<PAGE>   1
                         SECURITIES EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q



[ X ]   Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
        Exchange Act of 1934 for the quarterly period ended June 30, 1999.

[   ]   Transition Report Pursuant to Section 13 or 15(d) of the Securities
        Exchange Act of 1934.

                          Commission file No. 333-3954



                              IMC MORTGAGE COMPANY
               (Exact name of issuer as specified in its Charter)



                   Florida                                  59-3350574
        ------------------------------                ----------------------
       (State or other jurisdiction of                  (I.R.S. Employer
        incorporation or organization)                identification number)

                              5901 E. FOWLER AVENUE
                              TAMPA, FLORIDA 33617
                    (Address of Principal Executive Offices)

         Issuer's telephone number, including area code: (813) 984-2548


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

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

Title of each Class:                         Outstanding at August 12, 1999
--------------------------------------       ------------------------------
Common Stock, par value $.01 per share                 34,201,380




<PAGE>   2




                      IMC MORTGAGE COMPANY AND SUBSIDIARIES

                                      INDEX



<TABLE>
<S>                                                                                          <C>
PART I.  FINANCIAL INFORMATION                                                               Page

Item 1.           Financial Statements

                  Consolidated Balance Sheets as of
                  June 30, 1999 and December 31, 1998                                           1

                  Consolidated Statements of Operations
                  for the three months and the six months ended
                  June 30, 1999 and June 30, 1998                                               2

                  Consolidated Statements of Cash Flows
                  for the six months ended June 30, 1999
                  June 30, 1998                                                                 3

                  Notes to Consolidated Financial Statements                                    4

Item 2.           Management's Discussion and Analysis of
                  Results of Operations and Financial Condition                                22


PART II. OTHER INFORMATION

Item 1.           Legal Proceedings                                                            46

Item 2.           Changes in Securities                                                        46

Item 3.           Defaults Upon Senior Securities                                              46

Item 4.           Submission of Matters to a Vote of Security Holders                          46

Item 5.           Other Information                                                            46

Item 6.           Exhibits and Reports on Form 8-K                                             47
</TABLE>

















<PAGE>   3

                          PART I. FINANCIAL INFORMATION




                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                    (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)


<TABLE>
<CAPTION>
                                                                  June 30,             December 31,
                           ASSETS                                   1999                    1998
                                                                 -----------           ------------
                                                                 (Unaudited)
<S>                                                              <C>                   <C>
Cash and cash equivalents                                        $    14,846           $    15,454
Accrued interest receivable                                            7,928                10,695
Accounts receivable                                                   54,302                44,661
Mortgage loans held for sale, net                                    610,181               946,446
Interest-only and residual certificates                              352,544               468,841
Property, furniture, fixtures and equipment, net                      16,042                17,119
Mortgage servicing rights                                             42,498                52,388
Income tax receivable                                                  8,554                12,914
Goodwill                                                               8,454                89,621
Other assets                                                          21,278                25,500
                                                                 -----------           -----------
        Total assets                                             $ 1,136,627           $ 1,683,639
                                                                 ===========           ===========

         LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
   Warehouse finance facilities                                  $   633,448           $   984,571
   Term debt                                                         419,540               415,331
   Notes payable                                                      17,155                17,406
   Accounts payable and accrued liabilities                           11,963                15,302
   Accrued interest payable                                            6,653                 3,086
                                                                 -----------           -----------
      Total liabilities                                            1,088,759             1,435,696
                                                                 -----------           -----------

   Commitments and contingencies (Note 8)

   Redeemable preferred stock (redeemable at
    maturity at $100 per share and, under certain
    circumstances, upon a change in control)                          38,807                37,333
                                                                 -----------           -----------


Stockholders' equity:
   Common stock, par value $.01 per share; 50,000,000
       authorized; and 34,201,380 and 34,139,790 shares
       issued and outstanding                                            342                   341
   Additional paid-in capital                                        251,904               251,633
   Accumulated deficit                                              (243,185)              (41,364)
                                                                 -----------           -----------
         Total stockholders' equity                                    9,061               210,610
                                                                 -----------           -----------
Total liabilities and stockholders' equity                       $ 1,136,627           $ 1,683,639
                                                                 ===========           ===========
</TABLE>

           See accompanying Notes to Consolidated Financial Statements


                                       1
<PAGE>   4


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                        For the Three Months                    For the Six Months
                                                            Ended June 30,                         Ended June 30,
                                                    -------------------------------       -------------------------------
                                                        1999                1998              1999                1998
                                                    ------------       ------------       ------------       ------------
<S>                                                 <C>                <C>                <C>                <C>

Revenues:
   Gain on sales of loans                           $     13,528       $     71,159       $     31,639       $    131,139
                                                    ------------       ------------       ------------       ------------

   Warehouse interest income                              14,536             38,985             35,165             80,220
   Warehouse interest expense                             (8,737)           (32,944)           (23,211)           (66,438)
                                                    ------------       ------------       ------------       ------------
      Net warehouse interest income                        5,799              6,041             11,954             13,782
                                                    ------------       ------------       ------------       ------------

   Servicing fees                                         11,958             10,666             25,130             19,677
   Other                                                   7,175              9,436             14,820             16,575
                                                    ------------       ------------       ------------       ------------
      Total servicing fees and other                      19,133             20,102             39,950             36,252
                                                    ------------       ------------       ------------       ------------

      Total revenues                                      38,460             97,302             83,543            181,173
                                                    ------------       ------------       ------------       ------------

Expenses:
   Compensation and benefits                              23,747             33,421             53,097             61,859
   Selling, general and administrative                    26,052             30,870             49,477             55,809
   Other interest expense                                  6,905              5,283             15,789             10,173
   Interest expense-Greenwich Funds (Note 4)               7,499                 --             15,379                 --
   Market valuation adjustment (Note 5)                   62,876                 --             62,876                 --
   Goodwill impairment charge (Note 6)                    77,446                 --             77,446                 --
   Other charges (Note 7)                                  5,179                 --              5,179                 --
                                                    ------------       ------------       ------------       ------------
 Total expenses                                          209,704             69,574            279,243            127,841
                                                    ------------       ------------       ------------       ------------

   Income (loss) before provision for
      income taxes                                      (171,244)            27,728           (195,700)            53,332
   Provision for income taxes                                361             11,400              4,647             21,900
                                                    ------------       ------------       ------------       ------------

      Net income (loss)                             $   (171,605)      $     16,328       $   (200,347)      $     31,432
                                                    ============       ============       ============       ============

Net income (loss) per common share:
     Basic                                          $      (5.04)      $       0.53       $      (5.90)      $       1.02
                                                    ============       ============       ============       ============
     Diluted                                        $      (5.04)      $       0.47       $      (5.90)      $       0.90
                                                    ============       ============       ============       ============


Weighted average number of shares outstanding:
     Basic                                            34,201,380         30,799,173         34,211,493         30,775,154
     Diluted                                          34,201,380         35,043,008         34,211,493         34,828,065
</TABLE>

          See Accompanying Notes to Consolidated Financial Statements

                                       2
<PAGE>   5


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
                                   (Unaudited)





<TABLE>
<CAPTION>
                                                                                    For the Six Months
                                                                                       Ended June 30,
                                                                              -----------------------------
                                                                                 1999                 1998
                                                                              ---------           ----------
<S>                                                                           <C>                 <C>
Cash flows from operating activities:
  Net income (loss)                                                           $(200,347)          $  31,432
  Adjustments to reconcile net income (loss) to net cash provided by
   (used in) operating activities:
   Goodwill impairment charge                                                    77,446                  --
   Interest expense - Greenwich Funds                                             5,500                  --
   Depreciation and amortization                                                 13,864              11,344
   Deferred taxes                                                                    --               8,267
   Mortgage servicing rights                                                         --             (24,591)
   Net loss on joint venture                                                        117               1,512
   Net loss on sale of joint venture                                              2,592                  --
   Net loss on disposal of Rhode Island branch                                    2,587                  --
   Net change in operating assets and liabilities:
     Decrease (increase) in mortgages loans held for sale, net                  336,265             (44,583)
     Increase in securities purchased under agreements
        to resell and securities sold but not yet purchased                          --                (235)
    Decrease in accrued interest receivable                                       2,531               5,591
    Decrease (increase) in interest-only and residual certificates              116,297            (222,271)
    Decrease (increase) in other assets                                             873              (4,707)
    Increase in accounts receivable                                              (8,089)             (6,116)
    Decrease in income tax receivable                                             4,360                  --
    Increase in accrued interest payable                                          3,567               1,649
    Increase (decrease) in accounts payable and accrued liabilities              (3,969)                528
                                                                              ---------           ---------
         Net cash provided by (used in) operating activities                    353,594            (242,180)
                                                                              ---------           ---------

Investing activities:
   Investment in joint venture                                                     (638)             (2,280)
   Purchase of property, furniture, fixtures, and equipment                        (899)             (3,362)
   Other                                                                             --                (415)
                                                                              ---------           ---------
   Net cash used in investing activities                                         (1,537)             (6,057)
                                                                              ---------           ---------

Financing activities:
  Issuance of common stock                                                           --                   6
  Net increase (decrease) in warehouse finance facilities                      (351,123)             81,261
  Term debt and notes payable borrowings                                         91,338             306,016
  Term debt and notes payable repayments                                        (92,880)           (157,106)
                                                                              ---------           ---------
  Net cash provided by (used in) financing activities                          (352,665)            230,177
                                                                              ---------           ---------

Net decrease in cash and cash equivalents                                          (608)            (18,060)
Cash and cash equivalents, beginning of period                                   15,454              26,750
                                                                              ---------           ---------
Cash and cash equivalents, end of period                                      $  14,846           $   8,690
                                                                              =========           =========

Supplemental disclosure cash flow information:
       Cash paid during the period for interest                               $  45,312           $  74,961
                                                                              =========           =========
       Cash paid during the period for taxes                                  $     391           $   3,210
                                                                              =========           =========
</TABLE>

           See accompanying Notes to Consolidated Financial Statements



                                       3
<PAGE>   6


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                                   (UNAUDITED)



1.     ORGANIZATION AND BASIS OF PRESENTATION:

       IMC Mortgage Company and its wholly-owned subsidiaries (the "Company" or
       "IMC") purchase and originate mortgage loans made to borrowers who may
       not otherwise qualify for conventional loans for the purpose of
       securitization and sale. The Company typically securitizes these
       mortgages into the form of a Real Estate Mortgage Investment Conduit
       ("REMIC") or an owner trust. The mortgages are sold on a servicing
       retained (whereby the Company keeps the contractual right to service the
       mortgage) or a servicing released basis.

       The accompanying consolidated financial statements include the accounts
       of the Company and its wholly owned subsidiaries. All intercompany
       transactions have been eliminated in the accompanying consolidated
       financial statements.

       The accompanying unaudited condensed consolidated financial statements
       have been prepared in accordance with generally accepted accounting
       principles for interim financial information and with the instructions to
       Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
       include all of the information and footnotes required by generally
       accepted accounting principles for complete financial statements. In the
       opinion of management, all adjustments (consisting of normal recurring
       accruals) considered necessary for a fair presentation have been
       included. Operating results for the interim periods are not necessarily
       indicative of financial results for the full year. These unaudited
       condensed consolidated financial statements should be read in conjunction
       with the audited consolidated financial statements and notes thereto
       included in the Company's Annual Report on Form 10-K for the fiscal year
       ended December 31, 1998 and Current Reports on Forms 8-K dated July 22,
       1999, May 27, 1999, March 3, 1999, February 26, 1999, February 23, 1999,
       November 27, 1998 and October 21, 1998. The year-end balance sheet data
       was derived from audited financial statements, but does not include all
       disclosures required by generally accepted accounting principles.

       Certain reclassifications have been made to the presentations to conform
       to current period presentations.

       AGREEMENT TO SELL CERTAIN ASSETS AND TERMINATION OF STOCK PURCHASE
       AGREEMENT WITH THE GREENWICH FUNDS

       As described in the Company's Annual Report on Form 10-K for the fiscal
       year ended December 31, 1998, the Company, like several companies in the
       subprime mortgage industry, is being materially and adversely affected by
       significant and adverse conditions in the equity, debt and asset-backed
       capital markets. IMC's ability to access equity, debt and asset-backed
       capital markets has become severely restricted. These market conditions
       resulted in several other companies in the subprime mortgage industry
       filing for bankruptcy protection, such as Southern Pacific Funding
       (October 1, 1998), Wilshire Financial Services Group, Inc. (March 3,
       1999), MCA Financial Corp. (February 11, 1999), United

                                       4
<PAGE>   7

                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                                   (UNAUDITED)

       Companies (March 2, 1999) and certain subsidiaries of First Plus
       Financial (March 6, 1999).

       The Company's revolving credit facility with BankBoston, N.A. matured in
       mid-October 1998 and BankBoston was unwilling to extend the facility. In
       addition, beginning in September 1998, the Company's residual lenders,
       which had advanced approximately $276 million to the Company
       collateralized by its interest-only and residual certificates, proposed
       to reduce their exposure by making cash margin calls. Certain of the
       Company's warehouse lenders holding more than $2 billion in mortgage
       loans also threatened to make margin calls on their credit lines during
       September and October 1998. During this period, the Company's traditional
       strategy of minimizing the risks of interest rate fluctuations through a
       program of short selling United States Treasury securities subjected the
       Company to margin calls of approximately $47.5 million in cash as a
       "flight to quality" following the devaluation of the Russian ruble and
       concerns over economic conditions in the emerging markets generally
       disrupted the Company's anticipated hedging strategy.

       As a consequence, in October 1998, the Company, faced with the prospect
       of a forced liquidation of its assets or bankruptcy and the absence of
       other alternative sources of capital, entered into a $33 million standby
       revolving credit facility with Greenwich Street Capital Partners II, L.P.
       and certain of its affiliates (the "Greenwich Funds"). The facility
       provided IMC with interim financing for a period of 90 days, which
       enabled the Company to continue to operate while it sought a substantial
       source of capital which would either invest funds in the Company or
       acquire the Company. In return for providing the facility, the Greenwich
       Funds received a $3.3 million commitment fee and non-voting Class C
       exchangeable preferred stock representing, in value, the equivalent of
       40% of the common equity of the Company. The Class C exchangeable
       preferred stock is exchangeable for Class D preferred stock, which has
       voting rights equivalent to 40% of the voting power of the Company. Under
       the loan facility, the Greenwich Funds may exchange the loans for
       additional shares of Class C exchangeable preferred stock or shares of
       Class D preferred stock in an amount representing, in value, up to the
       equivalent of 50% of the common equity of the Company (in addition to the
       preferred stock received for providing the facility) (the "Exchange
       Option"). In addition, upon certain changes in control of the Company,
       the Greenwich Funds could elect either to (i) receive payment of the
       facility, plus accrued interest, and a take-out premium of up to 200% of
       the average principal amount of the loans outstanding, or (ii) exercise
       the Exchange Option. The Company and the Greenwich Funds also entered
       into intercreditor agreements with the Company's significant creditors
       requiring such creditors to "standstill" for up to 90 days.

