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

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                                    FORM 10-K

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
                                       OR

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

                        FOR THE TRANSITION PERIOD FROM TO
                         COMMISSION FILE NUMBER 0-22525

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


                              SIERRACITIES.COM INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


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                                DELAWARE                                   76-0438432
                     (STATE OR OTHER JURISDICTION OF                   (I.R.S. EMPLOYER
                     INCORPORATION OR ORGANIZATION)                    IDENTIFICATION NO.)

                         600 TRAVIS, SUITE 7050
                             HOUSTON, TEXAS                                   77002
                (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                   (ZIP CODE)
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       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 221-8822

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        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
                   SECURITIES REGISTERED PURSUANT TO SECTION
                                12(g) OF THE ACT:
                          COMMON STOCK, $.01 PAR VALUE
               RIGHTS TO PURCHASE SHARES OF JUNIOR PREFERRED STOCK
                       SERIES C, PAR VALUE $.01 PER SHARE

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

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

     The aggregate market value of the voting stock held by non-affiliates of
the registrant at March 14, 2000 based on the closing price on the Nasdaq
National Market on that date was approximately $229.5 million.

     The number of shares of the registrant's common stock outstanding on March
14, 2000 was 19,046,610.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Certain portions of the registrant's Proxy Statement for its Annual Meeting
of Stockholders to be held on May 9, 2000 are incorporated by reference in Part
III of this report.

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                              SIERRACITIES.COM INC.
                          INDEX TO REPORT ON FORM 10-K
                      FOR THE YEAR ENDED DECEMBER 31, 1999


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                                     PART I

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  Item 1.     Business ...................................................................................        3
  Item 2.     Properties .................................................................................       16
  Item 3.     Legal Proceedings ..........................................................................       16
  Item 4.     Submission of Matters to a Vote of Security Holders ........................................       16

                                     PART II

  Item 5.     Market for Registrant's Common Equity and Related Stockholder Matters ......................       17
  Item 6.     Selected Financial Data ....................................................................       18
  Item 7.     Management's  Discussion and Analysis of Financial Condition and Results of Operations .....       21
  Item 7A.    Quantitative and Qualitative Disclosures About Market Risk .................................       28
  Item 8.     Financial Statements and Supplementary Data ................................................       30
  Item 9.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .......       30

                                    PART III

  Item 10.    Directors and Executive Officers of the Registrant .........................................       30
  Item 11.    Executive Compensation .....................................................................       30
  Item 12.    Security Ownership of Certain Beneficial Owners and Management .............................       30
  Item 13.    Certain Relationships and Related Transactions .............................................       30

                                     PART IV

  Item 14.    Exhibits, Financial Statement Schedules and Reports on Form 8-K ............................       31
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                                     PART I

ITEM 1.    BUSINESS

                                   NAME CHANGE

     Effective February 1, 2000, First Sierra Financial, Inc. changed its name
to SierraCities.com Inc. The name change reflects the evolution of First Sierra
Financial, Inc. into a company that offers much more to small businesses than
equipment financing. As the business-to-business e-commerce services we offer
continue to expand, we are creating a community of small businesses built around
Internet-based financial services. The success of our e-commerce strategy is
reflected in our new alliances and in the continued growth of our customer base.
Now it is also reflected in our name, SierraCities.com Inc.

                                BUSINESS OVERVIEW

     SierraCities.com Inc. ("SierraCities.com") is a leading provider of
e-finance solutions for small businesses. Through our Internet-based technology
platform, we offer on-line end-to-end business financing fulfillment solutions
for specific equipment purchases and for general corporate purposes. Small
business customers can obtain financing directly through the Internet by
completing an application on-line, thus allowing them to receive approval for
credit via the Internet prior to making a purchasing decision. Through our
Internet-based technology we have automated much of the process related to the
application, data retrieval, underwriting, documentation, funding, servicing,
collections, auditing, data warehousing and data mining. As a result, we offer
approval usually within minutes and funding within 24 hours. Our technology
approach allows us to aggregate a large number of small business customers in a
highly efficient and cost-effective manner.

     Since our inception in 1994, we have funded over $2.6 billion in loans and
leases for the small business community and currently have approximately 83,000
small business customers. The total principal amount of assets under management
has grown from approximately $5.8 million as of December 31, 1994 to
approximately $1.4 billion as of December 31, 1999. The leases we finance relate
to a wide range of equipment including computers and peripherals, software,
telecommunications, and diagnostic equipment as well as other specialized
equipment for the healthcare, automotive, food and hospitality industries. The
equipment related to the leases we finance generally has a purchase price of
less than $250,000 ("small ticket" equipment leases), with an average of
approximately $20,000 for leases originating in 1997, $31,000 for leases
originating in 1998, and $30,000 for leases originating in 1999. We are
headquartered in Houston, Texas, with 31 branch offices in 15 different states
across the United States and three additional branches in the United Kingdom.

     Our electronic commerce network, a combination of strategic alliances with
Internet services, equipment vendors and independent finance companies, enables
us to efficiently offer financing solutions to a broad base of small business
customers, while at the same time providing us with a means of gathering
valuable financial and demographic data about these customers. We store this
information in a data warehouse that includes extensive financial and other
detailed information on approximately 169,000 small businesses from whom we have
received financing information since our inception in 1994. This allows us to
mine the data and provides us with the opportunity to cross-sell additional
products and services to our small business customers.

     During 1999 and early 2000 we took important steps to continue to build our
online marketplace for small business financing. We signed a series of
agreements with leading players in the small business e-commerce arena that
allows us to quickly and efficiently deliver our comprehensive online financing
solutions to their customers in the small business community. These alliances,
which provide us with significant access to the small business market, are as
follows:

o        We entered into strategic alliances with Intuit, the leader in small
         business accounting, personal finance and tax preparation software,
         under which our online financing program is being made available
         through QuickBooks2000, the newest version of Intuit's best-selling
         small business management software, and through Intuit's small business
         Web sites, www.quickbooks.com and www.quicken.com/small_business.


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o        We agreed to offer VerticalNet, Inc.'s internet customers our online
         financing program. VerticalNet, Inc. (www.verticalnet.com) currently
         owns and operates 55 industry-specific web sites designed as online
         business-to-business communities, known as vertical trade communities.

o        We entered into an agreement to provide our comprehensive web-based
         loan fulfillment technology to BizProLink.com, Inc., a network of
         online professional communities. BizProLink operates a comprehensive
         business-to-business e-commerce marketplace, consisting of 70 vertical
         business-to-business web-based communities. BizProLink's sites bring
         buyers and sellers together by providing industry-focused
         communities-of-interest for the exchange of business products and
         services.

o        We signed agreements with OneCore.com, an integrator of financial
         services specifically built for small businesses and entrepreneurs, and
         with WebSiteProfit.com, Inc., which owns www.smallbusinessloans.com.
         These providers of business-to-business products and services, focused
         specifically on the small business community, will offer their online
         customers our online financing solutions.

o        To further leverage our technology which delivers automated financing
         to the small business customer, we entered into an agreement with
         Firstar Corporation, the 14th largest bank in the United States, to
         utilize our technology platform to offer automated equipment financing
         to its small business customers. Our proprietary technology will be
         installed throughout Firstar's branch network, enabling small
         businesses to quickly and efficiently obtain financing for equipment
         purchases.

o        We debuted our "Business Boulevard," which is a small business portal
         built around our core e-finance products. We plan to join with select
         companies to expand the business-to-business e-commerce services
         available to our small business customers. In early 2000, we joined
         with Demandline.com, an Internet service, that allows growing
         businesses to "name their price" for core business services by pooling
         the buying power of thousands of growing companies to receive corporate
         rates from trusted, nationally-branded service providers. This alliance
         will enable us to offer core business services to our small business
         customer base, including long-distance telephone service, high-speed
         Internet access, Web hosting, mobile phone service, paging, payroll and
         credit card processing.

o        Furthermore, in fiscal 2000, we look forward to the prospect of
         launching an Internet-based business-to-business bank devoted
         exclusively to the banking and financing needs of our small business
         customers. This bank, which we plan to begin operating in the second
         quarter of 2000, will diversify our funding sources, lower our cost of
         funds and allow us to offer additional e-commerce products to our
         extensive customer base.

                                 GROWTH STRATEGY

     Our objective is to use the power of the Internet to deliver an increasing
number of financial and e-commerce services to small business customers. We
believe that the combination of our advanced technology, our access to a large
and growing customer base and our ability to electronically gather, store and
mine detailed financial and demographic data on these customers positions us to
capitalize on the high volume of repeat transactions that businesses conduct
every day. Our growth strategy consists of the following key elements:

     EXPAND OUR BUSINESS-TO-BUSINESS E-COMMERCE PRODUCTS AND SERVICES OFFERINGS.
Through our "Business Boulevard" we plan to capitalize on our small business
electronic commerce network and our scaleable technology by broadening the range
of e-commerce financial products and services that we offer to the small
business market with the goal of becoming a leading Internet-based business
destination.

     We believe our technology capabilities provide us with a competitive
advantage in the small business


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marketplace by allowing us to take advantage of the valuable information that we
collect in connection with our financing programs. We intend to use this
information to develop and market additional products and services that are
tailored to our customers' specific needs, which we believe will enable us to
increase revenues through cross-selling opportunities to our existing customer
base as well as acquiring new customers.

     EXPAND OUR BUSINESS ORIGINATION CHANNELS. We intend to continue to expand
our small business electronic commerce network by marketing our automated
financing solutions to leading players in the small business e-commerce arena,
to additional software and equipment vendors, and to independent finance
companies and banks. Such relationships will provide us with access to small
business customers and financing transactions.

                         CREDIT POLICIES AND PROCEDURES

     We believe our underwriting policies and procedures enable us to select
creditworthy small business customers and minimize the risks of delinquencies
and credit losses. We believe that our automated technology provides us with a
competitive advantage by enhancing the accuracy and consistency of our credit
decisions and lowering our costs in connection with such decisions. The nature
of our business requires two levels of review; the first focuses on the
qualification of the financing source and the second focuses on the small
business customer or ultimate end-user of the financed equipment.

     SOURCE QUALIFICATION. We perform a background investigation on the finance
company, financial institution or other financing source prior to accepting
financing applications through the source. This investigation includes
verification of bank and trade references and a review of financial statements,
past credit history and the business and industry in which the source operates.
Because participants in our Private Label program are required to provide us
with credit protection, we perform additional procedures to evaluate the
creditworthiness of our Private Label sources. These additional procedures may
include an examination of the source's financial statements and liquidity,
management team, staffing and servicing infrastructure and a review of the
source's ongoing support capabilities with respect to credit, documentation,
customer service and collections.

