U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

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

                   For the fiscal year ended December 31, 1999

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

 For the transition period from ______________________ to _____________________.

                        Commission File Number 000-25253

                             SUMMIT LIFE CORPORATION
                             -----------------------
                 (Name of small business issuer in its charter)

            OKLAHOMA                                      73-1448244
            --------                                      ----------
(State or other jurisdiction of                       (I.R.S. Employer
 incorporation or organization)                        Identification No.)

3021 Epperly Dr., P.O. Box 15808, Oklahoma City, Oklahoma          73155
---------------------------------------------------------          -----
        (Address of principal executive offices)                (Zip Code)

                    Issuer's telephone number: (405) 677-0781

Securities registered pursuant to Section 12(b) of the Act:  None
                                                             ----

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

          Common Stock, $.01 par value per share
          --------------------------------------
                     (Title of class)

         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days.

                                  Yes  X  No
                                      ---    ---

         Check if there is no  disclosure  of  delinquent  filers in response to
Item  405 of  Regulation  S-B is not  contained  in this  form,  and 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.  X
                                      ---
       Issuer's revenues for its most recent fiscal year were $812,734.

         The aggregate market value of the registrant's  common stock,  $.01 par
value,  held by  non-affiliates  of the  registrant  as of  March  27,  2000 was
$3,031,256  based  on the  closing  price  of $4.00  per  share on that  date as
reported by the OTC Bulletin  Board. As of March 27, 2000,  2,267,605  shares of
the registrant's common stock, $.01 par value, were outstanding.

       Transitional Small Business Disclosure Format (check one): Yes    No  X

DOCUMENTS  INCORPORATED BY REFERENCE:  Registrant's Proxy Statement for the 2000
Annual Meeting of Stockholders is incorporated by reference in Part III, Items 9
through 12, of this Form 10-KSB.

<PAGE>


                             SUMMIT LIFE CORPORATION
                                   FORM 10-KSB
                   For the Fiscal Year Ended December 31, 1999

                                TABLE OF CONTENTS

Part I.

Item 1.      Description of Business........................................   1
Item 2.      Description of Property........................................  10
Item 3.      Legal Proceedings..............................................  10
Item 4.      Submission of Matters to a Vote of Security Holders............  10

Part II.

Item 5.      Market for Common Equity and Related Stockholder Matters.......  10
Item 6.      Management's Discussion and Analysis or Plan of Operation......  11
Item 7.      Financial Statements...........................................  18
Item 8.      Changes  In  and  Disagreements  With Accountants on Accounting and
             Financial Disclosure...........................................  18

Part III.

Item 9.      Directors,  Executive  Officers,  Promoters  and  Control  Persons;
             Compliance With Section 16(a) of the Exchange Act..............  18
Item 10.     Executive Compensation.........................................  19
Item 11.     Security Ownership of Certain Beneficial Owners and Management.  19
Item 12.     Certain Relationships and Related Transactions.................  19
Item 13.     Exhibits and Reports on Form 8-K...............................  19

Signatures   ...............................................................  21








                                      -i-

<PAGE>


           CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

         This Annual Report on Form 10-KSB includes "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities  Act"),  and Section 21E of the Securities  Exchange Act of 1934, as
amended.  All statements  other than statements of historical  facts included in
this Report, including,  without limitation,  statements regarding the Company's
future financial position, business strategy, budgets, projected costs and plans
and  objectives  of  Management  for  future  operations,   are  forward-looking
statements. In addition,  forward-looking statements generally can be identified
by the use of  forward-looking  terminology  such as  "may,"  "will,"  "expect,"
"intend,"  "estimate,"  "anticipate"  or "believe"  or the  negative  thereof or
variations  thereon or similar  terminology.  Although the Company believes that
the expectations reflected in such forward-looking statements are reasonable, it
can give no assurance  that such  expectations  will prove to have been correct.
Such  statements  are based upon numerous  assumptions  about future  conditions
which may  ultimately  prove to be inaccurate  and actual events and results may
materially  differ  from  anticipated  results  described  in  such  statements.
Important  factors that could cause actual results to differ materially from the
Company's  expectations  ("cautionary  statements")  include the risks  inherent
generally in the  insurance  and financial  services  industries,  the impact of
competition and product pricing, changing market conditions, the risks disclosed
in the Company's  Annual  Report on Form 10-KSB for the Year Ended  December 31,
1999 under "ITEM 6--Management's  Discussion and Analysis or Plan of Operation,"
and elsewhere in this Report.  All subsequent  written and oral  forward-looking
statements  attributable  to the Company,  or persons acting on its behalf,  are
expressly  qualified  in their  entirety  by these  cautionary  statements.  The
Company assumes no duty to update or revise its forward-looking statements based
on changes in internal estimates or expectations or otherwise.  As a result, the
reader is cautioned not to place reliance on these forward-looking statements.


                                     PART I

ITEM 1.    DESCRIPTION OF BUSINESS

General

         Summit Life Corporation,  an Oklahoma  corporation  formed in 1994 (the
"Company"),  is an  insurance  holding  company.  The  Company's  primary  focus
currently is its life insurance  operations,  although  historically it has also
provided  residential  mortgage  loan  processing  services to  individuals  and
financing to medical accounts receivable factoring entities.

         The Company's  growth has been fueled primarily  through  acquisitions,
starting in 1994 when it acquired an Oklahoma-chartered  life insurance company.
Since then, the Company has acquired three  additional life insurance  companies
in Texas and  Louisiana.  The Company  consolidated  its  operations  in 1999 by
combining  three of the companies  into one company  operating in both Texas and
Oklahoma  and selling  the fourth  company  which  operated  in  Louisiana.  The
Company's  premium revenue  increased from $121,192 in 1998 to $213,598 in 1999,
and  the  Company  believes  that  internal   growth,   coupled  with  strategic
acquisitions  made  available  by the  current  consolidation  of the  insurance
industry,  present the Company with good  opportunities to achieve its operating
strategy.   SEE  "ITEM  6-MANAGEMENT'S   DISCUSSION  AND  ANALYSIS  OR  PLAN  OF
OPERATION."

         The Company's operating strategy is to continue to make acquisitions of
small,  marginally profitable or unprofitable  insurance companies,  consolidate
and streamline the  administrative  functions of these small companies,  improve
their  investment  yields  through  active  asset  management  in a  centralized
investment operation and eliminate their unprofitable  products and distribution
channels.  The Company believes that it is particularly well suited to make such
acquisitions  and to  capitalize  on the cost  savings  that can be  realized by
consolidating the administrative functions of the acquired companies.

                                      -1-

<PAGE>

         As of  December  31,  1999,  the  Company  had  approximately  913 life
insurance  policies  and  annuity  contracts  outstanding  and  individual  life
insurance in force of  approximately  $14 million.  As of December 31, 1999, the
Company had total  assets of  approximately  $7 million and total  shareholders'
equity of approximately $1,016,000.

          The  Company's  principal  office is located at 3021 Epperly Dr., P.O.
Box 15808,  Oklahoma City,  Oklahoma,  73155,  and its telephone number is (405)
677-0781.

History

         The Company was formed in 1994 and, since inception,  has acquired four
life insurance  companies with  operations in,  variously,  Oklahoma,  Texas and
Louisiana.  Three of these companies were combined in 1999 to form the Company's
flagship   company,   Great  Midwest  Life  Insurance   Company   ("GMLIC"),   a
Texas-domiciled  life  insurance  company  operating in Texas and Oklahoma.  The
Louisiana-domiciled  subsidiary  was sold in  December  1999 as a result  of the
Company's decision to concentrate its focus on Oklahoma and Texas.

         The Company closed its initial  public  offering on June 30, 1999 after
raising net  proceeds of  approximately  $712,000.  The proceeds of the offering
were used to repay  corporate  indebtedness  and to  increase  the  capital  and
surplus of the  subsidiary  insurance  company as well as for general  corporate
purposes.

Recent Events

         On  November  10,  1999,  the  Company  entered  into a Stock  Purchase
Agreement with First Alliance Insurance Company ("First  Alliance"),  to sell to
First  Alliance 100% of the capital  stock of the Company's  Louisiana-domiciled
life insurance  subsidiary,  Benefit Capital Life Insurance  Company  ("BCLIC").
Pursuant to the terms of the Stock Purchase Agreement,  which closed on December
30, 1999,  First  Alliance paid the Company  approximately  $519,000 in cash and
issued to the Company 25,000 shares of First Alliance's Class A common stock.

         On February 15, 2000, GMLIC executed an agreement, which is expected to
close in April 2000,  regarding the  acquisition  of 100% of the common stock of
Texas Savings Life Insurance  Company,  a Texas life insurance  company  ("Texas
Savings"),  for an amount  equal to the  statutory  capital and surplus of Texas
Savings as of December 31, 1999,  plus $400,000.  The  transaction is subject to
the approval of the Texas Department of Insurance,  which is expected during the
second  quarter of 2000.  See "ITEM 6.  MANAGEMENT'S  DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION."

Operations

Insurance Products

         General

         Through its  insurance  subsidiary,  the Company  offers a portfolio of
permanent and term life products as well as flexible  premium and single premium
annuities  designed  to  meet  the  needs  of  its  customers  for  supplemental
retirement  income,  estate planning and protection from unexpected  death.  The
target  niche is  middle  income  individuals,  families  and  small  businesses
throughout  its  marketing  territory.  The  Company's  business  strategy is to
continue to expand its  marketing  territory  through  subsidiary  growth and/or
company  acquisition,  and to increase  shareholder  value by  managing  certain
operating  fundamentals inherent to the insurance business.  The Company intends
to utilize  these  operating  fundamentals  to  differentiate  its  products  by
maintaining  its  position  as a  low-cost  producer  that  provides  high-value
products to its life  insurance  and  annuity  customers,  while also  providing
superior service to both agents and customers.  In addition, the Company intends
to continue to seek new business opportunities through mergers, acquisitions and
strategic alliances.

                                      -2-

<PAGE>

         The Company has realized very low entry costs in its purchases of small
insurance  companies.  The Company minimizes operating expenses by centralizing,
standardizing and more efficiently performing many functions common to most life
insurance   companies.   The  operations   performed  by  the  Company   include
underwriting  and policy  administration,  accounting  and financial  reporting,
marketing, regulatory compliance and asset management. The Company believes that
it is currently  utilizing just over 10% of its information  technology  systems
capability in the administration of these back office operations.

         Factors Affecting Insurance Operations

         The Company  believes that its operating  performance is  significantly
impacted by four basic elements: mortality, persistency,  operating expenses and
investment  yield.  The Company believes that its results for each of these four
elements for the last several years have been good.

         The Company believes its conservative risk selection  practices and its
disciplined field underwriting have resulted in the Company realizing  favorable
mortality  experience for the last several years. The Company fully  underwrites
each regular application and has no group underwriting and maintains very little
guaranteed issue business.

         The Company has consistently achieved favorable persistency on its life
insurance  products (i.e.,  lower lapse rates).  This high  persistency has been
achieved by providing quality service to its policyholders, incentives to agents
by, among other things, grading production bonuses by actual persistency, paying
persistency bonuses,  awarding recognition for both agency and agent persistency
achievements, and monitoring agency persistency on a quarterly and annual basis.
Persistency is the extent to which policies sold remain in force.  Policy lapses
over those actuarially anticipated could have an adverse effect on the financial
performance of the Company.  Policy  acquisition costs are deferred and expensed
over the premium paying period of a policy. Excess policy lapses, however, cause
the  immediate  expensing or amortizing of deferred  policy  acquisition  costs.
Provided  the Company  maintains  lapse and  surrender  rates within its pricing
assumptions for its insurance  policies,  the Company  believes that the present
lapse and  surrender  rate  should  not have a  material  adverse  effect on the
Company's financial results. For the years ended December 31, 1998 and 1999, the
Company's  lapse ratio on ordinary  business was 4% and 11%,  respectively.  The
increase in lapse ratio was attributable  primarily to the acquisition of GMLIC,
and the Company  anticipates  that such ratio will return to  historical  levels
(below 10%) during 2000.

         The  Company  has  aggressively  managed  its  cost  structure,   while
realizing  certain  operating  efficiencies  from minimal  personnel and reduced
overall  costs as a result of the various  acquisitions  it has  effected  since
1994. Other factors  contributing to the Company's lower cost structure include:
a flat  organizational  structure  which allows the Company to be  responsive to
changing business  conditions;  the location of the Company in a geographic area
which  provides  lower cost  operations  than  found in many other  areas of the
country; a well-trained experienced workforce; and efficient use of technology.

         The Company has maintained  competitive  portfolio yields, while at the
same time  maintaining a  conservative  approach with respect to its  investment
criteria.  Ultimately,  the  Company's  objective  with respect to its insurance
operations is to price each of its products to earn an adequate  margin  between
the  return to the  policyholder  and the  return  earned by the  Company on its
investments.  To the extent that the Company is able to realize higher portfolio
yields on its  investments,  it will be in a position  to offer more  attractive
pricing on its insurance products.

                                      -3-

<PAGE>

         Fixed Rate Annuities

         Annuities  are  long  term  savings   vehicles  that  are  particularly
attractive  to  customers  over  the  age of 50 who are or may be  planning  for
retirement  and seek a secure,  tax deferred  savings  product.  The  individual
annuity  business is a growing segment of the savings and retirement  market and
among the fastest  growing  segments  of the life  insurance  industry.  Annuity
products  currently  enjoy an advantage  over certain other  retirement  savings
products  because the payment of federal  income  taxes on interest  credited on
annuity policies is deferred during the investment accumulation period.

         Through GMLIC, the Company markets, issues and administers a variety of
fixed rate deferred  annuity  products,  including  single  premium and flexible
premium  deferred  annuities.  In a fixed rate deferred  annuity,  the insurance
company assumes the risk of interest  fluctuations and pays a minimum fixed rate
of interest,  usually 3% to 4% per year,  with an excess amount payable based on
investment yields of its investment portfolio. Single premium deferred annuities
("SPDAs"),  in general,  are savings vehicles in which the policyholder  makes a
single premium payment to an insurance  company.  The insurance  company credits
the account of the annuitant  with earnings at an interest rate (the  "crediting
rate"),  which is declared by the  insurance  company  from time to time and may
exceed but may not be lower than any contractually  guaranteed minimum crediting
rate. All of the Company's  annuities have a minimum guaranteed  crediting rate.
The Company also offers flexible premium deferred annuities ("FPDAs"). FPDAs are
deferred  annuities  in which the  policyholder  may elect to make more than one
premium payment. The Company currently does not offer variable annuity products.

         The Company periodically establishes an interest crediting rate for its
new annuity policies.  In determining the Company's  interest  crediting rate on
new  policies,  management  considers the  competitive  position of the Company,
prevailing  market  rates and the  profitability  of the  annuity  product.  The
Company  maintains the initial  crediting rate for a minimum period of one year.
Thereafter,  the  Company  may  adjust  the  crediting  rate at its  discretion,
although  historically  such adjustments have generally been made on a quarterly
basis. In establishing  renewal crediting rates, the Company primarily considers
the anticipated  yield on its investment  portfolio.  Interest rates credited on
the Company's in force annuity  policies  ranged from 5.15% to 8.15% at December
31,  1999.  All  of the  Company's  annuity  products  have  minimum  guaranteed
crediting  rates of 3.0% for the life of the policy.  At December 31, 1999, more
than 98% of the  Company's  in force  annuity  policies  were beyond the initial
crediting rate period.

