Mr.  Parker
     retains  shared voting and  investment  power through his ownership in, and
     position as Director of, the general  partner of the Parker Family  Limited
     Partnership.



                                      -29-
<PAGE>

ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     During 1995,  1997 and 1998,  Richard F. Latour,  Executive Vice President,
Chief Operating Officer and Chief Financial Officer of the Company,  borrowed an
aggregate of $152,776  from the Company to exercise  vested  options to purchase
Common  Stock (the  "Exercised  Options").  Mr.  Latour  repaid all  outstanding
indebtedness  to the Company upon the closing of the Offering  with the proceeds
of shares of Common  Stock  sold by him.  The loans  were  non-interest  bearing
unless the principal amount thereof was not paid in full when due, at which time
interest  accrued  and was  payable at a rate per annum  equal to the prime rate
published  by The Wall  Street  Journal  plus 4.0%.  The  outstanding  principal
balance of these  loans was  reduced  by any  dividends  payable  upon the stock
underlying the Exercised Options.  All principal amounts  outstanding under such
loans were due on the earlier of the end of  employment  or December  27,  2005.
During the fiscal year ended  December 31, 1998,  the largest  aggregate  amount
outstanding  under these loans was $106,300.  Mr. Latour also has an outstnading
Demand Note issued to the Company.  As at December 31, 1998, the balance payable
to Mr.  Latour under this Demand Note was $297,387 at an interest rate per annum
equal to a bank prime rate plus 1%.

     The Parker Family  Limited  Partnership,  controlled by Jeffrey  Parker,  a
director of the Company,  loaned the Company an aggregate of $2.4 million in the
form of Junior  Subordinated  Notes, $2.2 million of which was outstanding as of
December 31, 1998, as follows: $200,000 on September 1, 1994 at an interest rate
per annum  equal to the  higher  of 12% or a bank  prime  rate plus 3%  maturing
September 1, 1999;  $200,000 on May 1, 1995 at an interest  rate per annum equal
to 12% or a bank prime rate plus 4%  maturing  May 1, 2000;  $500,000 on June 1,
1996 at an  interest  rate per annum  equal to the higher of 12% or a bank prime
rate plus 3% maturing June 1, 2000;  $250,000 on December 1, 1996 at an interest
rate per annum  equal to the higher of 12% or a bank prime rate plus 3% maturing
December 1, 1999;  $500,000  on  December 1, 1996 at an interest  rate per annum
equal to the  higher of 12% or a bank prime rate plus 3%  maturing  December  1,
2002;  $250,000 on  December 1, 1996 at an interest  rate per annum equal to the
higher of 12% or a bank prime rate plus 3% maturing  December 1, 2001;  $125,000
on  September  1,  1997 at an  interest  rate per  annum  equal to 11%  maturing
September 1, 2001;  and  $125,000 on  September 1, 1997 at an interest  rate per
annum equal to 11% maturing September 1, 2003.

     Peter R.  Bleyleben,  the  President  and  Chief  Executive  Officer  and a
Director of the Company, loaned the Company an aggregate of $125,000 in the form
of Junior  Subordinated  Notes as  follows:  $100,000 on December 1, 1996 at 12%
interest  per annum  maturing  December 1, 2001;  and $25,000 on June 1, 1998 at
10.5% interest per annum  maturing June 1, 2003.  Mr.  Bleyleben also loaned the
Company  an  aggregate  of  $200,000  in the form of  demand  notes as  follows:
$100,000 on October 17, 1997 at an interest rate per annum equal to a bank prime
rate minus 1%; and  $100,000 on  December 1, 1998 at an interest  rate per annum
equal to a bank prime rate minus 1%.

     Alan J. Zakon,  a director of the Company,  loaned the Company an aggregate
of $200,000  in the form of Junior  Subordinated  Notes as follows:  $100,000 on
February  1, 1995 at 12%  interest  per annum  maturing  February  1, 2000;  and
$100,000 on March 18, 1998 at 10.5%  interest per annum through his IRA maturing
April 1, 1999.




                                      -30-
<PAGE>

     Ingrid R. Bleyleben,  the mother of Peter R.  Bleyleben,  the President and
Chief  Executive  Officer and a Director of the Company,  loaned the Company the
following amounts in the form of Junior Subordinated Notes: $120,000 on February
16, 1996 at an interest  rate per annum equal to 11.5%  maturing  March 1, 2001;
$25,000  on  December  17,  1996 at an  interest  rate per annum  equal to 11.5%
maturing January 1, 2002;  $20,000 on June 4, 1997 at an interest rate per annum
equal to 11.5%  maturing May 1, 2002; and $25,000 on June 1, 1998 at an interest
rate per annum equal to 10% maturing June 1, 2003.