     UNDERWRITING. Our technology enables us to process credit applications in
real time by utilizing a credit scoring model for transactions up to $100,000.
This Fair Isaac scoring model, developed for small business credit valuation,
performs the primary credit analysis and enables us to uniformly measure,
assess, validate and manage our credit process. Our automated credit processing
system reviews the information gathered in connection with the financing
application to confirm compliance with our underwriting policies and procedures.
Our underwriting guidelines generally require a credit investigation of the
small business customer including (i) an analysis of the current credit exposure
the customer has with us and their related pay history, (ii) an analysis of the
personal credit of the owner, who typically guarantees the financing
arrangement, including a review for derogatory information, liens, judgements
and pay history, (iii) verification of time in business, corporate name and
ownership information, (iv) a review of Dun & Bradstreet reports, if available,
for liens, judgements and business pay history, and (v) a review of bank and
trade references for larger transactions. For leases and loans originated under
our Private Label program, we allow our Private Label source to perform certain
of these credit information gathering functions. For transactions greater than
$100,000, our credit staff performs additional credit analysis including review
of financial statements and tax returns of the business and related financial
and industry information.

     In connection with our securitization program, financial guaranty insurers
and rating agencies perform extensive reviews of our underwriting standards and
procedures.

                          CUSTOMIZED FINANCING PROGRAMS

     We provide customized financing programs designed to meet the financing
needs of small businesses. Small businesses can apply for leases or loans
through either our web site, Internet services with whom we have formed
alliances or various equipment and software vendors, manufacturers, dealers,
financial institutions or independent lease brokers. We provide lease or loan
financing through a broad range of lease funding programs, referred to as our
Retail, Private Label, Captive Finance and Wholesale programs. While the terms
of the underlying leases and loans are similar in all four lease funding
programs, the financing arrangement we offer varies depending on the size and
servicing capabilities of the lease source.


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     RETAIL PROGRAM. Our Retail program focuses on providing financing services
directly to small businesses through the Internet. We have various origination
channels under our Retail program which include customers who come to our
websites directly, customers who come to us via service links we have
established with leading players in the small business e-commerce arena, and
customers who come to our website via our formal and informal relationships with
manufacturers, dealers and other equipment vendors who are in a position to
recommend us to their customers who need financing to purchase equipment. As of
December 31, 1999, we had active relationships with approximately 25,000 vendors
throughout the United States and the United Kingdom. The value-added services to
participants in our Retail program include consulting with vendors on
structuring financing transactions with equipment purchasers, training the
vendor's sales and management staff to understand and market our various
financing alternatives and customizing financing programs to encourage product
sales. In most cases, our sales representatives also work with the vendor's
equipment purchasers, providing them with the guidance necessary to complete the
equipment financing transaction. We also participate in some of our vendor's
sales and marketing efforts, including advertising, promotions, trade show
activities and sales meetings.

     We structure our Retail leases and loans on a nonrecourse basis, which
means that we assume the risk of loss in the event of default by the obligor. We
own the underlying equipment being financed and, in some cases, retain a
residual interest in the equipment. We also perform all servicing functions on
our Retail leases and loans.

     OTHER FINANCING PROGRAMS:

     Our Private Label program is designed to provide financing to established
financing companies that have demonstrated the ability to originate a large
volume of financing transactions. These companies follow prudent underwriting
guidelines established pursuant to our credit policy, provide us with credit
protection and provide servicing on an ongoing basis. The Private Label program
was developed to provide us with access to high volumes of small business
financing transactions eligible for the securitization market, while minimizing
our risk of loss. Our Private Label partners have typically included
middle-sized commercial banks and smaller finance companies.

     Under our Captive Finance program, we focus on cultivating partnerships
with large equipment vendors to help them develop, implement and administer a
customized, sales-oriented lease finance program. In addition to offering
financing, we provide the training, sales tools and often personnel, necessary
to support a financing program. To make customer finance an effective part of
the vendors' sales efforts, our Captive Finance program helps vendors build
systems that are tailored to their specific business and their customers. Our
sales consultants with backgrounds in software and communications technology
help the vendors' sales representatives achieve their companies' financial
objectives.

     Under our Wholesale program, which was discontinued in December 1999, we
financed equipment leases from brokers who were unwilling or unable to provide
the credit protection and perform the servicing functions necessary to
participate in our Private Label program. In a typical Wholesale transaction, we
originated transactions referred to us by a broker and paid the broker a
referral fee. We do not have recourse to the broker on our Wholesale financing
contracts, which means that we assume the risk of loss in the event of default
by the lessee. We perform all servicing functions on our Wholesale leases.

                       TERMS OF EQUIPMENT LEASES AND LOANS

     The structure of our financing instruments and our credit policies and
procedures are designed to minimize risk. Substantially all equipment leases and
loans that we acquire or originate are non-cancelable. During the term of the
lease, we generally receive scheduled payments sufficient, in the aggregate, to
cover our borrowing costs and the costs of the underlying equipment, and to
provide us with an appropriate profit margin. The initial non-cancelable term of
the lease is generally equal to or less than the equipment's estimated economic
life. A small portion of our leases provide us with additional revenues based on
the residual value of the equipment financed at the end of the initial term of
the lease. The initial terms of the lease generally range from 24 to 84 months,
with a weighted average initial term of 61 months as of December 31, 1999.


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

                          SERVICING AND ADMINISTRATION

     The financing for small businesses is operationally intensive due, in part,
to the small average transaction size. Accordingly, state-of-the-art technology
is critical in keeping servicing costs to a minimum and providing quality
customer service. Recognizing the importance of servicing, we utilize an
administration system that is tailored to support our operational needs. Our
system handles application tracking, document generation, booking, invoicing,
payment processing, automated collection queuing, portfolio evaluation, cash
forecasting and report preparation. The system is linked with a lockbox bank
account for payment processing and provides for direct withdrawal of payments as
they become due. Our technology also allows us to offer all of our customers
direct access to their application and related documents over the Internet. The
system's paperless environment substantially enhances the efficiency with which
we can offer financing to our customers.

     Our lease servicing responsibilities vary depending on the lease-funding
program under which we acquired or originated the lease. Servicing
responsibilities generally include billing, processing payments, remitting
payments to key sources and investors, preparing investor reports, paying taxes
and insurance and performing collection and liquidation functions.

     For equipment leases funded under our Private Label program, the lease
source performs the collection and customer service functions, while we perform
other servicing functions, including billing and cash receipts. This arrangement
allows the lease source to maintain close relationships with lessees and reduces
our servicing costs. We closely monitor delinquency information with respect to
leases from each Private Label source. If a lessee defaults, which typically
means when the account is 90 days past due, we send a notice to the lease source
stating that the source must repurchase the lease within 60 days.

     Under the Retail and Wholesale programs, we are normally responsible for
all servicing functions. We also perform all servicing functions with respect to
leases funded under our Captive Finance program that we retain in our portfolio.
For leases we acquire or originate under our Retail and Wholesale programs, and
those Captive Finance leases that we retain in our portfolio, our collections
policy is designed to identify payment problems in sufficient time to permit us
to quickly address delinquencies and, when necessary, to act to preserve equity
in the leased equipment. Collection procedures begin when payments are 13 days
past due.

     We retain the right to service all of the small business financing
contracts included in our securitization transactions. In return, we generally
receive a servicing fee of 0.50% per year on the outstanding principal balance
of all securitized financing contracts plus late fees which we collect out of
the customer's monthly payments. We believe that, by performing the servicing
functions on our securitized financing contracts, we enhance operating
efficiencies and provide an additional revenue stream. As of December 31, 1999,
we were servicing financing contracts with an aggregate principal amount of $1.4
billion, including $567 million aggregate principal amount of financing
contracts serviced for others.

                             SECURITIZATION PROGRAM

     We initially fund the acquisition or origination of our leases from working
capital or through our securitized warehouse facilities. From time to time,
depending on market conditions, we securitize the leases in our portfolio that
meet pre-established eligibility criteria by packaging them into a pool and
selling beneficial interests in the leases through public offerings and private
placement transactions.


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                   RESIDUAL INTERESTS IN UNDERLYING EQUIPMENT

     With respect to leases we acquire or originate under our Retail and
Wholesale programs, and those Captive Finance leases that we retain in our
portfolio, we may own a residual interest in the equipment covered by the lease.
We record the residual value of a lease on our books when there is no obligation
on the part of the lessee to purchase the equipment at the expiration of the
lease term. Of the leases in our portfolio through December 31, 1999,
approximately 79% as measured by net investment, had no residual value on our
books. This is generally because the lessee was granted an option to purchase
the equipment at the end of the term for a nominal price or the lessee was
required to purchase the equipment at the end of the term at a fixed price. Our
aggregate investment in residual values with respect to the equipment underlying
leases acquired and originated under our Retail and Wholesale programs through
December 31, 1999 was approximately $21 million, representing less than 2.8% of
the total outstanding leases.

     With respect to equipment in which we own a residual interest, we generally
seek to determine the best remarketing plan for the equipment prior to the
expiration of the lease covering the equipment. In many cases, our remarketing
plan provides for the continuation of the lease on a month-to-month or other
basis or the negotiated sale of the equipment to the lessee through equipment
brokers and remarketers, rather than our employees, in order to maximize the net
proceeds from the sale.

                                   TECHNOLOGY

     From our inception, we have pioneered the use of emerging technologies to
fuel our growth strategies. We have embraced the Internet in all our business
plans and development efforts. Our internally-developed systems for credit
evaluation, document fulfillment, application tracking, and lease and loan
servicing are highly integrated and available, in whole or in part, as an
internet-enabled solution. We began as a lease finance company specializing in
serving the small business customer. Accomplishing this required development of
a high degree of automation and efficiencies of scale in order to help maximize
profit margins on loans and leases. Our business model is helping to better
position us as a leading player in the business-to-business e-commerce arena.

     Our credit decision system automates the credit process, from information
retrieval to scoring to decision and notification. Most decisions are reached in
seconds and require no human intervention. Real-time, automated high-speed
interfaces to all of the major credit bureaus allow nearly instantaneous
retrieval of commercial and consumer financial data needed in the credit
decision process. Our tunable scoring algorithms incorporate credit bureau
data with Fair Isaac scorecards to return custom credit scores. Utilizing
COM, XML, and HTTP protocols, credit scores and decisions are reported to
internal and external client software modules. In 1999 we realized a major
milestone as we began offering automated finance services through
message-queuing and transaction-oriented gateway services to major
Internet-based trade exchanges. This new level of service has effectively
enabled us to expand our lease and loan originations and address the growing
demand by online providers for business financing, invoicing, and collection
services.