         Certain of the Company's  annuity  policies have a bonus crediting rate
for the first year of the policy,  which typically  exceeds the annual crediting
rate by 1% to 3%. The bonus and the base crediting  rates are fully disclosed in
the  annuity  contract.  The  Company  incorporates  a number of features in its
annuity  products  designed to reduce the early  withdrawal  or surrender of the
policies  and  to  partially   compensate   the  Company  for  lost   investment
opportunities  and  costs  if  policies  are  withdrawn  early.  Certain  of the
Company's   deferred  annuity   contracts   provide  for  penalty  free  partial
withdrawals,  typically up to 10% of the accumulation value annually.  Surrender
charge periods on annuity  policies  currently range from five years to the term
of the policy,  with the majority of such policies being issued with a surrender
charge  period of more than seven  years.  The average  length of the  surrender
period on the Company's  deferred  annuity  policies issued during 1998 and 1999
was eight years. The initial  surrender charge on annuity policies  generally is
8% of the premium and decreases over the surrender  charge period (of up to nine
years).  At December 31, 1999,  56% of the Company's  annuity  liabilities  were
subject to a surrender charge of 5% or more.

         Tax Qualified Annuities

         General.  The Company also markets tax qualified  retirement  annuities
that meet the  requirements  of Section  403(b) of the Internal  Revenue Code of
1986  ("TSAs") to  employees  of public  schools  and  certain  other tax exempt
organizations.  Teachers,  school  employees  and  employees of other tax exempt
organizations  purchase TSAs through automatic payroll deductions.  TSA products
tend to be  purchased  by  customers  who are  younger  than  purchasers  of the
Company's  other  annuity  products.  Therefore,  the  Company's  specialty  TSA
products tend to  incorporate  features that are attractive to customers in this
younger age bracket who have longer to  accumulate  before  retirement,  such as
combining  a more  competitive  crediting  interest  rate  offset  with a longer
surrender  charge  period.  The  Company  believes  that the  market for TSAs is
attractive  because TSAs broaden its customer base and provide an ongoing source
of premium  renewals.  Additionally,  because of their tax features and transfer
restrictions,  TSAs are less likely to be surrendered, making them a more stable
and  dependable  source of profits for the  Company.  In  addition to TSAs,  the
Company also sells other tax qualified  retirement  annuities such as Individual
Retirement  Annuities and other Employee  Pension type  programs.  Tax qualified
retirement  annuity values totaled almost $1,300,000 or approximately 27% of the
total annuities sold by the Company since inception.

                                      -4-

<PAGE>

         Favorable  Tax  Treatment.  Under the Internal  Revenue Code  ("Code"),
income taxes otherwise  payable on investment  earnings are deferred on earnings
unpaid  during the  accumulation  period of certain life  insurance  and annuity
policies. This favorable tax treatment may give the Company's annuity policies a
competitive  advantage  over other  investment  or savings  vehicles that do not
offer this  benefit.  To the extent that the Code may be revised to eliminate or
reduce the tax deferred status of life deferred payment annuity products,  or to
establish  a tax  deferred  status  to any  competing  policies,  the  Company's
competitive advantage may be adversely affected.

         Traditional Life Insurance

         Term Life.  The  Company's  subsidiary  offers a low cost 10 year level
term life insurance  product with level premiums for periods of ten years and an
annually renewable level term product which provides for increasing  premiums in
five year  durations,  both  utilizing  a low  indeterminate  premium  structure
afforded to it by its primary reinsurance company. The Company generally retains
a small fixed  portion of the insurance  risk,  then sells or cedes a portion of
its  risks  to its  reinsurer,  who in turn  pays  an  additional  allowance  or
commission to the Company.  This allows the Company to transfer a portion of its
risk and continue to grow its premium revenues and surplus.  These term products
are designed for and sold to individuals ages 20 through 60 and terminate at age
70. While term life normally is bought very  inexpensively  by consumers,  it is
also priced by companies using historical data that illustrates certain of these
coverages, when using adequate reinsurance, will not result in adverse claims.

         Whole  Life.  The  Company's  subsidiary  markets  low cost  guaranteed
premium  products in which  premiums are payable for the life of the insured and
insurance  protection  (upon certain  conditions  being met) is afforded for the
insured's  lifetime.  The premium paid for such whole life policies is generally
higher than the premium for comparable amounts of term insurance in the policy's
early years but is generally  lower in the later years of the policies life. The
policyholder  may borrow against the policy,  provided there is sufficient  cash
values,  at a rate that is comparable or lower than other  conventional  lending
sources.  The Company  generally  holds all cash values and if a death occurs it
pays death claims then  collects from the reinsurer to recover the excess of its
retention limits and benefits paid.

         Beginning  January 1999,  the life insurance  products of the Company's
subsidiary   included  annuities  in  addition  to  traditional  life  insurance
products. GMLIC also offers a graded benefit life product which is offered on an
individual basis,  primarily to persons age 40 to 85 and in amounts of $1,000 to
$5,000,  without evidence of insurability.  Benefits paid are less than the face
amount of the policy  during the first two years,  except in cases of accidental
death.

         Insurance Underwriting

         The  Company  follows  detailed,  uniform  underwriting  practices  and
procedures in its insurance  business  which are designed to assess risks before
issuing  coverage  to  qualified   applicants.   The  Company  has  professional
underwriters  who  evaluate  policy  applications  on the  basis of  information
provided by applicants and others. Management believes that its actual mortality
results are attributable to, among other things, the geographic  location of its
customer base in rural and suburban  areas (as opposed to urban areas),  as well
as its  consistent  application  of  appropriate  underwriting  criteria  to the
processing of new customer applications.

                                      -5-

<PAGE>

         Reinsurance

         Consistent  with the general  practice of the life insurance  industry,
the  Company's  subsidiary  reinsures  portions  of  coverage  provided by their
insurance products with other insurance  companies under agreements of indemnity
reinsurance.

         Indemnity reinsurance agreements are intended to limit a life insurer's
maximum  loss on a large or  unusually  hazardous  risk or to  obtain a  greater
diversification of risk.  Indemnity  reinsurance does not discharge the original
insurer's primary liability to the insured.  The Company's reinsured business is
ceded to numerous  reinsurers,  and the Company believes the assuming  companies
are able to honor all contractual  commitments,  based on the Company's periodic
reviews of their financial  statements,  insurance  industry reports and reports
filed with state insurance departments.

         As of  December  31,  1999,  the  policy  risk  retention  limit of the
Company's  subsidiary on the life of any one individual did not exceed  $10,000;
reinsurance ceded by the Company's subsidiary  represented 84% of gross combined
life insurance in force. At December 31, 1999, the Company's largest  reinsurer,
Optimum Re Insurance Company, accounted for approximately 83% of the $14 million
of the total insurance in force.

Investments

         Investment  activities are an integral part of the Company's  business;
investment income is a significant component of the Company's revenues. Upon the
purchase by a  policyholder  of an annuity or life  contract  and payment of the
premium,  the policy is issued and delivered to the new policyholder.  The funds
are  then  invested  as the  Company  determines  based  on  certain  guidelines
including  those set by the  National  Association  of  Insurance  Commissioners
("NAIC") as to the percentage of investment  that are placed in any one category
of  investments.  The  Company  has  historically  invested  a  majority  of its
available assets in securities that are issued, secured, guaranteed or backed by
federal, state or local governments, their agencies or instrumentalities.

         Profitability  is  significantly  affected by spreads between  interest
yields on investments and rates credited on insurance liabilities.  Although all
credited  rates on  single  premium  deferred  annuities  and  flexible  premium
deferred annuities may be changed as often as quarterly, after their first year,
changes in credited rates may not be sufficient to maintain targeted  investment
spreads in all economic and market  environments.  In addition,  competition and
other factors,  including the impact of the level of surrenders and withdrawals,
may limit the Company's ability to adjust or maintain  crediting rates at levels
necessary to avoid narrowing of spreads under certain market conditions. For the
year ended December 31, 1999, the average gross yield of the Company's  invested
assets was approximately 7.3% and the average credited rate was 5.5%.

         The  Company  balances  the  duration of its  invested  assets with the
expected  duration of benefit  payments arising from insurance  liabilities.  At
December 31, 1999, the adjusted  modified  duration of debt securities and short
term  investments  was 6.0 years.  At December  31,  1999,  the  duration of the
Company's insurance liabilities was 7.0 years.

         For information  regarding the composition and  diversification  of the
investment  portfolio  of the  Company  and its  subsidiary,  see  Note B to the
Company's Consolidated Financial Statements.

                                      -6-

<PAGE>

Acquisitions and Consolidations

General

         The Company's operating strategy is to continue to make acquisitions of
small,  marginally profitable or unprofitable  insurance companies,  consolidate
and streamline the  administrative  functions of these small companies,  improve
their  investment  yields  through  active  asset  management  by a  centralized
investment operation and eliminate their unprofitable  products and distribution
channels.  Because of their small size,  such companies are often  overlooked as
potential acquisition candidates by other companies in the industry. The Company
believes that it is particularly  well suited to make such  acquisitions  and to
capitalize  on the cost  savings  which can be  realized  by  consolidating  the
administrative functions of the acquired companies.

Historical Acquisitions

         The  Company's  growth  to  date  has  been  fueled  primarily  through
acquisitions.   Since  1994,  the  Company  has  acquired  four  life  insurance
companies. During 1999, three of these companies were combined, either by merger
or through transfer of operations, to create one company, operating in Texas and
Oklahoma,  while a fourth company was sold. The Company  intends to continue its
strategy of pursuing  similar  acquisitions of blocks of insurance  business and
small insurance companies and other insurance-related opportunities.  Management
believes that such  acquisitions will continue to lower unit costs by increasing
the number of policies and the amount of premiums over which fixed  expenses are
spread.

Targeted Future Acquisitions

         The Company has typically  sought  companies  that are  underdeveloped,
overly burdened with expenses or owned by financially  troubled  companies.  The
Company  believes  that  the  small  insurance  company  marketplace  is  highly
fragmented and faces numerous hurdles to its survival and growth over the coming
years. Some of those hurdles include  technological  obsolescence,  the need for
additional  capital and surplus due to the changing  regulatory  environment and
lack of sufficient exit strategies for owners of small,  closely-held companies.
The Company believes these factors have created acquisition  opportunities often
overlooked by the large insurance  companies.  The Company intends to capitalize
on these  opportunities as it continues to execute its growth plans. At the date
of this  Report,  the  Company  awaits  approval  from the Texas  Department  of
Insurance to purchase Texas Savings Life Insurance  Company,  a  Texas-domiciled
life insurance company.  The Company has no other agreements,  understandings or
arrangements with respect to any other acquisitions at this time.

Employees

         As of December 31, 1999, the Company had six full-time employees,  most
of which perform both  managerial and  administrative  functions.  The Company's
employees  also  perform  services for GMLIC which has no  employees.  It can be
anticipated  that the Company will have a need for more employees as the size of
its business  grows.  None of the Company's  employees is represented by a labor
union.  Management  believes that the Company's relations with its employees are
good.

Marketing

         The Company's  target markets are individuals in middle income brackets
in addition to small businesses in the states of Texas and Oklahoma. The Company
believes that this market is severely underserved as more major companies target
their  products and agency force toward the upper income and large policy sales.
Many large  companies no longer offer  insurance in face amounts under $100,000.
Although the Company does write multi-million dollar policies,  its average life
policy is approximately $17,000.

                                      -7-

<PAGE>

         The  pricing of the  Company's  products  is  generally  determined  by
reference to actuarial  calculations  and  statistical  assumptions  principally
relating to mortality, persistency,  investment yield assumptions,  estimates of
expenses and management's judgment as to market and competitive conditions.  The
premiums and deposits received,  together with assumed investment earnings,  are
designed to cover policy  benefits,  expenses  and  policyowner  dividends  plus
return a profit to the  Company.  These  profits  arise from the margin  between
mortality  charges  and  insurance  benefits  paid,  the margin  between  actual
investment  results and the  investment  income  credited  to  policies  (either
directly or through  dividends to  policyowners)  and the margin between expense
charges and actual  expenses.  The level of profits  also depend on  persistency
because policy acquisition costs, particularly agent commissions,  are recovered
over the life of the policy.  Dividends  and  interest  credited on policies may
vary from time to time reflecting changes in investment, mortality, persistency,
expenses  and  other  factors.  Interest  rate  fluctuations  have an  effect on
investment  income  and may have an impact on  policyowner  behavior.  Increased
lapses in policies may be experienced if the Company does not maintain  interest
rates and  dividend  scales  that are  competitive  with other  products  in the
marketplace.

         The Company markets its products  primarily through personal  producing
general agents ("PPGAs") and small independent  property and casualty  agencies.
The PPGAs include the Company's  founders and principal  stockholders,  James L.
Smith and  Charles L.  Smith.  James L. Smith and  Charles L. Smith are the sole
stockholders of the Smith Agency,  which undertakes life insurance and financial
planning for estates,  trusts and corporations,  was and is presently, a general
agent for several insurance  companies.  The Smith Agency has sold a majority of
the Company's  deferred annuities since the Company's  inception.  Additionally,
the  companies  acquired  by the Company  generally  have in place PPGAs who are
capable and  qualified  to generate the sales  desired by the  Company,  thereby
eliminating part of the expense of recruiting and training a new agency force.

Competition

         The life  insurance  business is highly  competitive  and consists of a
number of  companies,  many of which have greater  financial  resources,  longer
business  histories and more  diversified  lines of insurance  products than the
Company.   The  Company  may  encounter  increased   competition  from  existing
competitors or new market entrants,  some of which may be  significantly  larger
and  have  greater  business   resources.   Companies   typically   compete  for
policyholders on the basis of benefits,  rates,  financial strength and customer
service  and  compete  for  agents  and  brokers  on the  basis of  commissions,
financial strength and customer service. The Company, although smaller than most
of its  competitors,  provides  competitive  benefits  and  rates.  The  Company
believes  that its ability to  administer  its  functions at a much reduced rate
allows it to maintain low internal cost products.

         The Company has  identified  additional  areas where it has very little
competition  due to the size of the  Company as well as the size of its  target.
That  area is the  consolidation  field.  The  Company's  strategy  has  been to
consolidate and streamline the administrative  functions of small life insurance
companies.  Most large life  companies  have high  fixed  costs when  performing
acquisitions  restricting  them in the minimum size of purchase they can pursue.
The Company believes that the  consolidation of the industry will continue,  and
the Company intends to participate in the process.

Regulation

         The  Company's  insurance  subsidiary  is  subject  to  regulation  and
supervision  by the  states in which it  transacts  business.  The laws of these
jurisdictions  generally  establish  agencies with broad  regulatory  authority,
including  powers to: (1) grant and revoke  licenses to transact  business;  (2)
regulate  and  supervise  trade  practices  and market  conduct;  (3)  establish
guaranty associations; (4) license agents; (5) approve policy forms; (6) approve
premium rates for some lines of business; (7) establish reserving  requirements;
(8) prescribe the form and content of required financial statements and reports;
(9) determine the  reasonableness and adequacy of statutory capital and surplus;
and (10) regulate the type and amount of permitted investments.

         Most states also have  enacted  legislation  that  regulates  insurance
holding company groups,  including acquisitions,  extraordinary  dividends,  the
terms of  surplus  debentures,  the terms of  affiliate  transactions  and other
related  matters.  Currently,  the  Company  and its  insurance  subsidiary  are
registered as a holding company group pursuant to such  legislation in Texas and
Oklahoma.

                                      -8-

<PAGE>

         The  federal  government  does  not  directly  regulate  the  insurance
business.  However,  federal legislation and administrative  policies in several
areas,  including  pension  regulation,  age and sex  discrimination,  financial
services  regulation  and federal  taxation,  do affect the insurance  business.
Recently,  increased  scrutiny  has been  placed upon the  insurance  regulatory
framework,  and a number  of  state  legislatures  have  considered  or  enacted
legislative  proposals that alter, and in many cases increase,  the authority of
state agencies to regulate  insurance  companies and holding company groups.  In
addition,  legislation  has been  introduced  from time to time in recent  years
which, if enacted, could result in the federal government assuming a more direct
role in the regulation of the insurance industry.