       On February 19, 1999, the Company entered into a merger agreement with
       the Greenwich Funds. On March 31, 1999, the merger agreement was
       terminated and recast as an acquisition agreement (the "Acquisition
       Agreement") with the Greenwich Funds on substantially the same economic
       terms. The Company's execution and delivery of the



                                       5
<PAGE>   8
                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                                   (UNAUDITED)


       merger agreement and the Acquisition Agreement were unanimously approved
       by the Board of Directors of the Company, acting on the unanimous
       recommendation of a special committee of the Board consisting solely of
       disinterested directors. Under the Acquisition Agreement, the Company
       agreed to issue common stock to the Greenwich Funds representing
       approximately 93.5% of the outstanding common stock following such
       issuance. In return for such common stock issuance, the Greenwich Funds
       agreed to surrender their Class C exchangeable preferred stock and amend
       the loan agreement to (i) provide for an additional $35 million of
       working capital loans to the Company, (ii) forego the Exchange Option,
       (iii) reduce the takeout premium payable in certain events from 200% of
       the average principal amount outstanding from October 1998 to the
       prepayment date, to 10% of the average principal amount outstanding from
       the closing of the acquisition to the prepayment date, and (iv) extend
       the maturity of the loans thereunder until the third anniversary of the
       acquisition. The Company also entered into amended intercreditor
       agreements with certain of its creditors in February 1999 which provided
       an additional standstill period through the consummation of the
       transaction with the Greenwich Funds and for 12 months thereafter,
       provided the acquisition occurred within five months, and subject to
       earlier termination in certain events as provided in the intercreditor
       agreements.

       As discussed in Note 9 "Events Subsequent to June 30, 1999," on July 14,
       1999, the Company entered into an Agreement (the "Agreement") to sell
       certain assets to CitiFinancial Mortgage Company ("CitiFinancial
       Mortgage"), an indirectly wholly-owned subsidiary of Citigroup Inc. The
       Agreement, which is subject to a number of conditions, was approved by
       the Company's Board of Directors on July 30, 1999 and, as a result, the
       Acquisition Agreement with the Greenwich Funds terminated. Consequently,
       the Greenwich Funds will not be obligated to provide an additional $35
       million of loans to the Company.

       Also as discussed in Note 9 "Events Subsequent to June 30, 1999,"
       subsequent to June 30, 1999, the amended and restated intercreditor
       agreements were extended through September 16, 1999, subject to earlier
       termination in certain events. In the event the Company is not successful
       in obtaining further extensions of these agreements, the standstill
       periods thereunder would expire on September 16, 1999 and the lenders
       would be entitled to seek remedies under their loan agreements with the
       Company, including actions to realize upon the collateral that secure
       their loans. The financial statements do not include any adjustments that
       might result from the outcome of this uncertainty.

       The Agreement with CitiFinancial Mortgage is subject to the approval of
       the shareholders of the Company and creditors holding 90% of the
       Company's liabilities, and other customary closing conditions.



                                       6
<PAGE>   9
                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                                   (UNAUDITED)


2.    RECENT ACCOUNTING PRONOUNCEMENTS:

      In June 1998, the Financial Accounting Standards Board ("FASB") issued
      Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting
      for Derivative Instruments and Hedging Activities" ("SFAS 133"), which was
      amended by SFAS No. 137 "Accounting for Derivative Instruments and Hedging
      Activities - Deferral of the Effective Date of FASB Statement No. 133".
      SFAS 133 is effective, as amended, for fiscal quarters of fiscal years
      beginning after June 15, 2000 (January 1, 2001 for the Company). SFAS 133
      requires that all derivative instruments be recorded on the balance sheet
      at their fair value. Changes in the fair value of derivatives are recorded
      each period in current earnings or other comprehensive income, depending
      on whether a derivative was designated as part of a hedge transaction and,
      if it was, the type of hedge transaction. For fair-value hedge
      transactions in which the Company hedges changes in the fair value of an
      asset, liability or firm commitment, changes in the fair value of the
      derivative instrument will generally be offset in the income statement by
      changes in the hedged item's fair value. The ineffective portion of hedges
      will be recognized in current-period earnings.

      SFAS 133 precludes designation of a nonderivative financial instrument as
      a hedge of an asset or liability. The Company, prior to September 30, 1998
      hedged its interest rate risk on loan purchases by selling short United
      States Treasury Securities which match the duration of the fixed rate
      mortgage loans held for sale and borrowing the securities under agreements
      to resell. Prior to September 30, 1998 the unrealized gain or loss
      resulting from the change in fair value of these instruments has been
      deferred and recognized upon securitization as an adjustment to the
      carrying value of the hedged mortgage loans. SFAS 133 requires the gain or
      loss on these nonderivative financial instruments to be recognized in
      earnings in the period of changes in fair value without a corresponding
      adjustment of the carrying amount of mortgage loans held for sale. While
      the Company has no present plans to engage in hedging activities,
      management anticipates that if the Company uses derivative financial
      instruments to hedge the Company's interest rate risk on future loan
      purchases the Company will use derivative financial instruments which
      qualify for hedge accounting under the provisions of SFAS 133.

      The actual effect implementation of SFAS 133 will have on the Company's
      statements will depend on various factors determined at the period of
      adoption, including whether the Company is hedging its interest rate risk
      on loan purchases, the type of financial instrument used to hedge the
      Company's interest rate risk on loan purchases, whether such instruments
      qualify for hedge accounting treatment, the effectiveness of the hedging
      instrument, the amount of mortgage loans held for sale which the Company
      intends to hedge, and the level of interest rates. Accordingly, the
      Company can not determine at the present time the impact adoption of SFAS
      133 will have on its statements of operations or balance sheets.


                                       7
<PAGE>   10
                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                                   (UNAUDITED)


      Effective January 1, 1999, the Company adopted SFAS No. 134, "Accounting
      for Mortgage-Backed Securities Retained after the Securitization of
      Mortgage Loans Held for Sale by a Mortgage Banking Enterprise" ("SFAS
      134"). SFAS 134 amends SFAS No. 65, "Accounting for Certain
      Mortgage-Backed Securities" ("SFAS 65") to require that after an entity
      that is engaged in mortgage banking activities has securitized mortgage
      loans that are held for sale, it must classify the resulting retained
      mortgage-backed securities or other retained interests based on its
      ability and intent to sell or hold those investments. However, a mortgage
      banking enterprise must classify as trading any retained mortgage-backed
      securities that it commits to sell before or during the securitization
      process. Previously, SFAS 65 required that after an entity that is engaged
      in mortgage banking activities has securitized a mortgage loan that is
      held for sale, it must classify the resulting retained mortgage-backed
      securities or other retained interests as trading, regardless of the
      entity's intent to sell or hold the securities or retained interest.

      The application of the provisions of SFAS 134 did not have an impact on
      the Company's financial position or results of operations.

3.    EARNINGS PER SHARE:

      In February 1997, the Financial Accounting Standards Board issued SFAS No.
      128 "Earnings per Share" ("SFAS 128"), which became effective for the
      Company for reporting periods ending after December 15, 1997. Under the
      provisions of SFAS 128, basic earnings per share is determined by dividing
      net income (loss), adjusted for preferred stock dividends, by weighted
      average shares outstanding. Diluted earnings per share, as defined by SFAS
      No. 128, is computed assuming all dilutive potential common shares were
      issued.

      Amounts used in the determination of basic and diluted earnings per share
      are shown in the table below:

<TABLE>
<CAPTION>
                                                                 For the Three Months Ended           For the Six Months Ended
                                                                         June 30,                              June 30,
                                                               ------------------------------      ------------------------------
                                                                   1999              1998                1999            1998
                                                               ------------       -----------      ------------       -----------
                                                                                (in thousands, except share data)
       <S>                                                     <C>                <C>              <C>                <C>
       Net income (loss)                                       $   (171,605)      $    16,328      $   (200,347)      $    31,432
       Less accretion of preferred stocks                              (737)               --            (1,474)               --
                                                               ------------       -----------      ------------       -----------
       Income (loss) available to common stockholders-basic    $   (172,342)      $    16,328      $   (201,821)      $    31,432
                                                               ============       ===========      ============       ===========
       Weighted average common shares outstanding                34,201,380        30,799,173        34,211,493        30,775,154
       Adjustments for dilutive securities:
             Stock warrants                                              --         2,160,000                --         2,160,000
             Stock options                                               --         1,154,748                --         1,006,468
             Contingent shares                                           --           929,087                --           886,443
                                                               ------------       -----------      ------------       -----------
       Diluted common shares                                     34,201,380        35,043,008        34,211,493        34,828,065
                                                               ============       ===========      ============       ===========
</TABLE>




                                       8
<PAGE>   11
                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                                   (UNAUDITED)


       For the three and six months ended June 30, 1999, there were no
       adjustments for stock warrants, stock options and contingent shares in
       computing the diluted weighted average number of shares outstanding as
       their effect was antidilutive.

4.     WAREHOUSE FINANCE FACILITIES, TERM DEBT AND NOTES PAYABLE:

       WAREHOUSE FINANCE FACILITIES

       In October 1998, as a result of volatility in equity, debt and
       asset-backed markets, among other things, the Company entered into
       intercreditor agreements with Paine Webber Real Estate Securities, Inc.
       ("Paine Webber"), Bear Stearns Home Equity Trust 1996-1 ("Bear Stearns"),
       and Aspen Funding Corp. and German American Capital Corporation,
       subsidiaries of Deutsche Bank of North America Holding Corp ("DMG")
       (collectively, the "Significant Lenders"). The intercreditor agreements
       provided for the Significant Lenders to "standstill" and keep outstanding
       balances under their facilities in place, subject to certain conditions,
       for up to 90 days (which expired mid-January 1999) to allow for the
       Company to explore its financial alternatives. The intercreditor
       agreements also provided, subject to certain conditions, that the lenders
       would not issue any margin calls requesting additional collateral be
       delivered to the lenders. To induce DMG to enter the intercreditor
       agreement, the Company was required to permit DMG's committed warehouse
       and interest-only and residual credit facilities to become uncommitted
       and issued to DMG warrants exercisable at $1.72 per share to purchase
       2.5% of the common stock of the Company on a diluted basis.

       In mid-January 1999, the intercreditor agreements expired; however, on
       February 19, 1999, concurrent with the execution of the Acquisition
       Agreement discussed in Note 1 "Organization and Basis of Presentation"
       (see the Company's Annual Report on Form 10-K for the fiscal year ended
       December 31, 1998 and Note 17 of Notes to Consolidated Financial
       Statements "Significant Events and Events Subsequent to December 31,
       1998" included therein), the Company entered into amended and restated
       intercreditor agreements with the Significant Lenders. Under the amended
       and restated intercreditor agreements, the Significant Lenders agreed to
       keep their respective facilities in place until the closing of the
       acquisition and for 12 months thereafter provided that the closing of the
       acquisition occurred within five months, subject to earlier termination
       in certain events. The intercreditor agreements also require the Company
       to make various amortization payments on the underlying debt.

       As discussed in Note 9 "Events Subsequent to June 30, 1999," subsequent
       to June 30, 1999, the amended and restated intercreditor agreements were
       extended through September 16, 1999, subject to earlier termination in
       certain events. In the event the Company is not successful in obtaining
       further extensions of these agreements, the standstill periods



                                       9
<PAGE>   12
                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                                   (UNAUDITED)


       thereunder would expire on September 16, 1999 and the lenders would be
       entitled to seek remedies under their loan agreements with the Company,
       including actions to realize upon the collateral that secure their loans.
       In such an event, it is likely the Company would be unable to continue
       its business.

       None of the three Significant Lenders has formally reduced the amount
       available under its uncommitted facilities, but each has informally
       indicated its desire that the Company keep the average amount outstanding
       on the warehouse facilities well below the amount available. There can be
       no assurance that the Significant Lenders will continue to fund the
       Company under their uncommitted facilities.

       At June 30, 1999, the Company had a $1.25 billion uncommitted credit
       facility with Paine Webber. Outstanding warehouse borrowings, which bear
       interest at rates ranging from LIBOR (5.63% at June 30, 1999) plus 0.75%
       to LIBOR plus 2.00%, were approximately $66.1 million under this facility
       at June 30, 1999. The Company has informally requested that Paine Webber
       permit funding of an additional $200 million under its warehouse
       facilities, but has been notified that Paine Webber, at this time, does
       not intend to make any additional advances.

       At June 30, 1999, the Company had a $1.0 billion uncommitted credit
       facility with DMG which includes a $100.0 million credit facility
       collateralized by interest-only and residual certificates. At June 30,
       1999, approximately $159.3 million was outstanding under this facility.
       DMG has indicated to the Company that it does not intend to make any
       additional advances at this time and any funding will be on an
       "as-requested" basis.

       At June 30, 1999, the Company had a $1.0 billion uncommitted warehouse
       facility with Bear Stearns. This facility bears interest at LIBOR plus
       0.75%. At June 30, 1999, approximately $333.9 million was outstanding
       under this facility. Bear Stearns has requested that the Company maintain
       outstanding amounts under this warehouse facility at no more than $500
       million.

       At June 30, 1999, the Company had a $125 million committed warehouse
       facility with Residential Funding Corporation ("RFC") which bears
       interest at LIBOR plus 1.25%. At June 30, 1999, approximately $67.5
       million was outstanding under this facility. The RFC credit facility
       requires the Company to comply with various financial covenants,
       including, among other things, minimum net worth tests and a minimum
       pledged servicing portfolio. At June 30, 1999, the Company's net worth,
       tangible net worth and pledged servicing portfolio were below the minimum
       requirements under the covenants of the RFC credit facility. In July
       1999, RFC indicated that it will not continue to fund the Company under
       its committed facility after the facility matures on August 31, 1999. The
       Company is discussing terms for repayment of the amount that will be
       outstanding under the RFC credit facility



                                       10
<PAGE>   13
                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                                   (UNAUDITED)


       when the facility matures.

       Additionally, at June 30, 1999, approximately $6.6 million was
       outstanding under another warehouse line of credit, which bears interest
       at LIBOR plus 1.5% and has expired and is not expected to be renewed.

       Outstanding borrowings under the Company's warehouse financing facilities
       are collateralized by mortgage loans held for sale and servicing rights
       on approximately $210 million of mortgage loans. Upon the sale of these
       loans, proceeds are used to repay the borrowings under these lines.

       The Company has attempted to enter into arrangements to obtain warehouse
       facilities from lenders that are not currently providing warehouse
       facilities to the Company, but has not been successful.

       As a result of the DMG warehouse facility becoming uncommitted and the
       adverse market conditions currently being experienced by the Company and
       other mortgage companies in the industry, the Company's ability to
       continue to operate is dependent upon the Significant Lenders' discretion
       to provide warehouse funding to the Company. There can be no assurance
       the Significant Lenders will continue to fund the Company's warehouse
       requirements.

       TERM DEBT

       At June 30, 1999, outstanding interest-only and residual financing
       borrowings were $138.2 million under the Company's credit facility with
       Paine Webber. Outstanding borrowings bear interest at LIBOR plus 2.0% and
       are collateralized by the Company's interest in certain interest-only and
       residual certificates.

       Bear, Stearns & Co. Inc. and its affiliates, Bear Stearns Mortgage
       Capital Corporation and Bear, Stearns International Limited, provide the
       Company with an $100 million credit facility which is collateralized by
       the Company's interest in certain interest-only and residual
       certificates. At June 30, 1999, $82.0 million was outstanding under this
       credit facility, which bears interest at 1.75% per annum in excess of
       LIBOR.

       At June 30, 1999, outstanding interest-only and residual financing
       borrowings under the Company's credit facility with DMG were $41.4
       million. Outstanding borrowings bear interest at LIBOR plus 2.0% and are
       collateralized by the Company's interest in certain interest-only and
       residual certificates.

       The interest-only and residual financing facilities described above are
       subject to the intercreditor agreements and amended and restated
       intercreditor agreements described


                                       11
<PAGE>   14
                     IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                                  (UNAUDITED)


       under "Warehouse Finance Facilities" above.