     We are actively working with major small business e-commerce companies to
facilitate their business-to-business transactions. Our decisioning, financing,
and servicing modules can be combined to provide almost instantaneous credit and
financing decisions. These services, which leverage our proven credit decision
and portfolio management technologies, provide small business customers with an
alternative to credit card financing.

     Through our web site and web site integration with leading players in the
small business e-commerce arena, our technology allows small business customers
to quickly and seamlessly apply for loan and lease financing from
SierraCities.com. Our proprietary CreditWARE(TM) and LeaseWARE(TM) suite of
web-based e-commerce applications handle the post-approval processing of
fulfillment and servicing. This comprehensive set of tools includes the
following core services:

o        Online lease and loan payment calculation


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o        Seamless integration with our high-speed credit scoring and decision
         engine

o        Real-time status tracking

o        E-mail notification and document delivery

o        Comprehensive data warehousing and mining

o        Portfolio processing and performance monitoring

     Our integrated technology infrastructure provides us with a key competitive
advantage in the marketplace.

                                    CUSTOMERS

     We currently have approximately 83,000 small business customers. Our
customers are typically privately-owned small businesses with total assets of
less than $20 million, and have generally been in business for at least two
years. They operate in a diverse range of industries including health care,
business services, restaurant, and auto services. Our customers are located in
each of the 50 United States and in the United Kingdom, with concentrations in
California, Texas, Florida and New York. No other state or the United Kingdom
represents more than 5% of the total leases outstanding.

                                   COMPETITION

     We compete in the small business financing and e-financing technology
markets with a number of national, regional and local technology and finance
companies. Our competitors also include those equipment manufacturers that
finance the sale or lease of their own products and other traditional types of
financial services companies, such as commercial banks and savings and loan
associations, all of which may provide general business loans or financing for
equipment purchases. Our competitors include many larger, more established
companies that may have access to capital markets and to other funding sources
that may not be available to us or on better terms than we could receive. Many
of our competitors have substantially greater financial, marketing and
operational resources and longer operating histories than we do. Current or
future competitors may also develop more advanced software technologies
providing better e-finance solutions for small businesses.

     We believe that our advanced technology, our experienced management team
and sales force, and our significant customer base allow us to aggressively
compete with larger, more established companies. We also believe that the
combination of our advanced technology, our direct access to a large and growing
customer base and our ability to electronically gather, store and mine detailed
financial and demographic data on these customers positions us to capitalize on
the high volume of repeat transactions that businesses conduct every day.

                                    EMPLOYEES

     As of December 31, 1999, we had 604 employees of whom 380 were engaged in
marketing activities, 115 were engaged in credit, collection and customer
service activities, 46 were engaged in technological support and development
activities, and 63 were engaged in general administration activities. We believe
that our relationship with our employees is good. None of our employees are
members of a collective bargaining unit.

                                 SENIOR OFFICERS

     Set forth below are the names, ages, position and description of the
backgrounds of our senior officers and their principal occupations for at least
the past five years.

     THOMAS J. DEPPING, age 41, has served as our Chairman of the Board,
President and Chief Executive Officer since inception in June 1994. Mr. Depping
has over 17 years of experience in the financial services industry, including 11
years with SunAmerica Financial Resources and its predecessor company (which was
acquired by SunAmerica, Inc. in 1991). From 1991 to May 1994, Mr. Depping served
as President of SunAmerica Financial Resources, the equipment leasing and
financial division of SunAmerica, Inc.


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     SANDY B. HO, age 40, has served as our Executive Vice President and Chief
Financial Officer since January 1995. Ms. Ho has over 15 years of experience in
the financial services industry, including 10 years with SunAmerica Financial
Resources and its predecessor company (which was acquired by SunAmerica, Inc.
in 1991). From 1991 through 1994, Ms. Ho served as Vice President of SunAmerica
Financial Resources and Managing Director of SunAmerica Corporate Finance.

     MICHAEL A. SABEL, age 33, has served as our Executive Vice President and
Chief E-Commerce Officer since July 1999. From January 1999 through June 1999,
Mr. Sabel served as our Executive Vice President - Business Development. From
May 1998 through December 1998, Mr. Sabel served us as Executive Vice President
- Global Mergers and Acquisitions. Since joining us in May 1998, Mr. Sabel also
served as President of First Sierra (UK) Limited. From September 1994 until May
1998, Mr. Sabel was a member of the Investment Banking Group at Friedman,
Billings, Ramsey & Co., Inc., most recently serving as a Managing Director. From
August 1991 until August 1994, Mr. Sabel was a member of Sandler, O'Neil and
Partners' Corporate Strategies Group, most recently as a Vice President.

     DAVID L. PEDERSON, age 40, has served as our Executive Vice President and
Chief Information Officer since April 1998. Prior to joining SierraCities.com,
Mr. Pederson was President of Nexsoft, Inc., which he founded in 1993. Nexsoft
designed and developed our systems and communications network. Mr. Pederson has
over 15 years of experience in directing technology initiatives in the equipment
leasing industry.

     FREDERICK M. VAN ETTEN, age 46, has served as our Executive Vice President
and Chief Marketing Officer since July 1999. From September 1998 to June 1999,
Mr. Van Etten served as our Executive Vice President of Marketing. From January
1995 through August 1998, Mr. Van Etten served as our Senior Vice President of
Marketing. Mr. Van Etten has been involved in all aspects of the commercial
finance and equipment leasing business for over 20 years. Prior to joining us,
Mr. Van Etten was Managing Director of SunAmerica Corporate Finance, a division
of SunAmerica, Inc.

     E. ROGER GEBHART, age 42, has served as our Executive Vice President,
Capital Markets and Treasurer since October of 1999. From 1997 through October
of 1999, Mr. Gebhart served as Senior Vice President and Treasurer. From 1986
through May 1997, Mr. Gebhart served as a Vice President at First Union Capital
Markets Corp. in their equipment finance group. Mr. Gebhart has over 13 years
of experience in middle market commercial lending, specializing in the
equipment leasing and finance industry providing asset-backed securitization
financing funding facilities. Mr. Gebhart has experience in all aspects of
structured finance including asset-backed commercial paper, revolving credit
facilities, interest rate hedging instruments, commercial paper conduit
financing, and the public and private term asset-backed funding markets.

     ALAN L. LANGUS, age 52, has served as Executive Vice President, General
Counsel and Corporate Secretary since December 1999. From February 1996 through
December 1999, Mr. Langus served as Senior Vice President, Chief Counsel and
Secretary of ContiFinancial Corporation where he had overall responsibility for
the legal function. Prior to joining ContiFinancial, from December 1989 through
February 1996, Mr. Langus served as Vice President and Chief Counsel of the
Financial Services Group of Continental Grain Company. Mr. Langus has more than
10 years of experience in dealing with legal issues relating to commercial and
consumer lending.

     J. MICHAEL HOFMANN, age 56, has served as Executive Vice President since
October 1999 and will serve as President of the proposed SierraCities Bank, N.A.
Since December 1997, Mr. Hofmann continues to serve as President of Woodward
Financial, Inc., a closely held financial services advisory firm. Mr. Hofmann
has over thirty years of experience in the financial services industry serving
in various executive capacities including Chairman, Chief Executive Officer,
President or Executive Vice President of a number of organizations including,
from July 1982 to December 1997, First of America Bank - Central, First of
America Bank - Detroit, First of America Bank - Southeast, Mutual Savings Bank,
Heights of Texas, First Heights Bank, Pulte Home Corporation and K.M.H.
Holdings, Inc.


                                       10
<PAGE>   11
               SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES
                          LITIGATION REFORM ACT OF 1995

     We make forward-looking statements from time to time and desire to take
advantage of the "safe harbor" which is afforded such statements under the
Private Securities Litigation Reform Act of 1995 when they are accompanied by
meaningful cautionary statements identifying important factors that could cause
actual results to differ materially from those in the forward-looking
statements.

     The statements contained in "Item 1 - Business" and "Item 7 - Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
statements contained in future filings with the Securities and Exchange
Commission and publicly disseminated press releases, and statements that our
management may make from time to time in the future in presentations to
stockholders, prospective investors, and others interested in our business and
financial affairs, which are not historical facts, are forward-looking
statements that involve risks and uncertainties that could cause actual results
to differ materially from those set forth in the forward-looking statements. You
should not construe any projections of financial or operating performance or
statements concerning expectations as to future developments in any manner as a
guarantee that such results or developments will, in fact, occur. Our
projections of future financial or operating performance and expectations as to
future developments referenced in any forward-looking statement may not be
realized and our actual results may be significantly different from those set
forth in the forward-looking statements. In addition to the risks and
uncertainties of ordinary business operations, the forward-looking statements
referred to above are also subject to the risks and uncertainties outlined
below.

                                  RISK FACTORS

     WE DEPEND ON THE SECURITIZATION MARKET TO FINANCE OUR LEASES AND LOANS

     From time to time, depending on market conditions, we securitize the leases
and loans in our portfolio that meet pre-established eligibility criteria by
packaging them into a pool and selling beneficial interests in the leases and
loans through public offerings and private placement transactions. In a
securitized transaction, we transfer a pool of leases and loans to a
wholly-owned, special purpose subsidiary of SierraCities.com. The special
purpose subsidiary simultaneously transfers an interest in the leases and loans
to a trust, which issues beneficial interests in the leases and loans in the
form of senior and subordinated securities and sells such securities through
public offerings and private placement transactions. We generally retain the
right to receive any excess cash flows of the trust, which right is represented
by a trust certificate.

     We depend on securitizations for refinancing of amounts outstanding under
our securitized warehouse facilities, which we utilize to acquire and originate
additional leases and loans. Several factors affect our ability to complete
securitizations, including general conditions in the securities markets,
conditions in the asset-backed securities markets, the credit quality of our
portfolio, compliance of our leases with the eligibility requirements
established in connection with the securitizations, our ability to obtain
third-party credit enhancement, our ability to adequately service our portfolio,
and the absence of any material downgrading or withdrawal of ratings given to
securities previously issued in our securitizations. Any substantial reduction
in the availability of the securitization market for our leases and loans or any
adverse change in the terms of our securitizations could have a material adverse
effect on our business, financial condition and results of operations.