         State insurance  regulators and the NAIC are  continually  re-examining
existing laws and regulations and their application to insurance companies. From
time to time the NAIC has adopted,  and  recommended  to the states for adoption
and implementation, several regulatory initiatives designed to decrease the risk
of  insolvency  of insurance  companies in general.  These  initiatives  include
risk-based  capital ("RBC")  requirements  for determining the levels of capital
and surplus an insurer must maintain in relation to its insurance and investment
risks. The NAIC regulatory  initiatives also impose restrictions on an insurance
company's ability to pay dividends to its stockholders. These initiatives may be
adopted by the various states in which the Company's subsidiary is licensed, but
the ultimate content and timing of any statutes and regulations to be adopted by
the states  cannot be determined at this time. It is not possible to predict the
future impact of changing state and federal regulations on the operations of the
Company,  and there can be no assurance that existing insurance related laws and
regulations  will not  become  more  restrictive  in the future or that laws and
regulations enacted in the future will not be more restrictive.

         Most  states  have  enacted   legislation  or  adopted   administrative
regulations  which affect the  acquisition of control of insurance  companies as
well as transactions  between insurance  companies and persons controlling them.
The nature and extent of such  legislation  and  regulations  vary from state to
state.  Most  states,  however,  require  administrative  approval  of:  (1) the
acquisition  of 10 percent  or more of the  outstanding  shares of an  insurance
company  incorporated in the state; or (2) the acquisition of 10 percent or more
of the  outstanding  stock  of an  insurance  holding  company  whose  insurance
subsidiary is incorporated  in the state.  The acquisition of 10 percent of such
shares is generally  deemed to be the acquisition of control for purposes of the
holding  company  statutes.   It  requires  not  only  the  filing  of  detailed
information  concerning the acquiring  parties and the plan of acquisition,  but
also the receipt of  administrative  approval prior to the acquisition.  In many
states, an insurance authority may find that control does not, in fact, exist in
circumstances  in which a person owns or controls 10 percent or a greater amount
of securities.

         Under the  solvency  or  guaranty  laws of most states in which they do
business,  the Company's insurance subsidiary may be required to pay assessments
(up to certain  prescribed limits) to fund policyowner losses or the liabilities
of insolvent or  rehabilitated  insurance  companies.  These  assessments may be
deferred  or  forgiven  under  most  guaranty  laws if they  would  threaten  an
insurer's  financial  strength.  In certain  instances,  the  assessments may be
offset against future premium  taxes.  The Company's  subsidiaries  historically
have not been  required  to pay  assessments  in any  significant  amounts.  The
likelihood and amount of any future assessments cannot be estimated, as they are
beyond the control of the Company.

         As  part of  their  routine  regulatory  oversight  process,  insurance
departments  conduct periodic  detailed  examinations of the books,  records and
accounts of insurance companies  domiciled in their states.  Texas conducts such
examinations on a three to five year cycle under  guidelines  promulgated by the
NAIC. The Company expects to incur examination  expenses in 2000 for a scheduled
examination of GMLIC.

                                      -9-

<PAGE>

Federal Income Taxation

         The  annuity and life  insurance  products  marketed  and issued by the
Company's  subsidiary  generally  provide  the  policyowner  with an income  tax
advantage,  as compared to other savings  investments  such as  certificates  of
deposit  and bonds,  in that  income  taxation  on the  increase in value of the
product is  deferred  until  receipt  by the  policyowner.  With  other  savings
investments, the increase in value is taxed as earned. Annuity benefits and life
insurance  benefits  which  accrue  prior to the  death of the  policyowner  are
generally  not taxed until paid.  Life  insurance  death  benefits are generally
exempt from income tax, but not estate tax. Also, benefits received on immediate
annuities  (other than structured  settlements) are recognized as taxable income
ratably as opposed to the economic  accrual  methods,  which tend to  accelerate
taxable income into earlier years and which are required for other  investments.
The tax advantage  for annuities and life  insurance is provided in the Internal
Revenue Code ("the  Code"),  and is  generally  followed in all states and other
United  States  taxing  jurisdictions.  Accordingly,  it is subject to change by
Congress and the legislatures of the respective taxing jurisdictions.

         The  Company's  insurance  company  subsidiary  is taxed under the life
insurance  company  provisions  of the Code.  Provisions  in the Code  require a
portion of the expenses  incurred in selling  insurance  products to be deducted
over a period of years, as opposed to immediate  deduction in the year incurred.
This provision increases the tax for statutory accounting purposes which reduces
statutory surplus and, accordingly,  decreases the amount of cash dividends that
may be paid by the life insurance  subsidiary.  GMLIC also  qualifies  under the
small life insurance company rules for taxation which may further reduce taxes.

ITEM 2.    DESCRIPTION OF PROPERTY

         The  Company's  administrative,  marketing  and  production  facilities
consist of  approximately  3,000  square feet at a single  location in Del City,
Oklahoma.  The Company owns and occupies this facility and owns the  approximate
30,000  square feet of raw land  adjacent to the  property.  This  facility will
provide room for  possible  expansion  which will likely be utilized  within the
next few years.

ITEM 3.    LEGAL PROCEEDINGS

         The Company is involved from time to time in various legal  proceedings
and claims incident to the normal conduct of its business.  The Company believes
that such legal proceedings and claims,  individually and in the aggregate,  are
not likely to have a  material  adverse  effect on its  financial  condition  or
results of operations.

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

         No matters were submitted to a vote of the security  holders during the
fourth quarter of the fiscal year covered by this report.

                                      -10-

<PAGE>

                                     PART II

ITEM 5.    MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Trading Market

         There  is  currently  a  limited  market  for the  common  stock of the
Company,  which has been quoted on the OTC  Bulletin  Board since  October  1999
under  the  symbol  SUMC.  The  following  table  sets  forth,  for the  periods
indicated,  the high and low  quoted  prices of the  Company's  common  stock as
published by the OTC Bulletin Board:

                                                             Price Range
                                                       ------------------------
                      Date                                High           Low
              -------------------                      ----------     ---------
              October  1999                              $5.00         $5.00
              November 1999                              $5.00         $2.00
              December 1999                              $6.00         $3.938
              January  2000                              $5.00         $4.50
              February 2000                              $4.875        $2.00

         OTC Bulletin  Board  quotations  reflect  interdealer  prices,  without
retail   mark-up,   mark-down  or  commission  and  may  not  represent   actual
transactions.  The Company intends to make  application to list the common stock
on the Nasdaq SmallCap Market when it qualifies for listing.


                                      -11-

<PAGE>


Number of stockholders

         As of the close of  business  on March 27,  2000,  2,267,605  shares of
common stock were issued and  outstanding  and 5,000  shares of preferred  stock
were  issued and  outstanding.  At such date,  there  were  approximately  1,429
stockholders of record of the common stock.

Dividend Policy

         To date,  the Company  has  declared  no cash  dividends  on its common
stock,  and does not expect to pay cash  dividends in the near term. The Company
intends to retain future  earnings,  if any, to provide funds for operations and
the continued expansion of its business.

Recent Sales of Unregistered Securities

         During the second quarter of 1999, the Company issued 4,892 shares of a
newly  created  class  of  preferred  stock,  resulting  in  gross  proceeds  of
approximately  $489,200.  In October 1999,  the Company issued an additional 108
shares of  preferred  stock,  resulting  in gross  proceeds  to the  Company  of
$10,800.  It is the Company's  belief that each of the  individuals  to whom the
preferred stock was issued was a "sophisticated  investor" within the meaning of
Section  4(2) of the  Securities  Act and that each such  investor had access to
information  regarding  the  Company  and the  proposed  transaction.  No  sales
commissions were paid in connection with the sale of the preferred stock and the
securities were issued in reliance on the exemption from  registration  provided
by Section 4(2) of the Securities Act.

ITEM 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

         The following  discussion and analysis reviews the Company's operations
for the years ended December 31, 1999 and 1998. Certain statements  contained in
this discussion are not based on historical  facts,  but are based upon numerous
assumptions  about future conditions which may ultimately prove to be inaccurate
and actual events and results may differ  materially  from  anticipated  results
described in such statements.  The Company's  ability to achieve such results is
subject to certain risks and uncertainties  such as those inherent  generally in
the insurance  industry,  the impact of competition,  changing market conditions
and  other  risks.  The  following  discussion  and  analysis  should be read in
conjunction  with the financial  statements of the Company and the notes related
thereto included elsewhere in this Report.

Operating Data

         The following table sets forth selected information regarding operating
results for the periods indicated:

                                                      Year Ended December 31,
                                                      -----------------------
                                                        1998          1999
                                                      ---------     ---------
                                                       (dollars in thousands)
         Statement of Operations Data:
                  Revenues                            $     756     $     813
                  Benefits and expenses                   1,363         1,704
                                                      ---------     ---------
                           Net loss                   $    (607)    $    (891)
                                                      =========     =========

         Balance Sheet Data:
                  Cash and cash equivalents           $   1,492     $     936
                  Total assets                        $   8,406     $   7,016
                  Total liabilities                   $   7,629     $   6,000
                  Stockholders equity                 $     777     $   1,016


                                      -12-

<PAGE>


Results of Operations

      Discontinued Operations

         In  December  1998,  the  Company  adopted a plan to sell the  mortgage
services segment to a then officer of the Company in exchange for a $10,000 note
receivable.  The actual  disposal date was January 4, 1999.  The assets sold and
liabilities  assumed of the mortgage services segment consisted primarily of the
segment's "name", cash, and customer deposits. Operating results of the mortgage
services  segment  are  shown  separately  in  the  consolidated  statements  of
operations  included  elsewhere  in this  Report.

      Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

         Assets/Liabilities/Stockholders'  Equity.  Total assets were $7,015,821
at December 31, 1999, compared to $8,406,090 at December 31, 1998, a decrease of
17%.  The  decrease  was due to the  sale of  BCLIC  in  December  1999  and the
reduction of certain Company debt. See "ITEM 1.  DESCRIPTION OF  BUSINESS-Recent
Events." These offset the gain in assets  realized from the purchase of GMLIC in
January 1999.

         Total liabilities (primarily insurance reserves for future policyholder
benefits)  were  $5,999,783  at December 31,  1999,  compared to  $7,629,260  at
December 31, 1998, a decrease of 21%. The decrease was due primarily to the sale
of BCLIC and the resulting  decrease in reserves and from repayment of a portion
of the Company's outstanding debt.

         Total  stockholders'  equity  was  $1,016,038  at  December  31,  1999,
compared to $776,830 at December 31, 1998,  an increase of 31%. The increase was
primarily due to sales of the Company's  common stock  pursuant to the Company's
initial public  offering (the "IPO") effected in the first half of 1999, as well
as private placements of the Company's preferred stock in April 1999 and October
1999.

         Average  rate  of  return  on  investments,  including  cash  and  cash
equivalents,  was  approximately  7.3% for 1999 and  8.7% for  1998,  while  the
average rate credited to policyowner  accounts was approximately  5.5% and 6.2%,
respectively.

         At December 31, 1999,  the  Company's  net deferred tax assets  totaled
$37,241 and related primarily to net operating loss  carryforwards.  Realization
of net  operating  carryforwards  is dependent on generating  sufficient  future
taxable income.  The Company believes its operating strategy to continue to make
acquisitions  of small  insurance  companies,  consolidate  and  streamline  the
administrative functions of these small companies, improve unprofitable products
and  distribution  channels  will  generate  future  taxable  income.   Although
realization  of net  deferred tax assets is not  assured,  the Company  believes
these  sources  will  generate  sufficient  future  taxable  income  during  the
available  carryforward  period and believes it is more likely than not that the
recorded net deferred tax assets will be realized.

         Revenue.  Revenues  attributable to life insurance  increased 176% from
$121,192 to $213,598 for the year ended December 31, 1999,  compared to the year
ended  December 31, 1998.  The increase was due primarily to the  acquisition of
GMLIC in January 1999, and also reflects the continuing shift, from annuities to
life insurance, in the "mix" of insurance products sold by the Company. Prior to
1998,  the  Company  primarily  sold  annuities,  which are  recorded as deposit
liabilities,  rather than as revenues.  Revenues  relating to annuity  contracts
consist primarily of withdrawal and administrative charges. Conversely, premiums
relating to life insurance policies are recognized as revenues when received.

         Investment  income  decreased  13%,  from  $599,334  for the year ended
December 31, 1998 to $519,434 for the year ended December 31, 1999, primarily as
a result  of a  decrease  in assets  invested.  Certain  investments,  primarily
medical accounts receivable, were restructured so that the Company receives less
investment  income,  but is no longer  required to pay the  offsetting  interest
expense related to its previous financing activities.

                                      -13-

<PAGE>

         Other income  increased  137%, from $31,461 for the year ended December
31, 1998 to $74,500 for the year ended December 31, 1999,  primarily as a result
of certain administrative  functions performed for other companies,  the sale of
certain  intangible  property  and an increase in rents  received on  properties
owned by the Company's insurance subsidiaries.

         Costs and Expenses.  Total  expenses  increased 25% from  $1,362,965 to
$1,703,951  for the years ended December 31, 1998 and 1999,  respectively.  Such
increase was primarily  attributable to certain nonrecurring expenses associated
with the  combination of the insurance  subsidiaries  ($121,000),  a large death
claim received at year-end ($100,000) and certain  promotional  expenses used to
raise visibility of the Company in the investment community  ($72,000),  as well
as  amortization  of value of  purchased  insurance  business  relating to Great
Midwest and Benefit Capital.  Such amortization is expected to continue,  but at
reduced  levels,   over  the  premium-paying  life  of  the  acquired  policies.
Conservation  of  existing  business  in BCLIC  and the  resulting  decrease  in
amortization  expense was offset by the  purchase of GMLIC,  with its  resulting
amortization  of the purchased value of insurance  business,  as well as the one
time  write-off of goodwill  associated  with the  combination  of the Company's
insurance  subsidiaries.  Expenses  were also  impacted by a loss on the sale of
BCLIC ($57,824)  closed at year-end.  The Company  anticipates the sale of BCLIC
and the  combination of the remaining  subsidiaries  will result in cost savings
which will reduce expenses below 1998 levels.

         Policy  benefits  increased  178%  from  $87,925  to  $244,156  for the
comparable  periods,  due almost completely to the inclusion of Great Midwest in
the Company's  1999  operations.  In addition,  the year ended December 31, 1999
reflects a $20,600  expense not incurred  during the comparable  period in 1998,
related to examination  costs  associated  with  regulatory  examinations of the
Company's life insurance  subsidiaries.  Because such examinations are made on a
periodic  basis  ranging  from three to five  years,  the prior  period does not
reflect any of such costs. The Company expects to incur additional  expenses for
2000 due to a scheduled examination of GMLIC.

         Losses. The Company reported a loss from continuing  operations for the
year ended  December  31, 1999 of $883,679,  compared to a loss from  continuing
operations  for the year ended  December 31, 1998 of $609,741,  a 45%  increase.
This was due, in part, to management's  decision to write-off  certain  expenses
associated  with the goodwill of its insurance  subsidiaries  ($106,000)  and to
certain promotional expenses necessary to raise the value of the Company's stock
and attract large institutional  investors ($72,000), as well as the loss on the
sale of one of its insurance  subsidiaries.  Net loss  increased 53%, with a net
loss of $883,679 for the year ended December 31, 1999, compared to a net loss of
$577,242  for the year ended  December 31,  1998,  primarily  due to the factors
stated above.

         The Company's loss per share from  continuing  operations  increased to
$0.42 per share for the year ended  December  31,  1999,  compared  to a loss of
$0.30 per share for the year ended December 31, 1998. Net loss per share for the
comparable periods was $0.42 and $0.28 per share, respectively.