       At June 30,1999, the Company had borrowed $1.9 million under an agreement
       with Nomura Securities (Bermuda) Ltd. which matured in August 1998, bears
       interest at 2.0% per annum in excess of LIBOR and is collateralized by
       the Company's interest in certain interest-only and residual
       certificates. The Company has informally agreed to allow approximately
       1/3 of the cash from the interest-only and residual certificates to be
       used to reduce the amount outstanding under this facility on a monthly
       basis and the lender has informally agreed to keep the facility in place.
       There can be no assurance the informal agreement will provide for any
       further extension of the maturity of this loan agreement.

       At June 30, 1999, the Company also had outstanding a $5.3 million credit
       facility with a financial institution which bears interest at 10% per
       annum. The credit facility provides for repayment of principal and
       interest over 36 months, through October 2001.

       BankBoston provided the Company with a revolving credit facility which
       matured in October 1998, bore interest at LIBOR plus 2.75% and provided
       for borrowings up to $50.0 million to be used to finance interest-only
       and residual certificates or for acquisitions or bridge financing.
       BankBoston, with participation from another financial institution, also
       provided the Company with a $45.0 million working capital facility, which
       bore interest at LIBOR plus 2.75% and matured in October 1998. After
       maturity, the interest rate on these facilities increased to prime (7.75%
       at June 30, 1999) plus 2% per annum.

       The Company was unable to repay either of these BankBoston facilities
       when they matured and in October 1998 the Company entered into a
       forbearance and intercreditor agreement with BankBoston with respect to
       its combined $95.0 million facilities. That agreement provided that the
       bank would take no collection action, subject to certain conditions, for
       up to 90 days (which expired in mid-January 1999) to allow the Company to
       explore its financial alternatives.

       In mid-January, 1999 the forbearance and intercreditor agreement with
       BankBoston expired. On February 19, 1999 the Greenwich Funds purchased,
       at a discount, from BankBoston its interest in the credit facilities and
       entered into an amended intercreditor agreement with the Company relating
       to the combined $95.0 million facilities. On February 19, 1999, $87.5
       million was outstanding under the combined facilities. Under the amended
       intercreditor agreement, the Greenwich Funds agreed to keep its
       facilities in place for a period of 12 months thereafter if the
       acquisition described in the Acquisition Agreement (see Note 1
       "Organization and Basis of Presentation") was consummated within five
       months. As discussed in Note 9 "Events Subsequent to June 30, 1999,"
       subsequent to June 30, 1999, the amended intercreditor agreement was
       extended through September 16, 1999, subject to earlier termination in
       certain events. In the event the Company is not successful in obtaining
       further extensions of this agreement, the standstill periods



                                       12
<PAGE>   15
                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                                   (UNAUDITED)

       thereunder would expire on September 16, 1999 and the Greenwich Funds
       would be entitled to seek remedies under its loan agreements with the
       Company, including actions to realize upon the collateral that secure its
       loans. In such an event, it is likely the Company would be unable to
       continue its business. At June 30, 1999, $86.6 million was outstanding
       under the combined facilities.

       On October 15, 1998, the Company entered into an agreement for a $33.0
       million standby revolving credit facility with certain of the Greenwich
       Funds (the "Greenwich Loan Agreement"). The facility was available to
       provide working capital for a period of up to 90 days and bore interest
       at 10% per annum. After 90 days, the interest rate on the facility
       increased to 12% per annum on amounts outstanding after 90 days. The
       terms of the facility resulted in substantial dilution of existing common
       stockholders' equity equal to a minimum of 40%, up to a maximum of 90%,
       on a diluted basis, depending on (among other things) when, or whether
       the Company entered into a definitive agreement for a transaction which
       could result in a change of control. In mid-January 1999, the $33.0
       million standby revolving credit facility matured. On February 16, 1999,
       the Greenwich Funds made additional loans totaling $5.0 million available
       under the facility. On May 18, 1999, the interest rate on the facility
       was increased to 22% per annum on amounts outstanding after May 18, 1999.
       At June 30, 1999, $38.0 million was outstanding under the Greenwich Loan
       Agreement.

       The Company is required to advance monthly delinquent interest as the
       servicer under the pooling and servicing agreements related to
       securitizations the Company services. The Company typically makes these
       advances to the securitizations on or about the 18th of each month and
       such advances are typically repaid by the securitizations over a 30 day
       period. In this respect, on April 19, 1999, the Company borrowed $15
       million from the Greenwich Funds pursuant to secured promissory notes to
       fund a portion of delinquent interest advance to the securitizations.
       These notes bore interest at a rate of 20% per annum. These notes have
       been repaid in full.

       On May 18, 1999, the Company entered into a Note Purchase and Amendment
       Agreement (the "Note Purchase Agreement") with the Greenwich Funds.
       Borrowings under the Note Purchase Agreement bear interest at 20% per
       annum. On May 18, 1999, the Greenwich Funds loaned the Company an
       aggregate of $33.0 million under the Note Purchase Agreement to fund a
       portion of the delinquent interest advance to the securitizations. In
       consideration for these loans, the Company paid the Greenwich Funds a
       $1.2 million commitment fee. The $33.0 million borrowed under the Note
       Purchase Agreement on May 18, 1999 was repaid in full.

       On June 18, 1999, the Greenwich Funds loaned the Company an aggregate of
       $35.0 million under the Note Purchase Agreement to fund a portion of the
       delinquent interest advance to the securitizations. In consideration for
       these loans, the Company agreed to pay Greenwich Funds


                                       13
<PAGE>   16
                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                                   (UNAUDITED)

      a $1.0 million commitment fee. At June 30,1999, $26.1 million was
      outstanding under the Note Purchase Agreement, which was repaid in full by
      July 16, 1999.

      On July 16, 1999, the Company borrowed $45.0 million under the Note
      Purchase Agreement to fund a portion of the delinquent interest advance to
      the securitizations. In consideration for these loans, the Company agreed
      to pay the Greenwich Funds a $1.25 million commitment fee. The $45.0
      million borrowed under the Note Purchase Agreement was repaid in full by
      August 18, 1999.

      On August 18, 1999, the Company borrowed $45.0 million under the Note
      Purchase Agreement to fund a portion of the delinquent interest advance to
      the securitizations. In consideration for these loans, the Company agreed
      to pay the Greenwich Funds a $1.25 million commitment fee.

      The Greenwich Funds have provided the Company with funds to enable the
      Company to make the required delinquent interest advance to the
      securitizations each month, but has been unwilling to commit to make these
      funds available for more than 30 days at a time. If the delinquent
      interest advances are not made by the servicer each month pursuant to the
      pooling and servicing agreements, the Company's contractual rights to
      service the mortgage loans in the securitization could be terminated. The
      Company is dependent upon obtaining financing to fund the required monthly
      delinquent interest advances to the securitizations. There can be no
      assurance that the Greenwich Funds will continue to make funds available
      to permit the Company to make future delinquent interest advances and thus
      there can be no assurance the contractual rights to service the mortgage
      loans will not be terminated.

      Interest expense - Greenwich Funds of $15.4 million included in the
      accompanying Consolidated Statement of Operations for the six months ended
      June 30, 1999 consists of interest charges with respect to the Greenwich
      Loan Agreement as well as amortization of the $3.3 million commitment fee
      and the value attributable to the Class C preferred stock issued and the
      additional preferred stock issuable to the Greenwich Funds in exchange for
      its loan under the terms of the agreement. (See the Company's Annual
      Report on Form 10-K for the fiscal year ended December 31, 1998 and Note 4
      of Notes to Consolidated Financial Statements "Redeemable Preferred Stock"
      included therein). Interest expense-Greenwich Funds for the six months
      ended June 30, 1999 also includes interest expense and commitment fees
      related to the Note Purchase Agreements and $95.0 million credit
      facilities that the Greenwich Funds purchased from BankBoston on February
      19, 1999. Interest expense - Greenwich Funds included in the Consolidated
      Statement of Operations for the three months ended June 30, 1999 of $7.5
      million consists of interest charges and commitment fees related to the
      Greenwich Loan Agreement, the Note Purchase Agreements, and the $95.0
      million credit facilities that the Greenwich Funds purchased from
      BankBoston.



                                       14
<PAGE>   17
                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                                   (UNAUDITED)



      The warehouse notes and term debt have requirements that the Company
      maintain certain debt to equity ratios and certain agreements restrict
      the Company's ability to pay dividends on common stock. Capital
      expenditures are limited by certain agreements. At June 30, 1999, the
      Company was not in compliance with certain financial covenants related to
      credit facilities with the Significant Lenders. As described above, the
      Company entered into intercreditor agreements with the Significant
      Lenders which provide for the Significant Lenders to "stand-still" and
      keep outstanding balances under their facilities in place, subject to
      certain conditions, until September 16, 1999.

      NOTES PAYABLE

      At June 30, 1999, $4.3 million was outstanding under a mortgage note
      payable, which bears interest at 8.16% per annum and expires December
      2007. The note is collateralized by the Company's headquarters building.

      At June 30, 1999, $12.9 million was outstanding under notes payable to
      shareholders related to an acquisition completed in 1997. These notes bear
      interest at prime plus 2.0% per annum and matured on July 10, 1999. After
      maturity, the unpaid principal balance accrues interest until paid in full
      at prime plus 5% per annum. The Company is currently in negotiations
      regarding the amount and timing of repayment of these notes payable.

5.    INTEREST-ONLY AND RESIDUAL CERTIFICATES

      Activity in interest-only and residual certificates consisted of the
      following:

<TABLE>
<CAPTION>
                                        For the three months ended      For the six months ended
                                                 June 30,                       June 30,
                                           1999            1998            1999            1998
                                        ---------       ---------       ---------       ---------
                                              (in thousands)                (in thousands)
       <S>                              <C>             <C>             <C>             <C>
       Beginning balance ............    $ 445,833       $ 327,755       $ 468,841       $ 223,306
       Additions ....................           --         118,622              --         224,120
       Cash receipts ................      (30,413)           (800)        (53,421)         (1,849)
       Market valuation adjustment ..      (62,876)             --         (62,876)             --
                                         ---------       ---------       ---------       ---------
       Balance, June 30 .............    $ 352,544       $ 445,577       $ 352,544       $ 445,577
                                         =========       =========       =========       =========
</TABLE>


      During the second quarter of 1999, as a result of trends in the Company's
      serviced loan portfolio and adverse market conditions, as described in
      Note 1 "Organization and Basis of Presentation", the Company revised its
      loss curve assumption used to approximate the timing of losses over the
      life of the securitized loans so that expected losses from defaults
      gradually increase from zero in the first six months of the loan to 275
      basis points after 30 months, representing estimated aggregate losses over
      the life of the pool (i.e. historical plus future losses) of 4.3% of
      original pool balances. Prior to the second quarter of 1999, the Company
      expected losses from defaults to gradually increase from zero in the first
      six months of the loan to 175 basis points after 36 months.

      The Company believes the adverse market conditions affecting the
      non-conforming mortgage industry may limit the Company's borrowers'
      ability to refinance existing delinquent loans serviced by IMC with other
      non-conforming mortgage lenders that traditionally had offered loans to
      borrowers that are less creditworthy, which IMC believes may increase the
      frequency of defaults. There can be no assurance that the loss curve



                                       15
<PAGE>   18
                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                                   (UNAUDITED)


      assumption presently being used by the Company, based on the adverse
      market conditions, will prove to be sufficient. The revised loss curve
      assumption resulted in a decrease to the estimated fair value of the
      interest-only and residual certificates of approximately $62.9 million,
      which is reflected as a market valuation adjustment in the accompanying
      Consolidated Statements of Operations for the three and six months ended
      June 30, 1999.

      Prior to the fourth quarter of 1998, the Company discounted the present
      value of projected cash flows retained by the Company at discount rates
      ranging from 11% to 14.5%. During the fourth quarter of 1998, as a result
      of adverse market conditions, the Company adjusted to 16% the discount
      rate used to present value the projected cash flow retained by the
      Company.

6.    GOODWILL IMPAIRMENT

      In June 1999, CitiFinancial Mortgage submitted a non-binding letter of
      intent to the Company to purchase the Company's mortgage loan servicing
      business and substantially all of its correspondent origination loan
      business and a portion of its broker originated loan business. The
      non-binding letter of intent did not include the Company's eight operating
      subsidiaries, which produce the remaining broker originated loan business
      as well as direct originations. The Board of Directors met on June 14,
      July 2 and July 8, 1999 to discuss a transaction with CitiFinancial
      Mortgage and to consider other alternatives. The Company and CitiFinancial
      Mortgage negotiated the terms of an agreement until July 14, 1999 when the
      Company and CitiFinancial Mortgage entered into the Agreement as described
      in Note 9 "Events Subsequent to June 30, 1999." Also as discussed in Note
      9 "Events Subsequent to June 30, 1999," on July 26, 1999, the Board of
      Directors approved a formal plan to dispose of the eight operating
      subsidiaries.

      The Company reviews the potential impairment of goodwill on a
      non-discounted cash flow basis to assess recoverability. The cash flows
      are projected on a pre-tax basis over the estimated useful lives assigned
      to goodwill. The Board of Directors' approval, on July 26, 1999, of a
      formal plan to dispose of the eight operating facilities as described
      above led the Company to determine that the useful lives assigned to
      goodwill should be reduced to less than one year. The resulting evaluation
      of the goodwill associated with the eight operating subsidiaries resulted
      in a goodwill impairment charge of $77.4 million for the three and six
      months ended June 30, 1999.

7.    OTHER CHARGES

      LOSS ON DISPOSAL OF INVESTMENTS IN INTERNATIONAL OPERATIONS

      In March 1996, the Company entered into an agreement to form a joint
      venture (Preferred


                                       16
<PAGE>   19
                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                                   (UNAUDITED)



      Mortgages Limited) in the United Kingdom to originate and purchase
      mortgages made to borrowers who may not otherwise qualify for conventional
      loans for the purpose of securitization and sale. Under the agreement, the
      Company and a second party each owned 45% of the joint venture, and a
      third party owned the remaining 10%. The Company's original investment in
      the joint venture represented the acquisition of 675,000 shares of the
      joint venture's stock for $1.0 million and a note receivable from the
      joint venture for $1.0 million. Subsequent to the original investment, the
      Company made net advances to the joint venture and recorded its pro-rata
      share of the losses from the joint venture. The Company's net investment
      in the joint venture on June 30, 1999 was $4.1 million.

      On June 30, 1999, the Company entered into an agreement to sell its
      interest in the joint venture to one of its partners. Under the terms of
      sale agreement, the Company received $1.5 million in exchange for its
      interest the joint venture, including all shares, notes receivable,
      advances and interest due from the joint venture. The sale resulted in a
      loss of approximately $2.6 million, which is included in other charges in
      the accompanying Consolidated Statements of Operations for the three and
      six months ended June 30, 1999.

      In May 1999, the Company's management committed to a plan to sell its
      Canadian subsidiary, IMC Canada LTD, Inc. ("IMC Canada") to a third party.
      The sale of IMC Canada was completed on August 12, 1999. The assets of IMC
      Canada are recorded in the accompanying Consolidated Balance Sheet in
      other assets at their historical book value, which approximated fair value
      at June 30, 1999. The net proceeds from the disposition approximated the
      current carrying value of IMC Canada. The financial position and results
      of operations of IMC Canada were not material in relation to the financial
      position or results of operations of the Company.

      LOSS ON DISPOSAL OF ASSETS

      On January 1, 1996, the Company acquired assets of Mortgage Central Corp.,
      a Rhode Island corporation ("MCC"), a mortgage banking company which did
      business under the name "Equitystars" primarily in Rhode Island, New York,
      Connecticut and Massachusetts. The acquisition was accounted for using the
      purchase method of accounting and, accordingly, the purchase price of $2.0
      million was allocated to the assets purchased and the liabilities assumed
      based upon the fair values at the date of acquisition. The excess of the
      purchase price of over the fair values of assets acquired and liabilities
      assumed was recorded as goodwill.