     WE DEPEND ON EXTERNAL FINANCING TO FUND OUR LEASES AND LOANS

     We fund a large percentage of the loans and equipment leases we acquire
through our securitized warehouse facilities. The securitized warehouse
facilities are available to fund loans and leases which satisfy eligibility
criteria for inclusion in our public securitizations. We repay borrowings under
our securitized warehouse facilities with the proceeds we receive from our
public securitization transactions. Any adverse impact on our ability to
complete public securitization transactions could have a material adverse effect
on our ability to obtain or maintain securitized warehouse facilities or the
amount available under such facilities. Any failure to renew our existing
securitized warehouse facilities or obtain additional facilities or other
financings with pricing, advance rates and other terms


                                       11
<PAGE>   12
consistent with our existing facilities could have a material adverse effect on
our business, financial condition and results of operations.

     WE MAY NEED ADDITIONAL CAPITAL TO FINANCE OUR OPERATIONS

     Our financing business is capital intensive and requires access to
substantial short-term and long-term credit to fund new loans and equipment
leases. We expect to continue to require access to a large amount of capital to
maintain and expand our volume of loans and leases funded. If future market
conditions adversely affect our ability to finance loans and leases, we may
require additional capital to fund our operations. There can be no guarantee,
however, that additional capital will be available to finance our operations.

     INCREASES IN INTEREST RATES COULD ADVERSELY AFFECT OUR RESULTS OF
OPERATIONS

     The loans and leases we finance are non-cancelable and require payments to
be made by the lessee at fixed rates for specified terms. The rates we charge
are based on interest rates prevailing in the market at the time of loan and
lease approval. Until we securitize or otherwise sell our loans and leases, we
generally fund the loans and leases under our securitized warehouse facilities
or from working capital. If we were to become unable to securitize or otherwise
sell loans and leases with fixed rates within a reasonable period of time after
funding, our operating margins could be adversely affected by increases in
interest rates. Moreover, increases in interest rates which cause us to raise
the implicit rate we charge to our customers could cause a reduction in demand
for our financing. We generally undertake to hedge against the risk of interest
rate increases when our portfolio exceeds $10.0 million. These hedging
activities limit our ability to participate in the benefits of lower interest
rates with respect to our hedged portfolio. In addition, our hedging activities
may not adequately insulate us from interest rate risks.

     INCREASES IN LESSEE DEFAULTS COULD ADVERSELY AFFECT OUR BUSINESS AND
FINANCIAL CONDITION

     We specialize in acquiring and originating loans and equipment leases with
a purchase price of less than $250,000, generally involving small and mid-size
commercial businesses located throughout the United States. Small business loans
and leases generally entail a greater risk of non-performance and higher
delinquencies and losses than loans and leases entered into with larger, more
creditworthy lessees. Because of our short operating history, we have limited
performance data with respect to loans and leases we finance. Thus, our
historical delinquency and loss statistics do not necessarily predict our future
performance.

     We funded the vast majority of the leases we acquired or originated through
December 31, 1996 through a combination of the recourse and purchase price
holdback features of our Private Label program. During the year ended December
31, 1999, we funded approximately 58% of the leases that we acquired or
originated through our Retail and Wholesale programs which do not have these
credit protections. We believe that we will generate increasingly larger
percentages of our originations in the future through funding programs that do
not provide us with credit protection.

     The failure of our lessees to comply with the terms of their loans and
leases will result in the inability of these loans and leases to qualify to
serve as collateral under our securitized warehouse facilities and
securitization program and may have a material adverse effect on our liquidity.
Also, delinquencies and defaults in excess of levels estimated by our management
in determining our allowance for credit losses and in valuing our right to
receive excess cash flows under our securitization program could have a material
adverse effect on our ability to obtain financing and effect public
securitization transactions. Our inability to effect public securitization
transactions could, in turn, have a material adverse effect on our business,
financial condition and results of operations.

     OUR LOANS AND LEASES ARE CONCENTRATED IN A SMALL NUMBER OF STATES AND
INDUSTRIES; ADVERSE ECONOMIC OR REGULATORY CONDITIONS IN THOSE STATES OR
INDUSTRIES COULD ADVERSELY AFFECT OUR BUSINESS

     Although our portfolio of loans and leases includes obligors located
throughout the United States, we acquire or originate a majority of our leases
from sources operating in four states: California, Texas, Florida and New York.


                                       12
<PAGE>   13
The ability of our lessees to honor their contracts may substantially depend on
economic conditions in these states. All of our leases are collateralized by the
related equipment. The recourse and holdback provisions of our Private Label
program mitigate, but do not eliminate, a significant portion of any economic
risk not recoverable through the sale of the related equipment.

     Also, a substantial portion of our leases are concentrated in certain
industries, including the dental industry, the medical industry and the
veterinary industry. If the economic or regulatory conditions prevalent in such
industries were to change, our lessees may not be able to honor their lease
obligations.


           RISKS ASSOCIATED WITH OUR RELIANCE ON EMERGING TECHNOLOGIES

     WE MAY NOT BE SUCCESSFUL IN IMPLEMENTING OUR E-COMMERCE GROWTH STRATEGY

     Our e-commerce strategy depends on continued growth in the use by small
businesses of the Internet and similar forms of electronic communication as a
means for conducting commercial and financial services transactions. Small
businesses may elect not to conduct Internet banking or e-commerce transactions
because of issues such as cost, reliability, security, quality of service and
ease of use. If continued growth in the use of the Internet for such
transactions does not occur, it could have a material adverse effect on our
business, financial condition and results of operations.

     OUR INTELLECTUAL PROPERTY RIGHTS COULD BE MISAPPROPRIATED OR INFRINGED

     The growth of our business depends in large part on the continued
development and customer acceptance of our proprietary technology platform. It
may be possible for a third party to copy or otherwise obtain unauthorized
access to our database or our other intellectual property. There can be no
assurance that we will be able to prevent misappropriation or infringement of
our intellectual property. A failure to protect our intellectual property in a
meaningful manner could have a material adverse effect on our business,
operating results and financial condition. Moreover, we may need to engage in
litigation in order to enforce our intellectual property rights in the future or
to determine the validity and scope of the proprietary rights of others. Such
litigation could result in substantial costs and the diversion of management and
other resources, either of which could have a material adverse effect on our
business, financial condition and results of operations.

     OUR COMPUTER SYSTEMS COULD SUFFER SECURITY BREACHES

     We have received, and will continue to receive, highly confidential and
sensitive financial information from our customers. This information is
maintained on our computer systems and may be accessed through the Internet. Our
systems, like those of other Internet-based entities, are vulnerable to
break-ins, security breaches and similar problems. While we make commercially
reasonable efforts to protect our computer systems against such security
breaches, we are unable to provide any assurance that such efforts will
ultimately be successful. Any such security breach may subject us to litigation
and may result in our inability to attract and retain customers. In addition, if
the computer systems of another company suffer a security breach or if public
concern regarding Internet security generally worsens, our customers may choose
to conduct business with non-Internet based financial service providers. Any
such event could have a material adverse effect on our business, financial
condition and results of operations.

     GOVERNMENT REGULATION OF THE INTERNET COULD ADVERSELY AFFECT OUR E-COMMERCE
INITIATIVES

     Certain local, state, federal and foreign governments are now considering
proposals to regulate aspects of the Internet, on-line communication and
e-commerce, such as the privacy of consumer financial information, user
identification and other information, telecommunication access charges, on-line
content, liability and jurisdictional issues and the taxation of e-commerce. In
addition, the manner in which existing laws will be applied to e-commerce
transactions is uncertain. Increased costs or delays in connection with
e-commerce transactions may deter businesses from conducting such transactions,
which could have a material adverse effect on our business, financial condition
and results of operations.


                                       13
<PAGE>   14
    OUR COMPUTER SYSTEMS AND THOSE OF THIRD PARTIES ON WHOM WE RELY COULD FAIL
OR BE COMPROMISED

    Our computer systems may fail or the operation thereof may become
substantially delayed or limited because of computer viruses, telecommunications
interruption, human error, mechanical breakdown, power loss, fire, water or
storm damage or otherwise. In addition, we outsource certain critical functions
to third party technical and customer service providers and our operations could
be disrupted if these third parties experience technological or other
difficulties or terminate their relationship with us. Any such event could have
a material adverse effect on our business, financial condition and results of
operations.

    THE INTERNET INFRASTRUCTURE MAY NOT SUPPORT HIGH VOLUME BUSINESS-TO-BUSINESS
TRANSACTIONS

    The Internet has undergone a period of dramatic growth during the 1990s. If
general and commercial use of the Internet continues to grow, the Internet's
technical infrastructure may not be able to consistently support the increasing
volume of data placed on it. Transactional delays and aborted transactions may
result from the increasing amount of electronic data transmissions, the failure
of national and international organizations to establish universal standards and
protocols for data transmission and e-commerce and technological difficulties.
If the Internet is ultimately proven not to be commercially viable or falls into
general or commercial disuse for any of the foregoing reasons or otherwise, our
business, financial condition and results of operations could be adversely
affected.

    WE WILL RELY ON KEY EMPLOYEES TO EXECUTE E-COMMERCE INITIATIVES

    The success of our e-commerce initiatives will depend upon our ability to
recruit and retain appropriate employees and executives. We will depend to a
large extent upon the experience, abilities and continued efforts of executives
and other employees to maintain the consistent operation of our technology and
conduct our e-commerce initiatives. The loss of the services of one or more of
these individuals could have a material, adverse effect on our business,
financial condition and results of operations.

         RISKS ASSOCIATED WITH OUR PROPOSED INTERNET BANKING OPERATIONS

    WE MAY NOT RECEIVE REGULATORY APPROVAL OF OUR BANK CHARTER APPLICATION

    In connection with the formation of our Internet bank, we have filed an
application with the Office of the Comptroller of Currency ("OCC") for a
national bank charter. In addition, we have filed an application with the Board
of Governors of the Federal Reserve System (the "FRB") to be registered as a
bank holding company. There can be no assurance that the OCC will approve our
application for a national bank charter for our Internet bank or that the FRB
will approve our application to be registered as a bank holding company. These
OCC and FRB approvals are required for us to operate our Internet bank as
currently planned. Our inability to conduct certain of our operations through
our planned Internet bank would limit certain of our proposed e-commerce
products and service offerings.

    OUR ACTIVITIES AS A BANK HOLDING COMPANY AND THE ACTIVITIES OF THE BANK
WILL BE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION

    If our application to be registered as a bank holding company is approved,
we will be regulated by the FRB under the Bank Holding Company Act of 1956, as
amended. We will be required to: (i) file annual and other reports and
information with the FRB; (ii) submit to periodic regulatory examination by the
FRB; (iii) receive FRB approval prior to engaging in certain acquisitions of
control of other entities; and (iv) comply with FRB restrictions on non-banking
activities.