Liquidity and Capital Resources

      Liquidity

         The  principal  requirements  for  liquidity  in  connection  with  the
Company's  operations  are  in  contractual   obligations  to  policyowners  and
annuitants.  The Company's contractual obligations include payments of surrender
benefits, contract withdrawals,  claims under outstanding insurance policies and
annuities,  and policy  loans.  Payment of  surrender  benefits is a function of
"persistency", which is the extent to which insurance policies are maintained by
the policyowner.  Policyowners sometimes do not pay premiums, thus causing their
policies to lapse,  or  policyowners  may choose to surrender their policies for
their cash surrender  value. If actual  experience is different from the initial
or acquisition date assumptions,  a gain or loss could result.  Depending on the
nature of the  underlying  policy,  a lapse or surrender may result in surrender
charge revenue or surrender  benefit expense.  Such amounts may be less than, or
greater  than,  unamortized  acquisition  expenses  and/or  the  related  policy
reserves; accordingly,  current period earnings may either increase or decrease.
Additionally,  policy lapses and surrenders  may result in lost future  revenues
and possible profitability associated with the policy.

                                      -14-

<PAGE>

         On January 11, 1999, a registration statement relating to the Company's
IPO was  declared  effective  by the  Securities  and  Exchange  Commission.  In
accordance  with the terms of the  offering,  the Company  escrowed the offering
proceeds  until the  minimum  offering  of  $700,000  had been  obtained,  which
occurred in March 1999.  The Company  elected to close the  offering on June 30,
1999 after  receiving an aggregate of $822,000,  which  represented  the sale of
163,770  shares of common  stock  pursuant  to the  offering.  Net  proceeds  of
approximately  $712,000  were  utilized  for the stated  uses  described  in the
registration  statement  in the  following  manner:  repayment  of  indebtedness
related  to the  acquisition  of Great  Midwest,  $392,000,  repayment  of other
indebtedness, $100,000, increase the statutory capital and surplus of subsidiary
insurance companies $193,000,  recruitment of agents, $15,000, general corporate
purposes, $12,000.

         During 1999,  the Company issued 5,000 shares of its Series A Preferred
Stock,  resulting  in gross  proceeds of  approximately  $500,000.  The Series A
Preferred  Stock  provides for annual  dividends of 10% which are cumulative and
for a liquidation  preference of $100 per share.  The effect of preferred  stock
dividends  on the loss to common  shareholders  was  $28,830  for the year ended
December  31,  1999.  The net  proceeds  from the sale of the Series A Preferred
Stock were utilized to repay  outstanding  debt of the Company,  to increase the
statutory  capital  and  surplus of its  subsidiary  insurance  company,  and to
increase working capital. At December 31, 1999, the proceeds of both the IPO and
the private  placement of the Series A Preferred Stock had been expended for the
purposes for which such funds were raised.

      Capital Resources

         Although the Company  currently has a $150,000 bank line of credit,  it
funds most of its activity directly from cash flow from operations and cash flow
from financing  activities,  which includes deposits to  policyholders'  account
balances.  The line of  credit  extends  to July  2000,  with  amounts  borrowed
thereunder  bearing  interest at prime plus .5%. At December 31, 1999,  $110,000
was outstanding under the line of credit and, as of the date of this Report, the
Company has $40,000 available under the credit facility.

         On January 13,  1999,  the  Company  acquired  100% of the  outstanding
common stock of GMLIC, a Texas-chartered  life insurance company. The total cost
of the acquisition was  approximately  $939,000.  Of the purchase price, cash of
$607,000  was paid to seven of eight  stockholders  with the eighth  stockholder
receiving a promissory note for a principal amount of $332,000, payable in three
equal  annual  installments  at an  annual  interest  rate  of 6% on the  unpaid
principal balance. The Company partially funded the cash portion of the purchase
price with a $350,000  loan from a bank.  The loan accrues  interest at an index
rate plus .5%, payable monthly, and originally matured on July 9, 1999, at which
time the  Company  paid  $100,000 of the  principal  amount owed and renewed the
balance for a six-month  term maturing  January 9, 2000. The balance of the loan
was paid December 31, 1999 using  operating  cash flow and the proceeds from the
sale of BCLIC. In addition, in June 1999 the Company paid the first of the three
installments due on the promissory note held by the former stockholder.

         Formerly,  the  Company  has  financed  its loans to  medical  accounts
receivable  factoring entities from collateralized notes payable to individuals.
The loans and the notes payable  generally had  corresponding  three-year  terms
with interest paid semiannually or allowed to compound. The loans to the medical
accounts  receivable  factoring  entities and the  corresponding  collateralized
notes  payable  to  individuals  matured  during  April  and May  1999  and were
collected and repaid at that time. The Company  presently does not borrow direct
funds to finance its loan activities to medical  accounts  receivable  factoring
entities,  but  instead  conducts  any  such  activities  as  direct  investment
activities of its subsidiary out of available cash flow.

                                      -15-

<PAGE>

         On December 30, 1999,  the Company  received  $519,329 from the sale of
100% of the  outstanding  common  stock of  BCLIC.  See "ITEM  1-DESCRIPTION  OF
BUSINESS-Recent Events."

         On February 15, 2000, GMLIC executed an agreement, which is expected to
close in the second  quarter of 2000,  regarding the  acquisition of 100% of the
common stock of Texas  Savings,  a Texas life insurance  company,  for an amount
equal to the  statutory  capital and surplus of Texas Savings as of December 31,
1999,  plus  $400,000.  The  transaction is subject to the approval of the Texas
Department of Insurance,  which is expected in the second  quarter of 2000.  The
Company will fund the acquisition with available funds.

         In accordance  with the Company's  plan to  consolidate  certain of its
operations and thereby eliminate  duplicative capital and surplus  requirements,
the Company  determined to  consolidate  the operations of GMLIC and Summit Life
and Annuity  Company,  its  Oklahoma-domiciled  life  insurance  subsidiary.  In
October 1999,  after GMLIC was approved to do business in Oklahoma,  Summit Life
and Annuity Company's block of business was transferred to Great Midwest. Summit
Life and Annuity  Company was merged with and into the Company after  completion
of the transaction.  As a result of these series of transactions,  over $300,000
of the  statutory  capital and surplus  formerly  required to be  maintained  by
Summit Life and Annuity Company as a separate life insurance company was able to
be released to the Company as additional working capital.

         The  Company  has made and  intends  to make  ongoing  expenditures  in
connection with its subsidiary's marketing programs.  Historically,  the Company
has funded these expenditures from cash flow from operations.

         The Company  believes  that the  liquidity  resulting  from the sale of
BCLIC and the consolidation of its subsidiaries  described above,  together with
anticipated  cash from continuing  operations,  should be sufficient to fund its
operations,  including the  acquisition of Texas  Savings,  and to make required
payments  under its credit  facility,  the required  payments of  principal  and
interest under the 6% promissory notes payable to a former  stockholder of Great
Midwest  and the  annual  10%  dividend  on the Series A  Preferred  Stock.  The
Company's  ability to fund its operations  and to make  scheduled  principal and
interest  payments will depend on its future  performance,  which,  to a certain
extent, is subject to general  economic,  financial,  competitive,  legislative,
regulatory and other factors that are beyond its control.  The Company  believes
it will be able to meet  its  obligations  for  repayment  or it will be able to
obtain financing at reasonable  rates,  however,  there can be no assurance that
the Company will be able to effect any such refinancing on favorable terms.

Business Outlook and Risk Factors

         The  Company's  future  operating  results  may be  affected by various
trends,  developments and factors that the Company must  successfully  manage in
order to achieve favorable  operating  results.  In addition,  there are trends,
developments  and  factors  beyond  the  Company's  control  that may affect its
operations.  In  accordance  with  the  provisions  of  the  Private  Securities
Litigation  Reform Act of 1995, the  cautionary  statements and risk factors set
forth below and in the Company's  other filings with the Securities and Exchange
Commission,  identify important trends, factors and currently known developments
that  could  cause  actual  results  to  differ  materially  from  those  in any
forward-looking  statements  contained in this Report and in any written or oral
statements of the Company.  Forward-looking  statements  in this Report  include
revenue,  expense and earnings analysis for the remainder of 2000 as well as the
Company's  expectations relating to its business strategy.  Risk factors include
the following:

                                      -16-

<PAGE>

         Ability to  Complete  and  Integrate  Acquisitions;  Risks  Relating to
Growth Strategy.  A significant  portion of the Company's  strategy is to pursue
and complete acquisitions of companies and in force life insurance business that
meet its  acquisition  criteria.  The Company has  acquired and seeks to acquire
companies  and blocks of in force  insurance  policies to enhance the  Company's
stockholder value utilizing the Company's  operations,  management and access to
capital. The Company's ability to grow by acquisition is dependent upon, and may
be limited by, the availability of suitable acquisition  opportunities at values
deemed advantageous and capital and regulatory  constraints.  To the extent that
cash generated  internally is not sufficient to provide the capital required for
acquisitions,  the Company will require  additional debt and/or equity financing
in order to provide for such capital. Future debt financing, if available,  will
result in increased interest  expenses,  increased leverage and decreased income
available  to fund  acquisitions  and  expansion,  and may limit  the  Company's
ability  to  withstand   competitive  pressures  and  render  the  Company  more
vulnerable to business downturns. Future equity financings may dilute the equity
interests of existing  stockholders.  Growth by acquisition  also involves risks
that  could  adversely  affect  the  Company's   operating  results,   including
difficulties in integrating the operations and personnel of acquired  companies,
eliminating  duplicative costs and reducing overhead,  and the potential loss of
key  employees  and  customers  of acquired  companies  or lapse or surrender of
acquired insurance  policies.  In addition,  although the Company performs a due
diligence   investigation   of  each  business  that  it  acquires,   there  may
nevertheless be liabilities of an acquired business that the Company fails or is
unable to  discover  during its due  diligence  investigation  and for which the
Company, as a successor owner, may be responsible.

         In addition, there can be no assurance that the Company will be able to
obtain the capital  necessary to fully realize its growth  strategy,  consummate
acquisitions on satisfactory terms or, if any such acquisitions are consummated,
successfully  integrate such acquired businesses into the Company and remedy any
undiscovered  liabilities of any acquired companies.  See "ITEM 1-DESCRIPTION OF
BUSINESS-Acquisitions and Consolidations."

         Regulation. Insurance companies are subject to comprehensive regulation
in the jurisdictions in which they do business by state insurance commissioners.
Such  regulation  relates  to,  among  other  things:   prior  approval  of  the
acquisition  of a  controlling  interest in an insurance  company;  standards of
solvency  which must be met and  maintained;  licensing  of  insurers  and their
agents;  nature and  limitations of  investments;  deposit of securities for the
benefit of  policyowners;  approval of policy forms;  periodic  examinations  of
insurance  companies;  annual  and  other  reports  required  to be filed on the
financial  condition  of  insurers  or  for  other  purposes;  and  requirements
regarding reserves for unearned premium,  losses and other matters.  The Company
is subject to this type of regulation in any state in which it is licensed to do
business.  Such  regulation  could  create costs and  restrict  operations.  The
Company is currently subject to regulation in the states of Oklahoma and Texas.

         Intercorporate  transfers  of assets  and  dividend  payments  from the
Company's insurance  subsidiary are subject to prior notice and approval if they
are deemed "extraordinary" under these statutes. The Company is required to file
detailed annual reports with the state  insurance  regulatory body of each state
in which it is licensed, and the business and accounts of insurance subsidiaries
of the Company are subject to examination by such regulatory  bodies.  See "ITEM
1-DESCRIPTION OF BUSINESS-Regulation and Taxation."

         Persistency. Persistency is the extent to which policies sold remain in
force.  Policy lapses over those  actuarially  anticipated could have an adverse
effect on the financial performance of the Company. Policy acquisition costs are
deferred and expensed over the premium paying period of a policy.  Excess policy
lapses,  however, cause the immediate expensing or amortizing of deferred policy
acquisition  costs.  Provided the Company  maintains  lapse and surrender  rates
within its pricing assumptions for its insurance policies,  the Company believes
that the present  lapse and  surrender  rate should not have a material  adverse
effect on the Company's financial results. For the years ended December 31, 1998
and  1999,  the  Company's  lapse  ratio on  ordinary  business  was 4% and 11%,
respectively.

                                      -17-

<PAGE>

         Competition.  The life  insurance  business is highly  competitive  and
consists  of a  number  of  companies,  many of  which  have  greater  financial
resources,  longer business  histories and more  diversified  lines of insurance
products than the Company. The Company may encounter increased  competition from
existing competitors or new market entrants,  some of which may be significantly
larger and have greater  business  resources.  In  addition,  to the extent that
existing or future  competitors  seek to gain or retain market share by reducing
prices,  the Company might be compelled to lower its prices,  thereby  adversely
affecting operating results. See "ITEM 1-DESCRIPTION OF BUSINESS-Competition."

         Economic  State of the Insurance  Industry.  In the past decade,  there
have been instances where the United States insurance industry,  as a whole, has
suffered  substantial  losses on  investments,  which has reduced the  financial
stability of several insurance companies. Management believes that the principal
causes of industry losses have been inappropriate investment in high yield bonds
and real estate.  The Company has only minimal  holdings in high yield bonds and
real estate.  Management  believes  that these  factors leave the Company with a
relatively  lower investment loss risk compared to that to which the industry as
a whole is exposed.

         Interest  Rate  Volatility;   Investment  Spread  Risks.  Much  of  the
profitability in the insurance  industry is affected by fluctuations in interest
rates. Of prime importance in achieving  profitability is an insurance company's
ability to invest  premiums at a higher rate of interest  than the interest rate
credited to existing  policies.  Rapid  decreases or increases in interest rates
may affect an insurance  company's ability to maintain a positive spread between
the yield on invested  assets and the assumed  interest  rate credited to policy
reserves.  Rapid interest rate changes could cause increased  lapses of policies
in force,  although management believes the effect of such rate changes would be
minimal.

         Interest  rate  fluctuations  may also have an  impact  on  policyowner
behavior.  To the extent  that the fixed  rate  annuity  policies  issued by the
Company may subsequently carry lower fixed rates than those generally  available
in the market  place,  then there may be a tendency by certain  policyowners  to
surrender  their  policies.  While this  surrender  would likely be mitigated by
surrender charges under annuity contracts,  over the longer term such action may
reduce the Company's  future income.  There are  significant  surrender  charges
which  serve  to  discourage  policy  owners  from  surrendering  policies.  The
Company's ability to pay policyowner benefits with operating and investment cash
flows  and  cash  on  hand  may  be  impaired  by   substantial   interest  rate
fluctuations.

         Adequacy of Reserves.  A material  inadequacy in future policy benefits
reserves  could have a material  adverse  effect upon the  business,  results of
operations  and financial  condition of the Company.  Any inadequacy in reserves
would result in  additional  expenses  when the Company  incurs such benefits or
when the  Company  becomes  aware of the  inadequacy  and  increases  the future
policyholder benefits reserve.

         Dependence on Key  Personnel.  The  Company's  future  performance  and
development will depend, to a significant extent, upon the efforts and abilities
of members of senior management, particularly Charles L. Smith, President, Chief
Operating Officer and a director,  and James L. Smith, Chairman of the Board and
Chief Executive  Officer.  The loss of services of one or more members of senior
management could have a material adverse effect on the Company's  business.  The
Company's  future success also will depend on its ability to attract,  train and
retain skilled personnel in all areas of its business. The Company currently has
employment contracts with Charles L. Smith and James L. Smith, and maintains key
man insurance of $1 million on each of such individuals.

         Product Assumptions.  In reliance upon its actuarial consultants,  Rudd
and  Wisdom,  Inc.,  the  Company's  life  insurance  subsidiary  makes  certain
assumptions as to expected mortality,  lapse rates, investment results and other
factors  in  developing  the  pricing  and  other  terms  of its  products.  The
assumptions concerning such factors are generally based upon industry experience
and  influence   marketing  success  and  profitability.   Variation  of  actual
experience  from that assumed by the Company in developing such policy terms may
affect the products' profitability and marketability.

