SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    ---------

                                   FORM 10-KSB

(Mark One)

[X]  Annual Report to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Fiscal Year ended December 31, 1998.

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934

For the transition period from _____________to______________

Commission File No. 2-72849-NY

                               IMN FINANCIAL CORP.
                               -------------------
            (Exact name of registrant as specified in its character)

           Delaware                                  11-2558192
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

520 Broadhollow Road Melville, New York                 11747
---------------------------------------                 -----
(Address of principal executive offices)             (Zip code)

Registrant's telephone number, including area code:     (516) 844-9805
                                                         -------------
Securities registered pursuant to Section 12(b) of the Act:

Title of each Class               Name of each exchange on which registered
-------------------               -----------------------------------------
Not Applicable                                     None

Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $.001 par value
                          -----------------------------
                                (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


<PAGE>



for such shorter prior 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- KSB or any
amendment to this Form 10-KSB. Yes       No X
                                  ---       ---
           The issuer's net sales for the most recent fiscal year were
$36,400,605.

           The aggregate market value of the voting stock held by non-affiliates
based upon the last sale price on March 26, 1999 was approximately $9,668,719.

           As of March 26, 1999 there were 28,613,021 shares of Common Stock,
par value $.001 per share, outstanding.


                                       2



<PAGE>



                                     PART I

ITEM 1.  BUSINESS


GENERAL

          IMN Financial Corp., a Delaware corporation, (the "Company") is a
holding company which through its subsidiaries provides financial services such
as mortgage brokerage and mortgage banking services. The Company's main
subsidiary, Island Mortgage Network, Inc. ("Island Mortgage") formerly Donald
Henig Inc., is engaged in the business of originating and selling mortgage loans
secured primarily by one- to four-family residences. Island Mortgage originates
loans through its 42 branch offices located in 17 states throughout the United
States and the District of Columbia. The majority of Island Mortgage's loans are
made for the purchase of new homes or the refinancing of existing homes. Island
Mortgage targets its lending to middle market individuals, although it has
mortgage programs which cover the entire spectrum of mortgage lending. Island
Mortgage focuses its lending in the FHA Government guaranteed loan market.
Approximately 50% of Island Mortgage's loans are FHA and VA loans. A division of
Island Mortgage focuses on lending to individuals who have impaired or
unsubstantiated credit histories and/or unverifiable income and to individuals
with higher loan to value ratios. As a result, Island Mortgage's customers
generally are not averse to paying the higher interest rates charged for these
type of loan programs as compared to the interest rates charged by conventional
loans. This type of loan is generated through the use of direct mail and
telemarketing efforts.

          The Company strives to process each loan application received from
potential borrowers as quickly as possible in accordance with the Company's loan
application approval procedures. Accordingly, most loan applications receive
preliminary decisions within 24 hours of receipt and most accepted applications
are funded within 30-45 days thereafter. As the Company has expanded the
channels through which it originates loans, it has also broadened the types of
loans it offers. The Company offers a wide range of loan products, including
traditional residential mortgage loans for refinancing, educational, home
improvement and debt consolidation purposes, mortgage loans on small
multi-family and mixed-use properties, sub-prime loans, adjustable rate mortgage
loans and jumbo and super jumbo loans. The Company originates Title I home
improvement loans partially insured by the US Department of Housing and Urban
Development.

          Island Mortgage sells its loans primarily in the secondary market on a
whole loan basis in order to maximize profitability, reduce its exposure to
fluctuations in interest rates and to achieve greater liquidity. Through 1997,
the Company sold virtually all of its loan production on a whole loan sale basis
in private placements to a variety of institutional purchasers. The Company
funds its originations through warehouse lines of credit and a standby facility.
The Company intends to continue to sell loans primarily through whole loan
sales.

          The Company sells all paper loans which it originates on a flow basis
and all sub-prime loans on a bulk basis, each on a service-released basis, which
maximizes revenues because the Company receives the service-release premium at
the time the loan is sold. Since the Company


                                       3
                                       

<PAGE>



sells all loans which it originates on a service released basis, the Company
does not maintain a loan portfolio or a servicing loan portfolio, and has not
experienced any loan losses to date.

           The Company's business strategy includes (i) geographic expansion
throughout the US, (ii) growth through selected acquisitions, (iii) internal
growth and (iv) introduction and expansion of new products.

           HISTORY
           -------

           NGT Enterprises, Inc. was formed under the laws of the state of
Delaware on November 14, 1980 as Nuclear & Genetics Technology, Inc. On April
24, 1981, NGT Enterprises, Inc. changed its name to Nuclear & Genetic
Technology, Inc. On December 6, 1989 the name was changed back to NGT
Enterprises, Inc. On May 5, 1997, NGT Enterprises, Inc. amended its certificate
of incorporation to change its name to IMN Financial Corp. The predecessor
company was considered to be a development stage company until May 5, 1997 when
it acquired all of the assets of Island Mortgage Network, Inc., formerly Donald
Henig, Inc. and additional assets. On May 5, 1997, the predecessor company
acquired all of the capital stock of Island Mortgage Network, Inc., First
Equities Commercial Corp. and First Equities Service Corp., and holdings in the
Aristocrat Endeavor Fund from IMN Equities Inc. for 20,221,700 shares of its
common stock at a value of $.21 per share. Donald Henig Inc. was incorporated
under the laws of the state of New York on December 1, 1992.

           The Company's principal executive offices are located at 520
Broadhollow Road, Suite 200, Melville, New York 11747 (516) 844-9805.

EMPLOYEES

          As of March 25, 1999, the Company had 670 full time employees and 18
part time employees. None of the employees are covered by a collective
bargaining agreement. The Company considers its relations with its employees to
be good.


ITEM 2.   PROPERTIES

The Company is obligated under a number of operating leases for its main and
branch office facilities. The leases expire on various dates through September
2003. Total rent expense aggregated $1,213,327 and $820,924, for the years ended
December 31, 1998 and 1997, respectively.

The lease obligations are as follows, for the years ending December 31,:


                             1999                     $               1,132,266
                             2000                                       800,956
                             2001                                       509,035
                             2002                                       351,572
                             2003                                        83,481
                                                      -------------------------

                                Total                 $               2,877,310
                                                      =========================





                                        4

<PAGE>



ITEM 3.   LEGAL PROCEEDINGS

IMN FINANCIAL:

         IMNF v. Roche, Shields, Lopez, Community Bank of Northern Va., and
Congressional Funding in the Federal Court for the Eastern District of
Virginia. This is an action seeking $2,000,000 in damages and treble punitive
damages for fraud, RICO, and breach of contract involving IMNF's acquisition of
1st Potomac in December, 1997.

         DL Group v. IMN Financial Corp., Island Mortgage Network, American
National Mortgage Corp., and Kenneth Barash. Pending in the US District Court
for Connecticut. Plaintiff, which ran the net branch in Connecticut for former
IMNF subsidiary American, seeks to impose its oral agreement with American on
IMNF and Island as successors to American. Plaintiff seeks $236,000 in damages.
While some settlement negotiations are in process, the Company intends to file a
motion to dismiss the complaint.

         (Arbitration). McAdam Taylor v. IMN Financial. American Arbitration
Association, New York. Claimant, the seller of Citizens Mortgage to IMN
Financial, seeks $315,000 with interest from November 1997, for alleged failure
to pay balance due on Stock Purchase Agreement. IMNF has answered and
counterclaimed for undisclosed liabilities.

         Brannock v. CFI and IMNF is an action against CFI, the former owner of
the former IMNF subsidiary BDMC. Plaintiff claims he paid $150,000 toward an
abortive acquisition of BDMC before the IMNF acquisition. He seeks to impose a
constructive trust on the shares of BDMC. IMNF's answer is not yet filed. The
Company believes that its maximum potential liability in this case is not
material.

ISLAND MORTGAGE NETWORK:

         Paul Brumaire v. Island Mortgage Network is a breach of contract
action pending in the Civil Court of the State of New York, Kings County.
Plaintiff is seeking $14,500 as repayment of a mortgage commitment fee on a
mortgage which never closed. The property was sold at foreclosure thereafter.
Defendant has counterclaimed for $2,890. The case is in discovery. (A related
matter, is discussed below.)

         Paul Brumaire and Poupette Brumaire v. Isaac Teitelbaum, GreenPoint
Savings Bank, Richard Kaplan, Diconza, LaRocca & DiCunto L.L.P., Gem Funding
Limited, Alliance Capital, Network Title, Morici & Morici, Island Mortgage
Network and Brucha Funding, is a second action brought in federal court for the
Eastern District of New York, despite the continuing pendency of the lawsuit
referenced above. Plaintiff and his daughter claim $5,000,000 in actual and
$2,000,000 in punitive damages against a group of ten defendants, consisting of
every entity which was involved in an abortive plan to refinance two commercial
properties plaintiffs owned in Brooklyn, New York. Two motions to dismiss the
complaint were granted, but plaintiff has leave to replead one last time. The
Company believes that its maximum potential liability is not material.

         Crowley v. Island Mortgage Network is an action pending in Broward
County Florida, in which plaintiff claims that Island's predecessor entity,
BDMC, discriminated against her on the basis of marital status, and seeks
damages and punitive damages. Island's answer is not yet due, but management
intends to contest the matter vigorously, alleging it has no duty with regard to
its former subsidiary, and that plaintiff was not discriminated against.

         Wellcorp Inc. v. BDMC and Island is a breach of contract action pending
in Palm Beach County, Florida. Wellcorp was BDMC's landlord for premises in
Wellington, FL, who sues Island as successor in interest of its former
subsidiary, BDMC, due to Island's parent's purchase of its stock. The action
seeks $260,000 in past due and accelerated rents. Island has moved to dismiss
the complaint as against it, because it no longer owns the stock of BDMC.

         Vincam Human Resources v. BDMC and Island Mortgage Network is a breach
of contract action pending in Dade County Florida, in which plaintiff sues
Island for $708,000 as successor in interest to BDMC and its former parent CFI.
Island has moved to dismiss on the basis of improper service of the complaint,
and that motion is pending.

  
           Other than the above claims, the Company has no notice of any pending
or threatened litigation.


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

           During the fourth quarter of the fiscal year covered by this report,
the Company did not submit any matters to a vote of security holders.


                                     PART II

ITEM 5.  MARKET FOR THE COMPANY'S COMMON STOCK


As of the date hereof, the Company has outstanding 28,613,021 shares of its
Common Stock $.001 par value ("Common Stock"). The Company's Common Stock is
traded on the OTC Bulletin Board of the National Association of Securities
Dealers, Inc. ("Bulletin Board") under the symbol "IMNF." The following table
sets forth the high and low bid prices for Common Stock as reported on the
Bulletin Board.The high and low bid prices reflect inter-dealer prices, without
retail mark-up, mark-down or commission, and may not represent actual
transactions


                                                  Common Stock
                                                  ------------
Fiscal 1997                                      High        Low
-----------                                      ----        ---
Second (from May 5, 1997)                     $ 7.74       $ 3.00
Third                                           7.00         2.75
Fourth                                          3.93         2.25

Fiscal 1998
First                                         $ 5.00       $ 3.00
Second                                        4.0625       1.0625
Third                                           1.50         .625
Fourth                                        3.0625          .60

Fiscal 1999
First (through March 25, 1999)                  2.00        .8125

           On March 26, 1999, there were approximately 4,158 holders of record 
of the Company's 28,613,021

                                        5

<PAGE>



outstanding shares of Common Stock.