     If our application for a national bank is approved, our Internet bank will
be regulated by the OCC under the National Bank Act of 1864, as amended, and by
the Federal


                                       14
<PAGE>   15
Deposit Insurance Corporation under the Federal Deposit Insurance Act of 1950,
as amended. The bank will be required to: (i) submit annual and other reports
and information to the OCC; (ii) receive OCC approval prior to establishing
branches or conducting certain acquisitions or changes in control; (iii) submit
to periodic OCC examination; (iv) comply with the provisions of the Community
Reinvestment Act of 1977, as amended; and (v) comply with OCC regulations with
respect to minimum capital requirements, restrictions on lending and payments of
dividends and other provisions.

     We have not previously been required to comply with the statutes and
regulations generally applicable to bank holding companies and national banks.
Such statutes and regulations restrict the manner in which we could otherwise
use our capital, including restrictions on the payment of dividends to
stockholders. We may incur significant expenses in establishing any internal
structures and systems that we deem necessary in order to comply with such
statutes and regulations and, ultimately, we may not be able to comply with such
statutes and regulations. In addition, government regulators may impose
sanctions and additional requirements and restrictions on us. Any of the
foregoing could have a material adverse effect on our business, financial
condition and results of operations.

     OUR INTERNET BANK MAY ULTIMATELY BE UNSUCCESSFUL

     The formation and operation of our Internet bank will subject us to certain
expenses and incremental costs that we do not currently incur. These expenses,
together with the regulatory requirements generally applicable to banks and bank
holding companies and the uncertainty of customer demand for on-line banking
services, among other factors, may result in our inability to operate the bank
profitably, which could have a material, adverse effect on our business,
financial condition and results of operations.

     WE MAY BE ADVERSELY AFFECTED BY COMPETITION IN THE FINANCIAL SERVICES
MARKET

     The market for financial services is extremely competitive. This
competition is based primarily on service fees, interest rates and other product
terms. Although we believe that our technology and e-commerce strategy will
enable us to compete successfully, there can be no assurance that this will be
the case.

     We will compete against other Internet-based financial institutions,
companies marketing financial products directly to small businesses, traditional
"brick and mortar" financial institutions operating on a national, regional or
local basis and equipment manufacturers and retailers providing direct financing
for the products they sell. Because establishing a business on the Internet is
relatively easy and there are few other barriers to entry for existing financial
institutions, there are a substantial number of businesses which could compete
directly with us by implementing a business strategy similar to ours. Any of
these competitors may have greater capital and marketing resources, lower
overhead structures, more experienced management, larger customer bases and
longer operating histories than we do. Any such competition could affect our
ability to attract and retain customers, could cause us to deem it necessary to
discount interest rates or other product terms or incur additional expenses to
acquire and retain customers and could otherwise have a material adverse effect
on our business, financial condition and results of operations.

     WE MAY EXPERIENCE DELAYS IN INTRODUCING NEW PRODUCTS AND SERVICES

     We intend to offer a variety of banking products and services to our small
business customers, including checking and savings accounts, loans, certificates
of deposit and other traditional banking products and services. In the event
that our development or introduction of these products and services is delayed
or if we fail to recognize and respond to the new product or service demands of
our customers, our customers may purchase these products and services from our
competitors.


                                       15
<PAGE>   16
ITEM 2.  PROPERTIES

     Our corporate headquarters is located in 51,263 square feet of leased space
at 600 Travis Street, Houston, Texas 77002. In addition, we lease office space
for our regional offices in numerous locations throughout the United States and
the United Kingdom. We believe that our current facilities are adequate for our
existing needs and that suitable space will be available to satisfy future
growth, as required.

     From inception through 1997, our underwriting, customer service and
collection staff were located in our Jupiter, Florida office. In order to
consolidate our operations and maximize administrative efficiencies, we
relocated our operations center from Jupiter, Florida to our headquarters in
Houston, Texas. This relocation began in late 1997 and was completed in the
first half of 1998. In connection with this relocation, we incurred
non-recurring costs of $1.6 million during 1998 (or $0.08 per share), primarily
attributable to personnel-related expenses.

ITEM 3.  LEGAL PROCEEDINGS

     From time to time, SierraCities.com and our subsidiaries are parties to
various claims, lawsuits and administrative proceedings arising in the ordinary
course of business. Although we cannot predict the outcome of these lawsuits
with certainty, we do not expect these matters to have a material adverse effect
on our business, financial condition or results of operations.

     In January 2000, an action was brought against us entitled, United Capital
Leasing Corp. v. First Sierra Financial, Inc., No. H-99-4483, in the United
States District Court for the Southern District Court of Texas, Houston Division
(the "Action"). We have been sued by United Capital Leasing Corporation ("United
Capital") in the Action, which asserts claims of fraud, fraudulent inducement,
negligent misrepresentations, breach of contract, breach of warranty, civil
conspiracy and claims under the Texas Deceptive Trade Practices Act and the
Racketeer Influenced Corrupt Organizations Act. United Capital's allegations
arise from its purchase of an unspecified number of leases (as lessor) from the
Republic Group, an entity acquired by us in 1998. The Action is at a preliminary
stage. We first received notice of the Action, in January, 2000 and have not yet
filed any response to the Complaint. No disclosure or discovery has taken place
to date. United Capital has not specified the number or value of the leases
about which it complains, so we can make no determination of whether the Action
poses the risk of having a material adverse impact on our financial statements
or operations. Moreover, the outcome of the Action cannot be predicted.
Nevertheless, we intend to vigorously defend against the claims.

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

     No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 1999.


                                       16
<PAGE>   17
                                     PART II

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

                           PRICE RANGE OF COMMON STOCK

     Our common stock began trading on the Nasdaq National Market on May 15,
1997 under the symbol "FSFH." As of April 19, 1999, we changed our trading
symbol from "FSFH" to "BTOB" in recognition of our business-to-business
e-commerce initiatives. On March 15, 2000, the approximate number of holders of
record of our common stock was 3800. The following table sets forth the high and
low sale prices of our common stock for the periods indicated, as reported by
Nasdaq:


<TABLE>
<CAPTION>
                                                                 PRICE
                                                         ------------------------
                                                          HIGH             LOW
                                                         -------        ---------
<S>                                                      <C>            <C>
1999
      Fourth Quarter ................................    $24 1/4        $10 5/8
      Third Quarter .................................     26              8 15/16
      Second Quarter ................................     30 1/8          8 7/8
      First Quarter .................................     12 3/8          8 1/8

1998
      Fourth Quarter ................................     13 1/8          5 3/4
      Third Quarter .................................     32 5/8          6 3/8
      Second Quarter ................................     31             23 3/4
      First Quarter .................................     27             16
</TABLE>


                                 DIVIDEND POLICY

     We have never declared or paid any cash dividends on our common stock. We
currently intend to retain earnings to finance the growth and development of our
business and do not anticipate paying any cash dividends on our common stock in
the foreseeable future. In addition, provisions in certain of our credit
facilities and the terms of our Series A preferred stock contain certain
restrictions on the payment of dividends on our common stock. Holders of shares
of Series A preferred stock are entitled to receive annual cash dividends of
$1.86 per share, such dividends being cumulative and payable annually as
declared by our Board of Directors. Any future change in our dividend policy
will be made at the discretion of our Board of Directors in light of our
financial condition, capital requirements, earnings and prospects, restrictions
under our credit agreements, the rights of the holders of shares of our Series A
preferred stock and any other factors that our Board of Directors may deem
relevant.

                        SALES OF UNREGISTERED SECURITIES

     On October 1, 1998, we acquired all of the outstanding shares of capital
stock of Titan Finance, Limited in exchange for $2,250,000 in cash and
$2,250,000 in convertible subordinated promissory notes. The offering and
issuance of the promissory notes was effected pursuant to Regulation S,
promulgated under the Securities Act of 1933, as amended. The notes were
converted into 112,500 shares of our common stock in May 1999 in accordance with
their terms.


                                       17
<PAGE>   18
ITEM 6. SELECTED FINANCIAL DATA

     The following tables set forth certain of our historical consolidated
financial data and should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and our
Consolidated Financial Statements and related notes, included elsewhere in this
report. The data has been derived from our audited consolidated financial
statements.


<TABLE>
<CAPTION>
                                                                         YEAR ENDED DECEMBER 31,
                                                          -----------------------------------------------------
                                                            1999       1998        1997       1996       1995
                                                          --------   --------    --------   --------   --------
                                                                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                       <C>        <C>         <C>        <C>        <C>
OPERATING DATA:
    Gain on sale of lease financing receivables
       through securitized transactions ...............   $    811   $ 16,291    $ 18,164   $  3,456   $  3,259
    Gains from direct sales of lease financing
       receivables ....................................     16,473     18,434      17,095      9,755      4,926
    Interest income ...................................     72,343     17,315       9,193      6,387      3,069
    Servicing income ..................................      7,455      5,112       3,095      1,053        323
    Other income ......................................      5,268      3,991       4,052      2,720        958
                                                          --------   --------    --------   --------   --------
         Total revenues (1) ...........................    102,350     61,143      51,599     23,371     12,535
                                                          --------   --------    --------   --------   --------
    Salaries and benefits .............................     23,313     29,509      15,554      6,799      2,235
    Interest expense ..................................     37,554      6,027       5,180      5,049      2,632
    Provision for credit losses on lease financing
       receivables and investment in trust
       certificates ...................................     11,756     10,364       2,101        605        392
    Depreciation and amortization .....................      5,505      3,752       1,525        469        179
    Other general and administrative ..................     19,211     14,173      11,595      6,254      4,998
    Research and development costs of acquired
       companies ......................................       --        2,550        --         --         --
    Merger and acquisition expenses ...................       --        1,742        --         --         --
    Relocation of operations center ...................       --        1,593        --         --         --
                                                          --------   --------    --------   --------   --------
         Total expenses ...............................     97,339     69,710      35,955     19,176     10,436
                                                          --------   --------    --------   --------   --------
    Income (loss) before provision (benefit) for
       income taxes ...................................      5,011     (8,567)     15,644      4,195      2,099
    Provision (benefit) for income taxes ..............      2,723     (2,665)      5,107        932        720
                                                          --------   --------    --------   --------   --------
    Net income (loss) .................................   $  2,288   $ (5,902)   $ 10,537   $  3,263   $  1,379
                                                          ========   ========    ========   ========   ========
    Earnings (loss) per common share, diluted (2) .....   $   0.13   $  (0.43)   $   1.03   $   0.41   $   0.17
                                                          ========   ========    ========   ========   ========
    Weighted average shares outstanding, diluted ......     17,338     13,725      10,185      7,923      8,074
                                                          ========   ========    ========   ========   ========
</TABLE>

(1)  Prior to July 1, 1998, we structured our securitization transactions to
     meet the criteria for sales of lease financing receivables under generally
     accepted accounting principles. Effective July 1, 1998, we made a strategic
     decision to alter the structure of our subsequent securitizations so as to
     retain the leases we acquire and originate on our balance sheet. In the
     fourth quarter of 1999, with our planned conversion to a national bank, we
     began to de-emphasize the origination channels that generate lower return
     on equity and reduce the amount of lower yielding assets on our balance
     sheet. We did this in order to utilize our capital more effectively and to
     reduce the amount of capital we would be required to carry related to these
     assets when we become a bank. In connection with this strategy, in December
     1999, we sold approximately $76 million of lower yielding Private Label
     leases to a securitization facility utilizing an off balance sheet
     structure which provided us with 100% advance rates and did not require us
     to retain any residual interest.