      On June 30, 1999, the Company terminated its operations at the MCC offices
      in Rhode Island and began disposing of the related assets. Accordingly,
      the carrying amount of the goodwill that arose from the acquisition of MCC
      has been eliminated and the assets to be disposed of are recorded in the
      accompanying Consolidated Balance Sheet at their estimated net fair value.
      The loss on disposal of the assets of MCC of $2.6 million is included in
      other charges in accompanying Consolidated Statement of Operations for the
      three and six months

                                       17
<PAGE>   20
                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                                   (UNAUDITED)



     ended June 30,1999.

8.   COMMITMENTS AND CONTINGENCIES

      Certain members of management entered into employment agreements expiring
      through 2001 which, among other things, provide for aggregate annual
      compensation of approximately $1.4 million plus bonuses ranging from 5% to
      15% of base salary in the relevant year for each one percent by which the
      increase in net earnings per share of the Company over the prior year
      exceeds 10%, up to a maximum of 300% of annual compensation. No bonuses
      under these contracts were paid for the fiscal year 1998 and no bonuses
      are anticipated for the fiscal year 1999. Each employment agreement
      contains a restrictive covenant, which prohibits the executive from
      competing with the Company for a period of 18 months after termination,
      and certain deferred compensation upon a "change of control" as defined in
      the employment agreements. As discussed in Note 9 "Events Subsequent to
      June 30, 1999," on July 14, 1999, the Company entered into an Agreement to
      sell certain assets to CitiFinancial Mortgage. The Agreement is contingent
      upon CitiFinancial Mortgage entering into future employment arrangements
      with certain members of management acceptable to CitiFinancial Mortgage.
      There can be no assurance employment arrangements acceptable to certain
      members of management and CitiFinancial Mortgage can be achieved.

     Certain members of the Company's Board of Directors and certain members of
     the Company's senior management have employment agreements with the
     Company, and the Company's general counsel, a director of the Company, has
     a retainer agreement with the Company, that permit each of them, following
     a change of control, to voluntarily terminate their employment with, or
     retention by, the Company and become entitled to deferred compensation.
     Subsequent to June 30, 1999, the members of senior management who have
     these agreements and the Company's general counsel entered into mutual,
     general and irrevocable releases with the Company, which release the
     Company from payment of deferred compensation aggregating approximately $10
     million and all other obligations in the employment or retainer agreements
     in consideration for aggregate payments of $400,000 plus additional
     aggregate payments of $420,000 to be paid over a period of up to twelve
     months. The payments commenced upon execution of the release for those
     members of senior management who are not also directors and will commence
     upon consummation of the Agreement described in Note 9 "Events Subsequent
     to June 30, 1999," if the Agreement is approved by the Company's
     shareholders, for members of the Company's Board of Directors and general
     counsel. Each member of senior management and the Company's general counsel
     who has entered into a release has become an employee "at will" and may be
     terminated by the Company at any time without additional benefits.

     The Greenwich Funds have agreed to indemnify certain surety companies
     against losses on surety bonds issued with respect to the Company. To
     induce the Greenwich Funds to make this indemnity, on May 18, 1999 the
     Company entered into a Reimbursement Agreement (the



                                       18
<PAGE>   21
                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                                   (UNAUDITED)


     "Reimbursement Agreement") with the Greenwich Funds. Under the
     Reimbursement Agreement, the Company will reimburse the Greenwich Funds for
     any amounts it pays to indemnify the surety companies. The Company will
     also pay interest on any payments made by the Greenwich Funds to the surety
     companies at a rate equal to the prime rate plus 2%.

     LEGAL PROCEEDINGS

     The Company is party to various legal proceedings arising in the ordinary
     course of its business. Management believes that none of these matters,
     individually or in the aggregate, will have a material adverse effect on
     the consolidated financial condition or results of operations of the
     Company.

     On December 23, 1998, seven former shareholders of Corewest sued the
     Company in Superior Court of the State of California for the County of Los
     Angeles claiming the Company agreed to pay them $23.8 million in
     cancellation of the contingent "earn out" payment, if any, payable by the
     Company in connection with the Company's purchase of all of the outstanding
     shares of Corewest. In August 1999, five of the former shareholders of
     Corewest, representing approximately 80% of the interests of all former
     shareholders, settled their employment agreement claims and agreed to
     dismiss their claims under that lawsuit and signed mutual, general and
     irrevocable releases for approximately $1.4 million. The case is in the
     early stages of pleading; however, based on consultation with legal
     counsel, the Company's management believes there is no merit in the
     plaintiffs' claim.

     On June 17, 1999, the former shareholders of Central Money Mortgage Co.,
     Inc. ("Central Money Mortgage") sued the Company and its general counsel in
     U.S. District Court for the State of Maryland claiming failure to perform
     on certain oral and written representations made in connection with the
     Company's acquisition of the assets of Central Money Mortgage. The case is
     in the preliminary stages of discovery; however, based on consultation with
     legal counsel, the Company's management believes there is no merit in the
     plaintiffs' claims and intends to defend such action vigorously.

9.   EVENTS SUBSEQUENT TO JUNE 30, 1999

     On July 14, 1999, the Company entered into an Agreement to sell certain
     assets to CitiFinancial Mortgage. The Agreement was approved by the Board
     of Directors on July 30, 1999, and as a result, the Acquisition Agreement
     with the Greenwich Funds described in Note 1 "Organization and Basis of
     Presentation" terminated. Consequently, the Greenwich Funds will not be
     obligated to provide an additional $35 million of loans to the Company. The
     Agreement is subject to a number of conditions, including approval by the
     Company's common and preferred stockholders (together with a separate vote
     in favor of the transaction by the majority of the Company's common
     shareholders other than the Company's management) and approval by certain
     federal regulatory bodies and third parties. There can be no assurance that
     the stockholders of the Company will approve the transaction or that the
     other conditions will be met.


                                       19
<PAGE>   22
                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                                   (UNAUDITED)



     Under the Agreement, the Company will receive $100 million from
     CitiFinancial Mortgage for the sale of its mortgage servicing rights
     related to mortgage loans which have been securitized, real property
     consisting of the Company's Tampa, Florida headquarters building and the
     Company's leased facilities at its Ft. Washington, Pennsylvania, Cherry
     Hill, New Jersey and Cincinnati, Ohio office locations. Additionally, all
     furniture, fixtures and equipment and other personal property located at
     the premises described above will be included in the purchase. It is
     anticipated that substantially all of the employees at the locations
     referred to above at the time the Agreement is consummated will be offered
     employment by CitiFinancial Mortgage.

     The proceeds from the sale of assets will be used to repay certain
     indebtedness secured by certain assets of the Company. No payment is
     expected to be made to the Company's common shareholders as a result of
     this transaction, nor are any payments to common stockholders likely in the
     future.

     If the transaction contemplated by the Agreement is completed, it will
     result in the sale of the Company's servicing platform, substantially all
     its correspondent origination loan business and its broker originated loan
     business conducted at the locations referred to above. The remaining loan
     origination business, which primarily consists of broker and direct
     originations, is performed by eight operating subsidiaries. CitiFinancial
     Mortgage's offer to acquire certain assets of the Company did not include
     the subsidiaries and accordingly the subsidiaries are not part of the
     purchased assets.

      The Agreement to sell certain assets to CitiFinancial Mortgage did not
      include the Company's eight operating subsidiaries. Therefore, on July
      26, 1999, the Company's Board of Directors approved a formal plan to
      dispose of the eight subsidiaries, and it is anticipated the disposal
      will be substantially complete by September 30, 1999. The Company
      recorded a goodwill impairment charge of $77.4 million for the three and
      six months ended June 30, 1999 relating to the formal plan to dispose of
      the eight operating subsidiaries. Additional charges will be incurred
      relating to, among other things, disposal of assets and costs of
      disposal. The actual amount of goodwill impairment and additional charges
      will depend on the proceeds, if any, from disposal and the costs incurred
      to dispose of the subsidiaries.

     The Company is in the process of preparing to call a special meeting of its
     shareholders to approve the Agreement with CitiFinancial Mortgage. The
     Board of Directors will request shareholders to vote in favor of the
     transaction to allow the Company to attempt to continue to operate and
     repay its creditors in an orderly manner. There can be no assurance the
     Company's shareholders will approve the Agreement with CitiFinancial
     Mortgage. In such an event, it is likely the Company would be unable to
     continue its business.




                                       20
<PAGE>   23
                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                                   (UNAUDITED)


     Subsequent to June 30, 1999, the amended and restated intercreditor
     agreements were extended through September 16, 1999, subject to earlier
     termination in certain events. There can be no assurance that the Company
     will be successful in obtaining further extensions of these agreements. In
     the event the Company is not successful in obtaining further extensions of
     these agreements, the standstill periods thereunder would expire on
     September 16, 1999 and the Significant Lenders and the Greenwich Funds
     would be entitled to seek remedies under their loan agreements with the
     Company, including actions to realize upon the collateral that secure their
     loans. In such an event, it is likely the Company would be unable to
     continue its business.




                                       21
<PAGE>   24


ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

The following information should be read in conjunction with the consolidated
financial statements and notes included in Item 1 of this Quarterly Report, and
the financial statements and the notes thereto and Management's Discussion and
Analysis of Financial Condition and Results of Operations included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998
and current reports on Forms 8-K dated July 22, 1999, May 27, 1999, March 3,
1999, February 26, 1999, February 23, 1999, November 27, 1998 and October 21,
1998. The following management's discussion and analysis of the Company's
financial condition and results of operations and other sections of this
Quarterly Report on Form 10-Q contain "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995, which involve
risks and uncertainties. You can identify forward looking statements by the use
of such words as "expect", "estimate", "intend", "project", "budget",
"forecast", "anticipate", "plan", "in the process of" and similar expressions.
Forward looking statements include all statements regarding IMC's expected
financial position, results of operations, cash flows, financing plans, business
strategies, budgets, capital and other expenditures, competitive positions,
plans and objectives of management and markets for stock. All forward looking
statements involve risks and uncertainties. In particular, any statements
contained herein regarding the consummation and benefits of the proposed
transaction with CitiFinancial Mortgage Company ("CitiFinancial Mortgage"), as
well as expectations with respect to future sales, operating efficiencies and
product and product expansion, are subject to known and unknown risks,
uncertainties and contingencies, many of which are beyond the control of IMC,
which may cause actual results, performance or achievements to differ materially
from anticipated results, performance or achievements. Factors that might affect
such forward looking statements include, among other things, early termination
of the amended and restated intercreditor agreements or the standstill periods
relating to certain of IMC's creditors, overall economic and business
conditions, the demand for IMC's services, competitive factors in the industry
in which IMC competes, changes in government regulation, continuing tightening
of credit availability to the subprime mortgage industry, increased yield
requirements by asset-backed investors, lack of continued availability of IMC's
credit facilities, lack of available funds to permit IMC to make required
delinquent interest advances as the servicer under the pooling and servicing
agreements related to securitizations IMC services, termination of IMC's
contractual rights to service mortgage loans under the pooling and servicing
agreements related to securitizations IMC services, reduction in real estate
values, reduced demand for non-conforming loans, changes in underwriting
criteria applicable to such loans, prepayment speeds, delinquency and default
rates of mortgage loans owned or serviced by IMC, rapid fluctuation in interest
rates, risks related to not hedging against loss of value of IMC's mortgage loan
inventory, changes which influence the loan securitization and the net interest
margin securities (excess cashflow trust) markets generally, lower than expected
performance by companies acquired by IMC, market forces affecting the price of
IMC's common stock and other uncertainties associated with IMC's current
financial difficulties and the proposed transaction with CitiFinancial Mortgage,
and other risks identified in IMC's Securities and Exchange Commission filings.

GENERAL

IMC is a specialized consumer finance company engaged in purchasing,
originating, servicing and


                                       22
<PAGE>   25

selling home equity loans secured primarily by first liens on one- to
four-family residential properties. The Company focuses on lending to
individuals whose borrowing needs are generally not being served by traditional
financial institutions due to such individuals' impaired credit profiles and
other factors, such as the requested loan size, the ratio of loan amount to
property value or the ratio of borrower income to total debt payments. Loan
proceeds typically are used by such individuals to consolidate debt, to
refinance debt, to finance home improvements, to pay educational expenses and
for a variety of other uses. By focusing on individuals with impaired credit
profiles and providing prompt responses to their borrowing requests, the Company
has been able to charge higher interest rates for its loan products than
typically are charged by conventional mortgage lenders.

RESULTS OF OPERATIONS

Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998.

Net loss for the three months ended June 30, 1999 was $171.6 million
representing a decrease of $187.9 million or 1,151.0% from net income of $16.3
million for the three months ended June 30, 1998. The decrease in net income
resulted principally from a goodwill impairment charge of $77.4 million, which
resulted from the Company's evaluation of goodwill recoverability on June 30,
1999, and a $62.9 million mark-to-market adjustment in the value of the
Company's interest only and residual certificates, which resulted from an
increase in loss assumptions. The Company determined that the useful lives
assigned to goodwill associated with the Company's eight operating subsidiaries
should be reduced based on the events described in Note 6 "Goodwill Impairment"
of Notes to Consolidated Financial Statements included herein, and the resulting
evaluation of goodwill resulted in an impairment charge of $77.4 million.
Additionally, the Company revised the loss assumption used to approximate the
timing of losses over the life of the securitized loans as a result of trends in
the Company's serviced loan portfolio and adverse market conditions. Also
contributing to the decrease in net income were a decrease in gain on sale of
loans of $57.6 million or 81.0% to $13.5 million for the three months ended June
30, 1999 from $71.2 million for the three months ended June 30, 1998 and $7.5
million of interest expense and commitment fees associated with the credit
facility provided by Greenwich Street Capital Partners II, L.P. and certain
related affiliates (the "Greenwich Funds"). The decrease in net income was also
attributable to a $2.3 million or 24.0% decrease in other revenues to $7.2
million for the three months ended June 30, 1999 from $9.4 million for the three
months ended June 30, 1998 and other charges of $5.2 million during the three
months ended June 30, 1999 related to losses from the disposal of investments in
international operations and closing the Rhode Island branch office location.
The decrease in net income was partially offset by a $1.3 million or 12.1%
increase in servicing fees to $12.0 million for the three months ended June 30,
1999 from $10.7 million for the three months ended June 30, 1998.

The decrease in income was also partially offset by a $9.7 million or 28.9%
decrease in compensation and benefits to $23.7 million for the three months
ended June 30, 1999 from $33.4 million for the three months ended June 30, 1998
and a $4.8 million or 15.6% decrease in selling, general and administrative
expenses to $26.1 million for the three months ended June 30, 1999 from $30.9
million for the three months ended June 30, 1998. The decrease in income was
partially attributable to a $1.6 million or 30.7% increase in other interest
expense to $6.9 million for the three months ended June 30, 1999 from $5.3
million for the three months ended June 30, 1998.



                                       23
<PAGE>   26

Net loss before taxes was increased by a provision for income taxes of $0.4
million for the three months ended June 30, 1999 compared to a provision for
income taxes of $11.4 million for the three months ended June 30, 1998. No
income tax benefit has been applied to the net loss for the three months ended
June 30, 1999, as the Company determined it cannot be assured that the income
tax benefit could be realized in the future.