          On March 25, 1999, the last sale price of the Common Stock as reported
on the Bulletin Board was $.875.



                                 DIVIDEND POLICY

           The Company has never paid or declared dividends on its Common Stock.
The payment of cash dividends, if any, in the future is within the discretion of
the Board of Directors and will depend upon the Company's earnings, its capital
requirements, financial condition and other relevant factors. The Company
intends, for the foreseeable future, to retain future earnings for use in the
Company's business.



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

IMN FINANCIAL CORP. AND SUBSIDIARIES
------------------------------------

FORWARD-LOOKING STATEMENTS

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

RESULTS OF OPERATIONS - DECEMBER 31, 1998 vs. DECEMBER 31, 1997

Total operating income increased to $36,400,605 from $12,787,797 in the previous
year. The increase of 185% was a result of increased market penetration through
both internal growth and acquisitions.

Total operating expenses increased to $35,613,308 from $13,757,793 in the
previous year. This increase of 159% was a direct result of the Company's
expanded operations and corresponding increase of revenues. Total operating
expenses as a percentage of total operating income decreased to 97.84% from 108%
in the previous year. This reflects management's efforts to control costs and
the successful integration of the Company's recent acquisition.

The Company had income from operations of $787,297 versus a loss from operations
of $969,996 in the previous year.

The Company's income taxes increased from $27,999 to $449,836 as a result of the
increase in income from operations.

As a result of the above factors, the Company had a net income of $337,461 in
the year ended December 31, 1998 versus a loss of $997,995 in the previous year.


                                       6


<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

The Company believes that current operations will provide adequate cash flow to
meet current obligations. At December 31, 1998, the Company had cash of
$4,446,542 versus cash of $2,027,738 at December 31, 1997. Management believes
that these resources provide adequate working capital for the Company. In
December 1997, the Company sold an aggregate of 1,100 shares of Series A
Preferred Stock resulting in gross proceeds to the Company of $1,100,000. In
February and June 1998, the Company sold an aggregate of 3,150 shares of Series
B Preferred Stock resulting in gross proceeds to the Company of $3,000,000.

YEAR 2000 COMPLIANCE

Many computer systems and software products worldwide and throughout all
industries will not function properly as the year 2000 approaches unless
changed, due to a once-common programming standard that represents years using
two-digits. This is the "Year 2000 problem" that has received considerable media
coverage. The Company has recently upgraded its management information systems.
As part of this program, the Company identified those systems and applications
that required modification, redevelopment or replacement. The Company believes
that its management information systems are Year 2000 compliant. 

                                       7

<PAGE>

Item 7. FINANCIAL STATEMENTS

See pages F-1 to F-37.


Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

There were no changes in or disagreements with the Company's Accountants on
accounting or financial disclosures.


                                    PART III

Item 9.     Directors and Executive Officers, Promoters and Control Persons
            Compliance with Section 16(a) of the Exchange Act
            -------------------------------------------------

Directors, Executive Officers and Key Employees

The Directors, Executive Officers and Key Employees of the Company are as
follows:

   

                                        


                                       8

<PAGE>
   NAME                       AGE             POSITION
   ----                       ---             --------
 
  Edward R. Capuano          53          Chief Executive Officer, Chairman,
                                             President and Director

  Cindy L. Eisle             34          Chief Financial Officer and Treasurer

  James Richmond             53          Executive Vice President

  Pargie Raiola              57          Senior Vice President

  James Britton              52          Senior Vice President

  Patrick A. Reilly          42          Secretary and General Counsel



         EDWARD R. CAPUANO is the Chief Executive Officer, President, Chairman
and sole director of the Company.From 1995 to present Mr. Capuano has served as
the President of Island Mortgage. From 1993 to 1995 Mr. Capuano served as the
Northeastern Regional Director of United Capital Mortgage Corp. Mr. Capuano
earned a B.A. in Business Administration from Manhattan College in 1967.

         CINDY L. EISLE is the Chief Financial Officer and Treasurer of the
Company. From 1996 to May 1997 Ms. Eisle has served as the CFO of Island
Mortgage. From 1993 to 1996 Ms. Eisle served as the Assistant controller of
Midcoast Mortgage Corporation. Ms. Eisle earned a B.S. in Accounting in 1986
from the State University of New York at Binghamton and an M.B.A. in 1992 from
Dowling College.

         JAMES RICHMOND is an Executive Vice President of the Company. From 1996
to May 1997 Mr. Richmond served as an Executive Vice President of Island
Mortgage Network. From 1995 to 1996 Mr. Richmond served as an Executive Vice
President of New Jersey Lenders Corp. From 1993 to 1995 Mr. Richmond served as
an Executive Vice President of Globe Mortgage Co. Mr. Richmond has more than 27
years experience in the mortgage banking industry. Mr. Richmond served as the
President of the New Jersey Mortgage Bankers Association from 1994 to 1995. Mr.
Richmond earned a B.A. in History from the State University of New York at
StonyBrook in 1969.

         PARGIE RAIOLA has served as a Senior Vice President of the Company
since May 1997. From 1993- May 1997 Mr. Raiola served as a Senior Vice President
of Island Mortgage Network. Mr. Raiola has over 30 years experience in the
mortgage banking and financial services industry. Mr. Raiola earned a B.A. in
Economics from New York University in 1984

         JAMES BRITTON has served as a Senior Vice President of the Company
since May 1997. From 1996 to May 1997 Mr. Britton served as a Senior Vice
President of Island Mortgage Network. From 1994 to 1996 Mr. Britton served as
Regional Manager of Patriot Mortgage Co. From 1993 to 1994 Mr. Britton served as
Regional Manager of Affinity National Mortgage.


                                        9

<PAGE>



         PATRICK A. REILLY has served as the Secretary and General Counsel of
the Company since 1997. From 1993 to 1996 Mr. Reilly worked as an attorney for
Avis, Inc. specializing in environmental, employment and discrimination
litigation, divestiture and mergers and acquisitions. Mr. Reilly graduated from
Hofstra University School of Law in 1982.


           Directors of the Company are elected for one year terms or until
their successors are elected, and officers serve at the pleasure of the Board of
Directors.



COMPENSATION OF DIRECTORS

           The Company has not paid and does not presently propose to pay
compensation to any director for acting in such capacity, except for nominal
sums for attending Board of Directors meetings and reimbursement for reasonable
expenses in attending those meetings.


SECTION 16(A) REPORTING

           Under the securities laws of the United States, the Company's
directors, its executive (and certain other) officers, and any persons holding
ten percent or more of the Company's Common Stock must report on their ownership
of the Company's Common Stock and any changes in that ownership to the
Securities and Exchange Commission and to the National Association of Securities
Dealers, Inc.'s Automated Quotation System. Specific due dates for these reports
have been established. 


ITEM 10.  EXECUTIVE COMPENSATION


           The following table sets forth certain information regarding
compensation paid by the Company during each of the last three fiscal years to
the Company's Chief Executive Officer and to each of the Company's executive
officers who earned in excess of $100,000.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>

                                   Annual                                                         Long
                                   Compensa-                                                      Term
                                   tion                                                           Compensa
                                                                                                  -tion
                                                                                                  Securities
                                                              Other             Restrict-         Underly-
                                                              annual            ed stock          ing                LTIP
Name and                                             Bonus    compen-           award(s)          Options/           Payouts
principal position      Year       Salary ($)        ($)      sation            ($)               SARs (#)           ($)

<S>                     <C>        <C>               <C>      <C>               <C>               <C>                <C>
Edward Capuano          1998       $170,170          0        0                 0                 0                  0
CEO                     1997       $170,170          0        0                 0                 0                  0              
                        1996       $      0          0        0                 0                 0                  0
======================  =========  ===============   =======  ================  ================  =================  ==============

</TABLE>

STOCK OPTION PLANS

1997 Non-Statutory Stock Option Plan

The Company established a non-qualified stock option plan providing for the
issuance of up to 4,000,000 shares of Common Stock to its directors, officers,
key employees and consultants (the "1997 Plan"). To date, the Company has
granted directors, officers and key employees an aggregate of 2,200,000
non-qualified stock options, which have been exercised to date, and 75,000
non-qualified stock options to consultants of the Company, at an exercise price
of $6.50 per share. Future grants could have an adverse affect on the market
price of the Company's securities.

EMPLOYEE PENSION PLAN

The Company does not currently have an employee pension plan. The Company does
maintain a 401(k) plan which it does not contribute to.


LIMITATION ON LIABILITY OF DIRECTOR

           The Delaware General Corporation Law permits Delaware corporations to
eliminate or limit the personal liability of a director to the corporation for
monetary damages arising from certain breaches of fiduciary duties as a
director. The Company's Certificate of Incorporation includes such a provision
eliminating the personal liability of directors to the Company and its
stockholders for monetary damages for any breach of fiduciary duty as a
director, except (i) any breach of a director's duty of loyalty to the Company
or its stockholders; (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law; (iii) for any
transaction from which the director derived an improper personal benefit; or
(iv) for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General Corporation Law.
Directors are also not insulated from liability for claims arising under the
federal securities laws. The foregoing provisions of the Company's Certificate
of Incorporation may reduce the likelihood of derivative litigation against
directors for breaches of their fiduciary duties, even though such an action, if
successful, might otherwise have benefitted the Company and its stockholders.


                                       10

<PAGE>



           The Company's Certificate of Incorporation also provides that the
Company shall indemnify its directors, officers and agents to the fullest extent
permitted by the Delaware General Corporation Law. The Company does not have
directors' and officers' liability insurance but may secure such insurance in
the future. Furthermore, the Company may enter into indemnity agreements with
its directors and officers for the indemnification of and advancing of expenses
to such persons to the fullest extent permitted by law.


ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


           The following table sets forth certain information, as of March 31,
1999, and as adjusted to give effect to the Offering, regarding the beneficial
ownership of the Common Stock by (i) each beneficial owner of more than 5% of
the outstanding shares of Common Stock, (ii) each director of the Company, and
each executive officer of the Company, and (iii) by all executive officers,
directors of the Company as a group.

<TABLE>
<CAPTION>

NAME AND                   NUMBER OF SHARES             PERCENTAGE             
ADDRESS(1)                 BENEFICIALLY OWNED          OF COMMON STOCK        
----------                 ------------------          ---------------        

<S>                            <C>                        <C>                 
Edward R. Capuano              17,563,057                 61.4%               

Cindy L. Eisle                    2,164                     *                 

James Richmond                    1,163                     *                 

Pargie Raiola                      -0-                     -0-                

James Britton                     1,163                     *                

Patrick A. Reilly                  -0-                     -0-                

All officers and directors
as a group (6 persons)         17,567,547                  61.4%              



<FN>

-----------
*   less than one percent
(1) Unless otherwise indicated each person's address is 520 Broadhollow Road, 
    Mellville, New York 11747.
</FN>
</TABLE>


ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


                                       11

<PAGE>



Managerial and Financial Control

           On May 5, 1997, the Company acquired all the capital stock of Donald
Henig, Inc. ("DHI") from IMN Equities for 20,421,700 shares of common stock.
This acquisition enables IMN Equities to have majority managerial and financial
control in the decision making process of the Company.