                                      -18-

<PAGE>

         Potential Fluctuations and Operating Results. Due to the relatively low
capitalization  of the Company's  life  insurance  subsidiary,  their  operating
results are significantly  impacted by the amount of fixed rate annuity policies
sold,  as well as the level of death and other  policyowner  benefits in any one
reporting  period.  The annual  investment  returns and overhead costs will also
affect the subsidiary operating results.

         Additionally,   the  Company's  revenues  and  operating  results  have
historically  varied  significantly  from quarter to quarter and are expected to
continue to fluctuate in the future.  Historically,  operating results have been
seasonally  lower during the first fiscal quarter than during the other quarters
of the fiscal year. See "ITEM 6-MANAGEMENT'S  DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION-Results of Operations."

         Possible Need for Future Financing.  The Company anticipates,  based on
currently  proposed plans and assumptions  relating to its operations,  that the
additional  working  capital  made  available  from  the  consolidation  of  its
operating  subsidiaries,  together with the projected cash flow from operations,
will be sufficient to meet estimated capital  expenditures through 2000. If cash
flows do not develop as anticipated,  or if the Company's  proposed plans or the
basis  for its  assumptions  change,  the  Company  may be  required  to  obtain
additional  sources of capital.  There can be no assurance that the Company will
be able to obtain such financing on acceptable terms, or at all.

Year 2000 Readiness

         The Company  experienced  no  significant  problems  in its  operations
relating to Year 2000 readiness in its information  technology or in that of its
vendors.  Although the Company continues to monitor its systems and those of its
vendors,  the Company does not believe there will be any material  impact on its
operations for Year 2000 issues.

ITEM 7.    FINANCIAL STATEMENTS

         The  consolidated  financial statements of the Company are incorporated
by reference from pages F-1 through F- 23 of the attached Appendix,  and include
the following:

   Consolidated Financial Statements of Summit Life Corporation and Subsidiaries

   (1)  Report of Independent Certified Public Accountants;
   (2)  Consolidated Balance Sheets as of December 31, 1999 and 1998;
   (3)  Consolidated Statements of Operations for  Years Ended December 31, 1999
        and 1998;
   (4)  Consolidated  Statement  of  Shareholders'  Equity   for   Years   Ended
        December 31, 1999 and 1998;
   (5)  Consolidated Statements of Cash Flows for Years Ended December 31,  1999
        and  1998;  and
   (6)  Notes  to Consolidated Financial Statements.

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

         There have been no material  disagreements  between the Company and its
independent accountants on accounting and financial disclosure matters which are
required to be reported  under this Item for the period for which this Report is
filed.

                                      -19-

<PAGE>


                                    PART III

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

         The  information  required  will be  contained in the  Company's  Proxy
Statement for the 2000 Annual Meeting of Stockholders and is incorporated herein
by reference.

ITEM 10.   EXECUTIVE COMPENSATION

         The  information  required  will be  contained in the  Company's  Proxy
Statement for the 2000 Annual Meeting of Stockholders and is incorporated herein
by reference.

ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The  information  required  will be  contained in the  Company's  Proxy
Statement for the 2000 Annual Meeting of Stockholders and is incorporated herein
by reference.

ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The  information  required  will be  contained in the  Company's  Proxy
Statement for the 2000 Annual Meeting of Stockholders and is incorporated herein
by reference.

ITEM 13.   EXHIBITS AND REPORTS ON FORM 8-K

          (a)     The following documents are filed as part of this report:

                  (1) Financial Statements are attached hereto as Appendix A and
included  herein on pages F-1 through F-23.


                  (2) The exhibits set forth on the following  Exhibit Index are
filed with this Report or are incorporated by reference as set forth therein.

Exhibit
Number                                   Name of Exhibit
-------                                  ---------------

  3.1     First  Amended and Restated  Certificate  of  Incorporation  (filed as
          Exhibit 3.1 to the Company's Registration Statement on Form SB-2, file
          number 333-65097 and incorporated herein by reference)

  3.2     First  Amended  and  Restated  Bylaws  (filed  as  Exhibit  3.2 to the
          Company's  Registration  Statement on Form SB-2, file number 333-65097
          and incorporated herein by reference)

  4.1     Specimen  Certificate of the common stock (filed as Exhibit 4.1 to the
          Company's  Registration  Statement on Form SB-2, file number 333-65097
          and incorporated herein by reference)

  4.2     See Articles V and X of the Company's Certificate of Incorporation and
          Article  VI of the  Company's  Bylaws  (filed  as  Exhibit  4.2 to the
          Company's  Registration  Statement on Form SB-2, file number 333-65097
          and incorporated herein by reference)

  4.3     Form of Promotional  Shares Lock-In Agreement (filed as Exhibit 4.3 to
          the  Company's  Registration  Statement  on  Form  SB-2,  file  number
          333-65097 and incorporated herein by reference)

 10.1     Employment  Agreement  by and  between  the Company and James L. Smith
          (filed as Exhibit 10.1 to the Company's Registration Statement on Form
          SB-2, file number 333-65097 and incorporated herein by reference)

 10.2     Employment  Agreement  by and between the Company and Charles L. Smith
          (filed as Exhibit 10.2 to the Company's Registration Statement on Form
          SB-2, file number 333-65097 and incorporated herein by reference)

                                      -20-

<PAGE>

 10.3     Stock Purchase  Agreement between the Company and Orville Homer Miller
          et al. (filed as Exhibit 10.4 to the Company's  Registration Statement
          on Form  SB-2,  file  number  333-65097  and  incorporated  herein  by
          reference)

 10.4     Stock Purchase Agreement between the Company and CLS Enterprises, Inc.
          (filed as Exhibit 10.6 to the Company's Registration Statement on Form
          SB-2, file number 333-65097 and incorporated herein by reference)

 10.5     Designated  Agency  Officer  Agreement  (filed as Exhibit  10.7 to the
          Company's  Registration  Statement on Form SB-2, file number 333-65097
          and incorporated herein by reference)

 10.6     Stock Purchase Agreement between Summit Life Corporation,  Seller, and
          First  Alliance  Insurance  Company,  Buyer,  dated  November 10, 1999
          (filed as  Exhibit  2.1 to the  Company's  Current  Report on Form 8-K
          filed November 24, 1999 and incorporated herein by reference).

*10.7     Stock Purchase  Agreement  between Texas Savings  Holding  Company and
          Great Midwest Life Insurance Company, dated February 15, 2000.

*21.1     List of subsidiaries

*27.1     Financial Data Schedule

* Filed electronically herewith.

         (b) A report on Form 8-K was filed by the Company on November 24, 1999,
reporting  under "Item 2 -  Acquisition  or  Disposition  of Assets" the sale of
Benefit   Capital  Life   Insurance   Company,   the   Company's   wholly  owned
Louisiana-domiciled subsidiary.


                                      -21-

<PAGE>


                                   SIGNATURES

         In  accordance  with the  requirements  of  Section  13 or 15(d) of the
Securities  Exchange Act of 1934,  the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

March 30, 2000                          SUMMIT LIFE CORPORATION
                                        an Oklahoma corporation

                                        By:  /s/  Charles L. Smith
                                             --------------------------------
                                                  Charles L. Smith, President

         Pursuant to the  requirement  of the  Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities and on the dates indicated:

     NAME AND TITLE                                                 DATE
     --------------                                                 ----

/s/  James L. Smith                                             March 30, 2000
-----------------------
James L. Smith,
Chairman of the Board of Directors
and Chief Executive Officer
(Principal Executive Officer)


/s/  Charles L. Smith                                           March 30, 2000
-----------------------
Charles L. Smith,
President, Chief Operating Officer and Director


/s/  Quinton L. Hiebert                                         March 30, 2000
-----------------------
Quinton L. Hiebert,
Vice President, Chief Financial Officer and Secretary
(Principal Financial Officer)


/s/  Randal Beach                                               March 30, 2000
-----------------------
Randal Beach,
Director


/s/  Dean Brown                                                 March 30, 2000
-----------------------
Dean Brown.
Director


/s/  Thomas D. Sanders                                          March 30, 2000
-----------------------
Thomas D. Sanders,
Director


                                      -22-

<PAGE>


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                                      -23-

<PAGE>

                                   APPENDIX A








                        Consolidated Financial Statements

                    Summit Life Corporation and Subsidiaries

                     Years ended December 31, 1998 and 1999
                       with Report of Independent Auditors






                                      -24-

<PAGE>



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                                      -25

<PAGE>


                    Summit Life Corporation and Subsidiaries

                        Consolidated Financial Statements

                     Years ended December 31, 1998 and 1999




                                    Contents

Report of Independent Certified Public Accountants...........................F-1

Consolidated Financial Statements:
   Consolidated Balance Sheets...............................................F-2
   Consolidated Statements of Operations.....................................F-4
   Consolidated Statement of Stockholders' Equity............................F-5
   Consolidated Statements of Cash Flows.....................................F-6
   Notes to Consolidated Financial Statements................................F-8









                                      -26-

<PAGE>



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                                      -27-

<PAGE>






               Report of Independent Certified Public Accountants

Board of Directors
Summit Life Corporation

We have  audited the  accompanying  consolidated  balance  sheets of Summit Life
Corporation and Subsidiaries,  as of December 31, 1998 and 1999, and the related
consolidated statements of operations,  stockholders' equity, and cash flows for
the years then ended.  These financial  statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the consolidated financial position of Summit
Life  Corporation  and  Subsidiaries,  as of December 31, 1998 and 1999, and the
consolidated  results of their operations and their  consolidated cash flows for
the  years  then  ended  in  conformity  with  generally   accepted   accounting
principles.

GRANT THORNTON LLP

Oklahoma City, Oklahoma
February 29, 2000



                                      F-1



<PAGE>

<TABLE>

<CAPTION>

                    Summit Life Corporation and Subsidiaries

                           CONSOLIDATED BALANCE SHEETS

                                  December 31,

                                    ASSETS                                      1998             1999
                                                                           -------------     -------------
<S>                                                                        <C>               <C>

INVESTMENTS (notes A4 and B)
    Debt securities - available for sale                                    $ 4,105,139       $ 3,202,369
    Equity securities - available for sale                                       46,557            22,000
    Equity securities - other                                                       -              62,500
    Notes receivable                                                          1,241,468           312,864
    Short-term investments                                                      156,541         1,470,000
    Policy loans                                                                 18,142            37,947
    Investment real estate, net of accumulated depreciation of
       $3,293 in 1998 and $6,080 in 1999                                         73,251            72,580
                                                                           ------------      ------------
                                                                              5,641,098         5,180,260

CASH AND CASH EQUIVALENTS (note A3)                                           1,492,196           935,746

RECEIVABLES

    Accrued investment income                                                   240,417            85,753
    Advances to affiliates                                                       10,000            10,000
    Other                                                                         3,156             4,808
                                                                           ------------      ------------
                                                                                253,573           100,561

PROPERTY AND EQUIPMENT - AT COST (note A5)
    Building and improvements                                                   115,853           129,419
    Furniture and equipment                                                     132,811           114,470
    Automobiles                                                                  45,275            54,015
                                                                           ------------      ------------
                                                                                293,939           297,904
       Less accumulated depreciation                                             63,382            88,573
                                                                           ------------      ------------
                                                                                230,557           209,331
    Land                                                                         56,000            56,000
                                                                           ------------      ------------
                                                                                286,557           265,331

OTHER ASSETS

    Cost in excess  of net  assets of  business  acquired,  less
       accumulated   amortization   of   $123,321  in  1998  and
       $133,761 in 1999 (note A6)                                               106,918            45,000
    Deferred policy acquisition costs (note A8)                                  20,926            42,226
    Value of  purchased  insurance  business,  less  accumulated
       amortization  of  $205,949  in 1998 and  $52,965  in 1999
       (note A9)                                                                272,465           370,758
    Land and building held for sale (note A5)                                   176,153               -
    Deferred income taxes (notes A7 and E)                                       31,943            37,241
    Other                                                                       124,261            38,698
                                                                            -----------      ------------
                                                                                732,666           533,923
                                                                            -----------       -----------

                                                                            $ 8,406,090       $ 7,015,821
                                                                             ==========        ==========
</TABLE>



        The accompanying notes are an integral part of these statements.

                                       F-2

<PAGE>

<TABLE>

<CAPTION>

                    Summit Life Corporation and Subsidiaries

                     CONSOLIDATED BALANCE SHEETS - CONTINUED

                                  December 31,

       LIABILITIES AND STOCKHOLDERS' EQUITY                                1998             1999
                                                                        ----------       -----------
<S>                                                                    <C>               <C>

LIABILITIES

    Policy reserves and policyholder funds (note A10)                  $ 6,027,599       $ 5,335,971
    Unpaid claims                                                            4,354           107,000
    Accounts payable                                                        46,707            74,742
    Accrued and other liabilities                                          209,353            28,713
    Advances from affiliates                                                16,000            11,138
    Notes payable (note C)                                               1,325,247           442,219
                                                                        ----------       -----------

                                                                         7,629,260         5,999,783

COMMITMENTS AND CONTINGENCIES (notes G and I)                                  -                 -

STOCKHOLDERS' EQUITY (note D)
    Common stock,  $.01 par value - authorized, 5,000,000
       shares;  issued and outstanding, 2,054,735 shares in
       1998 and 2,267,605 shares in 1999                                    20,547            22,676
    Series A cumulative preferred stock, $.001 par value -
       authorized, 5,000 shares; issued and outstanding, 5,000
       shares in 1999; stated at liquidation value                             -             500,000
    Additional paid-in capital                                           2,079,661         2,923,596
    Common stock of parent held by subsidiary                                  -             (95,000)
    Common stock subscribed                                                 39,130               -
    Accumulated other comprehensive income (loss)                           25,985           (83,565)
    Accumulated deficit                                                 (1,349,363)       (2,251,669)
                                                                        ----------        ----------
                                                                           815,960         1,016,038
       Less stock subscriptions receivable                                  39,130               -
                                                                      ------------   -------------
                                                                           776,830         1,016,038

                                                                       $ 8,406,090       $ 7,015,821
                                                                        ==========        ==========

</TABLE>


        The accompanying notes are an integral part of these statements.

                                       F-3


<PAGE>

<TABLE>

<CAPTION>

                    Summit Life Corporation and Subsidiaries

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                             Year ended December 31,

                                                                            1998           1999
                                                                        -----------    -----------
<S>                                                                     <C>            <C>

Revenues (note O)
    Insurance premiums and other considerations (note A10)              $   121,192    $   213,598
    Investment income                                                       599,334        519,434
    Net realized gains on sale of investments                                 4,337          5,202
    Other                                                                    31,461         74,500
                                                                        -----------    -----------
                                                                            756,324        812,734

Benefits, losses, and expenses (note O)
    Policy benefits                                                          87,925        244,156
    Increase in policy reserves                                             232,746        208,160
    Interest                                                                129,191         97,402
    Taxes, licenses, and fees                                                23,428         43,819
    Depreciation and amortization                                           302,557        308,803
    General, administrative, and other operating                            587,118        743,787
    Loss on disposal of subsidiary                                             --           57,824
                                                                        -----------    -----------
                                                                          1,362,965      1,703,951
                                                                        -----------    -----------

                  Loss from continuing operations before income taxes      (606,641)      (891,217)

Income tax expense (benefit) - current (notes A7 and E)                       3,100         (7,538)
                                                                        -----------    -----------

                  Loss from continuing operations                          (609,741)      (883,679)

Earnings from operations of discontinued segment (note O)                    32,499           --
                                                                        -----------    -----------

                  Net loss                                                 (577,242)      (883,679)

Preferred stock dividends                                                      --           28,830
                                                                        -----------    -----------

                  NET LOSS AVAILABLE TO COMMON
                        STOCKHOLDERS                                    $  (577,242)   $  (912,509)
                                                                        ===========    ===========

Basic and diluted earnings (loss) per common share (note A11)
    From continuing operations                                          $      (.30)   $      (.42)
    From discontinued operations                                                .02           --
                                                                        -----------    -----------

                  NET LOSS                                              $      (.28)   $      (.42)
                                                                        ===========    ===========
Weighted average outstanding common shares, basic and diluted
    (note A11)                                                            2,047,037      2,177,196
                                                                        ===========    ===========

</TABLE>


        The accompanying notes are an integral part of these statements.