REVENUES

The following table sets forth information regarding components of the Company's
revenues for the three months ended June 30, 1999 and 1998:

<TABLE>
<CAPTION>
                                                          For the Three Months
                                                              Ended June 30,
                                                   --------------------------------
                                                     1999    (in thousands)   1998
                                                   --------                --------
<S>                                                <C>                     <C>
Gain on sales of loans                             $ 13,528                $ 71,159
                                                   --------                --------
Warehouse interest income                            14,536                  38,985
Warehouse interest expense                           (8,737)                (32,944)
                                                   --------                --------
       Net warehouse interest income                  5,799                   6,041
                                                   --------                --------
 Servicing fees                                      11,958                  10,666
 Other                                                7,175                   9,436
                                                   --------                --------
        Total revenues                             $ 38,460                $ 97,302
                                                   ========                ========
</TABLE>

Gain on Sales of Loans. For the three months ended June 30, 1999, gain on sales
of loans decreased to $13.5 million from $71.2 million for the three months
ended June 30, 1998, a decrease of 81.0% due primarily to a decrease in loans
sold through securitizations. The total volume of loans produced decreased by
82.4% to approximately $340 million for the three months ended June 30, 1999
from a total volume of approximately $1.9 billion for the three months ended
June 30, 1998. Originations by the Company's correspondent network decreased
97.0% to approximately $40 million for the three months ended June 30, 1999 from
approximately $1.3 billion for the three months ended June 30, 1998, while
production from the Company's broker network and direct lending operations
decreased by 51.8% to approximately $300 million for the three months ended June
30, 1999 from approximately $620 million for the three months ended June 30,
1998.

The Company sells the loans it purchases or originates through one of two
methods: (i) securitization, which involves the private placement or public
offering of pass-through mortgage-backed securities, or (ii) whole loan sales,
which involve selling blocks of loans to single purchasers. During the three
months ended June 30, 1999, based on the Company's lack of liquidity and adverse
market conditions, the Company was unable to sell any loans through the
securitization market. Mortgage loans delivered to securitization trusts
decreased by $1.6 billion, a decrease of 100% to $0 for the three months ended
June 30, 1999 from $1.6 billion for the three months ended June 30, 1998.
Mortgage loans sold in the whole loan market increased by approximately $165
million to approximately $440 million for the three months ended June 30, 1999
from approximately $275 million for the three months ended June 30, 1998.

Net Warehouse Interest Income. Net warehouse interest income decreased to $5.8
million for the three months ended June 30, 1999 from $6.0 million for the three
months ended June 30, 1998, a decrease


                                       24
<PAGE>   27
of 4.0%. The decrease in the three month period ended June 30, 1999 reflected
decreased mortgage loan production and mortgage loans held for sale and
increased interest rates related to the Company's warehouse finance facilities.

Servicing Fees. Servicing fees increased to $12.0 million for the three months
ended June 30, 1999 from $10.7 million for the three months ended June 30, 1998,
an increase of 12.1%. Servicing fees for the three months ended June 30, 1999
were positively affected by an increase in mortgage loans serviced for others
over the prior period. The Company increased its average portfolio of mortgage
loans serviced for others by approximately $575 million or 9.0% to approximately
$7.0 billion for the three months ended June 30, 1999 from approximately $6.4
billion for the three months ended June 30, 1998.

Other. Other revenues, consisting principally of the recognition of the increase
or accretion of the discounted value of interest-only and residual certificates
over time and prepayment penalties from borrowers who prepay the outstanding
balance of their mortgage, decreased by 24.0% to $7.2 million for the three
months ended June 30, 1999 from $9.4 million in three months ended June 30,
1998.

EXPENSES

The following table sets forth information regarding components of the Company's
expenses for the three months ended June 30, 1999 and 1998:

<TABLE>
<CAPTION>
                                                        For the Three Months
                                                             Ended June 30,
                                                  ------------------------------
                                                    1999   (in thousands)   1998
                                                  --------               -------
<S>                                               <C>                    <C>
Compensation and benefits                         $ 23,747               $33,421
Selling, general and administrative                 26,052                30,870
Other interest expense                               6,905                 5,283
Interest expense - Greenwich Funds                   7,499                    --
Market valuation adjustment                         62,876                    --
Goodwill impairment charge                          77,446                    --
Other charges                                        5,179                    --
                                                  --------               -------
         Total expenses                           $209,704               $69,574
                                                  ========               =======
</TABLE>

Compensation and benefits decreased by $9.7 million or 28.9% to $23.7 million
for the three months ended June 30, 1999 from $33.4 million for the three months
ended June 30, 1998, principally due to a reduction of personnel to originate
mortgage loans and a $1.8 million decrease in executive and management incentive
compensation to $0 for the three months ended June 30, 1999 from $1.8 million
for the three months ended June 30, 1998. The amount of executive bonuses is
directly related to increases in the Company's earnings per share. Although
executive bonuses of $1.8 million were accrued in the three months ended June
30, 1998, no executive bonuses were actually paid during 1998 and none are
anticipated for 1999.

Selling, general and administrative expenses decreased by $4.8 million or 15.6%
to $26.1 million for the three months ended June 30, 1999 from $30.9 million for
the three months ended June 30, 1998 principally due to a decrease in
underwriting and originating costs as a result of a decrease in the volume of
mortgage loan production.



                                       25
<PAGE>   28

Other interest expense increased by $1.6 million or 30.7% to $6.9 million for
the three months ended June 30, 1999 from $5.3 million for the three months
ended June 30, 1998 principally as a result of increased interest expense due to
an increase in outstanding interest-only and residual borrowings during the
three months ended June 30, 1999 as compared to the three months ended June 30,
1998.

Interest expense - Greenwich Funds includes costs associated with a $38 million
standby revolving credit facility dated as of October 12, 1998 entered into by
the Greenwich Funds and the Company on October 15, 1998, as well as interest
charges and commitment fees related to the Note Purchase and Amendment
Agreements and the $95.0 million credit facilities the Greenwich Funds purchased
from BankBoston on February 19, 1999. See Note 4 "Warehouse Finance Facilities,
Term Debt and Notes Payable" of Notes to Consolidated Financial Statements.

Market valuation adjustment, which represents a decrease in the estimated fair
value of the Company's interest-only and residual certificates for the three
months ended June 30, 1999, increased to $62.9 million for the three months
ended June 30, 1999 from $0 for the three months ended June 30, 1998. During the
second quarter of 1999, as a result of trends in the Company's serviced loan
portfolio and adverse market conditions in the non-conforming mortgage industry,
the Company revised the loss assumption used to approximate the timing of losses
over the life of the securitized loans so that expected losses from defaults
gradually increase from zero in the first six months of the loan to 275 basis
points after 30 months, representing estimated aggregate losses over the entire
life of the pool (i.e., historical plus future losses) of 4.3% of original pool
balances. During the fourth quarter of 1998, based on emerging trends in the
Company's portfolio and adverse market conditions, the Company revised its loss
curve assumptions so that expected losses from defaults gradually increased from
zero in the first six months of the loan to 175 basis points after 36 months.
Prior to the fourth quarter of 1998, the Company expected losses from defaults
to increase from zero in the first six months of the loan to 100 basis points
after 36 months.

The Company believes the adverse market conditions affecting the non-conforming
mortgage industry may limit the Company's borrowers' ability to refinance
existing delinquent mortgage loans serviced by the Company with other
non-conforming mortgage lenders that market their products to borrowers that are
less credit-worthy. As a result, the frequency of default may increase.

Goodwill impairment charge represents the writedown of goodwill resulting from
the Company's evaluation of the goodwill associated with the Company's eight
operating subsidiaries at June 30, 1999. The events described in Note 6
"Goodwill Impairment" of Notes to Consolidated Financial Statements included
herein led the Company to determine that the useful lives assigned to goodwill
should be reduced to less than one year, and the resulting evaluation of the
goodwill associated with the eight operating subsidiaries resulted in a goodwill
impairment charge of $77.4 million for the three months ended June 30, 1999.

Other charges represent losses from the disposal of investments in international
operations and closing the Rhode Island branch location. On June 30, 1999, the
Company entered into an agreement to sell to one of its joint venture partners
its 45% interest in a joint venture (Preferred Mortgages Limited) in the United
Kingdom formed to originate and purchase mortgages made to borrowers who may not
otherwise qualify for conventional loans for the purpose of securitization and
sale. Under the terms of the sale agreement, the Company received $1.5 million
in exchange for its interest in the joint



                                       26
<PAGE>   29

venture, including all shares, notes receivable, advances and interest due from
the joint venture. The sale resulted in a loss of approximately $2.6 million,
which is included in other charges for the three months ended June 30, 1999.

On June 30, 1999, the Company terminated operations at its branch office in
Rhode Island, which consisted of the assets of Mortgage Central Corp. ("MCC"), a
mortgage banking company acquired by the Company on January 1, 1996. The
carrying amount of the goodwill that arose from the acquisition of MCC was
eliminated and the assets to be disposed of were adjusted to their estimated net
fair value at June 30, 1999. The resulting loss on disposal of the assets of MCC
of $2.6 million is included in other charges for the three months ended June 30,
1999.

Income Taxes. The provision for income taxes for the three months ended June 30,
1999 was approximately $0.4 million which differed from the federal tax rate of
35% primarily due to state income taxes, amortization expenses related to
goodwill and a full valuation allowance established against the deferred tax
asset.

Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998.

Net loss for the six months ended June 30, 1999 was $200.3 million representing
a decrease of $231.8 million from net income of $31.4 million for the six months
ended June 30, 1998. The decrease in net income resulted principally from a
goodwill impairment charge of $77.4 million, which resulted from the Company's
evaluation of goodwill recoverability at June 30, 1999, and a $62.9 million
mark-to-market adjustment in the value of the Company's interest-only and
residual certificates, which resulted from an increase in loss assumptions. The
Company determined that the useful lives assigned to goodwill associated with
the Company's eight operating subsidiaries should be reduced based on the events
described in Note 6 "Goodwill Impairment" of Notes to Consolidated Financial
Statements included herein, and the resulting evaluation of goodwill resulted in
an impairment charge of $77.4 million. Additionally, the Company revised the
loss assumption used to approximate the timing of losses over the life of the
securitized loans as a result of trends in the Company's serviced loan portfolio
and adverse market conditions. Also contributing to the decrease in net income
were a decrease in gain on sale of loans of $99.5 million or 75.9% to $31.6
million for the six months ended June 30, 1999 from $131.1 million for the six
months ended June 30, 1998 and $15.4 million of interest expense, commitment
fees and other charges associated with credit facilities provided by the
Greenwich Funds. The decrease in net income was also attributable to a $1.8
million or 13.3% decrease in net warehouse interest income to $12.0 million for
the six months ended June 30, 1999 from $13.8 million for the six months ended
June 30, 1998 and other charges of $5.2 million during the six months ended June
30, 1999 related to losses from the disposal of investments in international
operations and closing the Rhode Island branch office location. The decrease in
net income was partially offset by a $5.5 million or 27.7% increase in servicing
fees to $25.1 million for the six months ended June 30, 1999 from $19.7 million
for the six months ended June 30, 1998.

The decrease in income was also partially offset by a $8.8 million or 14.2%
decrease in compensation and benefits to $53.1 million for the six months ended
June 30, 1999 from $61.9 million for the six months ended June 30, 1998 and a
$6.3 million or 11.3% decrease in selling, general and administrative expenses
to $49.5 million for the six months ended June 30, 1999 from $55.8 million for
the six months ended June 30, 1998. The decrease in income was partially
attributable to a $5.6



                                       27
<PAGE>   30

million or 55.2% increase in other interest expense to $15.8 million for the six
months ended June 30, 1999 from $10.2 million for the six months ended June 30,
1998 and a $1.8 million or 10.6% decrease in other revenues to $14.8 million for
the six months ended June 30, 1999 from $16.6 million for the six months ended
June 30, 1998.

Net loss before taxes was increased by a provision for income taxes of $4.6
million for the six months ended June 30, 1999 compared to a provision for
income taxes of $21.9 million for the six months ended June 30, 1998. No income
tax benefit has been applied to the net loss for the six months ended June 30,
1999, as the Company determined it cannot be assured that the income tax benefit
could be realized in the future.

REVENUES

The following table sets forth information regarding components of the Company's
revenues for the six months ended June 30, 1999 and 1998:

<TABLE>
<CAPTION>
                                                           For the Six Months
                                                              Ended June 30
                                                  ---------------------------------
                                                     1999   (in thousands)    1998
                                                  --------                ---------
<S>                                               <C>                     <C>
Gain on sales of loans                            $ 31,639                $ 131,139
                                                  --------                ---------
Warehouse interest income                           35,165                   80,220
Warehouse interest expense                         (23,211)                 (66,438)
                                                  --------                ---------
      Net warehouse interest income                 11,954                   13,782
                                                  --------                ---------
Servicing Fees                                      25,130                   19,677
Other                                               14,820                   16,575
                                                  --------                ---------
      Total revenues                              $ 83,543                $ 181,173
                                                  ========                =========
</TABLE>

Gain on sales of loans. For the six months ended June 30, 1999, gain on sales of
loans decreased to $31.6 million from $131.1 million for the six months ended
June 30, 1998, a decrease of 75.9%, due primarily to a decrease in loans sold
through securitizations. The total volume of loans produced decreased by 80.9%
to approximately $695 million for the six months ended June 30, 1999 from a
total volume of approximately $3.6 billion for the six months ended June
30,1998. Originations by the Company's correspondent network decreased 98.1% to
approximately $50 million for the six months ended June 30, 1999 from
approximately $2.5 billion for the six months ended June 30, 1998, while
production from the Company's broker network and direct lending operations
decreased by 44.5% to approximately $645 million for the six months ended June
30, 1999 from approximately $1.2 billion for the six months ended June 30, 1998.

The Company sells the loans it purchases or originates through one of two
methods: (i) securitization, which involves the private placement or public
offering of pass-through mortgage-backed securities, or (ii) whole loan sales,
which involve selling blocks of loans to single purchasers. During the six
months ended June 30, 1999, based on the Company's lack of liquidity and adverse
market conditions, the Company was unable to sell any loans through the
securitization market. Mortgage loans delivered to securitization trusts
decreased by $3.1 billion, a decrease of 100% to $0 for the six months ended
June 30, 1999 from $3.1 billion for the six months ended June 30, 1998. Mortgage
loans sold in the whole loan market increased by approximately $575 million, to
approximately $950 million for the six months ended June 30, 1999 from
approximately $375 million for the six months ended June 30, 1998.



                                       28
<PAGE>   31
Net Warehouse Interest Income. Net warehouse interest income decreased to $12.0
million for the six months ended June 30, 1999 from $13.8 million for the six
months ended June 30, 1998, a decrease of 13.3%. The decrease in the six month
period ended June 30, 1999 reflected decreased mortgage loan production and
mortgage loans held for sale and increased interest rates related to the
Company's warehouse finance facilities.

Servicing Fees. Servicing fees increased to $25.1 million for the six months
ended June 30, 1999 from $19.7 million for the six months ended June 30, 1998,
an increase of 27.7%. Servicing fees for the six months ended June 30, 1999 were
positively affected by an increase in mortgage loans serviced for others over
the prior period. The Company increased its average portfolio of mortgage loans
serviced for others by approximately $1.4 billion or 23.2% to approximately $7.3
billion for the six months ended June 30, 1999 from approximately $5.9 billion
for the six months ended June 30, 1998.

Other. Other revenues, consisting principally of the recognition of the increase
or accretion of the discounted value of interest-only and residual certificates
over time and prepayment penalties from borrowers who prepay the outstanding
balance of their mortgage, decreased by 10.6% to $14.8 million for the six
months ended June 30, 1999 from $16.6 million in six months ended June 30, 1998.