Issuance of Stock

           On September 30, 1996, the Company issued 326,000 shares of common
stock in consideration for the payment on its behalf of $16,900 in expenses by
its president.

Sale of C.S. Amsterdam Realty, Inc.

           DHI sold C.S. Amsterdam Realty, Inc., one of its subsidiaries to a
related party. The related party is a minority shareholder (less than 5%
non-voting) of the parent company.

           The collateral underlying a company asset is encumbered by a security
interest for a liability of a related party. The related party is a minority
shareholder (less than 5% non-voting) of the parent company.

           DHI was involved in advances to and from the following related
entities. In addition, many of these companies were charged for their share of
adminstrative costs, which totaled $218,032.

         1) C.S. Amsterdam Realty, Inc. - Owned by a minority shareholder (less
than 5% non-voting) of the parent company.

         2) The Best Mortgage Services of America, Inc. - Was a subsidiary of
DHI until December 24, 1996.

         3) UCMC Consulting Corp. - Owned by a majority shareholder of the
parent and an employee of DHI.

         4) First Equities Corp. - Formerly parent of DHI.

         5) Edward Capuano - Majority shareholder of DHI.

         6) Wireless Mexicano, Inc. - Owned by a minority shareholder (less than
5% non-voting) of DHI.

         7) Network Title Agency Corporation - 75% owned by a minority
shareholder (less than 5% non- voting) of DHI.

         8) The Skulsky Trust - The trustee is an employee of DHI and the
trust's beneficiary is a minority shareholder (less than 5% non-voting) of DHI.

         DHI and these related parties agreed to an assignment of their
intercompany balances. As of March 31, 1997, DHI owed $1,561,993 to the Skulsky 
Trust.

                                       12

<PAGE>






ITEM 13.      EXHIBITS, LISTS AND REPORTS ON FORM 8-K

(A) EXHIBITS (NUMBERED IN ACCORDANCE WITH ITEM 601 OF REGULATION S-B).

EXHIBIT
   NO.                     DESCRIPTION
   ---                     -----------

*27                        Financial Data Schedule

-----------------
* Filed herewith

 (b) Reports on Form 8-K. The Registrant filed four reports on Form 8-K for
     reportable events dated January 13, 1998, which report contained
     information relating to Item 2 and Item 7, on September 22, 1998 which
     report contained information relating to Item 2 and Item 7, on November 2,
     1998 which report contained information relating to Item 5 and Item 7 and
     on December 8, 1998 which report contained information relating to Item 5
     and Item 7. On January 29, 1998 the Registrant filed Form 8-K/A amending 
     its January 13, 1998 filing and on November 24, 1998 filed a Form 8-K/A
     amending its November 2, 1998 filing.


                                       13

<PAGE>


                                   SIGNATURES

           In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has duly caused this Annual Report on Form 10-KSB to be
signed on its behalf by the undersigned, thereunto duly authorized.

                                          IMN Financial Corp

                                          By: /s/ Edward Capuano
                                          Edward Capuano, Chief Executive
                                            Officer and Chairman of the Board

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

/s/Edward R. Capuano        Chief Executive Officer,      April 13, 1999
Edward R. Capuano           President and Director


/s/ Cindy L. Eisle          Chief Financial Officer       April 13, 1999
Cindy L. Eisle


/s/ Patrick A. Reilly       Secretary                     April 13, 1999
Patrick A. Reilly


                                       14

<PAGE>


                     








                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                                TABLE OF CONTENTS

                           DECEMBER 31, 1998 AND 1997




                      Independent Auditor's Report                       F-2





    

                      Consolidated Statements of Financial Position      F-3-F-4

                      Consolidated Statements of Income                  F-5-F-6

                      Consolidated Statements of Stockholders' Equity    F-7

                      Consolidated Statements of Cash Flows              F-8-F10

                      Notes to Consolidated Financial Statements         F-11


                                      F-1









<PAGE>






                          INDEPENDENT AUDITOR'S REPORT


To the Board of Directors and Stockholders
IMN Financial Corp. and Subsidiaries

We have audited the accompanying consolidated statements of financial position
of IMN Financial Corp. and Subsidiaries as of December 31, 1998 and 1997 and the
related consolidated statements of income, stockholders' equity, and cash flows
for the years ended December 31, 1998 and 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of IMN Financial Corp.
and Subsidiaries as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for the years ended December 31, 1998 and 1997, in
conformity with generally accepted accounting principles.






Syosset, New York
March 24, 1999

                                      F-2




<PAGE>


                                                                     



                                                                       

                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                  Consolidated Statements of Financial Position
                                  December 31,



<TABLE>
<CAPTION>




                                                       1998             1997
                                                   ------------    -------------

ASSETS
<S>                                                <C>              <C>         
  Cash                                             $  4,446,542     $  2,027,738
  Mortgage Inventory                                 74,109,762       44,152,619
  Points,  Fees and Other Receivables                 7,919,147        2,496,389
  Investments                                         7,630,245        7,705,025
  Prepaid Expenses                                    3,690,823        1,982,735
  Mortgage Receivable                                 2,254,013        2,276,636
  Property and Equipment (Net of
     Accumulated Depreciation)                        2,225,629        1,315,080
  Intangible Assets (Net of Accumulated
    Amortization)                                     5,095,053        5,618,896
  Deferred Income Taxes                                 259,500
  Other Assets                                          514,693          267,692
                                                   ------------     ------------

      TOTAL ASSETS                                 $108,145,407     $ 67,842,810
                                                   ============     ============


</TABLE>







            See accompanying independent auditor's report and notes.

                                      F-3

<PAGE>


                                                                          

                                                                       

                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                  Consolidated Statements of Financial Position
                                  December 31,



<TABLE>
<CAPTION>


                                                       1998               1997
                                                   -------------    -------------
LIABILITIES
<S>                                                <C>              <C>          
  Accounts Payable and Accrued Expenses            $   6,332,544    $   5,219,984
  Warehouse Lines of Credit                           73,344,945       43,652,500
  Borrowers Escrow Funds                               1,354,661          777,364
  Capital Lease Obligations                              135,817          211,662
  Corporate Taxes Payable                                310,650                0
  Notes Payable                                          712,374        1,133,317
  Deferred Income                                        840,084          590,081
  Due to Related Party                                10,439,778        4,920,813
  Deferred Income Taxes                                  704,410          415,125
                                                   -------------    -------------

    TOTAL LIABILITIES                                 94,175,263       56,920,846

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
  Preferred Stock - 5,000,000 shares, $.001 par
      value authorized, 5,960 and 1,100 shares                 6                1
      issued and outstanding in 1998 and 1997,
      respectively
  Common Stock - 45,000,000 shares, $.001 par
     value authorized; 28,661,905 and 31,764,107
     issued 31,764,107 shares outstanding
     31,764,107 shares issued and outstanding in
     1998 and 1998 and 1997, respectively                 28,663           31,764
  Paid-in Capital                                     20,203,554       17,693,293
  Stock subscription receivable                       (5,916,100)      (6,141,600)
  Unrealized Gain on Available-for-Sale
      Securities                                         396,576          355,294
  Retained Earnings                                     (742,555)      (1,016,788)
                                                   -------------    -------------

    TOTAL STOCKHOLDERS' EQUITY                        13,970,144       10,921,964
                                                   -------------    -------------

TOTAL LIABILITIES AND STOCKHOLDERS'
    EQUITY                                         $ 108,145,407    $  67,842,810
                                                   =============    =============

</TABLE>

            See accompanying independent auditor's report and notes.

                                      F-4

<PAGE>


                                                                          

                                                                       
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                        Consolidated Statements of Income
                            Years Ended December 31,

<TABLE>
<CAPTION>


                                                       1998            1997
                                                   ------------    ------------
OPERATING INCOME
<S>                                              <C>              <C>   
     Points, Fees and Premium Income -
        Operating Branches                         $ 29,849,430    $ 10,720,139
     Points, Fees and Premium Income -
        Closed Branches                               1,486,000               0
     Interest Income                                  4,322,788       1,367,996
     Management Fee Income                              742,387         699,662
                                                   ------------    ------------

     Total Operating Income                          36,400,605      12,787,797

OPERATING EXPENSES
     General and Administrative Expenses -
        Operating Branches                            9,644,816       3,184,149
     General and Administrative Expenses -
        Closed Branches                               1,375,004               0
     Field and Direct Expenses -
        Operating Branches                           16,927,054       8,267,735
     Field and Direct Expenses -
        Closed Branches                               1,248,362               0
     Interest Expense                                 5,434,808       1,044,281
     Depreciation                                       350,072         142,998
     Amortization of Acquisition Goodwill               438,822         146,029
     Other Amortization                                 194,370               0
     Acquisition Expenses                                     0         972,601
                                                   ------------    ------------

     Total Operating Expenses                        35,613,308      13,757,793
                                                   ------------    ------------

INCOME (LOSS) FROM OPERATIONS                           787,297        (969,996)

PROVISION FOR INCOME TAXES                              449,836          27,999
                                                   ------------    ------------

NET INCOME (LOSS)                                       337,461        (997,995)

Preferred Dividends Paid                                 63,231               0
                                                   ------------    ------------

NET INCOME (LOSS) AVAILABLE TO
    COMMON STOCKHOLDERS                            $    274,230    $   (997,995)
                                                   ============    ============
</TABLE>


            See accompanying independent auditor's report and notes.

                                      F-5
<PAGE>
                                                                          

                                                                       
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                        Consolidated Statements of Income
                            Years Ended December 31,
<TABLE>
<CAPTION>


                                                 1998              1997
                                              ---------       -----------
OTHER COMPREHENSIVE INCOME                                    
Unrealized Gain on Available-for-Sale                         
<S>                                           <C>            <C>            
     Securities (Net of Income Tax)           $               $   355,294
                                              ---------       -----------
                                                              
COMPREHENSIVE INCOME (LOSS)                   $               $  (642,701)
                                              =========       ===========
                                                              
Basic Earnings (Loss) Per Share                    0.01             (0.10)
                                              =========       ===========
                                                              
Diluted Earnings (Loss) Per Share                  0.01             (0.10)
                                              =========       ===========
                                                          
</TABLE>






            See accompanying independent auditor's report and notes.