     As a result, total revenues for 1995, 1996 and 1997 included securitized
     gain on sale for the entire year, total revenues for 1998 included
     securitized gain on sale only from January 1, 1998 through June 30, 1998,
     and total


                                       18
<PAGE>   19
     revenues for 1999 only included $0.8 million securitized gain on sale from
     securitizing certain lower yielding Private Label leases as described
     above.

(2)  See Note 3 to our consolidated financial statements for a description of
     the computation of earnings (loss) per share.


<TABLE>
<CAPTION>
                                                                                   DECEMBER 31,
                                                          --------------------------------------------------------------
                                                             1999         1998         1997         1996         1995
                                                          ----------   ----------   ----------   ----------   ----------
                                                                                  (IN THOUSANDS)
<S>                                                       <C>          <C>          <C>          <C>          <C>
BALANCE SHEET DATA:
Assets:
     Lease financing receivables, net .................   $  871,948   $  337,162   $   27,675   $   62,769   $   67,945
     Cash and cash equivalents ........................       57,083        7,928       14,569        3,793        1,265
     Other receivables ................................        7,613       11,596        4,087         --           --
     Investment in trust certificates .................        9,808        7,288       12,512        9,534         --
     Marketable securities ............................        3,460        5,042        4,223         --           --
     Goodwill and other intangible assets, net ........       43,500       39,202       20,162        2,003          732
     Property and equipment, net ......................       11,723        9,909        5,801        3,615         --
     Other assets .....................................        8,627        6,923        3,929        2,040        1,367
     Current tax receivables ..........................          590        3,243         --           --           --
                                                          ----------   ----------   ----------   ----------   ----------
         Total assets .................................   $1,014,352   $  428,293   $   92,958   $   83,754   $   71,309
                                                          ==========   ==========   ==========   ==========   ==========

Liabilities and Stockholders' Equity:
     Nonrecourse debt .................................   $  766,095   $  276,511   $     --     $     --     $     --
     Other debt .......................................       27,425       23,026       14,937       53,153       56,166
     Subordinated notes payable .......................        1,000        3,250        6,000        9,000        9,000
     Other liabilities ................................       51,878       40,989       28,794       13,374        4,300
                                                          ----------   ----------   ----------   ----------   ----------
         Total liabilities ............................      846,398      343,776       49,731       75,527       69,466
                                                          ----------   ----------   ----------   ----------   ----------

     Redeemable preferred stock .......................           70          469        2,640        3,890         --
     Stockholders' equity .............................      167,884       84,048       40,587        4,337        1,843
                                                          ----------   ----------   ----------   ----------   ----------
         Total liabilities and stockholders' equity ...   $1,014,352   $  428,293   $   92,958   $   83,754   $   71,309
                                                          ==========   ==========   ==========   ==========   ==========
</TABLE>


                                       19
<PAGE>   20
<TABLE>
<CAPTION>
                                                                                 YEAR ENDED DECEMBER 31,
                                                           ------------------------------------------------------------------
                                                              1999          1998          1997          1996          1995
                                                           ----------    ----------    ----------    ----------    ----------
                                                                                 (DOLLARS IN THOUSANDS)
<S>                                                        <C>           <C>           <C>           <C>           <C>
OTHER DATA:
Lease financing receivables acquired and originated (1):
     Retail (2) -
         Average interest rate .........................        15.14%        16.60%        15.79%        16.09%         --
         Principal amount ..............................   $  566,238    $  347,913    $   98,229    $    7,526    $     --
     Other:
         Private Label -
             Average interest rate .....................         7.85%         7.53%         9.14%         9.45%         9.78%
             Principal amount ..........................   $  296,111    $  249,327    $  210,113    $  161,137    $   65,244
         Wholesale (2) -
             Average interest rate .....................        11.26%        12.47%        13.32%        14.07%         --
             Principal amount ..........................   $   57,713    $  106,215    $   74,781    $   10,543    $     --
         Captive Finance -
             Principal amount ..........................   $  153,238    $  164,290          --            --            --
                                                           ----------    ----------    ----------    ----------    ----------
     Total -
         Average interest rate .........................        12.28%        12.94%        11.66%        10.00%         9.78%
         Principal amount ..............................   $1,073,300    $  867,745    $  383,123    $  179,206    $   65,244
Total principal amount adjusted for pooling-of-
     interest method ...................................   $1,073,300    $  897,131    $  640,359    $  352,203    $  168,035
Total leases serviced (at period end) -
     Principal amount ..................................   $1,448,517    $  892,929    $  504,387    $  217,283    $   77,204
Electronic commerce network activity:
     Active customers (at period end) ..................       82,516        43,649        30,675        14,294         3,453
     Financing applications ............................       96,641        47,263        38,622        16,117         5,124
</TABLE>

--------------------
(1)  Lease financing receivables do not include leases originated by the
     entities we acquired and accounted for as poolings of interests prior to
     the acquisition date of such entities for all years presented. Lease
     financing receivables acquired or originated during 1997 do not include
     approximately $44.6 million of leases acquired in connection with our
     acquisition of Heritage Credit Services, Inc. Lease financing receivables
     acquired or originated during 1998 do not include approximately $17.9
     million of leases acquired in connection with our acquisitions of three
     leasing companies located in the United Kingdom.

(2)  We established our Retail and Wholesale program in July 1996.


                                       20
<PAGE>   21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

                                    OVERVIEW

     SierraCities.com is a leading provider of e-finance solutions for small
businesses. Since our inception, our primary financing product has been
equipment leases. We acquire, originate, sell and service equipment leases
relating to a wide range of equipment, including computers and peripherals,
software, telecommunications and diagnostic equipment as well as other
specialized equipment for the health care, automotive, food and hospitality
industries. The equipment we finance generally has a purchase price of less than
$250,000, with an average of approximately $20,000 for leases originated in
1997, $31,000 for leases originated in 1998, and $30,000 for leases originated
in 1999. Because of their relatively small size, the leases we finance are
commonly referred to in the finance industry as "small ticket leases."

     We fund the acquisition or origination of our leases from working capital
or through our securitized warehouse facilities. From time to time, depending on
market conditions, we securitize the leases in our portfolio that meet
pre-established eligibility criteria by packaging them into a pool and selling
beneficial interests in the leases through public offerings and private
placement transactions.

     Prior to July 1, 1998, we structured our securitization transactions to
meet the criteria for sales of lease financing receivables under generally
accepted accounting principles. Thus, for all securitizations completed prior to
this date, we recorded a gain on sale of lease financing receivables when we
included the receivables in a securitization. Effective as of July 1, 1998, we
made a strategic decision to alter the structure of our subsequent
securitization transactions so as to retain the leases we acquire and originate
on our balance sheet and earn an interest margin on those assets over the life
of the leases. This decision has not had a significant impact on our cash flow,
but it has negatively affected our earnings per share in the period since the
change. In the fourth quarter of 1999, with our planned conversion to a national
bank, we began to de-emphasize the origination channels that generate lower
return on equity and reduce the amount of lower yielding assets on our balance
sheet. We did this in order to utilize our capital more effectively and to
reduce the amount of capital we would be required to carry related to these
assets when we become a bank. In connection with this strategy, in December
1999, we sold approximately $76 million of lower yielding Private Label leases
to a securitization facility utilizing an off balance sheet structure which
provided us with 100% advance rates and did not require us to retain any
residual interest. We will continue in 2000 with this strategy to selectively
reduce the amount of lower yielding assets on our balance sheet. We will
continue to evaluate different structuring alternatives and will use the
structure that provides us with the best execution.

     We began operations in June 1994 and initially developed a program to
purchase leases from leasing companies that had the ability to originate
significant lease volume and were willing and able to provide us with credit
protection and perform some of the more labor-intensive servicing functions on
an ongoing basis with respect to the leases sold to us. This program, referred
to as our "Private Label" program, was designed to provide us with access to
high volumes of leases eligible for the securitization market, while minimizing
our risk of loss. We have experienced significant growth in our Private Label
program since its inception. Under this program, we purchased $4.5 million of
leases in 1994, $65.2 million of leases in 1995, $161.1 million of leases in
1996, $210.1 million of leases in 1997, $249.3 million of leases in 1998, and
$296.1 million of leases in 1999.

     In 1996, as part of our growth strategy, we established our Retail and
Wholesale programs through two strategic acquisitions and we expanded these
programs through internal growth and additional acquisitions in 1997, 1998 and
1999. Through our Retail program we develop relationships with manufacturers,
dealers and other vendors of equipment who refer their small business customers
to us for equipment financing. Through our Wholesale program (which was
discontinued in December 1999) we received volume from small ticket lease
brokers who were unable or unwilling to provide the credit protection or perform
the servicing functions required under our Private Label program. Under our
Retail program, we funded $7.5 million of leases in 1996, $98.2 million of
leases in 1997, $347.9 million of leases in 1998, and $566.2 million of leases
in 1999. Under our Wholesale program, we funded $10.5 million of leases in 1996,
$74.8 million of leases in 1997, $106.2 million of leases in 1998, and $57.7
million of leases in 1999.


                                       21
<PAGE>   22
     We established our Captive Finance program with our acquisition of
Integrated Lease Management, Inc. in March 1998. Under our Captive Finance
program, we funded $164.3 million of leases in 1998 and $153.2 million of leases
in 1999, a majority of which we subsequently sold to third parties. As a result,
substantially all of the revenue we generated under this program during 1998 and
1999 was from gains recognized from selling these leases rather than from yield
income.