EXPENSES

The following table sets forth information regarding components of the Company's
expenses for the six months ended June 30, 1999 and 1998:

<TABLE>
<CAPTION>
                                                         For the six months
                                                             Ended June 30,
                                                  -------------------------------
                                                    1999   (in thousands)  1998
                                                  --------               --------

<S>                                               <C>                    <C>
Compensation and benefits                         $ 53,097               $ 61,859
Selling, general and administrative                 49,477                 55,809
Other interest expense                              15,789                 10,173
Interest expense-Greenwich Funds                    15,379                     --
Market valuation adjustment                         62,876                     --
Goodwill impairment charge                          77,446                     --
Other charges                                        5,179                     --
                                                  --------               --------
     Total expenses                               $279,243               $127,841
                                                  ========               ========
</TABLE>

Compensation and benefits decreased by $8.8 million or 14.2% to $53.1 million
for the six months ended June 30, 1999 from $61.9 million for the six months
ended June 30, 1998, principally due to a reduction of personnel to originate
mortgage loans and a $3.2 million decrease in executive and management incentive
compensation to $0 for the six months ended June 30, 1999 from $3.2 million for
the six months ended June 30, 1998. The amount of executive bonuses is directly
related to increases in the Company's earnings per share. Although executive
bonuses of $3.2 million were accrued in the six months ended June 30, 1998, no
executive bonuses were actually paid during 1998 and none are anticipated for
1999.

Selling, general and administrative expenses decreased by $6.3 million or 11.3%
to $49.5 million for the six months ended June 30, 1999 from $55.8 million for
the six months ended June 30, 1998 principally due to a decrease in underwriting
and originating costs as a result of a decrease in the volume of mortgage loan
production.



                                       29
<PAGE>   32

Other interest expense increased by $5.6 million or 55.2% to $15.8 million for
the six months ended June 30, 1999 from $10.2 million for the six months ended
June 30, 1998 principally as a result of increased interest expense due to
increased interest-only and residual borrowings.

Interest expense - Greenwich Funds includes costs associated with a $38 million
standby revolving credit facility entered into by Greenwich Funds and the
Company on October 15, 1998. Interest expense - Greenwich Funds includes
interest charges as well as amortization of a $3.3 million commitment fee,
amortization of the value attributable to the Class C exchangeable preferred
stock issued, and amortization of value assigned to the beneficial conversion
feature associated with the Exchange Option in favor of the Greenwich Funds
under the terms of the standby revolving credit facility. Interest expense -
Greenwich Funds also includes interest charges and commitment fees related to
Note Purchase and Amendment Agreements and on the $95.0 million credit
facilities the Greenwich Funds purchased from BankBoston on February 18, 1999.
See Note 4 "Warehouse Finance Facilities, Term Debt and Notes Payable" of Notes
to Consolidated Financial Statements included herein.

Market valuation adjustment, which represents the realized loss on the Company's
interest-only and residual certificates for the six months ended June 30, 1999,
increased to $62.9 million for the six months ended June 30, 1999 from $0 for
the six months ended June 30, 1998. During the second quarter of 1999, as a
result of trends in the Company's serviced loan portfolio and adverse market
conditions in the non-conforming mortgage industry, the Company revised the loss
assumption used to approximate the timing of losses over the life of the
securitized loans so that expected losses from defaults gradually increase from
zero in the first six months of the loan to 275 basis points after 30 months,
representing estimated aggregate losses over the life of the pool (i.e.,
historical plus future losses) of 4.3% of original pool balances. During the
fourth quarter of 1998, based on emerging trends in the Company's portfolio and
adverse market conditions, the Company revised its loss curve assumptions so
that expected losses from defaults gradually increased from zero in the first
six months of the loan to 175 basis points after 36 months. The Company believes
the adverse market conditions affecting the non-conforming mortgage industry may
limit the Company's borrowers' ability to refinance existing delinquent mortgage
loans serviced by the Company with other non-conforming mortgage lenders that
market their products to borrowers that are less credit-worthy. As a result the
frequency of default may increase.

Goodwill impairment charge represents the write-down of goodwill resulting from
the Company's evaluation of the goodwill associated with the Company's eight
operating subsidiaries at June 30, 1999. The events described in Note 6
"Goodwill Impairment" of Notes to Consolidated Financial Statements led the
Company to determine that the useful lives assigned to goodwill should be
reduced to less than one year, and the resulting evaluation of the goodwill
associated with the eight operating subsidiaries resulted in a goodwill
impairment charge of $77.4 million for the six months ended June 30, 1999.

Other charges represent the loss on disposal of investments in international
operations and closing the Rhode Island branch location. On June 30, 1999, the
Company entered into an agreement to sell to one of its joint venture partners
its 45% interest in a joint venture (Preferred Mortgages Limited) in the United
Kingdom formed to originate and purchase mortgages made to borrowers who may not
otherwise qualify for conventional loans for the purpose of securitization and
sale. Under the terms of the sale agreement, the Company received $1.5 million
in exchange for its interest in the joint venture, including all shares, notes
receivable, advances and interest due from the joint venture. The


                                       30
<PAGE>   33
sale resulted in a loss of approximately $2.6 million, which is included in
other charges for the six months ended June 30, 1999.

On June 30, 1999, the Company terminated operations at its branch office in
Rhode Island, which consisted of the assets of MCC, a mortgage banking company
acquired by the Company on January 1, 1996. The carrying amount of the goodwill
that arose from the acquisition of MCC was eliminated and the assets to be
disposed of were adjusted to their estimated fair value at June 30, 1999. The
resulting loss on disposal of the assets of MCC of $2.6 million is included in
other charges for the six months ended June 30, 1999.

Income Taxes. The provision for income taxes for the six months ended June 30,
1999 was approximately $4.6 million which differed from the federal tax rate of
35% primarily due to state income taxes, the non-deductibility for tax purposes
of a portion of interest expense - Greenwich Funds and the goodwill impairment
charge and a full valuation allowance established against the deferred tax
asset.

FINANCIAL CONDITION

June 30, 1999 Compared to December 31, 1998

Mortgage loans held for sale, net, at June 30, 1999 were $610.2 million, a
decrease of $336.3 million or 35.5% from mortgage loans held for sale of $946.4
million at December 31, 1998. Included in mortgages held for sale, net, at June
30, 1999 and December 31, 1998 were $76.4 million and $84.6 million,
respectively, of mortgage loans which were not eligible for securitization due
to delinquency and other factors (loans under review). The amount by which cost
exceeds market value on loans under review is accounted for as a valuation
allowance. The valuation allowances at June 30, 1999 and June 30, 1998 were
$21.0 million and $24.0 million, respectively.

Accounts receivable increased $9.6 million or 21.6% to $54.3 million at December
31, 1999 from $44.7 million at June 30, 1998, primarily due to an increase in
servicing advances outstanding. As the servicer for the securitization trusts,
the Company is required to advance certain principal, interest and escrow
amounts to the securitization trust for the delinquent mortgagors and to pay
expenses related to foreclosure activities. The Company then collects the
amounts from the mortgagors or from the proceeds from liquidation of foreclosed
properties. The Company expects the total dollar amount of delinquencies to
increase in future periods as the servicing portfolio increases and the
securitization pools continue to mature.

Interest-only and residual certificates at June 30, 1999 were $352.5 million,
representing a decrease of $116.3 million or 24.8% from interest-only and
residual certificates of $468.8 million at December 31, 1998. Mortgage servicing
rights decreased $9.9 million or 18.9% to $42.5 million at December 31, 1999
from $52.4 million June 30, 1998. The decrease in mortgage servicing rights
consists of amortization of $9.9 million. The decrease in interest-only and
residual certificates resulted from the receipt of cash on the interest-only and
residual certificates in the six months ended June 30, 1999 and from the
Company's revision of the loss curve assumption used to approximate the timing
of losses over the life of the securitized loans. See Note 5 "Interest Only and
Residual Certificates" of Notes to Consolidated Financial Statements included
herein.



                                       31
<PAGE>   34

Goodwill decreased $81.2 million to $8.5 million at June 30, 1999 from $89.6
million at December 31, 1998 due to a $77.4 million impairment charge related
to the Company's eight operating subsidiaries, amortization of goodwill, and
elimination of the $1.9 million carrying amount of goodwill associated with the
acquisition of MCC. On June 30, 1999 the Company terminated operations at the
MCC offices in Rhode Island and began disposing of the related assets. See Note
7 "Other Charges" of Notes to Consolidated Financial Statements included herein.

The events described in Note 6 "Goodwill Impairment" of Notes to Consolidated
Financial Statements included herein and the continued decline in financial
results of the Company resulted in an evaluation of the goodwill associated with
the Company's eight operating subsidiaries for possible impairment at June 30,
1999. The Company reviews the potential impairment of goodwill on a
non-discounted cash flow basis to assess recoverability. The cash flows are
projected on a pre-tax basis over the estimated useful lives assigned to
goodwill. The events described above led the Company to determine that the
useful lives assigned to goodwill should be reduced to less than one year. The
resulting evaluation of the goodwill associated with the eight operating
subsidiaries resulted in a goodwill impairment charge of $77.4 million.

Borrowings under warehouse financing facilities at June 30, 1999 were $633.4
million, a decrease of $351.1 million or 35.7% from borrowings under warehouse
financing facilities of $984.6 million at December 31, 1998. This decrease was a
result of decreased mortgage loans held for sale, caused by IMC's significant
lenders imposing restrictions on IMC's ability to borrow funds to originate
mortgage loans. See " -Liquidity and Capital Resources" included herein and in
the Company's Annual Report on Form 10-K for the year ended December 31, 1998
and Note 3 of Notes to the Consolidated Financial Statements "Warehouse Finance
Facilities, Term Debt and Notes Payable" included therein.

Term debt and notes payable at June 30, 1999 was $436.7 million, representing an
increase of $4.0 million or 0.9% from term debt and notes payable of $432.7
million at December 31, 1998. This increase was primarily a result of additional
borrowings from the Greenwich Funds, offset by repayment of certain amounts
under term debt from cash flows received from interest-only and residual
certificates as provided in the intercreditor agreements. Additional borrowings
from the Greenwich Funds included an additional $7.3 million borrowed under a
standby revolving credit facility and $26.1 million outstanding at June 30,1999
related to a Note Purchase Agreement. See Note 4 "Warehouse Finance Facilities,
Term Debt and Notes Payable" of Notes to Consolidated Financial Statements
included herein.

The Company's net deferred tax asset of $0 at June 30, 1999, after valuation
allowance, represented no change from a deferred tax asset, after valuation
allowance, of $0 at December 31, 1998. The deferred tax asset is primarily due
to temporary differences in the recognition of market valuation adjustments,
income related to the Company's interest-only and residual certificates for
income tax purposes and a full valuation allowance on the deferred tax asset.

Redeemable preferred stock, consisting of Class A ($19.8 million) and Class C
($18.3 million), increased $1.5 million to $38.8 million at June 30, 1999 from
$37.3 million at December 31, 1998, due to accretion of the preferred stock
discount. In July 1998, the Company sold $50 million of Class A


                                       32
<PAGE>   35

redeemable preferred stock to certain of the Greenwich Funds and Travelers
Casualty and Surety Company ("Travelers"). The Class A redeemable preferred
stock was convertible into non-registered common stock at $10.44 per share. As
described in Note 4 "Preferred Stock" of Notes to the December 31, 1998
Consolidated Financial Statements included in IMC's Annual Report on Form 10-K
for the year ended December 31, 1998, the conversion feature was eliminated in
October 1998. The elimination of the conversion feature resulted in a discount
to the Class A redeemable preferred stock of approximately $32 million, which
was charged to paid in capital in 1998 and is being accreted to preferred stock
until the mandatory redemption dates beginning in 2008.

In October 1998, the Company issued 23,760.758 shares of Class C exchangeable
preferred stock to certain of the Greenwich Funds in conjunction with a $33
million credit facility provided by certain of the Greenwich Funds as described
in Note 4 "Preferred Stock" of Notes to the December 31, 1998 Consolidated
Financial Statements included in IMC's Annual Report on Form 10-K for the year
ended December 31, 1998. The preferred stock was recorded at $18.3 million based
on an allocation of the proceeds from the $33 million credit facility.

Stockholders' equity as of June 30, 1999 was $9.1 million, a decrease of $201.5
million over stockholders' equity of $210.6 million at December 31, 1998.
Stockholders equity decreased for the six months ended June 30, 1999 primarily
as a result of a net loss of $200.3 million.

LIQUIDITY AND CAPITAL RESOURCES

During the six months ended June 30, 1999, the Company used its cash flow from
the sale of loans through whole loan sales, loan origination fees, processing
fees, net interest income, servicing fees and borrowings under its warehouse and
term debt facilities to meet its working capital needs. The Company's cash
requirements during the six months ended June 30, 1999 included the funding of
loan purchases and originations, payment of principal and interest costs on
borrowings, operating expenses, and capital expenditures.

The Company has an ongoing need for substantial amounts of capital. Adequate
credit facilities and other sources of funding are essential to the continuation
of the Company's ability to purchase and originate loans. The Company typically
has operated, and expects to continue to operate, on a negative operating cash
flow basis. During the six months ended June 30, 1999, the Company received cash
flows from operating activities of $353.6 million, an increase of $595.8
million, or 246.0%, from cash flows used in operating activities of $242.2
million during the six months ended June 30, 1998. During the six months ended
June 30, 1999, cash flows used by the Company in financing activities were
$352.7 million, a decrease of $582.8 million or 253.2% from cash flows received
from financing activities of $230.2 million during the six months ended June 30,
1998. The cash flows received from operating activities relate primarily to the
sale of mortgage loans held for sale and cash flows used in financing activities
related primarily to the repayment of warehouse finance facilities borrowings.

Significant cash outflows are incurred upon the closing of a securitization
transaction; however, the Company does not receive a significant portion of the
cash representing the gain until later periods when the related loans are repaid
or otherwise collected. The Company borrows funds on a short-term basis to
support the accumulation of loans prior to sale. These short-term borrowings are
made under warehouse lines of credit with various lenders.



                                       33
<PAGE>   36
During the year ended December 31, 1998, equity, debt and asset-backed markets
were extremely volatile, effectively denying the Company access to publicly
traded debt and equity markets to fund cash needs. Additionally, the spread over
treasury securities demanded by investors to acquire newly issued asset-backed
securities widened, resulting in less profitable gain on sales of loans sold
through securitization. The Company has responded by reducing the premium the
Company pays to correspondents and brokers to acquire loans, but the reduction
of premiums in the future may not offset the wider spreads demanded by
investors. Investors may not continue to invest in the Company's asset-backed
securities at all.

As a result of these adverse market conditions, among other things, in October
1998 the Company entered into intercreditor arrangements with Paine Webber Real
Estate Securities, Inc. (Paine Webber), Bear Stearns Home Equity Trust 1996-1
(Bear Stearns) and Aspen Funding Corp. and German American Capital Corporation,
subsidiaries of Deutsche Bank of North America Holding Corp. (DMG)
(collectively, the "Significant Lenders"), which held $3.25 billion of the
Company's available warehouse lines and approximately $263 million of the
Company's interest-only and residual financing at June 30, 1999. The
intercreditor arrangements provided for the Significant Lenders to "standstill"
and keep outstanding balances under their facilities in place, subject to
certain conditions, for up to 90 days (which expired mid-January 1999) to allow
the Company to explore its financial alternatives. The intercreditor agreements
also provided, subject to certain conditions, that the lenders would not issue
any margin calls requesting additional collateral be delivered to the lenders.
See the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1998, Note 3 of Notes to the Consolidated Financial Statements "Warehouse
Finance Facilities, Term Debt and Notes Payable" included therein.