                                      F-6

<PAGE>



                                                                                



                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                 Consolidated Statements of Stockholders' Equity
                     Years Ended December 31, 1998 and 1997
                                                                                
<TABLE>
<CAPTION>
                                                                                                         
                                                                                                         
                                 COMMON              COMMON            PREFERRED          PREFERRED      
                                 STOCK               STOCK               STOCK              STOCK        
          DATE                  (SHARES)              ($)              (SHARES)              ($)         
------------------------     --------------      --------------      -------------      --------------   
<S>                             <C>                       <C>        <C>                <C>              
Balance 1/1/97              4,257,199             426          16,867               0               0
Reverse Split              (3,192,900)            638            (638)              0
Reverse Acquisition        20,421,700          20,422       6,727,382       6,747,804
Preferred Stock Issued          5,000               5              (5)              0
Series C
Pref. Stock Converted
  Series A                  3,522,180           3,522          (3,150)             (3)         (3,519)
  Series B                    254,562             255            (140)             (1)           (254)
Rounding                            1               1              (2)              3               3
Issued for Acquisition         94,131              94         299,906         300,000
Treasury Stock Retired     (7,000,000)         (7,000)          7,000               0
Stock Issued as                26,925              27          62,978          63,005
Compensation
Underwriting Expenses        (569,840)       (569,840)
Net Income                    274,230         274,230
Imputed Interest -            (60,500)        (60,500)
current amortization
Imputed Interest             (286,000)        286,000               0
Unrealized Gain on             41,282          41,282
Available for Sale
Securities
                         ------------    ------------    ------------    ------------    ------------

Balance 12/31/98           28,661,905    $     28,663           5,960    $          6    $ 20,203,554
                         ============    ============    ============    ============    ============


                                                                                                   
                                                 UNREALIZED                                        
                                                                                                   
                                                                                                   
                                                  GAIN ON                                          
                                                 AVAILABLE-                                        
    ADDITIONAL               STOCK                  FOR                                            
     PAID-IN             SUBSCRIPTION               SALE                 RETAINED                  
     CAPITAL              RECEIVABLE             SECURITIES              EARNINGS               TOTALS
 ----------------      -----------------      ----------------       ----------------      ------------
  <C>                         <C>                   <C>             <C>                     <C>    
Balance 1/1/97                (18,793)         (1,500)
Reverse Split         
Reverse Acquisition   
Preferred Stock Issued
Series C
Pref. Stock Converted
  Series A                          0
  Series B                          0
Rounding              
Issued for Acquisition
Treasury Stock Retired
Stock Issued as       
Compensation
Underwriting Expenses 
Net Income            
Imputed Interest -    
current amortization
Imputed Interest      
Unrealized Gain on    
Available for Sale
Securities
                         ------------    ------------    ------------    ------------

Balance 12/31/98         $ (5,916,100)   $    396,576    $   (742,555)   $ 13,970,144
                         ============    ============    ============    ============

</TABLE>

                                      F-7



                                                                                
See accompanying independent auditor's report and notes.

<PAGE>





                                                                          




                                                                       
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows
                            Years Ended December 31,

<TABLE>
<CAPTION>



                                                                    1998            1997
                                                                ------------    ------------


CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                             <C>             <C>          
     Net Income (loss)                                          $    337,461    $   (997,995)
     Adjustments to reconcile net income to 
     net cash providedby operating activities:
          Depreciation and amortization                              983,264         439,909
          Value of options                                                 0          50,891
          Market value adjustment on foreclosed real estate                0          63,750
          Deferred Taxes                                              29,785               0
          Other non-cash income/expense items:                       (12,231)              0
     Change in assets and liabilities:
          Increase in points, fees and other receivables          (5,432,488)     (1,385,116)
          Increase in prepaid expenses                            (1,584,667)       (485,646)
          Increase in other assets                                  (858,757)       (237,270)
          Increase (decrease) in accounts payable and accrued
             expenses                                              3,174,699      (1,308,427)
          Increase in borrowers escrow funds                         866,897         124,211
          Increase in deferred income                                250,003          66,978
          Increase in corp. income taxes payable                     310,650               0
                                                                ------------    ------------

     Total adjustments                                            (2,272,845)     (2,670,720)
                                                                ------------    ------------

     Net cash used by operating activities                        (1,935,384)     (3,668,715)

CASH FLOWS FROM INVESTING ACTIVITIES:
     Investment in real estate development partnership               (32,000)        (25,000)
     Purchase of property and equipment                             (958,086)       (282,377)
     Mortgages originated (net of those sold)                    (45,171,726)     (2,508,157)
     Advances (or allocations) from/to related parties (net)       7,303,015      (1,734,373)
     Disbursement of cash for acquisitions                           (60,000)     (1,516,672)
     Receipt of cash through acquisitions                            (24,126)      1,720,555
     Notes receivable extended                                    (3,617,408)              0
                                                                ------------    ------------

     Net cash used by investing activities                       (42,560,331)     (4,346,024)
                                                                ------------    ------------

</TABLE>

            See accompanying independent auditor's report and notes.

                                      F-8


<PAGE>

                                                                        
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows
                            Years Ended December 31,


<TABLE>
<CAPTION>


                                                       1998            1997
                                                   ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
<S>                                                    <C>             <C>      
      Underwriting expenses                            (569,840)       (636,500)
      Sale of preferred stock                         3,000,000       1,100,000
      Payment of notes payable and capital leases      (269,983)        (42,989)
      Collection of stock subscriptions                       0         458,400
      Net proceeds from warehouse line of credit     44,794,950       9,142,087
      Collection of mortgage receivable                  22,623          21,479
      Dividends Paid                                    (63,231)              0
                                                   ------------    ------------

     Net cash provided by financing activities       46,914,519      10,042,477

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

     Net increase in cash and equivalents             2,418,804       2,027,738

CASH AND CASH EQUIVALENTS - JANUARY 1                 2,027,738               0
                                                   ------------    ------------

CASH AND CASH EQUIVALENTS - DECEMBER 31            $  4,446,542    $2,027,738.00
                                                   ============    ============



</TABLE>








            See accompanying independent auditor's report and notes.

                                      F-9

<PAGE>



                                                                                

                                                                        

                                                                       
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows
                            Years Ended December 31,

<TABLE>
<CAPTION>



                                                                1998          1997
                                                            -----------   -----------

SUPPLEMENTAL DISCLOSURES:


<S>                                                         <C>           <C>        
  Interest Paid                                             $ 5,141,753   $ 1,417,930
                                                            ===========   ===========

  Income Taxes Paid                                         $   113,234   $     6,306
                                                            ===========   ===========



SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:


 Equipment acquired through capital lease obligations       $         0   $   100,246
                                                            ===========   ===========

 Stock issued for subscriptions                             $         0   $ 6,600,000
                                                            ===========   ===========

 Stock and assets used for acquisitions                     $   300,000   $10,739,317
                                                            ===========   ===========

 Increase in Market Value of Available-for-Sale Securities  $    41,282   $   355,294
                                                            ===========   ===========

Assets distributed to reduce debt                           $ 4,744,745   $         0
                                                            ===========   ===========

Notes issued to acquire assets                              $   554,710   $         0
                                                            ===========   ===========


</TABLE>










            See accompanying independent auditor's report and notes.

                                      F-10

<PAGE>


                                                                         
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1997

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION
The financial statements presented herein are of IMN Financial Corp. and
Subsidiaries.

IMN Financial Corp. (the Company) was incorporated under the laws of the State
of Delaware on October 13, 1982 as Nuclear & Genetic Technology, Inc. The
Company changed its name to NGT Enterprises Inc. and then to IMN Financial
Corp., in conjunction with the reorganization described below. The Company was
considered to be a development stage company since December 1, 1992, with no
operating history. After its reorganization, the Company began operating in the
financial services field, through its subsidiaries, as described in the
following paragraphs.

Island Mortgage Network, Inc. ("Island"), a wholly owned subsidiary acquired on
May 5, 1997, was incorporated under the laws of the State of New York on
December 1, 1992. It operates under the D/B/As "Island Mortgage Network" and
"Reliance Mortgage Network". Its principal business activity is the origination
and sale of residential mortgage loans. Presently, all mortgages are either
table funded, funded through company resources or funded through the Company's
warehouse lines of credit. Virtually all loans are closed subject to a binding
purchase agreement with an investor and sold shortly after closing. The Company
does not perform any loan servicing activities. The Company received its New
York State mortgage banker's license on May 12, 1994. It holds additional
licenses in the states of Alaska, California, Connecticut, Delaware, Florida,
Georgia, Illinois, Maine, Maryland, Massachusetts, New Jersey, Ohio,
Pennsylvania, South Carolina, Tennessee, Texas, Vermont, Virginia and Washington
D.C. As of the date of this report, the Company has applied for its mortgage
banking licenses in a number of additional states. It is the Company's intention
to continue its expansion nationally. The Company is approved to participate in
FHA and Freddie Mac programs.

Citizens Mortgage Service Company ("Citizens"), a wholly owned subsidiary
acquired on September 5, 1997, was incorporated under the laws of the State of
Pennsylvania on April 10, 1973. Its principal business activity is that of a
full service mortgage banker, consisting of the origination and sale of
residential mortgage loans secured by one to four family residences. It holds
mortgage bankers' licenses in the states of New Jersey, Pennsylvania and
Delaware. Citizens is approved to participate in FHA, Fannie Mae, GNMA and
Freddie Mac programs. As of January 1, 1998, all of Citizens mortgage banking
activities were conducted through Island. Citizens remained inactive until mid
1998 when it restarted mortgage banking activities in the sub prime market.

First Equities Service Corp. ("Service") , a wholly owned subsidiary acquired on
May 5, 1997, was incorporated under the laws of the State of New York on January
24, 1997. Its principal business activity is participation in real estate
development projects through financing efforts. It is presently servicing the
same states serviced by Island Mortgage Network, Inc.
                                      

                                      F-11





<PAGE>

                                                                        
                                                                                
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1997

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

ORGANIZATION (CONT'D)

First Equities Commercial Corp. ("Commercial") , a wholly owned subsidiary
acquired on May 5, 1997, was incorporated under the laws of the State of New
York on January 23, 1997. Its principal business activity is that of a
commercial real estate broker. It is presently servicing the same states
serviced by Island Mortgage Network, Inc.

Green Shield Mortgage Corp. ("Green Shield") , a wholly owned subsidiary
acquired on August 1, 1997, was incorporated under the laws of the State of New
Jersey on December 3, 1996. Its principal business activity is that of a
mortgage banker, consisting of the origination and sale of residential mortgage
loans secured by one to four family residences. It holds mortgage bankers'
licenses in the states of New Jersey and Pennsylvania. Green Shield is approved
to participate in FHA programs. Green Shield's activity is included herein from
the date of acquisition to December 31, 1997. It was sold effective January 1,
1998 (Note 12).

1st Potomac Mortgage Corporation ("Potomac"), a wholly owned subsidiary acquired
on December 30, 1997, was incorporated under the laws of the State of Virginia
on December 28, 1989. Its principal business activity is that of a mortgage
banker, consisting of the origination and sale of residential mortgage loans
secured by one to four family residences. It holds mortgage bankers' licenses in
the states of Virginia, North Carolina and Maryland. Potomac is approved to
participate in FHA programs. Potomac's activity is included herein from the date
of acquisition to December 31, 1997. It was sold effective January 1, 1998 (Note
12).