     Torrence C. Harder, a director of the Company,  loaned the Company $100,000
in the form a of Junior  Subordinated  Note on  November  1, 1994 at an interest
rate per annum equal to 12.0% or a bank prime rate plus 3% maturing  November 1,
1999. Additionally,  Torrence C. Harder Cultural Foundation, a entity related to
Torrence  C.  Harder,  loaned  the  Company  $50,000  in the  form  a of  Junior
Subordinated  Note on January  1, 1996 at an  interest  rate per annum  equal to
11.5% maturing January 1, 2001.

     All of the foregoing  transactions,  with the exception of the loans to Mr.
Latour,  are on terms  similar to those that  would have been  obtained  through
arms-length negotiations.

                                     PART IV

ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)(1)   Financial Statements
         Included in Exhibit 99 incorporated by reference herein.

   (2) None.

   (3) Exhibits Index

Exhibit
Number                   Description

3.1       Restated Articles of Organization, as amended. (1).

3.2       Bylaws. (1).

10.1      Amended  and  Restated  Revolving  Credit  Agreement  among  The First
          National  Bank of Boston,  Commerzbank  Bank AG, New York Branch,  and
          Leasecomm Corporation dated August 6, 1996. (1).

10.2      Agreement and Amendment No. 1 to Amended and Restated Revolving Credit
          Agreement  among The First National Bank of Boston,  Commerzbank  Bank
          AG, New York Branch,  and Leasecomm  Corporation  dated  September 23,
          1997. (1).

10.3      Amended and Restated Loan Agreement between Leasecomm  Corporation and
          NatWest Bank N.A. dated July 28, 1995. (1).

10.4      First  Amendment  to  Amended  and  Restated  Loan  Agreement  between
          Leasecomm  Corporation  and NatWest Bank N.A.  dated October 30, 1995.
          (1).

10.5      Second  Amendment  to Amended  and  Restated  Loan  Agreement  between
          Leasecomm  Corporation  and Fleet Bank,  N.A.  (formerly  NatWest Bank
          N.A.) dated August 6, 1996. (1).

10.6      Third  Amendment  to  Amended  and  Restated  Loan  Agreement  between
          Leasecomm Corporation and Fleet Bank, N.A. dated August 11, 1997. (1).

10.7      Office Lease Agreement by and between AJ Partners Limited  Partnership
          and  Leasecomm  Corporation  dated  July 12,  1993 for  facilities  in
          Newark, California. (1).


                                      -31-
<PAGE>

10.8      Office Lease Agreement by and between MicroFinancial  Incorporated and
          Desmond Taljaard and Howard Friedman, Trustees of London and Leeds Bay
          Colony I Realty Trust, dated April 14, 1994 for facilities in Waltham,
          Massachusetts. (1).

**10.9    1987 Stock Option Plan. (1).

**10.10   Forms of Grant under 1987 Stock Option Plan. (1).

**10.11   Board of Directors Stock Unit Compensation Plan. (1).

**10.12   1998 Equity Incentive Plan. (3).

**10.13   Employment Agreement between the Company and Peter R. Bleyleben. (3).

**10.14   Employment Agreement between the Company and Richard F. Latour. (3).

10.15     Standard Terms and Condition of Indenture dated as of November 1, 1994
          governing the BLT Finance Corp. III 6.03% Lease-Backed  Notes,  Series
          1998-A  (the  "1998-A  Notes"),   the  BLT  Finance  Corp.  III  6.42%
          Lease-Backed  Notes,  Series  1997-A (the "1997-A  Notes") and the BLT
          Finance Corp. III 6.69% Lease-Backed Notes, Series 1996-A (the "1996-A
          Notes"). (2).

10.16     Second Amended and Restated Specific Terms and Conditions of Indenture
          dated as of October 1, 1998,  governing the 1996-A  Notes,  the 1997-A
          Notes and the 1998-A Notes. (3).

10.17     Supplement to Indenture  dated May 1, 1996 governing the 1996-A Notes.
          (2).

10.18     Supplement  to  Indenture  dated August 1, 1997  governing  the 1997-A
          Notes. (2).

10.19     Supplement  to  Indenture  dated as of October 1, 1998  governing  the
          1998-A Notes. (3).

10.20     Specimen 1997-A Note. (2).

10.21     Specimen 1996-A Note. (2).

10.22     Specimen 1998-A Note. (3).

10.23     Standard Terms and Conditions of Servicing governing the 1996-A Notes,
          the 1997-A Notes and the 1998-A Notes. (2).