In mid-January 1999, the original intercreditor agreements expired; however, on
February 19, 1999, concurrent with the execution of the Acquisition Agreement
described in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 and Note 17 of Notes to Consolidated Financial Statements
"Significant Events and Events Subsequent to December 31, 1998" included
therein, the Company entered into amended and restated intercreditor agreements
with the Significant Lenders. Under the amended and restated intercreditor
agreements, the Significant Lenders agreed to keep their respective facilities
in place through the closing under the Acquisition Agreement if the closing
occurred within five months, and for twelve months thereafter, subject to
earlier termination in certain events. The intercreditor agreements require the
Company to make various amortization payments on the underlying debt. Failure to
make the required payments would permit the Significant Lenders to terminate the
standstill period under the intercreditor agreements and to exercise remedies.

None of the three Significant Lenders has formally reduced the amount available
under its facilities, but each has informally indicated its desire that the
Company keep the average amount outstanding on the warehouse facilities well
below the amount available. There can be no assurance that the Significant
Lenders will continue to fund the Company under their uncommitted facilities.
See the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1998 and Note 3 "Warehouse Finance Facilities, Term Debt and Notes Payable"
and Note 17 "Significant Events and Events Subsequent to December 31, 1998" of
Notes to Consolidated Financial Statements included therein.




                                       34
<PAGE>   37

At June 30, 1999, the Company had a $1.25 billion uncommitted warehouse and
residual financing facility with Paine Webber. This Warehouse facility bears
interest rates at rates ranging from LIBOR plus 0.65% to LIBOR plus 0.90%.
Approximately $66.1 million was outstanding under this warehouse facility as of
June 30, 1999. The Company had informally requested that Paine Webber permit
funding of an additional $200 million under its warehouse facilities, but has
been notified that Paine Webber does not intend to make any additional advances
at this time.

At June 30, 1999, the Company also had a $1.0 billion uncommitted warehouse
facility with Bear Stearns. This facility bears interest at LIBOR plus 0.75%.
Approximately $333.9 million was outstanding under this facility at June 30,
1999. Bear Stearns has requested that the Company maintain outstanding amounts
under this warehouse facility at no more that $500 million.

At June 30, 1999, the Company had a $1.0 billion credit facility with DMG, which
includes a $100 million credit facility collateralized by interest-only and
residual certificates. Approximately $159.3 million was outstanding under this
warehouse financing facility at June 30, 1999. DMG has indicated to the Company
that it does not plan to make any additional advances at this time and
additional fundings will be on an "as requested" basis. To induce DMG to enter
the intercreditor agreement in October 1998, the Company consented to convert
DMG's committed warehouse and residual facility to an uncommitted facility. See
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1998 and Note 3 "Warehouse Finance Facilities, Term Debt and Notes Payable" of
Notes to Consolidated Financial Statements included therein.

At June 30, 1999, the Company had a $125 million committed warehouse facility
with Residential Funding Corporation ("RFC") which bears interest at LIBOR plus
1.25%. At June 30, 1999, approximately $67.5 million was outstanding under this
facility. The RFC credit facility requires the Company to comply with various
financial covenants, including, among other things, minimum net worth tests and
a minimum pledged servicing portfolio. At June 30, 1999, the Company's net
worth, tangible net worth, and pledged servicing portfolio were below the
minimum requirements under the convenants of the RFC credit facility. In July
1999, RFC indicated that it will not continue to fund the Company under its
committed facility after the facility matures on August 31, 1999. The Company is
discussing terms for repayment of the amount that will be outstanding under the
RFC credit facility when the facility matures.

Additionally, at June 30, 1999, approximately $6.6 million was outstanding under
another warehouse line of credit, which bears interest at LIBOR plus 1.5% and
has expired and is not expected to be renewed.

Outstanding borrowings under the Company's warehouse financing facilities are
collateralized by mortgage loans held for sale and servicing rights on
approximately $210 million of mortgage loans. Upon the sale of these loans, the
proceeds are used to repay the borrowings under these lines.

The Company has attempted to enter into arrangements to obtain warehouse
facilities from lenders that are not currently providing warehouse financing to
IMC, but has not been successful.


                                       35
<PAGE>   38
As a result of the DMG warehouse facility becoming uncommitted and the adverse
market conditions currently being experienced by the Company and other mortgage
companies in the industry, the Company's ability to continue to operate is
almost entirely dependent upon the Significant Lenders' discretion to provide
warehouse funding to the Company. The Significant Lenders may not continue to
fund the Company's warehouse requirements.

At June 30, 1999, the Company had borrowed $138.2 million under its residual
financing credit facility with Paine Webber. Outstanding borrowings bear
interest at LIBOR plus 2.0% and are collateralized by the Company's interest in
certain interest-only and residual certificates.

Bear, Stearns & Co. Inc. and its affiliates, Bear, Stearns Mortgage Capital
Corporation and Bear, Stearns International Limited, provide the Company with a
residual financing credit facility which is collateralized by the Company's
interest in certain interest-only and residual certificates. At June 30, 1999,
$82.0 million was outstanding under this credit facility, which bears interest
at 1.75% per annum in excess of LIBOR.

At June 30, 1999, outstanding interest-only and residual financing borrowings
under the Company's credit facility with DMG were $41.4 million. Outstanding
borrowings bear interest at LIBOR plus 2% and are collateralized by the
Company's interest in certain interest-only and residual certificates.

At June 30, 1999, the Company had borrowed $1.9 million under a residual
financing credit facility which matured in August 1998, bears interest at 2.0%
per annum in excess of LIBOR and is collateralized by the Company's interest in
certain interest-only and residual certificates. The Company has informally
agreed to allow approximately 1/3 of the cash from the interest-only and
residual certificates to be used to reduce the amounts outstanding under this
facility on a monthly basis and the Lender has informally agreed to keep the
facility in place. There can be no assurance the informal agreement will provide
for any further extension of the maturity of this loan agreement.

At June 30, 1999 the Company also had outstanding $5.3 million under a credit
facility with a financial institution which bears interest at 10% per annum.
That credit facility provides for repayment of principal and interest over 36
months through October 2001.

BankBoston provided the Company with a revolving credit facility which matured
in October 1998, bore interest at LIBOR plus 2.75% and provided for borrowings
up to $50 million to be used to finance interest-only and residual certificates,
or for acquisitions or bridge financing. BankBoston with participation from
another financial institution also provided the Company with a $45 million
working capital facility, which bore interest at LIBOR plus 2.75% and matured in
October 1998. After maturity, the interest rates on these facilities increased
to prime plus 2% per annum. The Company was unable to repay these credit
facilities when they matured and in October 1998, the Company entered into a
forbearance and intercreditor agreement with BankBoston with respect to these
credit facilities. The forbearance and intercreditor agreement provided that the
bank would take no collection action, subject to certain conditions, for up to
90 days (which expired mid-January 1999) in order for the Company to explore its
financial alternatives.


                                       36
<PAGE>   39

In mid-January 1999, the forbearance and intercreditor agreement with BankBoston
expired. On February 19, 1999, $87.5 million was outstanding under these credit
facilities. On February 19, 1999, the Greenwich Funds purchased, at a discount,
from BankBoston its interest in the credit facilities and entered into an
amended intercreditor agreement relating to these facilities with the Company.
Under the amended intercreditor agreement, the Greenwich Funds agreed to keep
these facilities in place for a period of twelve months thereafter if the
acquisition described in the Acquisition Agreement was consummated within five
months.

The Company's current warehouse lines generally are subject to one-year terms.
The Company's current creditors most likely will not renew their facilities as
they expire and the Company may not be able to obtain additional credit lines.

The Company is required to advance monthly delinquent interest as the servicer
under the pooling and servicing agreements related to securitizations the
Company services. The Company typically makes these advances to the
securitizations on or about the 18th of each month and such advances are
typically repaid by the securitizations over a 30 day period. In this respect,
on April 19, 1999, the Company borrowed $15 million from the Greenwich Funds
pursuant to secured promissory notes to fund a portion of delinquent interest
advance to the securitizations. These notes bore interest at a rate of 20% per
annum. These notes have been repaid in full.

On May 18, 1999, the Company entered into a Note Purchase and Amendment
Agreement (the "Note Purchase Agreement") with the Greenwich Funds. Borrowings
under the Note Purchase Agreement bear interest at 20% per annum. On May 18,
1999, the Greenwich Funds loaned the Company an aggregate of $33.0 million under
the Note Purchase Agreement to fund a portion of the delinquent interest advance
to the securitizations. In consideration for these loans, the Company paid the
Greenwich Funds a $1.2 million commitment fee. The $33.0 million borrowed under
the Note Purchase Agreement on May 18, 1999 was repaid in full.

On June 18, 1999, the Greenwich Funds loaned the Company an aggregate of $35.0
million under the Note Purchase Agreement to fund a portion of the delinquent
interest advance to the securitizations. In consideration for these loans, the
Company agreed to pay Greenwich Funds a $1.0 million commitment fee. At June
30,1999, $26.1 million was outstanding under the Note Purchase Agreement, which
was repaid in full by July 16, 1999.

On July 16, 1999, the Company borrowed $45.0 million under the Note Purchase
Agreement to fund a portion of the delinquent interest advance to the
securitizations. In consideration for these loans, the Company agreed to pay the
Greenwich Funds a $1.25 million commitment fee. The $45.0 million borrowed under
the Note Purchase Agreement was repaid in full by August 18, 1999.

On August 18, 1999, the Company borrowed $45.0 million under the Note Purchase
Agreement to fund a portion of the delinquent interest advance to the
securitizations. In consideration for these loans the Company agreed to pay the
Greenwich Funds a $1.25 million commitment fee.

The Greenwich Funds have provided the Company with funds to enable the Company
to make the required delinquent interest advance to the securitizations each
month, but has been unwilling to commit to make these funds available for more
than 30 days at a time. If the delinquent interest



                                       37
<PAGE>   40

advances are not made by the servicer each month pursuant to the pooling and
servicing agreements, the Company's contractual rights to service the mortgage
loans in the securitization could be terminated. The Company is dependent upon
the Greenwich Funds to continue to fund the Company monthly and allow the
Company to make required delinquent interest advances to the securitizations.
There can be no assurance the Greenwich Funds will continue to make funds
available to permit the Company to make future delinquent interest advances and
there can be no assurance the contractual rights to service the mortgage loans
will not be terminated.

On July 14, 1998, Travelers and certain of the Greenwich Funds (together, the
"Purchasers") purchased $50 million of the Company's Class A preferred stock.
The Class A preferred stock was convertible into common stock at $10.44 per
share. The Class A preferred stock bears no dividend and is redeemable by the
Company over a three-year period commencing in July 2008. As part of the
preferred stock purchase agreement, the Company agreed to use its best efforts
to cause two persons designated by the Purchasers to be elected to the Company's
board of directors. The Purchasers were also granted an option to purchase,
within the next three years, an additional $30 million of Series B redeemable
preferred stock at par. The Class B preferred stock was convertible into common
stock at $22.50 per share. In October 1998, the terms of the $50 million Class A
preferred stock and the terms of the Class B preferred stock were amended to
eliminate the right to convert into common stock. See Note 4 "Preferred Stock"
of Notes to the December 31, 1998 Consolidated Financial Statements included in
IMC's Annual Report on Form 10-K for the year ended December 31, 1998.

On October 15, 1998 the Company entered into an agreement for a $33 million
standby revolving credit facility with certain of the Greenwich Funds. The
facility was available to provide working capital for a period of up to 90 days,
or until mid-January 1999. The terms of the standby revolving credit facility
resulted in substantial dilution of existing common stockholders' equity equal
to a minimum of 40%, up to a maximum of 90%, on a diluted basis, depending on
(among other things) when, or whether, a change of control transaction occurs.
In mid-January 1999, the $33 million standby revolving credit facility matured.
On February 16, 1999, the Greenwich Funds made additional loans totaling $5
million available under the facility. On February 19, 1999, the Company and the
Greenwich Funds entered into an amended and restated intercreditor agreement,
whereby the Greenwich Funds agreed to keep the facility in place for a period
through the closing under the Acquisition Agreement if the closing occurred
within a five month period and for twelve months thereafter, subject to earlier
termination in certain events as provided in the amended and restated
intercreditor agreement. At June 30, 1999, $38.0 million was outstanding under
this facility.

On February 19, 1999, the Company entered into a merger agreement with the
Greenwich Funds which was terminated and recast as an acquisition agreement on
March 31, 1999. Under the Acquisition Agreement, the Company agreed to issue
common stock to the Greenwich Funds representing approximately 93.5% of the
outstanding common stock after each issuance, leaving the existing common
shareholders of the Company with 6.5% of the common stock outstanding. Upon the
closing, certain of the Greenwich Funds would surrender all of the outstanding
Class C exchangeable preferred stock for cancellation and enter into an
amendment and restatement of their existing loan agreement with IMC, pursuant to
which the Greenwich Funds would make available to IMC an additional $35 million
in working capital loans.

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<PAGE>   41


On July 14, 1999, the Company entered into an Agreement to sell certain assets
to CitiFinancial Mortgage for $100 million. The Agreement, which is subject to a
number of conditions, was approved by the Company's Board of Directors on July
30, 1999 and, as a result, the Acquisition Agreement with the Greenwich Funds
terminated. Consequently, the Greenwich Funds will not be obligated to provide
an additional $35 million of loans to the Company. See Note 9 "Events Subsequent
to June 30, 1999" of Notes to Consolidated Financial Statements included herein.

The proceeds from the sale are anticipated to be used to repay certain
indebtedness secured by certain assets of the Company. No payment is expected to
be made to the Company's common shareholders as a result of this transaction,
nor are any payments to common stockholders likely in the future.

Subsequent to June 30, 1999, the amended and restated intercreditor agreements
were extended through September 16, 1999, subject to earlier termination in
certain events. In the event the Company is not successful in obtaining further
extensions of these agreements, the standstill periods thereunder would expire
on September 16, 1999 and the lenders would be entitled to seek remedies under
their loan agreements with the Company, including actions to realize upon the
collateral that secure their loans. In such an event, the Company most likely
would be unable to continue its business. See Note 9 "Events Subsequent to June
30, 1999" of Notes to Consolidated Financial Statements included herein.

The Company has substantial capital requirements and it anticipates that it will
need to arrange for additional external cash resources or increased credit
facilities. There can be no assurance that existing warehouse and interest-only
and residual certificate lenders will continue to fund the Company under their
uncommitted facilities, that existing credit facilities can be increased,
extended or refinanced, or that funds generated from operations will be
sufficient to repay the Company's existing debt obligations or meet its
operating and capital requirements. To the extent that the Company is not
successful in increasing, maintaining or replacing existing credit facilities,
the Company would not be able to hold loans pending securitization or whole loan
sale and therefore would have to further curtail its loan production activities
to attempt to sustain operations. The Company may not be successful in
sustaining operations.

RISK MANAGEMENT

The Company purchases and originates mortgage loans and has historically sold
them through securitizations or whole loan sales. At the time of securitization
of the loans, the Company recognizes gain on sale based on a number of factors
including the difference, or "spread", between the interest rate on the loans
and interest rate paid to investors (which typically is priced based on the
United States Treasury security with a maturity corresponding to the anticipated
life of the loans). Historically, when interest rates rise between the time the
Company originates or purchases the loans and the time the loans are priced at
securitization, the spread narrows, resulting in a loss in value of the loans.
To protect against such losses, in quarters ended prior to October 1998, the
Company hedged a portion of the value of the loans through the short sale of
United States Treasury securities. Prior to hedging, the Company performed an
analysis of its loans taking into account, among other things, interest rates
and maturities to determine the amount, type, duration and proportion of each
United States Treasury security to sell short so that the risk to value of the
loans would be effectively hedged. The Company executed the sale of the United
States Treasury securities with large, reputable securities firms and used the
proceeds received to acquire United States Treasury securities under repurchase
agreements. These securities



                                       39
<PAGE>   42

were designated as hedges in the Company's records and were closed out when the
loans were sold.