                                      F-4

<PAGE>

<TABLE>
<CAPTION>

             CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (NOTE D)

                     Years ended December 31, 1998 and 1999
                                                                                        Series A cumulative
                                                               Common Stock                preferred stock
                                                            ----------------------     --------------------------
                                                                                                                   Additional
                                                             Shares         Par         Shares        Liquidation    paid-in
                                               Total         Issued         Value       issued          value        capital
                                            -------------  -----------    ---------    -----------    -----------  -----------
<S>                                         <C>            <C>            <C>          <C>            <C>          <C>
Balance at January 1, 1998                  $   339,435      1,939,780    $    19,398          --     $      --     $ 1,044,992
Common stock issued                           1,035,818        114,955          1,149          --            --       1,034,669
Comprehensive loss
   Net loss                                    (577,242)          --             --            --            --            --
   Other comprehensive loss
      Unrealized loss on investments, net       (21,181)
                                            -----------
              Comprehensive loss               (598,423)
                                            -----------    -----------    -----------   -----------   -----------   -----------

Balance at December 31, 1998                    776,830      2,054,735         20,547          --            --       2,079,661
Sale of common stock, net of offering
   expenses of $110,488 (note P)                711,934        163,770          1,638          --            --         710,296
Sale of preferred stock                         500,000           --             --           5,000       500,000          --
Collection of stock subscriptions
   receivable                                    39,130         30,100            301          --            --          38,829
Issuance of common stock of parent
   to subsidiary                                   --           19,000            190          --            --          94,810
Dividends on preferred stock                    (18,627)          --             --            --            --            --
Comprehensive loss

   Net loss                                    (883,679)          --             --            --            --            --
   Other comprehensive loss
      Unrealized loss on investments, net      (109,550)
                                            -----------
              Comprehensive loss               (993,229)
                                            -----------    -----------    -----------   -----------   -----------   -----------

Balance at December 31, 1999                $ 1,016,038      2,267,605    $    22,676         5,000   $   500,000   $ 2,923,596
                                            ===========    ===========    ===========   ===========   ===========   ===========

                                           Common                         Accumulated
                                           stock of                          Other
                                           parent             Common      Comprehensive                      Stock
                                           held by            Stock          income       Accumulated     subscriptions
                                          subsidiary        Subscribed       (loss)         deficit        receivable
                                          --------------   --------------  -------------  --------------  --------------



Balance at January 1, 1998                 $        --      $    42,383    $    47,166    $  (772,121)   $   (42,383)
Common stock issued                                 --           (3,253)          --             --            3,253
Comprehensive loss
   Net loss                                         --             --             --         (577,242)          --
   Other comprehensive loss
      Unrealized loss on investments, net                                      (21,181)

              Comprehensive loss
                                             -----------    -----------    -----------    -----------    -----------

Balance at December 31, 1998                        --           39,130         25,985     (1,349,363)       (39,130)
Sale of common stock, net of offering
   expenses of $110,488 (note P)                    --             --             --             --             --
Sale of preferred stock                             --             --             --             --             --
Collection of stock subscriptions
   receivable                                       --          (39,130)          --             --           39,130
Issuance of common stock of parent
   to subsidiary                                 (95,000)          --             --             --             --
Dividends on preferred stock                        --             --             --          (18,627)          --
Comprehensive loss

   Net loss                                         --             --             --         (883,679)          --
   Other comprehensive loss
      Unrealized loss on investments, net                                     (109,550)

              Comprehensive loss
                                             -----------    -----------    -----------    -----------    -----------
Balance at December 31, 1999                 $ (95,000)     $    --        $   (83,565)   $(2,251,669)$         --
                                             ===========    ===========    ===========    ===========    ===========
</TABLE>

         The accompanying notes are an integral part of this statement.

                                       F-5
<PAGE>

<TABLE>

<CAPTION>


                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                             Year ended December 31,

                                                                                                  1998            1999
                                                                                           -------------    ------------
<S>                                                                                        <C>             <C>

Increase (Decrease) in Cash and Cash Equivalents

Cash flows from operating activities
    Net loss                                                                               $   (577,242)   $   (883,679)
    Adjustments to reconcile net loss to net cash used in operating activities
           Depreciation and amortization                                                        299,689         303,472
           Deferral of policy acquisition costs                                                  (9,615)        (26,631)
           Amortization of deferred policy acquisition costs                                      2,868           5,331
           Interest credited to policyholder account balances                                   280,948         233,523
           Gain on sale of investment securities                                                 (4,337)         (5,202)
           (Gain) loss on sale of assets                                                         (8,089)         (1,664)
           Loss on disposal of subsidiary                                                           -            57,824
           Common stock issued for directors' services                                           32,753             -
           Other                                                                                  7,590         (29,107)
           (Increase) decrease in
              Accrued investment income                                                         (68,747)        144,242
              Other receivables                                                                  15,163          (9,430)
              Other assets                                                                        4,265         (29,668)
           Increase (decrease) in

              Policy reserves                                                                   (64,306)        (28,388)
              Accounts payable                                                                  (14,968)        154,710
              Accrued and other liabilities                                                      81,665        (120,193)
                                                                                          -------------     -----------

                  Net cash used in operating activities                                         (22,363)       (234,860)

Cash flows from investing activities
    Purchases of investment securities                                                       (2,710,265)     (2,627,174)
    Proceeds from disposition or maturities of investment securities                          2,189,797       1,830,142
    Issuance of notes receivable                                                               (204,200)        (71,000)
    Payments received on notes receivable                                                       139,517       1,015,251
    Increase in policy loans                                                                    (13,024)        (12,226)
    Advance to affiliates                                                                        (6,000)            -
    Purchase of property and equipment                                                           (1,613)         (6,636)
    Proceeds from sale of assets                                                                 11,826         165,500
    Net cash acquired (paid) in acquisition of business                                         527,578        (406,766)
    Net cash acquired on disposal of subsidiary                                                     -            86,869
                                                                                          -------------    ------------

                  Net cash used in investing activities                                         (66,384)        (26,040)

Cash flows from financing activities
    Deposits to policyholder account balances                                                   514,906          67,009
    Withdrawals from policyholder account balances                                             (159,505)       (394,212)
    Payments on notes payable                                                                  (168,466)     (1,492,731)
    Advances from (payments to) affiliate                                                        16,000          (4,862)
    Proceeds from issuance of notes payable                                                     150,000         510,000
    Proceeds from stock subscriptions receivable                                                  3,253          39,130
    Proceeds from sale of common and preferred stock                                              1,357       1,039,172
    Dividends paid on preferred stock                                                               -           (18,627)
    Initial public offering costs                                                               (70,059)        (40,429)
                                                                                           ------------    ------------

                  Net cash provided by (used in) financing activities                           287,486        (295,550)
                                                                                            -----------     -----------

                  NET INCREASE (DECREASE) IN CASH
                     AND CASH EQUIVALENTS                                                       198,739        (556,450)

Cash and cash equivalents at beginning of year                                                1,293,457       1,492,196
                                                                                             ----------      ----------

Cash and cash equivalents at end of year                                                    $ 1,492,196    $    935,746
                                                                                             ==========     ===========

</TABLE>


        The accompanying notes are an integral part of these statements.

                                       F-6

<PAGE>

<TABLE>

<CAPTION>


                CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

                             Year ended December 31,

                                                                                                  1998            1999
                                                                                            --------------------------
<S>                                                                                         <C>             <C>
Cash paid (received) during the year for:

    Interest                                                                                 $   56,000     $   246,000
    Income taxes                                                                                    300          (7,000)

Noncash investing and financing activities:

    Purchase of an automobile by the incurrence of a note payable                            $      -       $    14,059

    Conversion of convertible notes, other notes payable, and accrued interest
       to common stock                                                                              -           281,700
    Notes receivable acquired on sale of land and building, net of deferred
       gain of $72,958                                                                          217,042             -

    Acquisition of Benefit Capital Life Insurance Company in exchange for
       100,000 shares of common stock (note N)                                                  998,445             -
           In conjunction with the acquisition, assets were acquired and
           liabilities were assumed as follows:
              Estimated fair value of assets acquired, including
                  cash and cash equivalents of $527,578     $ 2,051,746
              Liabilities assumed                            (1,053,291)
                                                              ---------

                     Estimated fair value of common
                         stock issued                       $   998,455
                                                            ===========

    Acquisition of Great Midwest Life Insurance Company in exchange for
       issuance of note payable and cash (note N)                                                   -           331,807
           In conjunction with the acquisition, assets were acquired and
           liabilities were assumed as follows:
              Estimated fair value of assets acquired, including
                  cash and cash equivalents of $250,546     $ 1,349,905
              Liabilities assumed                              (360,786)
              Issuance of note payable                         (331,807)
                                                            -----------

                     Cash paid                              $   657,312
                                                            ===========

    Disposal of Benefit Capital Life Insurance Company in exchange for
       stock and cash (note O)                                                                      -            62,500
           In conjunction with the disposal, assets were sold and
           liabilities were transferred as follows:
              Book value of assets sold, including cash and
                  cash equivalents of $ 432,460             $ 1,597,816
              Liabilities transferred                          (958,163)
                                                            -----------

                         Net assets sold                        639,653

              Proceeds for sale

                  Cash received                                 519,329
                  First Alliance Corporation common
                     stock received                              62,500
                                                           ------------
                                                                581,829
                                                           ------------
                     Loss on disposal of subsidiary        $     57,824
                                                           ============

</TABLE>




        The accompanying notes are an integral part of these statements.
                                      F-7

<PAGE>





                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1998 and 1999

NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES

    1.     Basis of Consolidation and Nature of Operations

    The consolidated  financial  statements  include the accounts of Summit Life
    Corporation  (SLC)  and its  wholly-owned  subsidiaries  (collectively,  the
    Company).  Wholly-owned subsidiaries include Summit Life and Annuity Company
    (SLAC), Family Benefit Life Insurance Company (FBLIC),  Benefit Capital Life
    Insurance Company (BCLIC), and Great Midwest Life Insurance Company (GMLIC).
    BCLIC was  acquired on January 13, 1998 and was sold on December  30,  1999.
    GMLIC was acquired on January 13, 1999.  FBLIC was merged into GMLIC with an
    effective date of February 1, 1999. In October 1999, GMLIC and SLAC received
    the necessary regulatory approvals to complete a reinsurance agreement which
    transferred all of SLAC's insurance  business to GMLIC.  Effective  November
    24, 1999, SLAC was merged into SLC.  Intercompany  transactions and balances
    have been eliminated.

    SLC is a holding  company which  specializes  in the sale of life  insurance
    products through its life insurance subsidiary,  GMLIC. GMLIC is licensed in
    Oklahoma  and Texas and  primarily  sells  fixed  rate  annuities  and  life
    insurance products.

    2.     Use of Estimates

    The  preparation  of  financial  statements  in  conformity  with  generally
    accepted  accounting  principles  requires  management to make estimates and
    assumptions   that  affect  certain   reported   amounts  and   disclosures;
    accordingly, actual results could differ from those estimates.

    3.     Cash and Cash Equivalents

    cash  equivalents  include time  deposits and  certificates  of deposit with
    maturities when acquired of three months or less and money market funds.

    The Company  maintains its cash and cash  equivalents  in accounts which may
    not be federally insured. The Company has not experienced any losses in such
    accounts  and believes it is not exposed to any  significant  credit risk on
    such accounts.

    4.     Investments

    The Company accounts for certain  investments in debt and equity  securities
    as follows:

    o  Debt  securities  that the Company has the positive intent and ability to
       hold to  maturity  are  classified  as  held-to-maturity  securities  and
       reported at amortized cost.

                                      F-9
<PAGE>


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1998 and 1999

NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES - CONTINUED

    4.     Investments - Continued

    o  Debt and equity  securities that are bought and held  principally for the
       purpose of selling in the near term are classified as trading  securities
       and reported at fair value,  with unrealized gains and losses included in
       operations.

    o  Debt and equity  securities  not  classified  as either  held to maturity
       securities or trading  securities  are  classified as  available-for-sale
       securities and reported at fair value,  with unrealized  gains and losses
       excluded from earnings and reported as other comprehensive income (loss).

    Declines in the fair value of individual  securities below cost or amortized
    cost  that are  other  than  temporary  result in  write-downs  included  in
    operations.  The specific  identification  method is followed in determining
    the cost of securities sold.

    Generally,  notes  receivable  are  stated at the  aggregate  of the  unpaid
    balances less estimated uncollectible amounts.

    Short-term  investments  consist primarily of certificates of deposit and in
    1999 interests in medical receivables. Short term investments are carried at
    cost,  which  approximates  market.  The  interests  in medical  receivables
    provides for 10% return on the  investment,  and at December  31, 1999,  the
    $1,320,000 medical  receivables  investment is collateralized by receivables
    with face values of $1,584,000.

    Investment real estate is carried at depreciated cost.

    5.     Property and Equipment

    Depreciation  is  provided  in  amounts  sufficient  to  relate  the cost of
    depreciable  assets to operations over their  estimated  useful lives on the
    straight-line method. Useful lives range from five to forty years.

    Long-lived assets to be held and used, including investment real estate, are
    reviewed for impairment whenever events or changes in circumstances indicate
    that the related  carrying  amount may not be  recoverable.  When  required,
    impairment  losses are recognized based upon the estimated fair value of the
    asset.

    During January 1998, upon  acquisition of BCLIC,  the Company  relocated its
    Louisiana operations from Thibodaux to rented facilities in New Orleans. The
    Thibodaux  land and  building was held for sale at December 31, 1998 and was
    reported  at the lower of  carrying  value or fair  value less cost to sell.
    During 1999, the building was sold at a loss of approximately $7,000.

    6.     Cost in Excess of Net Assets of Business Acquired

    Cost in excess of net  assets  of  business  acquired  is  amortized  on the
    straight-line  method  over  ten to  fifteen  years  for  insurance  company
    acquisitions and five years for other acquisitions.




                                      F-10
<PAGE>


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1998 and 1999

NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES - CONTINUED

    6.     Cost in Excess of Net Assets of Business Acquired - Continued

    On an ongoing basis,  management  reviews the valuation and  amortization of
    cost in excess of net assets of business  acquired.  As part of this review,
    the Company  estimates the value and future benefits of the net income to be
    generated by the related  subsidiaries to determine  whether  impairment has
    occurred.

    7.     Income Taxes

    SLC and each of its subsidiaries file separate income tax returns.

    The  Company  recognizes  current  tax expense  based on  estimated  amounts
    payable or refundable on tax returns for the year.

    Deferred tax  liabilities or assets are recognized for the estimated  future
    tax effects attributable to temporary differences and carryforwards based on
    provisions  of the  enacted  tax law.  Deferred  tax assets are reduced by a
    valuation  allowance  if it is more likely than not that some portion or all
    of the deferred tax assets will not be realized.

    8.     Deferred Policy Acquisition Costs

    The costs of writing new business,  consisting  primarily of commissions and
    certain costs of policy issuance, are deferred.  Deferred policy acquisition
    costs for life insurance  products,  including immediate annuities with life
    contingencies,  are  amortized  over the  estimated  lives of the  policies.
    Deferred  policy  acquisition  costs for  investment  products,  principally
    single premium deferred  annuities,  are amortized with interest in relation
    to the present  value of the  expected  gross  profits,  based on  estimated
    investment yields, mortality,  persistency,  and surrender charges, over the
    lives of the  policies.  Deferred  policy  acquisition  costs  are  reviewed
    periodically  to insure that the  unamortized  balance does not exceed those
    amounts recoverable from future profits.