                              RESULTS OF OPERATIONS

1999 COMPARED TO 1998

     Revenues increased $41.3 million, or 67%, from $61.1 million for 1998 to
$102.4 million for 1999, due to strong originations which generated higher
interest income. The $41.3 million increase in revenues in 1999 was net of a
$15.5 million decrease in gain on sale of lease financing receivables from 1998
as a result of our strategic decision to alter the structure of our
securitization transactions, effective July 1, 1998, so as to retain the leases
on our balance sheet. In connection with our strategy to convert to a national
bank, in December 1999 we recognized $0.8 million of gain on sale from selling
certain lower yielding Private Label leases to a securitization facility
utilizing an off balance sheet structure that provides us with 100% advance
rates and does not require any residual interest.

     Gains from direct sales of lease financing receivables decreased $1.9
million, or 11%, from $18.4 million for 1998 to $16.5 million for 1999. The
decrease is related to a decrease in the volume of leases sold to third parties.

     Interest income increased $55.0 million, or 318%, from $17.3 million for
1998 to $72.3 million for 1999. The increase was primarily related to a 389%
increase in our average balance of interest bearing assets outstanding during
1999 primarily as a result of our decision, effective July 1, 1998, to retain
lease receivables on our balance sheet after securitization.

     Servicing income increased $2.4 million, or 46%, from $5.1 million for 1998
to $7.5 million for 1999. Servicing income consists of late charge income
collected on leases owned and serviced by us and servicing income earned on
leases sold under our securitization programs. This increase was due to an
increase in late charges collected, which resulted from a 66% increase in the
average balance of leases owned and serviced. The increase in servicing income
was partially offset by the absence in the current year of servicing fees
related to lease receivables securitized after July 1998. Effective July 1,
1998, we began retaining leases on our balance sheet after securitization.
Servicing fees related to lease receivables securitized after such date were
recorded as reduction of interest expense rather than servicing income.

     Other income increased $1.3 million, or 32%, from $4.0 million for 1998 to
$5.3 million for 1999. The increase is primarily attributable to a higher level
of documentation fees and other fees collected in connection with the
origination and administration of the leases due to the overall expansion of our
business.

     Salaries and benefits decreased $6.2 million, or 21%, from $29.5 million
for 1998 to $23.3 million for 1999. Continued enhancements made to our
e-commerce technology platform allowed us to increase efficiency and decrease
salaries and benefits while handling a higher number of lease originations.
Total lease originations increased 20% from 1998 to 1999 and lease originations
for the Retail program increased 63% from 1998 to 1999. Average leases owned and
serviced increased 66% from 1998 to 1999.

     Interest expense increased $31.6 million, or 523%, from $6.0 million for
1998 to $37.6 million for 1999. The increase is primarily related to a 603%
increase in the average outstanding borrowings as a result of our decision,
effective July 1, 1998, to retain lease receivables and the related borrowings
on our balance sheet after securitization. The increase was partially offset by
the servicing fees and cash flows allocable to trust certificates that we
received from lease receivables securitized after July 1, 1998. As we retain
lease receivables on our balance


                                       22
<PAGE>   23
sheet, the related servicing fees and cash flows allocable to the trust
certificates are recorded as a reduction of interest expense.

     Provision for credit losses increased $1.4 million, or 13%, from $10.4
million for 1998 to $11.8 million for 1999. The increase is primarily due to an
increase in lease receivables retained on our balance sheet during 1999, which
resulted from our decision to retain leases on our balance sheet effective July
1, 1998. The provision for 1998 included a $6.0 million charge to write down the
carrying value of our investment in trust certificates as a result of the
widening of our spread over Treasuries paid to investors in securitization
transactions from the time we initially securitized our leases in our
securitized warehouse facilities to the time we permanently securitized our
leases in December 1998. The widening of spreads was due to economic turmoil in
Russia and Asia as well as other economic factors. This write-down affected only
the lease receivables we securitized prior to July 1, 1998.

     Depreciation and amortization increased $1.7 million, or 47%, from $3.8
million for 1998 to $5.5 million for 1999. Such increase was primarily
attributable to a 16% increase in goodwill and other intangible assets from 1998
to 1999, resulting from acquisitions during 1999. Additionally, we experienced a
39% increase in fixed assets from 1998 to 1999 as a result of our acquisitions
of leasing companies during 1999 and the overall expansion of our business.

     Other general and administrative expenses increased $5.0 million, or 36%,
from $14.2 million for 1998 to $19.2 million for 1999. The increase in general
and administrative expenses primarily resulted from the general expansion of our
business and included an increase in expenses related to office rental,
communication and insurance.

     In April 1998, we acquired Nexsoft, Inc. of Denver, Colorado. Nexsoft, Inc.
is a software development firm specializing in software for the equipment
leasing industry. We accounted for this transaction using the purchase method of
accounting. We allocated the purchase price to the net assets acquired and to
purchased in-process research and development. Purchased in-process research and
development includes the value of products in the development stage which were
not considered to have reached technological feasibility. As a result, we
expensed $2.6 million of acquisition costs during 1998.

     During 1998, we incurred approximately $1.7 million of merger and
acquisition expenses in connection with the acquisitions and proposed
acquisitions of companies accounting for or to be accounted for under the
pooling-of-interests method. Approximately $0.6 million of this amount was
incurred in connection with the terminated merger with the Oliver-Allen
Corporation.

     During 1998, we incurred approximately $1.6 million of costs in connection
with the relocation of our operations center from Jupiter, Florida to Houston,
Texas.

1998 COMPARED TO 1997

     Gain on sale of lease receivables decreased $1.9 million, or 10%, from
$18.2 million for the year ended December 31, 1997 to $16.3 million for the year
ended December 31, 1998. This decrease in leases sold was largely the result of
our strategic decision, effective July 1, 1998, to alter the structure of our
securitization transactions so as to retain our lease financing receivables on
our balance sheet after securitization and recognize interest income over the
life of the leases, rather than recognizing gain on sale at the time of
securitization. Because of this decision, the volume of lease receivables
securitized that met the criteria for sales of lease financing receivables under
generally accepted accounting principles decreased from $395.7 million in 1997
to $265.0 million in 1998.

     Gains from direct sales of lease financing receivables increased $1.3
million, or 8%, from $17.1 million for the year ended December 31, 1997 to $18.4
million for the year ended December 31, 1998. This increase directly resulted
from an increase in the volume of leases brokered or discounted to third
parties.



                                       23
<PAGE>   24
     Interest income increased $8.1 million, or 88%, from $9.2 million for the
year ended December 31, 1997 to $17.3 million for the year ended December 31,
1998. This increase primarily related to a 78% increase in our average balance
of lease receivables outstanding during 1998 as a result of our decision to
retain lease receivables on our balance sheet after securitization. An
increase in our weighted average yield of lease receivables, resulting from
the fact that leases acquired under our Retail program, which are higher
yielding, represented a larger percentage of our total originations in 1998
than in 1997, also contributed to the overall increase in interest income.

     Servicing income increased $2.0 million, or 65%, from $3.1 million for the
year ended December 31, 1997, to $5.1 million for the year ended December 31,
1998. This increase primarily resulted from a 100% increase in the weighted
average balance of lease receivables serviced under our securitization program,
which was partially offset by a decrease in the ratio of late fees collected to
total assets owned and serviced. The ratio of late fees collected to total
assets owned and serviced decreased because of lower delinquencies in our
portfolio of owned and serviced leases. The change in the structure of our
securitization transactions also served to offset the increase in servicing
income. Effective July 1, 1998, when we began retaining lease receivables on our
balance sheet after securitization, servicing fees related to lease receivables
securitized after such date were recorded as reduction of interest expense
rather than as servicing income.

     Other income decreased $0.1 million, or 2%, from $4.1 million for the year
ended December 31, 1997, to $4.0 million for the year ended December 31, 1998.
Other income consists of miscellaneous income items and documentation and other
fees we collect in connection with our origination and administration of leases.
Although documentation and administration fees increased by $0.3 million in 1998
due to the overall expansion of our business, other miscellaneous income items
decreased by $0.4 million in 1998.

     Salaries and benefits increased $13.9 million, or 89%, from $15.6 million
for the year ended December 31, 1997 to $29.5 million for the year ended
December 31, 1998. This increase was primarily related to a 154% increase in the
number of people we employed from December 31, 1997 to December 31, 1998. The
number of employees increased because of our acquisitions as well as the general
expansion of our business. During the fourth quarter 1998, as part of our
ongoing effort to increase the efficiency of our operations, we eliminated
certain administrative positions and underperforming sales people thereby
reducing our work force by 103 people, or 17%, from 597 people on September 30,
1998.

     Interest expense increased $0.8 million, or 16%, from $5.2 million for the
year ended December 31, 1997 to $6.0 million for the year ended December 31,
1998. This increase primarily related to a 20% increase in outstanding
borrowings as a result of our decision, effective July 1, 1998, to retain lease
receivables and the related borrowings on our balance sheet after
securitization. This increase was partially offset by the servicing fees and
cash flows allocable to trust certificates that we received from lease
receivables securitized after July 1, 1998. As we retain lease receivables on
our balance sheet, the related servicing fees and cash flows allocable to the
trust certificates are recorded as a reduction of interest expense.

     Provision for credit losses increased $8.3 million, or 393%, from $2.1
million for the year ended December 31, 1997 to $10.4 million for the year ended
December 31, 1998. This increase was primarily due to a $6.0 million charge to
write down the carrying value of our investment in trust certificates as a
result of the widening of the spread over Treasuries paid to investors in
securitization transactions from the time we initially securitized our leases in
our securitized warehouse facilities to the time we permanently securitized our
leases in December 1998. The widening of spreads was due to economic turmoil in
Russia and Asia as well as other economic factors. In December 1998, we were
successful in completing a public securitization in a difficult market. This
write-down affects only the lease receivables we securitized prior to July 1,
1998. As for leases securitized after July 1, 1998, we no longer record an
investment in trust certificates and gain on sale related to such
securitization. The increase in provision for credit losses was also the result
of an increase in lease receivables retained on our balance sheet during 1998,
which also resulted from our decision to retain leases on balance sheet
effective July 1, 1998.

     Depreciation and amortization increased $2.3 million, or 146%, from $1.5
million for the year ended December 31, 1997, to $3.8 million for the year ended
December 31, 1998. This increase was primarily attributable to an 88% increase
in goodwill and other intangible assets during 1998, due to our acquisition of
five businesses from April 1998 through October 1998 which were recorded under
the purchase method of accounting. A 71% increase in our


                                       24
<PAGE>   25
fixed assets from December 1997 to December 1998 also contributed to the
increase in depreciation and amortization.