Historically, when the value of the hedges decreased, generally largely
offsetting an increase in the value of the loans, the Company, upon settlement
with its counterparty, would pay the hedge loss in cash and realize the
generally corresponding increase in the value of the loans as part of its
interest-only and residual certificates. Conversely, if the value of the hedges
increased, generally largely offsetting a decrease in the value of the loans,
the Company, upon settlement with its counterparty, would receive the hedge gain
in cash and realize the generally corresponding decrease in the value of the
loans through a reduction in the value of the related interest-only and residual
certificates.

The Company believes that its hedging activities using United States Treasury
securities were substantially similar in purpose, scope and execution to
customary hedging activities using United States Treasury securities engaged in
by several of its competitors.

In September 1998, the Company believes that, primarily due to significant
volatility in debt, equity and asset-backed markets, investors demanded wider
spreads over United States Treasury securities to acquire newly issued
asset-backed securities. The effect of the increased demand for the United
States Treasury Securities resulted in a devaluation of the Company's hedge
position that was not offset by an equivalent increase in the gain on sale of
loans at the time of securitization because investors demanded wider spreads
over the United States Treasury securities to acquire the Company's asset-backed
securities. In September 1998, the Company stopped hedging its interest rate
risk on loan purchases and in October 1998 the Company closed all of its open
hedge positions.

The Company uses a discount rate of 16% to present value the difference (spread)
between (i) interest earned on the portion of the loans sold and (ii) interest
paid to investors with related costs over the expected life of the loans,
including expected losses, foreclosure expenses and a servicing fee. Based on
market volatility in the asset-backed markets and the widening of the spreads
recently demanded by asset-backed investors to acquire newly issued asset-backed
securities, there can be no assurance that discount rates utilized by the
Company to present value the spread described above will not change in the
future, particularly if the spreads demanded by asset-backed investors to
acquire newly issued asset-backed securities continues to increase. An increase
in the discount rates used to present value the spread described above of plus
1%, 3% or 5% would result in a corresponding decrease in the value of the
interest-only and residual certificates at June 30, 1999 of approximately 2%, 6%
and 9%, respectively. A decrease in the discount rates used to present value
the spread described above of minus 1%, 3% or 5% would result in an increase in
the value of the interest-only and residual certificates at June 30, 1999 of
approximately 2%, 7% and 12%, respectively.

INFLATION

Inflation historically has had no material effect on the Company's results of
operations. Inflation affects the Company most in the area of loan originations
and can have an effect on interest rates. Interest rates normally increase
during periods of high inflation and decrease during periods of low inflation.

Profitability may be directly affected by the level and fluctuation in interest
rates which affect the Company's ability to earn a spread between interest
received on its loans and the costs of its



                                       40
<PAGE>   43

borrowings. The profitability of the Company is likely to be adversely affected
during any period of unexpected or rapid changes in interest rates. A
substantial and sustained increase in interest rates could adversely affect the
ability of the Company to purchase and originate loans and affect the mix of
first and second mortgage loan products. Generally, first mortgage production
increases relative to second mortgage production in response to low interest
rates and second mortgage production increases relative to first mortgage
production during periods of high interest rates. A significant decline in
interest rates could decrease the size of the Company's loan servicing portfolio
by increasing the level of loan prepayments. Additionally, to the extent
servicing rights and interest-only and residual certificates have been
capitalized on the books of the Company, higher than anticipated rates of loan
prepayments or losses could require the Company to write down the value of such
servicing rights and interest-only and residual certificates which could have a
material adverse effect on the Company's results of operations and financial
condition. Conversely, lower than anticipated rates of loan prepayments or lower
losses could allow the Company to increase the value of interest-only and
residual certificates which could have a favorable effect on the Company's
results of operations and financial condition. Fluctuating interest rates also
may affect the net interest income earned by the Company from the difference
between the yield to the Company on loans held pending sales and the interest
paid by the Company for funds borrowed under the Company's warehouse facilities.
In addition, inverse or flattened interest yield curves could have an adverse
impact on the profitability of the Company because the loans pooled and sold by
the Company have long-term rates, while the senior interests in the related
securitization trusts are priced on the basis of intermediate term rates.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133 "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"), which was amended by SFAS No.
137 "Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of SFAS No. 133." SFAS 133, as amended, is effective for
fiscal quarters of fiscal years beginning after June 15, 2000 (January 1, 2001
for the Company). SFAS 133 requires that all derivative instruments be recorded
on the balance sheet at their fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other comprehensive
income, depending on whether a derivative was designated as part of a hedge
transaction and, if it is, the type of hedge transaction. For fair-value hedge
transactions in which the Company hedges changes in the fair value of an asset,
liability or firm commitment, changes in the fair value of the derivative
instrument will generally be offset in the income statement by changes in the
hedged item's fair value. The ineffective portion of hedges will be recognized
in current-period earnings.

SFAS 133 precludes designation of a nonderivative financial instrument as a
hedge of an asset or liability. The Company has historically hedged its interest
rate risk on loan purchases by selling short United States Treasury Securities
which match the duration of the fixed rate mortgage loans held for sale and
borrowing the securities under agreements to resell. Prior to September 30, 1998
the unrealized gain or loss resulting from the change in fair value of these
instruments has been deferred and recognized upon securitization as an
adjustment to the carrying value of the hedged mortgage loans. SFAS 133 requires
the gain or loss on these nonderivative financial instruments to be recognized
in earnings in the period of changes in fair value without a corresponding
adjustment of the carrying amount of mortgage loans held for sale. Management



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<PAGE>   44

anticipates that if the Company uses derivative financial instruments to hedge
the Company's interest rate risk on loan purchases the Company will use
derivative financial instruments which qualify for hedge accounting under the
provisions of SFAS 133.

The actual effect implementation of SFAS 133 will have on the Company's
statements will depend on various factors determined at the period of adoption,
including whether the Company is hedging its interest rate risk on loan
purchases, the type of financial instrument used to hedge the Company's interest
rate risk on loan purchases, whether such instruments qualify for hedge
accounting treatment, the effectiveness of the hedging instrument, the amount of
mortgage loans held for sale which the Company intends to hedge, and the level
of interest rates. Accordingly, the Company can not determine at the present
time the impact adoption of SFAS 133 will have on its statements of operations
or balance sheets.

Effective January 1, 1999, the Company adopted SFAS No. 134, "Accounting for
Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise" ("SFAS 134"). SFAS 134 amends
SFAS No. 65, "Accounting for Certain Mortgage-Backed Securities" ("SFAS 65") to
require that after an entity that is engaged in mortgage banking activities has
securitized mortgage loans that are held for sale, it must classify the
resulting retained mortgage-backed securities or other retained interests based
on its ability and intent to sell or hold those investments. However, a mortgage
banking enterprise must classify as trading any retained mortgage-backed
securities that it commits to sell before or during the securitization process.
Previously, SFAS 65 required that after an entity that is engaged in mortgage
banking activities has securitized a mortgage loan that is held for sale, it
must classify the resulting retained mortgage-backed securities or other
retained interests as trading, regardless of the entity's intent to sell or hold
the securities or retained interest. The application of the provisions of SFAS
134 did not have an impact on the Company's financial position or results of
operations.

YEAR 2000

The year 2000 (Y2K) problem is the result of computer programs being written
using two digits rather than four to define the applicable year. Thus year 1998
is represented by the number "98" in many software applications. Consequently,
on January 1, 2000, the year will revert to "00" in accordance with many non-Y2K
compliant applications. To systems that are non-Y2K compliant, the time will
seem to have reverted back 100 years. So, when computing basic lengths of time,
the Company's computer programs, certain building infrastructure components
(including, elevators, alarm systems, telephone networks, sprinkler systems and
security access systems) and many additional time-sensitive software that are
non-Y2K compliant may recognize a date using "00" as the year 1900. This could
result in system failure or miscalculations which could cause personal injury,
property damage, disruption of operations and/or delays in payments from
borrowers, any or all of which could materially adversely effect the Company's
business, financial condition or results of operations.

During 1998 the Company implemented an internal Y2K compliance task force. The
goal of the task force is to minimize the disruptions to the Company's business,
which could result from the Y2K problem, and to minimize other liabilities,
which the Company might incur in connection with the Y2K problem. The task force
consists of existing employees of the Company and an outside consultant


                                       42
<PAGE>   45

hired specifically to address the Company's internal Y2K issues.

The Company has conducted a company-wide assessment of its computer systems and
operations infrastructure, and is currently testing its systems to determine
their Y2K compliance. The Company presently believes those business-critical
computer systems which are not presently Y2K-compliant will have been replaced,
upgraded or modified prior to 2000.

During 1998, the Company initiated communications with third parties whose
computer systems' functionality could impact the Company. These communications
included a questionnaire requesting specific information from third parties with
respect to their systems and services related to Y2K compliance. The responses
received ranged from point-by-point responses to the Company's questionnaire, to
global response statements estimating compliance target dates, to direct
compliance letters. The Company received a 100% response rate in one or more of
these forms. All of the Company's material third-party vendors that are not
currently compliant have estimated compliance target dates from the end of the
second quarter of 1999 to the end of the third quarter of 1999. Based on these
responses, the Company believes that the material third-party vendors will be
Y2K compliant, although there can be no assurance that this will be the case.

The costs of the Company's Y2K compliance efforts are being funded with cash
flows from operations. In total, these costs are not expected to be
substantially different from the normal, recurring costs that are incurred for
systems development, implementation and maintenance. As a result, these costs
are not expected to have a material adverse effect on the Company's financial
position, results of operations or cashflows. To date, the Company has spent
approximately $250,000 on Y2K compliance and anticipates that Y2K expenses
through December 31, 1999 will be less than $1.0 million.

The Company has currently identified two material potential risks related to its
Y2K issues. The first risk is that the Company's primary lenders, depository
institutions and collateral custodians do not become Y2K compliant before year
end 1999, which could materially impact the Company's ability to access funds
and collateral necessary to operate its businesses. The Company is currently
accessing the risks related to these and other Y2K risks, and has received some
assurances that the computer systems of its lenders, depository institutions and
collateral custodians, many of whom are among the largest financial institutions
in the country, will be Y2K compliant by the year end 1999.

The second risk is that the external servicing system on which the Company
relies to service mortgage loans does not become Y2K compliant before year-end
1999. Failure on the part of the servicing system could materially impact the
Company's servicing operations. As of February 5, 1999, the Company received
confirmation that the servicing system had achieved Y2K compliance.

The Company is developing contingency plans for all non-Y2K compliant internal
systems. Contingency plans include identifying alternative processing platforms
and alternative sources for services and businesses provided by critical non-Y2K
compliant financial depository institutions, vendors and collateral custodians.
However, there can be no assurance that the Company's lenders, depository
institutions, custodians and vendors will resolve their own Y2K compliance
issues in a timely manner. The failure by these other parties to resolve such
issues could have a significant effect on the Company's operations and financial
condition.



                                       43
<PAGE>   46

The foregoing assessment of the impact of the Y2K problem on the Company is
based on management's best estimates at the present time and could change
substantially. The assessment is based upon numerous assumptions as to future
events. There can be no guarantee that these estimates will prove accurate, and
the actual results could differ from those estimated if these assumptions prove
inaccurate. The disclosure in this Section, "Year 2000", contains
forward-looking statements, which involve risks and uncertainties. Reference is
made to the first paragraph of Item 2. "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included herein.










































                                       44
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                           PART II. OTHER INFORMATION























                                       45
<PAGE>   48

PART II.      OTHER INFORMATION

Item 1.       Legal Proceedings -

              IMC is a party to various legal proceedings arising out of the
ordinary course of its business. Management believes that none of these actions,
individually or in the aggregate, will have a material adverse effect on the
results of operations or financial condition of IMC.

              On December 23, 1998, seven former shareholders of Corewest sued
IMC in Superior Court of the State of California for the County of Los Angeles
claiming IMC agreed to pay them $23.8 million in cancellation of the contingent
"earn out" payment, if any, payable by IMC in connection with IMC's purchase of
all the outstanding shares of Corewest. In August 1999, five of the former
shareholders of Corewest, representing approximately 80% of the interests of all
former shareholders, settled their employment agreement claims and agreed to
dismiss their claims under that lawsuit and signed mutual, general and
irrevocable releases for approximately $1.4 million. The case is in the early
stages of pleading; however, based on consultation with legal counsel, the
Company's management believes there is no merit in the plaintiffs' claims and
intends to defend against such action vigorously.

              On June 17, 1999, the former shareholders of Central Money
Mortgage Co., Inc. ("Central Money Mortgage") sued the Company and its general
counsel in U.S. District Court for the State of Maryland claiming failure to
perform on certain oral and written representations made in relation to the
Company's acquisition of the assets of Central Money Mortgage. The case is in
the preliminary stages of discovery; however, based on consultation with legal
counsel the Company's management believes there is no merit in the plaintiffs'
claims and intends to defend such action vigorously.

Item 2.       Changes in Securities - None

Item 3.       Defaults Upon Senior Securities -

              At June 30, 1999, the Company was not in compliance with certain
financial covenants related to its credit facilities with Paine Webber Real
Estate Securities, Inc., Bear Stearns Home Equity Trust 1996-1, and Aspen
Funding Corp. and German American Capital Corporation, subsidiaries of Deutsche
Bank of North America Holding Corp. (collectively, the "Significant Lenders").
As described in Note 4 "Warehouse Finance Facilities, Term Debt and Notes
Payable" to the Consolidated Financial Statements included herein, the Company
entered into intercreditor agreements with the Significant Lenders which provide
for the Significant Lenders to "stand-still" and keep outstanding balances under
their facilities in place, subject to certain conditions, until September 16,
1999.

              At June 30, 1999, the Company had a $125 million committed
warehouse facility with Residential Funding Corporation ("RFC") which bears
interest at LIBOR plus 1.25%. At June 30, 1999, approximately $67.5 million was
outstanding under this facility. The RFC credit facility requires the Company to
comply with various financial covenants, including, among other things, minimum
net worth tests and a minimum pledged servicing portfolio. At June 30, 1999, the
Company's net worth, tangible net worth and pledged servicing portfolio were
below the minimum requirements under the covenants of the RFC credit facility.
In July 1999, RFC indicated that it will not continue to fund the Company under
its committed facility after the facility matures on August 31, 1999.

Item 4.       Submission of Matters to a Vote of Security Holders - None

Item 5.       Other Information - None








                                       46
<PAGE>   49
Item 6.       Exhibits and Reports on Form 8-K -

              A.      Exhibits

                      27 - Financial Data Schedule  (for SEC use only)

                      99 - Report of Independent Certified Public Accountants

              B.      Reports on Form 8-K

              On July 22, 1999, the Company filed a Current Report on Form 8-K
to report that the Company had entered into an Asset Purchase Agreement with
CitiFinancial Mortgage Company.

              On May 27, 1999, the Company filed a Current Report on Form 8-K to
report that the Company had entered into a Note Purchase and Amendment Agreement
with the Greenwich Funds.
























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<PAGE>   50



SIGNATURES

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



Date:       August 23, 1999        IMC MORTGAGE COMPANY



            By:  /s/ Thomas G. Middleton
               ---------------------------------------------------------------
            Thomas G. Middleton, President, Chief Operating Officer, Assistant
            Secretary and Director



            By:  /s/ Stuart D. Marvin
               --------------------------------------

            Stuart D. Marvin, Chief Financial Officer

















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