    9.     Value of Purchased Insurance Business

    Value of purchased insurance business represents the actuarially  determined
    present  value of estimated  net cash flows  embedded in existing  insurance
    contracts  when  acquired  and  is  amortized  with  interest  based  on the
    incidence of the related cash flows. At December 31, 1999, approximately 13%
    of the unamortized value of purchased  insurance  business is expected to be
    amortized in each of the next five years,  based on current  conditions  and
    assumptions as to future events on acquired policies in force.

                                      F-11


<PAGE>

<TABLE>

<CAPTION>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1998 and 1999

NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES - CONTINUED

    9.     Value of Purchased Insurance Business - Continued

    An analysis of the value of purchased  insurance business is presented below
for the year ended December 31:

                                                                                           1998                1999
                                                                                         --------            --------
<S>                                                                                      <C>                 <C>

              Balance, beginning of year                                                 $     -             $ 272,465
              Acquisition                                                                  478,414             423,723
              Imputed interest on unamortized balance at 6.5%                               31,097              45,252
              Amortization                                                                (237,046)           (182,842)
              Disposal of subsidiary                                                           -              (187,840)
                                                                                          --------            --------

              Balance, end of year                                                       $ 272,465           $ 370,758
                                                                                          ========            ========
</TABLE>

    10.    Revenues and Policy Reserves and Policyholder Funds

    Premiums   received  on  deferred   annuities  and  annuities  without  life
    contingencies (i.e., investment contracts) are recorded as deposits into the
    policyholder's account balance. Revenues relating to these contracts consist
    primarily  of  withdrawal  and  administrative  charges.  Premiums  for life
    insurance  products  and for  certain  annuities  with  life  contingencies,
    including  selection of annuity settlement options with life  contingencies,
    are recognized as revenues when due.

    policyholder  account  balances  include amounts  deposited by policyholders
    plus interest  credited,  less  withdrawals and any  administrative  charges
    deducted by the Company.  The  liabilities  for future  policy  benefits for
    annuities  with life  contingencies  are  computed as the  present  value of
    future benefit payments,  including  assumptions as to investment yields and
    mortality.

    Policy reserves for life insurance  products are computed using  assumptions
    as to  investment  yields,  mortality,  morbidity,  withdrawals,  and  other
    assumptions based on the Company's experience, modified as necessary to give
    effect  to  anticipated  trends  and  to  include  provisions  for  possible
    unfavorable  deviations.  Reserve interest  assumptions are graded and range
    from 8% to 3.5%.  Such  liabilities  are,  for some  plans,  graded to equal
    statutory  values or cash  values at or prior to  maturity.  Policy  benefit
    claims are  charged to expense in the period  that the claims are  incurred.
    All  insurance-related  benefits,  losses,  and expenses are reported net of
    reinsurance ceded.

    Mortgage loan closing and funding  income and related fees are recognized at
    the time the underlying mortgage loan transaction is closed.

    11.    Earnings (Loss) Per Common Share

    Earnings  (loss)  per common  share are  computed  based  upon net  earnings
    (loss),  after  deduction  of  preferred  stock  dividends,  divided  by the
    weighted average number of common shares outstanding during each period.

                                      F-12
<PAGE>

<TABLE>

<CAPTION>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1998 and 1999

NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES - CONTINUED

    11.    Earnings (Loss) Per Common Share - Continued

    The weighted  average  outstanding  common shares for December 31, 1998 have
    been  adjusted  retroactively  to reflect the  changes in capital  structure
    discussed in Note D. Conversion rights and convertible  notes,  discussed in
    Note D, were antidilutive;  therefore, basic and diluted earnings (loss) per
    common share are the same.

    12.    Other Comprehensive Loss

    Accumulated  other  comprehensive  income  (loss)  consists  solely  of  net
unrealized investment gains (losses).

    Unrealized loss on investments, net consists of the following:

                                                                                     1998             1999
                                                                                   ---------        ---------
<S>                                                                                <C>              <C>

       Unrealized loss on investments arising during period                        $ (16,844)       $(104,348)
           Less reclassification adjustment for gains included in net loss             4,337            5,202
                                                                                   ---------        ---------

                         Unrealized loss on investments, net                       $ (21,181)       $(109,550)
                                                                                    ========         ========
</TABLE>

    13.  Reclassifications

    Certain  reclassifications have been made to the 1998 consolidated financial
    statements to conform to the 1999 presentation.

NOTE B - INVESTMENTS

    The amortized  cost of debt  securities  and the cost of equity  securities,
    together with their estimated fair values, are summarized as follows:

<TABLE>
                                                                             December     31,      1998
                                                          ---------------------------------------------------
                                                               Cost/         Gross      Gross      Estimated
                                                          amortized     unrealized    unrealized     fair
                          Type of investment                   cost         gains      losses        value
       -------------------------------------------------  ----------    ----------    ----------   ---------
<S>                                                       <C>           <C>           <C>          <C>


       Debt securities - available for sale
           U.S. Treasury and other U.S. government
              corporations and agencies                  $   100,585    $     165   $      -       $   100,750
           Mortgage-backed securities                      3,876,061       31,562       (7,984)      3,899,639
           Industrial and miscellaneous                       98,750        6,000          -           104,750
                                                         -----------    ---------   ----------      ----------

                                                          $4,075,396    $  37,727   $   (7,984)    $ 4,105,139
                                                         ===========    =========   ==========      ==========

       Equity securities - available for sale           $     50,315    $      -    $   (3,758)    $    46,557
                                                         ===========    =========   ==========     ===========
</TABLE>


                                      F-13

<PAGE>

<TABLE>

<CAPTION>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1998 and 1999

NOTE B - INVESTMENTS - CONTINUED





                                                                           December     31,      1998
                                                        ---------------------------------------------------
                                                             Cost/         Gross      Gross      Estimated
                                                        amortized     unrealized    unrealized     fair
                        Type of investment                   cost         gains      losses        value
     -------------------------------------------------  ----------    ----------    ----------   ---------
<S>                                                     <C>           <C>           <C>          <C>

       Debt securities - available for sale
           U.S. Treasury and other U.S. government
              corporations and agencies                  $  327,065  $       134    $ (11,561)   $   315,638
           Mortgage-backed securities                     2,623,905          526      (56,238)     2,568,193
           Industrial and miscellaneous                     331,002          -        (12,464)       318,538
                                                          ---------  -----------     --------     ----------

                                                         $3,281,972  $       660    $ (80,263)   $ 3,202,369
                                                          =========  ===========     ========     ==========

       Equity securities - available for sale            $   25,962  $         -    $  (3,962)   $    22,000
                                                          =========  ============   =========     ==========

    The  amortized  cost  and  estimated  fair  values  of debt  securities,  by
    contractual  maturity,  are shown below.  Actual  maturities may differ from
    contractual  maturities  because  borrowers  may have  the  right to call or
    prepay obligations with or without call or prepayment penalties.

                                                                                           December 31, 1999
                                                                                     --------------------------
                                                                                      Amortized      Estimated
                                                                                        cost         fair value
                                                                                     -----------     -----------
value

       Due within one year or less                                                    $  150,054      $  150,189
       Due six to ten years                                                              232,043         223,162
       Due after ten years                                                               275,970         260,825
                                                                                       ---------      ----------
                                                                                         658,067         634,176
       Mortgage-backed securities                                                      2,623,905       2,568,193
                                                                                       ---------       ---------

                                                                                      $3,281,972      $3,202,369
                                                                                       =========       =========
</TABLE>


    Proceeds  from sales of  available-for-sale  securities  were  approximately
    $530,000 for 1998 and $446,000 for 1999. Gross gains of $11,752 for 1998 and
    $7,387 for 1999 and gross losses of $7,415 for 1998 and $2,185 for 1999 were
    realized on those sales.

    Equity securities - other consist of First Alliance Corporation (FAC) common
    stock carried at cost.  The securities are restricted as to sale or transfer
    through  December  30, 2000 and FAC  retains  the right of first  refusal to
    purchase the shares through December 30, 2001.

    Notes  receivable  include $909,743 for 1998 of loans made to entities which
    purchase,  administer,  and collect medical accounts  receivable.  The notes
    provided for interest at 20% payable semiannually and matured in 1999.


                                      F-14


<PAGE>

<TABLE>

<CAPTION>


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1998 and 1999

NOTE B - INVESTMENTS - CONTINUED

    During 1998, an 8%,  $240,000  ten-year  first  mortgage and an 8%,  $50,000
    ten-year  second  mortgage were received in  conjunction  with the sale of a
    building  and  related  land for  $300,000  which  had a  carrying  value of
    $220,000.  The transaction  resulted in a gain of $80,000 which was deferred
    and is being  recognized  on the  installment  method  until  adequate  down
    payment has been  received.  Notes  receivable at December 31, 1998 and 1999
    include $199,000 and $183,000, net of remaining deferred gain of $73,000 and
    $67,000, respectively, relating to these mortgages.

NOTE C - NOTES PAYABLE

    Notes payable consist of the following at December 31:

                                                                                               1998          1999
                                                                                           -----------    -----------
<S>                                                                                        <C>            <C>

       Bank line of credit,  interest  payable monthly at an index determined by
       the bank (8.25% at December 31, 1998), paid off
       during 1999                                                                         $   150,000    $         -

       Uncollateralized  note payable to individual,  interest  payable
       annually at 8%, paid off during 1999                                                     75,000              -

       Note  payable to bank,  payable in monthly  installments  of $690 through
       March 1999, including interest at 10.5%, paid off
       during 1999                                                                              28,179              -

       Note payable to  stockholder,  interest  payable at 7.75%,  paid
       off during 1999                                                                          32,325              -

       Note payable to individual,  interest  payable  semiannually  at
       6.75%, paid off during 1999                                                              30,000              -

       Note payable to stockholder,  interest  payable  semiannually at
       8%, paid off during 1999                                                                 50,000              -

       Uncollateralized  note payable to stockholder,  interest payable
       annually at 6.75%, due February 1, 2000                                                  50,000           50,000

       10% notes  payable to  individuals,  the  majority  of which are
       stockholders,  interest  payable either  semiannually or allowed
       to compound, paid off during 1999                                                       909,743              -

       Bank  line of  credit,  interest  payable  quarterly  at the Wall  Street
       Journal prime (8.5% at December 31, 1999) plus .5%, due
       July 1, 2000; guaranteed by certain officers and directors                                  -            110,000

</TABLE>


                                      F-15

<PAGE>

<TABLE>

<CAPTION>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1998 and 1999

NOTE C - NOTES PAYABLE - CONTINUED
                                                                                               1998             1999
                                                                                             --------         --------
<S>                                                                                          <C>               <C>

       Uncollateralized  note payable to stockholder,  interest payable
       at 6.75%, due with principal on April 30, 2000                                              -             50,000

       Note payable to a  corporation,  interest  payable at 6%, due with annual
       principal installments of approximately $111,000
       through June 1, 2001                                                                        -            221,205

       Note  payable to bank,  payable in monthly  installments  of $337 through
       January 2003, including interest at 6.95%;
       collateralized by vehicle                                                                   -             11,014
                                                                                             ---------          -------

                                                                                            $1,325,247         $442,219
                                                                                             =========          =======

    The aggregate  maturities of notes payable for years  subsequent to December
31, 1999 are as follows:

                     Year ending December 31
                         2000                                                               $323,965
                         2001                                                                114,211
                         2002                                                                  3,873
                         2003                                                                    170
                                                                                             -------

                                                                                            $442,219
                                                                                             =======
</TABLE>


NOTE D - STOCKHOLDERS' EQUITY

    On September 21, 1998, in conjunction  with its initial  public  offering of
    common stock (see Note P), the following  changes in capital  structure were
    approved and effected:

       Each share of  outstanding  Class B common  stock was  exchanged  for one
       share of Class A common stock and Class B common stock was eliminated.

       Class A common stock was redesignated as, simply, common stock.

       The par value of the common  stock was changed  from $.50 to $.01 and the
       authorized number of shares was increased from 2,000,000 to 5,000,000.

       A 5-for-2 stock split on common stock was effected.

       5,000,000  shares of $.001 par value  preferred  stock  with  rights  and
       preference to be determined by the Board of Directors was created.


                                      F-16

<PAGE>


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1998 and 1999

NOTE D - STOCKHOLDERS' EQUITY - CONTINUED

    These  changes  have  been  given  retroactive  effect  in the  accompanying
    consolidated financial statements.

    On April  23,  1999,  nonvoting  Series A  Cumulative  Preferred  Stock  was
    created.  Semiannual dividends of $5 per share are cumulative. The preferred
    stock has priority as to liquidation value ($100 per share) and dividends in
    arrears over common stock upon dissolution.

    Prior to 1998,  the  Company,  in an  effort  to raise  additional  capital,
    acquired a convertible note for $55,000 then offered the related  conversion
    rights  to  existing   stockholders   on  a  basis   consistent  with  their
    then-current ownership percentage.  Conversion rights not otherwise accepted
    by  existing  stockholders  were  ultimately  accepted  by  certain  Company
    officers who are also  stockholders.  These officers accepted the conversion
    rights by issuing  noninterest-bearing  promissory  notes  payable,  thereby
    committing  to purchase  33,602  shares of common  stock at $1.30 per share.
    These  promissory  notes and the Company's  requirement to issue the related
    common stock have been reflected in the accompanying  consolidated financial
    statements as stock  subscriptions  receivable and common stock  subscribed.
    Through  December 31, 1998,  12,207 common shares had been issued under this
    arrangement  for $15,869 and at December 31, 1998,  30,100 common shares are
    subscribed  under  notes  receivable  of  $39,130.  During  1999,  the notes
    receivable were collected, and the common stock was issued.

NOTE E - INCOME TAXES

    The  components  of net  deferred  tax  assets and  changes  in the  related
valuation allowance are as follows:

                                                               December 31,
                                                         ----------------------
                                                           1998           1999
                                                         ---------    ---------
Deferred tax assets

    Net operating loss carryforwards                     $ 110,289    $ 203,852
    Policy reserves and policyholder funds                  41,106       38,782
    Other                                                   21,246       14,767
    Valuation allowance for deferred tax assets           (101,517)    (167,025)
                                                         ---------    ---------
                                                            71,124       90,376

Deferred tax liabilities

    Value of purchased insurance business                  (37,055)     (51,906)
    Depreciation                                            (2,126)        --
    Other                                                     --         (1,229)
                                                         ---------    ---------
                                                           (39,181)     (53,135)
                                                         ---------    ---------

                  Net deferred tax assets                $  31,943    $  37,241
                                                         =========    =========

Increase in valuation allowance                          $  72,971    $  65,508
                                                         =========    =========


                                      F-17

<PAGE>

<TABLE>

<CAPTION>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1998 and 1999

NOTE E - INCOME TAXES - CONTINUED

    A  reconciliation  of income tax (expense)  benefit at the statutory rate to
    the Company's effective rate is as follows:

                                                                                      1998            1999
                                                                               -----------     -----------
<S>                                                                            <C>             <C>

   Expected statutory rate                                                              34%             34%
   Small life insurance company deduction                                              (20)            (20)
   Increase in valuation allowance                                                     (12)             (7)
   Other                                                                                (3)             (6)
                                                                               -----------     -----------

                                                                                        (1%)             1%
                                                                               ===========     ===========

At December 31, 1999,  the following  operating  loss  carryforwards,  which
begin expiring in 2010, were available for tax purposes:

                        SLC                                                    $ 1,276,000
                        GMLIC                                                       89,000

</TABLE>

NOTE F - RELATED PARTY TRANSACTIONS

    The Company is affiliated with an insurance  agency by common  ownership and
    management.  Insurance  regulatory  authorities  have  approved an agreement
    whereby  the  Company  pays the agency 75% of the  commission  rate to which
    nonaffiliates   are   subject.   During  1998  and  1999,   commissions   of
    approximately $4,000 and $1,000, respectively, were paid to this agency.