American National Mortgage Corporation ("ANMC") , a wholly owned subsidiary
acquired on December 2, 1997, was incorporated under the laws of the State of
New Jersey on May 18, 1990. Its principal business activity is that of a
mortgage banker, consisting of the origination and sale of residential mortgage
loans secured by one to four family residences. ANMC is approved to participate
in FHA and Fannie Mae programs. ANMC's activity is included herein from the date
of acquisition to December 31, 1997. It was sold effective January 1, 1998 (Note
12).

Gentry Capital Mortgage Corporation ("Gentry"), a wholly owned subsidiary
acquired on April 17, 1998, was immediately liquidated into Island (Note 12).

Bankers Direct Mortgage Company (BDMC), a wholly owned subsidiary acquired on
September 10, 1998, was sold effective immediately after the acquisition (Note
12).

                                      F-12






<PAGE>
                                                                         

                                                                                
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1997

NOTE  1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

ORGANIZATION (CONT'D)

PRINCIPLES OF CONSOLIDATION
---------------------------
The consolidated financial statements of the Company include the accounts of IMN
Financial Corp. and its wholly owned subsidiaries, Island Mortgage Network, Inc.
, Citizens Mortgage Service Company, First Equities Service Corp., First
Equities Commercial Corp, and the activities of sold subsidiaries where
applicable. All significant intercompany balances and transactions have been
eliminated in consolidation. Less than 50% owned subsidiaries, which are
accounted for under the equity method of accounting, are not included in the
consolidation herein.

REORGANIZATION
--------------
In September 1996, Island, its shareholders and First Equities Corp. ("First
Equities") entered into an agreement wherein a reverse acquisition was
effectuated. As a result, the shareholders of Island received shares of First
Equities Corp. on a pro-rata basis, in exchange for their shares in Island, and
Island became a subsidiary of First Equities.

On April 1, 1997, First Equities entered into an agreement with IMN Equities,
Inc. whereby First Equities transferred certain assets (100% of the outstanding
stock of Island, 100% of the outstanding stock of Service and 100% of the
outstanding stock of Commercial, along with 141,176 shares of Aristocrat
Endeavor Fund, Ltd.) to IMN Equities, Inc., in exchange for 16,760,628 shares of
IMN Equities, Inc. common stock and 5,001 shares of IMN Equities, Inc. preferred
stock.

On May 5, 1997, IMN Equities, Inc. entered into an agreement with the Company,
whereby IMN Equities Inc. transferred certain assets (100% of the outstanding
stock of Island, 100% of the outstanding stock of Service, 100% of the
outstanding stock of Commercial, and its holdings in the Aristocrat Endeavor
Fund, Ltd.) to IMN, in exchange for 20,221,700 shares of the Company's common
stock with a value equal to the book value of the assets received, in accordance
with SEC reverse acquisition rules.

CASH AND CASH EQUIVALENTS
-------------------------
For purposes of the statement of cash flows, the Company considers all
investments purchased with a maturity of three months or less to be cash
equivalents.

MORTGAGE INVENTORY
------------------
The Company presents its mortgage inventory at lower of cost or market. As of
the date of this report, substantially all of the December 31, 1998 mortgage
inventory has been sold. Mortgage inventory secures the related warehouse lines
of credit (Note 7).

ACCOUNTS RECEIVABLE
-------------------
Management has analyzed accounts receivable at December 31, 1998 and considers
all accounts to be currently collectible. Therefore, no provision has been made
for uncollectible accounts.

                                      F-13



<PAGE>
                                                                        

                                                                                
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1997

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

INVESTMENT SECURITIES
---------------------
Management determines the appropriate classification of investment securities at
the time they are acquired, and evaluates the appropriateness of such
classification at each balance sheet date. The classification of those
securities and the related accounting policies are as follows:

TRADING SECURITIES: Trading securities are held for resale in anticipation of
short-term (generally 90 days or less) fluctuations in market prices. Trading
securities, consisting primarily of actively traded equity securities, are
stated at fair value. Realized and unrealized gains and losses are included in
income.

AVAILABLE-FOR-SALE SECURITIES: For the year ended December 31, 1998 and 1997,
the Company has adopted Financial Accounting Standards Board Statement No. 115,
Accounting for Certain Investments in Debt and Equity Securities (SFAS 115).
Under the provisions of SFAS 115, certain marketable securities are considered
available-for-sale securities. Available-for-sale securities are stated at fair
value, and unrealized holding gains and losses, net of the related deferred tax
effect, are reported as a separate component of stockholders' equity.

Dividends on marketable equity securities are recognized in income when
declared. Realized gains and losses are included in income. Realized gains and
losses are determined on the basis of the actual cost of the securities sold.

See Note 3 for further details of the Company's investments.

DEFERRED COSTS
--------------
Direct processing costs associated with mortgages in the Company's pipeline at
December 31, 1998 and 1997, have been deferred. These costs include commissions,
processing salaries and related expenses, appraisal fees, credit costs, and
other direct expenses. These costs are recognized when a loan commitment between
a permanent investor and a borrower has been arranged, and all significant
services have been performed.

Commissions paid under a "draw against commission" arrangement have been
deferred when the draw exceeds the commission earned.

PROPERTY AND EQUIPMENT
----------------------
Property and equipment contributed to the Company by a former shareholder are
stated at the appraised fair market values at the date of contribution. Property
and equipment purchased by the Company is stated at cost.

Depreciation is calculated using straight-line and accelerated methods over the
estimated useful lives of the assets.

                                      F-14




<PAGE>
                                                                        

                                                                               
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1997

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

ACQUISITION GOODWILL
--------------------
Acquisition Goodwill represents the cost in excess of fair value of identifiable
assets of acquired businesses, and is being amortized on a straight line basis
over 10 years. The Company annually evaluates whether events and circumstances
have occurred subsequent to its acquisition, which may indicate that the
remaining useful life of goodwill warrants revision, or that the remaining
balance of goodwill may not be recoverable. To make a determination as to
whether goodwill has been impaired, the Company estimates the related business
segment's discounted future cash flows, and compares it to the remaining life of
the goodwill.

REVENUE RECOGNITION
-------------------
All fees are earned and recognized as revenue when a loan commitment between a
permanent investor and a borrower has been arranged, and all significant
services have been performed. Premium income is recognized when the related
mortgage closes and a binding purchase agreement is effectuated, or after title
is transferred, whichever occurs first.

Certain application, commitment and other fees associated with the Company's
pipeline as of December 31, 1998 and 1997, collected during loan processing,
give rise to the liability account "deferred income". Application fees are
recognized as revenue when the loans are closed.

INCOME TAXES
------------
The Company is filing a consolidated income tax return with its subsidiaries.
Therefore, the provision for income taxes provided for herein reflects those
taxes currently due on a consolidated basis. The Company provides for deferred
income taxes resulting from temporary differences in reporting certain income
and expense items (Note 19) for income tax and financial reporting purposes. The
change in deferred income taxes for the current year is reflected in the
provision for income taxes.

PRIOR PERIOD STATEMENTS
-----------------------
The 1997 financial statements may have been reclassified to conform with current
year's classifications.

FAIR VALUES OF FINANCIAL INSTRUMENTS
------------------------------------
SFAS No. 107 "Disclosures about Fair Value of Financial Instruments", requires
disclosure of fair value information about financial instruments, whether or not
recognized in the statement of financial position, for which it is practicable
to estimate that value. In cases where quoted market prices are not available,
fair values are based upon estimates using present value or other valuation
techniques. Those techniques are significantly affected by the assumptions and
estimates used, including the discount rate and the estimated future cash flows.
In that regard, the resulting fair value estimates cannot be substantiated by
comparison to independent markets and, in many cases, could not be realized by
immediate settlement of the instrument. SFAS No.

                                      F-15


<PAGE>
                                                                         

                                                                                
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1997

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

FAIR VALUES OF FINANCIAL INSTRUMENTS (CONT'D)
---------------------------------------------
107 excludes certain financial instruments and all non-financial instruments
from its disclosure requirements. Accordingly, the aggregate fair value amounts
do not represent the underlying fair value of the Company.

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate fair
value:

CASH AND CASH EQUIVALENTS: The carrying amount of cash on hand and money market
funds is considered to be a reasonable estimate of fair value.

MORTGAGE INVENTORY: The fair value of mortgage loans held for sale, presented at
lower of cost of market, is estimated at the actual cost of the loan (par value)
plus the premium to be paid by the investor. The total estimated fair value is
mortgage inventory of $74,109,762 plus premiums of $2,019,808, totaling
$76,129,570.

MORTGAGE RECEIVABLE: As disclosed in Note 4, the mortgage is collateralized and
carries an adjustable interest rate which varies with prime. Therefore, the
carrying amount is considered to be a reasonable estimate of fair value.

WAREHOUSE FINANCING FACILITIES: This facility has an original maturity of less
than 120 days and, therefore, the carrying value is a reasonable estimate of
fair value.

ESTIMATES
---------
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported assets and liabilities, and the disclosure of
contingent assets and liabilities at the date of the financial statements, and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

RECENT PRONOUNCEMENTS
---------------------
The Company has complied with all recent pronouncements which have effective
dates preceding the dates relating to these financial statements. All recent
pronouncements which have effective dates subsequent to the dates relating to
these financial statements, would have no effect on the financial statements
presented herein.

                                      F-16






<PAGE>

                                                                         
                                                                                
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1997

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

EARNINGS PER SHARE
------------------
In accordance with SFAS No. 128, the Company computes basic earnings (loss) per
share on a daily weighted average basis, as described in Note 11. Diluted
earnings (loss) per share are unchanged from basic, as the change resulting from
the conversion of any and all options or convertible securities are immaterial .

NOTE 2 - ACQUISITIONS

1997
----

Pursuant to an acquisition agreement dated August 1, 1997, the Company acquired
100% of the issued and outstanding capital stock of Green Shield. The
consideration for this acquisition was 144,906 shares of the Company's common
stock, the distribution of a Green Shield note valued at approximately $147,000
and cash of $350,000.

Pursuant to an acquisition agreement dated September 5, 1997, the Company
acquired 100% of the issued and outstanding capital stock of Citizens. The
consideration for this acquisition was cash of $376,237.

Pursuant to an acquisition agreement dated December 30, 1997, the Company
acquired 100% of the issued and outstanding capital stock of Potomac. The
consideration for this acquisition was $1,000,000 of the Company's common stock
(333,333 shares).

Pursuant to an acquisition agreement dated December 2, 1997, the Company and
Island acquired 100% of the issued and outstanding capital stock of ANMC. The
consideration for this acquisition was 461,538 shares of the Company's common
stock, plus short-term financing totaling $230,000 (Note 15).

Pursuant to several other acquisition agreements, the Company acquired 100% of
the issued and outstanding stock of Bay City Mortgage Corp. ("Bay City"), Senko
Financial Services Corp. ("Senko"), and Jefferson Financial Corporation
("Jefferson"). The consideration for these acquisitions was 110,344 shares,
16,667 shares, and 11,320 shares of the Company's common stock, respectively.
All of the acquisitions were liquidated into the Company, and the operating
assets and liabilities transferred to Island.