10.24     Specific Terms and Conditions of Servicing governing the 1996-A Notes,
          the 1997-A Notes and the 1998-A Notes. (2).

10.25     Commercial Lease, dated November 3, 1998, between Cummings  Properties
          Management, Inc. and MicroFinancial Incorporated. (3).

10.26     Amendment  to Lease #1,  dated  November  3,  1998,  between  Cummings
          Properties Management, Inc. and MicroFinancial Incorporated. (3).

10.27     Employment Agreement between the Company and J. Gregory Hines. (3).

10.28     Employment Agreement between the Company and John Plumlee. (3).

10.29     Employment Agreement between the Company and Carol Salvo. (3).

10.30     Fourth  Amendment to Amended and Restated Loan  Agreement,  dated July
          31, 1998, among Leasecomm Corporation, the lenders parties thereto and
          Fleet Bank, National Association, as agent. (4)

10.31     Fifth Amendment to Amended and Restated Loan Agreement,  dated January
          27, 1999, among Leasecomm Corporation, the lenders parties thereto and
          Fleet Bank, National Association, as agent for such lenders. (4)

10.32     Second Amended and Restated Revolving Credit Agreement,  dated January
          27, 1999, among Leasecomm Corporation, the lenders parties thereto and
          BankBoston, N.A., as agent. (4)


                                      -32-
<PAGE>

21.1      Subsidiaries of Registrant. (1).

*27       Financial Data Schedule.

*99       Consolidated  Financial Statements and Notes to Consolidated Financial
          Statements

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

*         Filed herewith.

**        Management contract or compensatory plan or arrangement required to be
          filed as an exhibit pursuant to Item 14(c) of this Report.

(1)       Incorporated  by reference to the Exhibit with the same exhibit number
          in the Registrant's  Registration  Statement on Form S-1 (Registration
          Statement  No.  333-56639)  filed  with the  Securities  and  Exchange
          Commission on June 9, 1998.

(2)       Incorporated  by reference to the Exhibit with the same exhibit number
          in the Registrant's  Amendment No. 1 to Registration Statement on Form
          S-1  (Registration  Statement No. 333-56639) filed with the Securities
          and Exchange Commission on August 3, 1998.

(3)       Incorporated  by reference to the Exhibit with the same exhibit number
          in the Registrant's  Amendment No. 2 to Registration Statement on Form
          S-1  (Registration  Statement No. 333-56639) filed with the Securities
          and Exchange Commission on January 11, 1999.

(4)       Incorporated  by reference to the Exhibit with the same exhibit number
          in the Registrant's  Amendment No. 3 to Registration Statement on Form
          S-1  (Registration  Statement No. 333-56639) filed with the Securities
          and Exchange Commission on February 4, 1999.

(b)       No reports have been filed on Form 8-K.

(c)       See (a)(3) above.

(d)       None.


                                      -33-
<PAGE>


                                   SIGNATURES

     Pursuant to the  requirements of Section 13 of the Securities  Exchange Act
of 1934,  the  registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

                                    MICROFINANCIAL INCORPORATED.


                                    By: /s/ PETER R. BLEYLEBEN
                                        ----------------------------------------
                                            Peter R. Bleyleben
                                            President, Chief Executive
                                              Officer and Director

                              Date: March 31, 1999

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

               SIGNATURE                 TITLE                                  DATE

<S>                                      <C>                                    <C> 
/s/ PETER R. BLEYLEBEN                   President, Chief Executive Officer     March 31, 1999
-------------------------------------    and Director
Peter R. Bleyleben


/s/ RICHARD F. LATOUR                    Executive Vice President, Chief        March 31, 1999
-------------------------------------    Operating Officer, Chief Financial
Richard F. Latour                        Officer, Treasurer, Clerk and
                                         Secretary


/s/ BRIAN E. BOYLE                       Director                               March 31, 1999
-------------------------------------
Brian E. Boyle


/s/ TORRENCE C. HARDER                   Director                               March 31, 1999
-------------------------------------
Torrence C. Harder


/s/ JEFFREY P. PARKER                    Director                               March 31, 1999
-------------------------------------
Jeffrey P. Parker


/s/ ALAN J. ZAKON                        Director                               March 31, 1999
-------------------------------------
Alan J. Zakon

</TABLE>




                                      -34-