    From time to time, the Company makes advances to and receives  advances from
    affiliates,  generally  officers and  stockholders.  Such  advances  have no
    specified repayment terms but are generally short-term in nature.

    During  1998,  directors'  fees of  $33,000  were  approved  by the Board of
    Directors  and paid through the issuance of 11,697 shares (as adjusted - see
    Note D) of common stock.

    Included  in  notes  receivable  at  December  31,  1998 is a  $25,000  note
    receivable  from a  corporation  owned by a minority  stockholder.  The note
    provided for interest at 8% payable in two installments and matured June 11,
    1999.

NOTE G - COMMITMENTS AND CONTINGENCIES

    Under its annuity contracts,  the Company is committed to credit interest on
    policyholder  account balances at guaranteed rates.  During the first policy
    year the guaranteed  rates range up to 8.5%. After the first year the lowest
    guaranteed rate is 3%.


                                      F-18

<PAGE>


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1998 and 1999

NOTE G - COMMITMENTS AND CONTINGENCIES - CONTINUED

    Most states  have  established  guaranty  fund  associations  to ensure that
    policyholders  receive  the  benefit  of the  insurance  products  they have
    purchased.  The guaranty funds receive their funding through  assessments to
    companies  which write  business in the  respective  states.  The Company is
    liable for such  mandatory  assessments  upon  notification  by the  states;
    however,  such assessments may be partially recovered through a reduction in
    future premium taxes.

    Certain  investments  with  carrying  values of  $263,200  were  pledged  to
    regulatory authorities in accordance with statutory requirements at December
    31, 1999.

    The Company leases  certain  equipment used in operations and storage space.
    Rent  expense  under these leases for 1998 and 1999 was $10,957 and $16,322,
    respectively.  At December 31, 1999, there are no future  commitments due to
    terms being on a month-to-month basis.

    The Company is involved in various legal actions  relating to its operation.
    Management  believes that losses, if any, arising from such actions will not
    be material to the Company's consolidated financial statements.

NOTE H - STATUTORY CAPITAL AND SURPLUS

    SLC's insurance company subsidiaries prepare their statutory-basis financial
    statements in accordance with accounting  practices  prescribed or permitted
    by  the  domiciliary  state  insurance  department.  "Prescribed"  statutory
    accounting   practices   include  state  laws,   regulations,   and  general
    administrative  rules,  as well as a variety of publications of the National
    Association  of  Insurance   Commissioners  (NAIC).   "Permitted"  statutory
    accounting  practices  encompass  all  accounting  practices  that  are  not
    prescribed;  such practices may differ from state to state,  may differ from
    company to company  within a state,  and may change in the future.  The NAIC
    has  approved  the  Codification  of  Statutory  Accounting  Practices  (the
    Codification).  The Codification will be effective on January 1, 2001. It is
    currently  uncertain  when  individual  states will require  adoption of the
    Codification  for statutory  financial  statements.  The Company has not yet
    determined  what  effect,   if  any,  the  Codification  will  have  on  its
    subsidiary's statutory financial statements.

    SLAC was  required  to  maintain  statutory  capital and surplus of at least
    $250,000  and, at  December  31,  1998,  its  statutory  capital and surplus
    amounted to $360,000.

    FBLIC was  required  to maintain  statutory  capital and surplus of at least
    $100,000  and, at  December  31,  1998,  its  statutory  capital and surplus
    amounted to $150,000.

    BCLIC was  required  to maintain  statutory  capital and surplus of at least
    $300,000  and, at  December  31,  1998,  its  statutory  capital and surplus
    amounted to $519,000.

    GMLIC is  required  to  maintain  statutory  capital and surplus of at least
    $700,000  and, at  December  31,  1999,  its  statutory  capital and surplus
    amounted to  $907,000.  GMLIC  cannot  declare  dividends  which  exceed the
    greater of 10% of statutory  capital and surplus or the gain from operations
    of the  preceding  twelve  months  without  the prior  consent  of the Texas
    Commissioner  of Insurance.  The maximum  dividend which may be paid in 2000
    under this formula without prior consent is $90,000.


                                      F-19


<PAGE>


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1998 and 1999

NOTE I - REGULATORY MATTERS

    At periodic intervals,  the domiciliary state insurance department routinely
    examines the insurance company subsidiaries'  statutory financial statements
    as part of their legally  prescribed  oversight of the  insurance  industry.
    Based  on  these   examinations,   the   regulators   can  direct  that  the
    subsidiaries'  statutory financial statements be adjusted in accordance with
    their findings.

NOTE J - REINSURANCE

    The Company  reinsures  that portion of insurance risk which is in excess of
    its retention  limits,  generally  under yearly  renewable  term  contracts.
    Retention limits range up to $20,000 on life policies.  Reinsurance premiums
    are recognized as a reduction of insurance premiums and other considerations
    over the policy  term and  totaled  $20,000  and  $52,000 for 1998 and 1999,
    respectively.

    Reinsurance  does not  discharge  or diminish  the primary  liability of the
    Company  on the  risks  reinsured;  however,  it does  serve  to  limit  the
    Company's  maximum  loss on  risks.  The  Company  would be  liable  for the
    reinsurance risks ceded to other companies in the event that reinsurers were
    unable to meet their obligations.

    At December 31, 1998 and 1999,  reinsurance  recoverables on policy reserves
were not significant.

NOTE K - EMPLOYMENT AGREEMENTS

    Effective April 1, 1997, the Company entered into employment agreements with
    the  Company's   Chief  Executive   Officer  and  President,   both  Company
    stockholders.  The employment  agreements  provide,  among other things, for
    six-year  terms,  base and  maximum  salaries,  increases  to base  salaries
    subject to Board of Director approval, annual bonuses, and benefits.

    The  agreements  also provide each employee the right to purchase  shares of
    common stock at a specified  price per share during the first three years of
    the agreements.  The number of shares available to the employees under these
    agreements  is  subject  to grant by the Board of  Directors;  however,  the
    difference between the option price and market price of all such shares must
    not be less than $5,000 each.  At December 31, 1999,  the Board of Directors
    had not granted any shares relating to these agreements.

    The  agreements may be terminated by mutual  consent,  by the Company at its
    sole discretion  without cause, or by the Company for cause, as defined.  If
    the agreements are terminated for cause, as defined,  severance  payments of
    $50,000 are  payable to each  employee.  If the  agreements  are  terminated
    without cause, severance payments to each employee will be equivalent to the
    maximum salary over the term of the agreements less amounts previously paid,
    but not less than  $360,000  for the  President  and  $450,000 for the Chief
    Executive Officer.



                                      F-20

<PAGE>

<TABLE>

<CAPTION>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1998 and 1999

NOTE L - SEGMENT INFORMATION

    Prior to 1999, the Company had the following reportable  segments:  mortgage
    services, life insurance, and corporate. The mortgage services segment which
    has been  discontinued  (see  Note O)  provided  residential  mortgage  loan
    processing services to individuals. The life insurance segment sells annuity
    and other life insurance products. The corporate segment provided support to
    the  Company's  operating  subsidiaries  and  provided  financing to certain
    medical  receivable  factoring  entities.  The  accounting  policies used to
    develop segment information  correspond to those described in the summary of
    significant  accounting  policies.  The  reportable  segments  were distinct
    business units.  Subsequent to the  discontinuance  of the mortgage services
    segment,  the Company operated only in the life insurance segment.  Revenues
    from  customers  are all  attributed  to the United  States.  The  following
    information about the segments is for the year ended December 31, 1998.

                                                            Mortgage           Life
                                 1998                       services          insurance      Corporate         Totals
    -----------------------------------------               ---------       ------------     ----------      -----------
<S>                                                         <C>             <C>               <C>            <C>



    Revenues from customers                                  $118,739       $   121,192      $       -       $   239,931
    Intersegment revenues                                         -              12,708           11,745          24,453
    Investment income, including net realized
       gains on sale of investments                               -             392,253          211,418         603,671
    Interest expense                                            1,434               -            129,191         130,625
    Depreciation and amortization                                 -             239,482           63,075         302,557
    Income tax expense (benefit)                                 (646)            3,100              -             2,454
    Segment loss                                              (32,499)          376,211          233,530         577,242
    Segment assets                                                528         7,231,895        1,423,094       8,655,517
    Expenditures for segment assets                               -               1,613              -             1,613

    Reconciliation to Consolidated Amounts

    Revenues

       Total revenues for reportable segments
           Revenues from customers                                                                           $   239,931
           Intersegment revenues                                                                                  24,453
           Investment income, including net realized gains on sale of investments                                603,671
                                                                                                              ----------
                                                                                                                 868,055

       Other revenues                                                                                             31,461
       Elimination of intersegment revenues                                                                      (24,453)
       Discontinued operations                                                                                  (118,739)
                                                                                                              ----------

                         Total consolidated revenues                                                         $   756,324
                                                                                                              ==========

    Assets

       Total assets for reportable segments                                                                   $8,655,517
       Elimination of intersegment assets                                                                       (249,427)
                                                                                                              ----------

                                                                                                              $8,406,090
                                                                                                              ==========
</TABLE>

                                      F-21

<PAGE>

<TABLE>

<CAPTION>


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1998 and 1999

NOTE M - FAIR VALUE OF FINANCIAL INSTRUMENTS

    The following  methods and assumptions  were used to estimate the fair value
    of each class of  financial  instruments  as of December  31, 1998 and 1999.
    Such  information,  which pertains to the Company's  financial  instruments,
    does not purport to represent  the  aggregate net fair value of the Company.
    The  carrying  amounts in the table are the  amounts at which the  financial
    instruments are reported in the consolidated financial statements.

    All of the Company's financial  instruments are held for purposes other than
    trading.  The fair values of debt and equity  securities are estimated based
    on quoted market prices for those or similar investments. The carrying value
    of certain notes  receivable and policy loans  approximate fair value due to
    nominal  interest  rate changes  subsequent  to issuance.  The fair value of
    other  notes  receivable  is based on  discounted  future  cash flows  using
    current rates at which similar loans with similar  maturities  would be made
    to borrowers with similar credit risk.  The carrying  amounts of cash,  cash
    equivalents, short-term investments, and receivables approximate fair values
    because of the short maturity of those assets.  Cash surrender value is used
    in determining the fair value of investment contracts.  Estimated fair value
    of notes  payable is the  discounted  amount of future  cash flows using the
    Company's current incremental rate of borrowing for similar liabilities.

                                                                        1998                             1999
                                                           -----------------------------------------------------------
                                                             Carrying           Fair          Carrying        Fair
                                                              amount            value          amount         value
                                                           ------------     ------------    ------------  ------------
<S>                                                        <C>              <C>             <C>           <C>


       Financial assets

           Debt securities - available for sale              $4,105,139     $4,105,139      $3,202,369     $3,202,369
           Equity securities - available for sale                46,557         46,557          22,000         22,000
           Equity securities - other                                -              -            62,500         62,500
           Notes receivable                                   1,241,468      1,315,000         312,864        370,957
           Short-term investments                               156,541        156,541       1,470,000      1,470,000
           Policy loans                                          18,142         18,142          37,947         37,947
           Cash and cash equivalents                          1,492,196      1,492,196         935,746        935,746
           Receivables                                          253,573        253,573         100,561        100,561

       Financial liabilities
           Policyholder account balances -
              investment contracts                           $4,975,587     $4,720,000      $4,886,903     $4,673,874
           Notes payable                                      1,325,247      1,322,000         442,219        440,987

</TABLE>


                                      F-22


<PAGE>


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1998 and 1999

NOTE N - BUSINESS ACQUISITIONS

    In January 1998, in exchange for 100,000 shares of common stock (as adjusted
    - see Note D), the Company  acquired  BCLIC, a Louisiana  corporation,  in a
    business  combination  accounted  for as a  purchase.  BCLIC  was  primarily
    engaged in the sale of life insurance products in Louisiana.  The results of
    operations of BCLIC are included in the accompanying  consolidated financial
    statements since the date of acquisition. Because the Company's common stock
    was not traded, its fair value was not reliably measurable.  Therefore,  the
    cost of the acquisition was estimated  through  measuring  directly the fair
    values of BCLIC's assets and liabilities. The total cost of the acquisition,
    as estimated, was approximately $998,000. The estimated fair value of assets
    acquired was $2,051,746 and liabilities assumed were $1,053,291.

    In January 1999, the Company  acquired 100% of the outstanding  common stock
    of GMLIC in a business  combination  accounted for as a purchase.  GMLIC was
    primarily  engaged in the sale of life  insurance  products  in the state of
    Texas.  The  results  of  operations  of GMLIC  have been  included  in  the
    accompanying   consolidated   financial   statements   since   the  date  of
    acquisition.  The total cost of the acquisition was approximately  $939,000.
    Of the  purchase  price,  cash of  $607,000  was  paid  to  seven  of  eight
    stockholders with the eighth  stockholder  receiving a promissory note for a
    principal amount of $332,000,  payable in three equal annual installments at
    an annual interest rate of 6% on the unpaid principal balance.  Prior to the
    acquisition,  GMLIC only  prepared  statutory  basis  financial  statements;
    therefore,  summarized pro forma information relating to revenues, net loss,
    and basic and  diluted  loss per  common  share,  assuming  the  acquisition
    occurred as of January 1, 1998, was not practicable to determine.

NOTE O - DISCONTINUED OPERATIONS AND DISPOSITIONS

    In December 1998, the Company  adopted a plan to sell its mortgage  services
    segment  to an  officer  of the  Company  in  exchange  for a  $10,000  note
    receivable.  The actual  disposal date was January 4, 1999.  The assets sold
    and liabilities assumed of the mortgage services segment consisted primarily
    of the segment's "name", cash, and customer deposits.

    Operating  results  of the  mortgage  services  segment  for the year  ended
    December  31, 1998 are shown  separately  in the  accompanying  consolidated
    statements of operations.

    Revenues  of the  mortgage  services  segment for 1998 were  $118,739.  This
    amount  is  not  included  in  revenues  in  the  accompanying  consolidated
    statements of operations.  There are no revenues or expenses attributable to
    the mortgage services segment for 1999.

    On December 30, 1999, the Company sold 100% of the outstanding  common stock
    of BCLIC for $62,500 of First  Alliance  Corporation  common  stock  (25,000
    shares)  and  $519,329  in cash,  resulting  in a loss of  $57,824.  BCLIC's
    operating results included in the consolidated statements of operations were
    revenues  of  $208,647  and  $142,705  in 1998 and 1999,  respectively,  and
    benefits,  losses,  and  expenses of $307,133 and $159,330 in 1998 and 1999,
    respectively.


                                      F-23

<PAGE>


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1998 and 1999

NOTE P - INITIAL PUBLIC OFFERING

    During 1998, SLC began the process of an initial public offering, which went
    effective in January  1999,  of up to 1,000,000  shares of its common stock.
    The initial public  offering  price of the shares was $5 per share,  and the
    minimum  purchase  per  subscriber  was 100 shares.  The offering was closed
    effective  June 30, 1999,  resulting  in the  issuance of 163,770  shares of
    common stock and gross proceeds of approximately $822,000.

    At December 31, 1998,  the Company had offering  costs of $110,000 which had
    been deferred and were  included in other  assets.  These costs were charged
    against the gross proceeds of the offering in 1999.

    The Company used the proceeds primarily to (i) fund the acquisition of GMLIC
    (see Note N), (ii) repay debt, and (iii) provide working capital and general
    corporate funds.

NOTE Q - SUBSEQUENT EVENTS

    On February 15, 2000,  GMLIC  executed an agreement to purchase  100% of the
    outstanding common stock of Texas Savings Life Insurance Company (TSLIC) for
    an amount  equal to TSLIC's  capital and  surplus at December  31, 1999 plus
    $400,000.  TSLIC is primarily engaged in the sale of life insurance products
    and is licensed in the state of Texas. The acquisition will be accounted for
    under the  purchase  method and is  expected to be  completed  in the second
    quarter.


                                      F-24