The Company has not completed its valuation of these purchases (due to certain
contingencies), and the purchase price allocations are subject to change when
further information becomes available. All acquisitions were accounted for using
the "purchase " method of accounting.

                                      F-17







<PAGE>
                                                                         

                                                                                
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1997

NOTE 2 - ACQUISITIONS (CONT'D)

1997 (CONT'D)
-------------

The total purchase price of all the acquisitions is allocated as follows:


Cash and equivalents                             $    1,441,081
Mortgage inventory                                   21,904,705
Accounts receivable                                     661,628
Prepaid expenses                                        147,896
Investments                                           1,664,459
Property and equipment                                  595,140
Goodwill                                              5,395,708
Other assets                                            183,833
Accounts payable and accrued expenses                (2,793,066)
Warehouse line of credit                            (21,449,095)
Deferred income                                         (67,949)
Notes payable                                          (831,336)
Deferred income taxes payable                          (415,174)
Other liabilities                                      (434,027)
                                                    -----------

    Total allocation of purchase price           $    6,003,803
                                                    ===========

Certain of the foregoing acquisitions were sold during 1998 (Note 12).

1998
----

Pursuant to an acquisition agreement dated April 4, 1998, the Company acquired
100% of the issued and outstanding capital stock of Gentry Capital Mortgage
Corporation. The consideration for this acquisition was 94,131 shares of the
Company's common stock worth $300,000, $60,000 in cash and notes payable of
$394,710. Gentry was then liquidated into the Company and the operating assets
and liabilities were transferred to Island.

Pursuant to an acquisition agreement dated September 4, 1998, the Company
acquired 100% of the issued and outstanding capital stock of Bankers Direct
Mortgage Company (Bankers). The consideration for this acquisition is contingent
on future earnings and certain covenants and is not expected to be material.

Pursuant to an acquisition agreement dated December 21, 1998, the Company
acquired 100% of the assets of Lenders Associates Corporation. The consideration
for this acquisition is a note contingent on future earnings and is estimated to
be approximately $160,000.

                                      F-18


<PAGE>
                                                                         

                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1997

NOTE 2 - ACQUISITIONS (CONT'D)

1998 (CONT'D)
-------------

The Company has not completed its valuation of these purchases (due to certain
contingencies), and the purchase price allocations are subject to change when
further information becomes available. All acquisitions were accounted for using
the "purchase " method of accounting.

The total purchase price of all the acquisitions is allocated as follows:


Cash and equivalents                              $      36,749
Mortgage inventory                                    5,357,495
Accounts receivable                                     520,215
Prepaid expenses                                        184,017
Property and equipment                                1,090,112
Goodwill                                              1,006,986
Other assets                                            320,980
Accounts payable and accrued expenses                (1,060,677)
Warehouse line of credit                             (5,754,392)
Notes payable                                           (76,831)
Other liabilities                                      (709,944)
                                                     ----------

    Total allocation of purchase price             $    914,710
                                                     ==========


Certain of the foregoing acquisitions were sold during 1998 (Note 12).

                                      F-19








<PAGE>
                                                                         

                                     Page 19
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1997

NOTE 2 - ACQUISITIONS (CONT'D)

PRO FORMA INFORMATION
---------------------

The pro forma unaudited results of operations for the year ended December 31,
1997, assuming the 1997 acquisitions had occurred on January 1, 1997, are as
follows:



                                                  Year Ended
                                                   12/31/97
                                             -----------------

Revenues                                     $     29,965,037

Expenses                                          (33,881,764)

Acquisition Goodwill                                 (823,515)
Amortization
                                             -----------------

Net Income (Loss)                            $     (4,740,242)
                                             =================


The 1998 acquisitions are not considered significant and therefore proforma
results of operations for 1998 are not presented.


                                      F-20

<PAGE>
                                                                        

NOTE 3 -  INVESTMENTS

INVESTMENTS WITHOUT READILY DETERMINABLE FAIR VALUES
----------------------------------------------------
The Company owns 100,000 shares of Wireless Mexicano, Inc. ("Wireless"), a
related party (Note 13). The investment was acquired in a stock for stock
exchange on December 30, 1996, between the Company's former parent, First
Equities Corp. and Wireless Mexicano, Inc. The Company valued this exchange
utilizing sales of Wireless securities on or about December 30, 1996, to arrive
at a cost of $500,000.

The Company owns common and preferred stock of Seasons Mortgage Group, Inc.
("Seasons"). By agreement, this amounts to a 31.25% ownership interest. The
Company acquired this stock as part of its acquisition of Potomac. The stock
ownership has been transferred to the Company. In conjunction with purchase
accounting rules, the stock has been valued at market value at acquisition date.
It is being accounted for utilizing the equity method of accounting thereafter.

The Company owns 50% of Thunder Development Ltd Co ("Thunder"), a real estate
development partnership. The Company acquired its ownership percentage for cash
in 1997. This investment is being accounted for utilizing the equity method of
accounting.

                                      F-21


<PAGE>

                                                                         
                                                                                
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1997

NOTE 3 -  INVESTMENTS (CONT'D)

INVESTMENTS WITHOUT READILY DETERMINABLE FAIR VALUES (CONT'D)
-------------------------------------------------------------

Carrying value of investments without readily determinable fair values:


Wireless Mexicano, Inc.                      $         500,000
Seasons Mortgage Group, Inc.                         1,631,825
Thunder Development Ltd Co                              76,844
                                             -----------------

     Total                                   $       2,208,669
                                             =================

AVAILABLE-FOR-SALE SECURITIES
-----------------------------
<TABLE>
<CAPTION>


                                         Unrealized       Change in       Unrealized                        Aggregate Fair
                                        Holding Gain      Unrealized     Holding Gain                          Value at
                                        at December      Holding Gain     at December    Original Cost of    December 31,
                                          31, 1997         for 1998        31, 1998         Investment           1998
                                      ---------------- ---------------- --------------- ------------------ -----------------
<S>                                   <C>              <C>              <C>             <C>                <C>              
Aristocrat Endeavor Fund, Ltd.        $        355,294 $         41,282 $       396,576 $        5,000,000 $       5,396,576
Community Bank-Market                                0                0               0             25,000            25,000
                                      ---------------- ---------------- --------------- ------------------ -----------------
     Total                            $        355,294 $         41,282 $       396,576 $        5,025,000 $       5,421,576
                                      ================ ================ =============== ================== =================
</TABLE>


                                      F-22

<PAGE>


                                                                         
                                                                                
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1997

NOTE 4 -  MORTGAGE RECEIVABLE

In conjunction with the sale of The Best Mortgage Company of America, Inc., one
of Island's former subsidiaries, the Company holds a mortgage of $2,300,000 on
the underlying vacant land.

The terms of the mortgage provide for equal monthly payments of $15,302, which
includes interest thereon at a rate of 7% per annum, for a term of 5 years,
based on a 30 year amortization. The unpaid balance is due with the sixtieth
monthly payment.

Aggregate maturities of the mortgage receivable at December 31, 1998 are as
follows:


Year ending:                   12/31/99                $               26,864
                               12/31/00                                28,806
                               12/31/01                             2,198,343
                                                       ----------------------

                                                       $            2,254,013
                                                       ======================

                                            
NOTE 5 - PROPERTY AND EQUIPMENT

The major categories of property and equipment are as follows at December 31,:


                                                      1998              1997
                                                  -----------       -----------
Furniture, Fixtures and Equipment                 $ 2,463,301       $ 1,376,989
Furniture, Fixtures And Equipment
    Under Capital Leases                              318,845           321,489
Leasehold Improvements                                407,414           292,776
Land                                                  207,500                 0
                                                  -----------       -----------

    Total                                           3,397,060         1,991,254
Less: Accumulated Deprecation                      (1,171,431)         (676,174)
                                                  -----------       -----------

    Total Property And Equipment                  $ 2,225,629       $ 1,315,080
                                                  ===========       ===========



Depreciation charged to operations, which includes amortization of capital lease
obligations, during 1998 and 1997 was $350,072 and $142,988, respectively.

Equipment under Capital Leases of $318,845 and $321,489 secure the related
financing in 1998 and 1997, respectively (Note 16).


                                      F-23


<PAGE>
                                                                         
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1997


NOTE 6 - INTANGIBLE ASSETS

The major categories of intangible assets are as follows at December 31,:


                                                     1998               1997
                                                 -----------        -----------
Acquisition goodwill                             $ 5,298,562        $ 5,395,661
Other goodwill                                       150,000            150,000
Organization costs                                   699,345            496,106
Franchise Fee                                              0              6,000
                                                 -----------        -----------

    Total                                          6,147,907          6,047,767
Less: Accumulated Amortization                    (1,052,854)          (428,871)
                                                 -----------        -----------

    Total Intangible Assets                      $ 5,095,053        $ 5,618,896
                                                 ===========        ===========

Amortization expense charged to operations during 1998 and 1997 was $633,192 and
$146,029, respectively.



NOTE 7 - WAREHOUSE LINES OF CREDIT

The Company has the following warehouse and security agreements:

ISLAND MORTGAGE NETWORK, INC.
-----------------------------
Island has seven warehouse and security agreements under which lines of credit
have been established for funding mortgage loans. As of December 31, 1998 and
1997, the Company had total credit lines of $ 98,000,000 and $46,000,000,
respectively, from the participating lenders. The agreements call for interest
to be calculated at rates based on prime or LIBOR ranging from 7.15% to 11.75%.
The related mortgages collateralize each advance. As of December 31, 1998 and
1997, the Company owed $73,344,945 and $28,549,995 under these agreements.

AMERICAN NATIONAL MORTGAGE CORP.
--------------------------------
As of December 31, 1997, ANMC had three warehouse and security agreements under
which lines of credit have been established for funding mortgage loans. As of
December 31, 1997, ANMC had total credit lines of $23,000,000 from the
participating lenders. The agreements call for interest to be calculated at
prime plus 1%, and at the commercial paper rate plus 2.6%. The related mortgages
collateralize each advance. As of December 31, 1997, the Company owed
$10,735,874 under these agreements.

As of December 31, 1998, ANMC is no longer a subsidiary of IMN Financial Corp..

1ST POTOMAC MORTGAGE CORP.
--------------------------
As of December 31, 1998, Potomac had five warehouse and security agreements
under which lines of credit have been established for funding mortgage loans. As
of December 31, 1997, Potomac had total credit lines of $14,700,000 from the
participating lenders. The agreements call for interest to be calculated from a
range of prime plus 1% to LIBOR plus 3.5%. The related mortgages collateralize
each advance. As of December 31, 1997, the Company owed $4,366,631 under these
agreements.

As of December 31, 1998, Potomac is no longer a subsidiary of IMN Financial
Corp.


                                      F-24

<PAGE>
                                                                        
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1997


NOTE 8 - PROFIT SHARING PLAN

The Company adopted a 401(k) pension plan covering substantially all employees.
While the Company may elect to match employee contributions, it did not do so in
1998 or 1997.

NOTE 9 -  STOCK BASED COMPENSATION

As of the date of these financial statements, there were no stock options
outstanding issued to employees of the Company under the Company's Employee
Stock Option Plan.

Stock options issued for services (Note 10) are accounted for in accordance with
SFAS No. 123. The Company values such stock options using the Black Scholes
option valuation model, and expenses the value over the expected life of the
option. The amount charged to 1997 was $50,891. There were no options issued for
services in 1998.

NOTE 10 - STOCKHOLDERS' EQUITY

PREFERRED STOCK
---------------
SERIES A
--------

On December 31, 1997, the Company entered into a subscription agreement under
which investors agreed to purchase 1100 shares of Series A Convertible Preferred
Stock, $.001 par value, for $1,000 per share. The total consideration paid was
$1,100,000.

The preferred shares are convertible beginning 100 days from issuance, and
ending on the mandatory conversion date, two years from issuance. The number of
common shares to be exchanged upon conversion is based upon a formula utilizing
the market price of the common stock on or about the conversion date.

The preferred stock will rank senior to all common stock, now or hereafter
issued, and also to any additional preferred stock, now or hereafter issued, as
to payment of dividends, distribution of assets upon liquidation, dissolution,
or winding up of the corporation, voluntary or involuntary, unless approved by
the preferred shareholders, or for a transaction wherein the Company receives
proceeds of at least $3 million.


                                      F-25


<PAGE>
                                                                         
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1997


The preferred stock shall receive dividends of $60.00 per share, payable
quarterly, and no more, which shall be fully cumulative, shall accrue without
interest (except those in arrears) from the date of issuance, and shall be
payable quarterly in cash or Company stock.

The preferred stock subscription agreement also provides for warrants which are
more fully described under "Options and Warrants" below.

There is no mandatory redemption required on the part of the investors or the
Company, and no sinking fund requirements.

During 1998 140 preferred shares were converted into 254,562 shares of common
stock. Dividends of $63,231 were paid to Series A convertible preferred
shareholders in 1998.

SERIES B
--------

In the first quarter of 1998, the Company entered into a Securities Purchase
Agreement. Under the terms of the agreement, the buyers would receive 3,150
shares, 8% Convertible Preferred Stock and warrants to purchase additional
shares. The proceeds to the Company were $3,000,000. The agreement provided for
the issuance of preferred shares and warrants. The shares are convertible at 75%
of the average closing bid prices of the Company's common stock as quoted by
Bloomberg, LP for the five-day trading period (the "Average Price") ending on
the day prior to the date of the conversion (the "Conversion Price"). The
Conversion Price may not be greater than 120% of the Average Price on the
closing date (the "Maximum Price"). The warrants expire on February 20, 2001 and
are exercisable at 120% of the market price on the date of exercise. During
1998, all of the Series B preferred shares were converted into 3,522,180 shares
of common stock.

SERIES C
--------

In October 1998, the Company issued 5,000 shares of Convertible Preferred Stock
to the Aristocrat Endeavor Fund, Ltd. (Aristocrat). The transaction reinstates
Aristocrat to its proper preferred stock holding position, erroneously excluded
from the stock distributions during the Company's reverse acquisition in 1997.

The Series C shares are non voting and have no preference as to dividends. They
are convertible into 200 shares of common stock, per preferred share, at a
conversion price of $5 per share.

                                      F-26


<PAGE>
                                                                         
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1997


PAID-IN CAPITAL AND COMMON STOCK
--------------------------------

1997
----

On May 13, 1997, the Company issued 20,421,700 shares of common stock in
connection with the acquisition of certain assets from IMN Equities, Inc. This
transaction resulted in an increase in the equity of the Company of $6,747,804,
based on the book value of the assets acquired (a reverse acquisition).

On May 13, 1997, the Company issued 1,100,000 options to each of two consulting
companies (total options issued - 2,200,000) for services rendered to the
Company. The exercise price of $3.00 per share was equal to the market price of
the underlying stock on that day. The options were exercised simultaneously,
resulting in an increase in equity of $6,600,000.

On August 1, 1997, the Company issued options to purchase shares of the Company
stock to a consultant (see "Options and Warrants"). These options were valued in
accordance with SFAS

123 (Note 9), and a portion was charged to expense and paid-in capital in the
amount of $50,891. This transaction had no effect on the equity of the Company.

At various times during 1997 the Company issued common stock to acquire other
companies (Note 2). The total stock issued for acquisitions in 1997 was
1,078,108 shares increasing the equity of the Company by $3,845.570.

On December 31, 1997, the Company issued preferred stock as described above (see
"Preferred Stock" above). The transaction resulted in an increase in the equity
of the Company of $1,100,000.

On December 17, 1997, the Company issued 7,000,000 shares of treasury stock for
future use. The shares are held in the corporate name and are unencumbered.

In conjunction with the foregoing sales of shares, the Company paid consulting
fees and incurred expenses which were charged to paid-in capital, and resulted
in a decrease in the equity of the Company of $635,500.

1998
----

As described in the preferred stock section above, the Company sold Series B
Preferred Shares during 1998 resulting in an increase to the equity of the
Company of $3,000,000.

At various times during 1998 the Company issued common stock to acquire other
companies (Note 2). The total stock issued for acquisitions in 1998 was 94,131
shares increasing the equity of the Company by $300,000.

                                      F-27


<PAGE>
                                                                         
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1997


In January 1998, the Company paid for services by issuing 26,925 shares of
common stock. The transaction had the effect of a charge to expense and an
increase to paid-in capital in the amount of $63,005.

In conjunction with the foregoing sales of shares, the Company paid consulting
fees and incurred expenses which were charged to paid-in capital, and resulted
in a decrease in the equity of the Company of $569,840.

OPTIONS AND WARRANTS
--------------------
On May 13, 1997, the Company implemented and registered in form S-8, a
nonstatutory stock option plan. Under the terms of the plan, the Company can
issue up to 4,000,000 stock options, which, upon exercise, are unrestricted
shares. The plan calls for issuance of options until December 31, 1999. As
indicated above, the Company issued 2,200,000 of these options on May 13, 1997,
all of which were exercised.

On August 1, 1997, the Company issued options to a consultant as indicated
above. The options grant the right to purchase 75,000 shares at $6.625 until
August 1, 1999. There are restrictions as to the number of shares which may be
purchased during specific time periods. In accordance with SFAS 123, the options
were valued using the Black-Sholes option model resulting in a charge to income
of $50,891.

The 2,200,000 options issued and exercised in 1997 to consultants of the Company
produced a zero value utilizing the Black-Shores option model since the exercise
price and market price were equal and the options were exercised simultaneously.

SUBSCRIPTIONS TO COMMON STOCK
-----------------------------
On May 13, 1997, the Company issued 2,200,000 shares of common stock upon the
exercise of stock options described above in the Paid-In capital and Options and
Warrants sections. In consideration for the stock, the shareholders executed
promissory notes to the Company. The notes are due on or before May 13, 2002.
The notes bear interest at 5% per annum, and a financing fee of $330,000 was
charged upon the issuance. Interest was imputed to adjust the interest rate to
9% per annum. As of December 31, 1998, total payments against the notes were
$458,400.

NOTE 11 - EARNINGS PER SHARE

Earnings per share has been computed on the basis of the total weighted average
number of shares outstanding.

                                      F-28


<PAGE>
                                                                         
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1997


<TABLE>
<CAPTION>

                                                            DECEMBER 31,  DECEMBER 31,
                                                               1998           1997
                                                           -----------    -----------

<S>                                                         <C>             <C>      
Number of shares outstanding - Start of Period              31,764,107      1,064,300

Increase (decrease) in shares outstanding                   (3,102,202)    30,699,807
                                                           -----------    -----------

Number of shares outstanding - End of period                28,661,905     31,764,107
                                                           ===========    ===========




                                                            DECEMBER 31,  DECEMBER 31,
                                                                1998         1997
                                                            ------------   ----------
Weighted Average Number of Shares
  Outstanding - Basic                                         29,139,093   30,562,402
                                                            ============   ==========
Weighted Average Number of Shares
  Outstanding - Diluted                                       30,406,423          N/A
                                                            ============   ==========
</TABLE>


NOTE 12- SALE OF SUBSIDIARIES

On March 31, 1998 the Company entered into an agreement to sell Green Shield
Mortgage Corp., 1st Potomac Mortgage Corporation, and American National Mortgage
Corporation to Northport Industries, Inc.(Northport). The agreement was
effective January 1, 1998 and provided for $100 in consideration. In addition,
the Company agreed to continue to manage the sold companies for a period of one
year. Northport agreed to pay a $10,000 a month management fee, per company, and
to reimburse the Company for any monies expended on its behalf through the
issuance of a promissory note.

On October 16, 1998 the Company entered into a second agreement with Northport
to sell Bankers Direct Mortgage Company and Gentry Capital Financial Services,
Inc. The agreement was effective September 10, 1998. The balance of the terms of
the contact mirror the previous contract.

Under these agreed upon terms, Northport owed the Company $3,617408 plus
interest of $217,044 as of December 31, 1998. This debt, evidenced by a
promissory note, was assigned to the Skulsky Trust, as repayment of debt.

It should be noted that the company removed certain intangible assets from these
subsidiaries before the sale. These assets continue to be carried on the
Company's books as Goodwill and consequently no gain or loss was recognized on
these sales.

                                      F-29


<PAGE>
                                                                         
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1997


NOTE 13- RELATED PARTY TRANSACTIONS

During 1997 and 1998, the Company was involved in advances to and from the
following related entities. In addition, many of these companies were charged
for their share of administrative costs and direct expenses (paid on their
behalf) and management fees, which totaled $8,895,837 and $2,952,813 for the
years ended December 31, 1998 and 1997, respectively. $360,000 and $699,662 of
the management fee income shown in the Operating Income section of the
Consolidated Statements of Income for the years ended December 31, 1998 and
1997, respectively, is from related parties.


(1) Network Title Agency Corporation - 75% owned by a minority shareholder (less
than 5%) of the Company, under common administration


(2) C.S. Amsterdam Realty, Inc. - Owned by a minority shareholder (less than 5%)
of the Company, under common administration.

(3) UCMC Consulting Corp. - Owned by a majority shareholder of the parent and an
employee of the Company, under common administration.

(4) Wireless Mexicano, Inc. - Partially owned by a minority shareholder (less
than 5%) of the Company, under common administration.

(5) Edward Capuano - Majority shareholder of the Company.

(6) The Skulsky Trust - The trustee is an employee of the Company, and the
trust's beneficiary is a minority shareholder (less than 5%) of the Company.

(7) Seasons Mortgage Group, Inc. - 31% acquired by Company as part of the
Potomac acquisition.

(8) Action Abstract, Inc. - Owned by a director of the Company.

The Skulsky Trust has an agreement with the Company whereby the Company has the
right to offset any intercompany balance against monies owed to the trust.
Accordingly, the Company had a net balance due to the Skulsky Trust of
$10,439,778 and $4,920,813, as of December 31, 1998 and 1997, respectively. The
debt is interest free with no set repayment terms.

                                      F-30


<PAGE>
                                                                         
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1997


NOTE 14 - 

NOTE 15 - NOTES PAYABLE

IMNF AND ISLAND
---------------
In conjunction with the acquisition of ANMC on December 2, 1997 (Note 2), the
Company is indebted to the former shareholder of ANMC in the amount of $230,000.
The terms of the note provide for a down payment of $130,000 in January 1998,
and monthly principal payments of $15,000 for six months, with a final payment
of $10,000 the following month. The note is non-interest bearing. As of December
31, 1998 and 1997, the outstanding balance was $0 and $230,000, respectively.

In conjunction with the acquisition of Gentry, the Company owes $434,327 at
December 31, 1998. It consist partly of an installment note, with a due date of
October 2000. It is payable in monthly installments of $2,409, which includes
interest at 10.5%. The balance at December 31, 1998 is $49,971. The remaining
balance of $384,356 is composed of two notes with identical terms, to the former
owners of Gentry. Each note is due May 2008, and is payable in monthly
installments of $2,500, which includes interest at 9%.

In connection with an acquisition of assets made during 1998, the Company owes
$180,772 at December 31, 1998. It is expected to be paid within the coming
twelve months.

GREEN SHIELD MORTGAGE CORP.
---------------------------
Green Shield is indebted to a bank in the amount of $169,111. The obligation is
an installment note, with a due date of December 10, 2001. It is payable in
monthly installments of $4,109, which includes interest at 7.75%. It is secured
by property owned by the former Green Shield shareholder and, per the
acquisition agreement, is to be replaced by Company collateral. In connection
with the sale of Green Shield during 1998, this note is no longer an obligation
of the Company (Note 12).

1ST POTOMAC MORTGAGE CORP.
--------------------------
Potomac is indebted to a bank in the amount of $199,190. The obligation is a
line of credit, and is due in 1998. It bears interest at the rate of prime plus
2%, and is secured by substantially all of the assets of Potomac.

                                      F-31

<PAGE>


                                                                        
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1997


NOTE 15 - NOTES PAYABLE (CONT'D)

1ST POTOMAC MORTGAGE CORP. (CONT'D)
-----------------------------------


Potomac is indebted to a bank in the amount of $184,811. The obligation is an
installment note, with a due date of September 20, 2000. It is payable in
monthly installments of $2,079, which includes interest at 9.25%. It is also
secured by substantially all of the assets of Potomac.

Potomac is indebted to a former shareholder in connection with a stock
redemption in the amount of $134,748. The note is payable in monthly
installments of $5,000, including imputed interest at 5.75%, plus certain lump
sum payments. The note is due December 30, 1998. The related stock is being held
in escrow as collateral.

Potomac is indebted to various other parties in the amount of $132,137. The
debts are due at various times, ending in the year 2000. They carry interest
rates which range from 9.5% to 10.99%. These loans are unsecured.

In connection with the sale of Potomac during 1998, the above items are no
longer obligations of the Company (Note 12).

FIRST EQUITIES SERVICE CORP.
----------------------------
Service is indebted to a bank in the amount of $97,275. The obligation is an
installment note, with a due date of January 2003. It is payable in monthly
installments of $1,104, which includes interest at 9%. It is secured by the
related real estate.

Principal payments are due in accordance with the following schedule, for the
years ending December 31:

1999                                    $        250,118
2000                                              78,353
2001                                              56,802
2002                                              62,130
2003                                              40,311
Thereafter                                       224,660
                                        ----------------
   Total                                $        712,374
                                        ================


                                      F-32


<PAGE>


                                                                        
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1997


NOTE 16- CAPITAL LEASE OBLIGATIONS

The Company leases equipment with lease terms expiring through August 2002.
Obligations under capital leases are reflected in the accompanying financial
statements at the present value of future minimum lease payments, discounted at
interest rates ranging from 8.4% to 18%.

The future minimum lease obligations under capital leases, and the net present
value of the future minimum lease payments, are due as follows, for the years
ending December 31,


1999                                           $        60,652
2000                                                    41,845
2001                                                    38,895
2002                                                    13,905
                                               ---------------

Total minimum lease payments                           155,297
Less: Amounts representing interest                     19,480
                                               ---------------

Present value of net minimum
lease payments                                 $       135,817
                                               ===============



NOTE 17- COMMITMENTS AND CONTINGENCIES

EMPLOYMENT CONTRACTS
--------------------
The Company has entered into employment contracts with certain senior members of
management. Some agreements renew automatically on an annual basis, and others
continue until October 2003. Some include provisions for bonuses based on volume
at particular locations.

The following schedule presents the minimum amounts due for the next five years
under these contracts, assuming the contracts continue to renew:

          Years ending December 31,


               1999            $691,200
               2000            $691,200
               2001            $632,867
               2002            $516,200
               2003            $360,100


                                      F-33






<PAGE>


                                                                        
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1997


NOTE 17- COMMITMENTS AND CONTINGENCIES (CONT'D)

MORTGAGES
---------
In the normal course of business, the Company enters into commitments to extend
mortgages to borrowers whose loans have not closed at year end. On December 31,
1998 and 1997, those commitments totaled $97,703,391 and $83,425,596,
respectively.

Also in the normal course of business, the Company enters into commitments to
sell mortgages to investors. These commitments include loans closed before year
end, which are currently in inventory, as well as loans closed after year end.
On December 31, 1998 and 1997, those commitments amounted to $171,813,153 and
$94,207,977, respectively.

CONTINGENCIES - OFF BALANCE SHEET RISK
--------------------------------------
Service is a general partner in a real estate development company, Thunder
Development LTD Co. The partnership has obligations, under mortgages and
promissory notes, to various parties, which total $1,409,568. The total assets
of Service, included herein, potentially exposed to a claim relating to these
items, are $1,200,428.

During the normal course of operations, warehouse lenders provide funding to
third party escrow accounts on behalf of the Company for mortgages which do not
close immediately. The escrow balance varies depending on the Company's volume
of business.

OTHER COMMITMENTS
-----------------
In connection with the acquisitions described above, and the related employment
agreements, the Company has agreed to issue additional shares of stock, should
certain volume levels be achieved. The agreements state specific numbers of
shares (110,000) in some instances , dollar amounts ($1,525,000) to be divided
by market value in other instances, and formulas for both dollar amounts and
number of shares in still other instances.

NOTE 18 - CONCENTRATIONS OF CREDIT RISK

The Company maintains cash balances at several financial institutions. The
Federal Deposit Insurance Corporation insures balances at each institution up to
$100,000. Uninsured balances aggregated $4,468,469 and $1,819,941 at December
31, 1998 and 1997, respectively.


                                      F-34










<PAGE>


                                                                         
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1997

NOTE 19 - INCOME TAXES

Temporary differences which give rise to deferred tax assets and liabilities as
of December 31, 1998 are as follows:


                                                     Deferred Tax  Deferred Tax
                                                         Asset       Liability
                                                    ------------- ------------
Provision for doubtful accounts                      $259,500       $      0
Liability attributable to appreciated
  asset acquired                                            0        415,065
Deferred profit on Installment Sale                         0        289,345
                                                     --------       --------
                                                     $259,500       $704,410
                                                     ========       ========


The provision for income taxes is as follows:


                                              December 31,        December 31,
                                                 1998                1997
                                             --------------    ---------------
Current:
  Federal                                    $      622,045    $          0
  State                                             295,946          27,999

Deferred:
  Federal                                          (429,230)              0
  State                                             (38,925)              0
                                             --------------    ------------
     Total                                   $      449,836    $     27,999
                                             ==============    ============



                                      F-35


<PAGE>


                                                                         
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1997

NOTE 19 - INCOME TAXES (CONT'D)

The Provision for Income Taxes is different than the amount computed using the
United States Federal Statutory Income Tax Rate for the reasons set forth below:


                                                  December 31,    December 31,
                                                      1998          1997
                                                 --------------  -------------

Expected tax at US statutory rate                       34.0%        (34.0)%
State and local income taxes                     *      32.6%          2.9%
Valuation allowance for operating                          5             0%
loss carryforwards not expected
to be used (released)
                                                        (9.5)%        34.0%
                                                   ----------  ------------
     Total                                              57.1%          2.9%
                                                   ==========  ============

* Effective rate is high due to the fact that subsidiaries do not file state tax
returns on a consolidated basis. As a result, no net operating loss carryforward
is available to one of the subsidiaries with a very large taxable income. In
addition, other subsidiaries with taxable losses currently have state taxes due
based on capital.

NOTE 20 - PRIMARY FINANCIAL STATEMENT COMPONENTS

PRIMARY COMPONENTS OF PREPAID EXPENSES


                                               December 31,       December 31,
                                                   1998               1997

                                            ---------------     --------------
Prepaid processing costs                    $     1,897,326     $      878,420
Advance draws against commissions                 1,387,354            988,250
Prepaid insurance                                    79,083             47,332
Other prepaid expenses                              327,060             68,733
                                            ---------------     --------------

  Total prepaid expenses                    $     3,690,823     $    1,982,735
                                            ===============     ==============




                                      F-36





<PAGE>


                                                                         
                      IMN FINANCIAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1998 and 1997


NOTE 20 - PRIMARY FINANCIAL STATEMENT COMPONENTS (CONT'D)

PRIMARY COMPONENTS OF GENERAL AND ADMINISTRATIVE EXPENSES
---------------------------------------------------------
<TABLE>
<CAPTION>


                                                        December 31,         December 31,
                                                           1998                 1997
                                                       ---------------     ---------------
<S>                                                    <C>                 <C>            
Salaries                                               $     3,858,710     $     1,112,025
Payroll taxes and benefits                                     858,537             342,061
Rent and occupancy                                           1,206,010             710,341
Other expenses                                               5,096,563           1,019,722
                                                       ---------------     ---------------
   Total general and administrative expenses
     - operating and closed branches                   $    11,019,820     $     3,184,149
                                                       ===============     ===============


PRIMARY COMPONENTS OF FIELD AND DIRECT EXPENSES
-----------------------------------------------


                                                         December 31,         December 31,
                                                             1998                 1997
                                                       ---------------     ----------------
Salaries                                               $     6,174,654     $      1,286,416
Salaries
Commissions                                                  7,948,276            4,505,625
Payroll Taxes and Benefits                                   1,185,637              513,091
Appraisal Fees and Credit Reports                            2,297,195            1,127,592
Other expenses                                                 569,654              835,011
                                                       ---------------     ----------------
   Total field and direct expenses
       - operating and closed branches                 $    18,175,416     $      8,267,735
                                                       ===============     ================

</TABLE>

NOTE 21- ACQUISITION RELATED EXPENSES

1997
----
This item includes expenses incurred by certain acquired corporations. The
results of operations of these companies is included in the statement of income
of the Company, effective with the acquisition date. Certain mortgages in
process at the acquisition date were completed in the acquired company, which
gives rise to these expenses.

                                      F-37