     Other general and administrative expenses increased $2.6 million, or 22%,
from $11.6 million for the year ended December 31, 1997 to $14.2 million for the
year ended December 31, 1998. This increase resulted from the general expansion
of our business and our 1998 acquisitions.

     In April 1998, we acquired Nexsoft, Inc. of Denver, Colorado. Nexsoft, Inc.
is a software development firm specializing in software for the equipment
leasing industry. We accounted for this transaction using the purchase method of
accounting. We allocated the purchase price of the net assets acquired and to
purchased in-process research and development. Purchased in-process research and
development includes the value of products in the development stage that was not
considered to have reached technological feasibility. As a result, we expensed
$2.6 million of acquisition costs during the year ended December 31, 1998.

     During 1998, we incurred approximately $1.7 million of merger and
acquisition expenses in connection with the acquisition or proposed acquisition
of companies accounted for or to be accounted for under the pooling-of-interests
method. Approximately $0.6 million of this amount was incurred in connection
with the terminated merger with the Oliver-Allen Corporation.

     During 1998, we incurred approximately $1.6 million of costs in connection
with the relocation of our operations center from Jupiter, Florida to Houston,
Texas.

                         LIQUIDITY AND CAPITAL RESOURCES

     Our small business financing business is capital intensive and requires
access to substantial short-term and long-term credit to fund the acquisition
and origination of loans and equipment leases. Since inception, we have funded
our operations primarily through borrowings under our securitized warehouse
facilities, sales of our common stock and by including certain of our leases in
public and private securitization transactions. We expect to continue to require
access to large amounts of capital to maintain and expand our volume of loans
and equipment leases and, depending upon market conditions, to complete
acquisitions of additional equipment and loan finance businesses.

     We use capital to acquire and originate leases, pay interest expenses,
repay obligations in connection with borrowings under our securitized warehouse
facilities, and pay operating and administrative expenses, income taxes and
capital additions. The structure of our funding programs and our securitized
warehouse facilities and public securitization transactions enabled us to
generate positive cashflow from operations during the previous three years.

     We use our securitized warehouse facilities to fund the acquisition and
origination of loans and leases that satisfy the eligibility requirements
established under each securitized warehouse facility. These securitized
warehouse facilities provide us with advance rates that generally do not require
us to utilize our capital during the period that loan and lease receivables are
financed under such facilities. The liquidity provided under certain of our
securitized warehouse facilities is generally interim in nature and we seek to
refinance or resell the loan and lease receivables that were funded under these
interim facilities through our public securitization program within three to
twelve months.

     In April 1999, we filed a shelf registration statement with the Securities
and Exchange Commission to register up to an additional $300 million of our debt
and/or equity securities. In June 1999, we utilized the shelf registration to
make an underwritten public equity offering of 4,000,000 shares of our common
stock, from which we received cash proceeds of approximately $68.4 million, net
of expenses. In July 1999, the underwriters of our offering exercised their
over-allotment option and purchased an additional 600,000 shares of our common
stock, from which we received cash proceeds of approximately $10.4 million, net
of expenses. We used the net proceeds from the offering for general corporate
purposes, including the funding of net asset originations and other working
capital needs.


                                       25
<PAGE>   26
     We believe that our existing cash and investment balances, cash flow from
our operations, net proceeds from future securitization transactions, amounts
available under our securitized warehouse facilities and proceeds from our
securities offerings will be sufficient to fund our operations for the
foreseeable future.

SECURITIZED WAREHOUSE FACILITIES

     As of December 31, 1999, our six securitized warehouse facilities had an
aggregate funding capacity of $871.0 million with $354.5 million available for
use.

     Through June 30, 1998, our securitized warehouse facilities were structured
such that transfers to those facilities were considered sales under generally
accepted accounting principles. Effective July 1, 1998, concurrent with our
strategic decision to retain our lease receivables on our balance sheet as
long-term investments, we modified the structure of our securitized warehouse
facilities such that advances under the facilities would be considered debt
under generally accepted accounting principles. In the fourth quarter of 1999,
with our planned conversion to a national bank, we began to de-emphasize the
origination channels that generate lower return on equity and reduce the amount
of lower yielding assets on our balance sheet. We did this in order to utilize
our capital more effectively and to reduce the amount of capital we would be
required to carry related to these assets when we become a bank. In connection
with this strategy, in December 1999, we sold approximately $76 million of lower
yielding Private Label leases to a securitization facility utilizing an off
balance sheet structure which provided us with 100% advance rates and did not
require us to retain any residual interest. We will continue in 2000 with this
strategy to selectively reduce the amount of lower yielding assets on our
balance sheet. We will continue to evaluate different structuring alternatives
and will use the structure that provides us with the best execution. The cash
flow available to us, which is generally based on the advance rates and discount
rates set forth in the facility agreements, was generally unaffected by the
modifications to the agreements.

PUBLIC SECURITIZATION TRANSACTIONS

     To date, the proceeds that we have received from our public securitization
transactions have generally been sufficient to repay amounts we have borrowed
under our securitized warehouse facilities, as well as related issuance
expenses. We generally structure our securitization transactions to qualify as
financings for income tax purposes. Therefore, no income tax is payable in the
current period on the gain recognized. We anticipate that our future financings
of loans and equipment leases will be principally through securitization
transactions and, to a lesser extent, through portfolio sales and sales to
third-party financing sources.

     As of December 31, 1999, we had completed six permanent public
securitization transactions involving the issuance of $1.1 billion of senior and
subordinated securities. We completed the Series 1996-1 and 1996-2 transactions
in 1996, the Series 1997-1 transaction in September 1997, the Series 1998-1
transaction in December 1998, the Series 1999-1 transaction in April 1999 and
the Series 1999-2 transaction in September 1999.

     In connection with the Series 1996-1 and 1996-2 transactions, Class A
certificates, rated AAA by Standard and Poor's, Aaa by Moody's Investor Services
and AAA by Duff & Phelps Credit Rating Co., were sold in the public market. The
Class B-1 and Class B-2 Certificates were rated BBB and BB, respectively, by
Duff & Phelps Credit Rating Co, and were sold on a non-recourse basis in the
private market.

     In connection with the Series 1997-1 transaction, four tranches of Class A
Notes, rated AAA by Standard and Poor's, Aaa by Moody's Investor Services, Inc.
and AAA by Duff & Phelps Credit Rating Co., were sold in the public market. The
Class B-1 and Class B-2 Notes were rated BBB and AA, respectively, by Duff &
Phelps Credit Rating Co, and were sold on a non-recourse basis in the private
market. The Class B-2 Note was enhanced through a letter of credit with Dresdner
Bank AG, which resulted in the higher ratings. We retained a Class B-3 Note,
which was rated B by Duff & Phelps Credit Rating Co., for future sale in the
private market.

     In connection with the Series 1998-1 transaction, four tranches of Class A
Notes, rated AAA by Standard and Poor's, Aaa by Moody's Investor Services, Inc.,
AAA by Duff & Phelps Credit Rating Co., and AAA by Fitch


                                       26
<PAGE>   27
IBCA, Inc. were sold in the public market. The Class B-1 and Class B-2 Notes
were rated BBB and BB by Duff & Phelps Credit Rating Co. and Fitch IBCA, Inc.,
and were sold and financed on a non-recourse basis in the private market. A
Class B-3 Note was rated B by Duff & Phelps Credit Rating Co. and Fitch IBCA,
Inc. which we retained for future sale in the private market.

     In connection with the Series 1999-1 transaction, four tranches of Class A
Notes, rated AAA by Standard and Poor's, Aaa by Moody's Investor Services, Inc.,
AAA by Duff & Phelps Credit Rating Co., and AAA by Fitch IBCA, Inc. were sold in
the public market. The Class B-1 and Class B-2 Notes were rated BBB and BB by
Duff & Phelps Credit Rating Co. and Fitch IBCA, Inc., and were sold and financed
on a non-recourse basis in the private market. A Class B-3 Note was rated B by
Duff & Phelps Credit Rating Co. and Fitch IBCA, Inc., which we retained for
future sale in the private market.

     In connection with the Series 1999-2 transaction, four tranches of Class A
Notes, rated AAA by Standard and Poor's, Aaa by Moody's Investor Services, Inc.,
AAA by Duff & Phelps Credit Rating Co. and AAA by Fitch IBCA, Inc. were sold in
the public market. Class B Notes rated A by Standard and Poor's, A by Duff &
Phelps Credit Rating Co., A by Fitch IBCA, Inc. and A2 by Moody's Investor
Services, Inc. were also sold in the public market. The Class C Note, rated BBB
by Duff & Phelps Credit Rating Co. and Fitch IBCA, Inc. and the Class D Note,
rated BB by Duff & Phelps Credit Rating Co. and Fitch IBCA, Inc., were sold and
financed on a non-recourse basis in the private market. A Class E Note was rated
B by both Duff & Phelps Credit Rating Co. and Fitch IBCA, Inc. and was retained
by us for future sale in the private market.

     We were able to realize approximately 94% of the present value of the
remaining scheduled payments of the equipment leases included in our Series
1996-1 and 1996-2 securitizations, approximately 96% of the present value of the
remaining scheduled payments of the equipment leases included in our Series
1997-1 securitization, and approximately 95% of the present value of the
remaining scheduled payments of the equipment leases included in our Series
1998-1, Series 1999-1 and 1999-2 securitizations.

SUBORDINATED NOTES

     In May 1997, we entered into a $5.0 million subordinated revolving credit
facility with an affiliate. Due to availability of funds under other facilities,
it was determined that this revolving credit facility was no longer needed and
was terminated in 1999, based upon mutual agreement of all parties involved.
Advances under this facility bore interest at 11% per annum.

     In connection with the acquisition of Heritage Credit Services, Inc. in May
1997, we issued a $1.0 million subordinated note payable to the former owner.
Such note bears interest at 9% per annum, payable quarterly, with the
outstanding principal amount due in May 2002.

     On October 1, 1998, we acquired all of the outstanding shares of capital
stock of Titan Finance Limited, a company incorporated in England and Wales, in
exchange for $2.3 million in cash and $2.3 million in convertible subordinated
promissory notes. The notes were converted into 112,500 shares of our common
stock in May 1999 in accordance with their terms. Prior to the conversion, the
promissory notes bore interest at a rate of 6% per annum, payable semi-annually,
with the outstanding principal amount due October 1, 2003.

INTEREST RATE MANAGEMENT ACTIVITIES

     The implicit yield to us on all of our leases is on a fixed interest rate
basis due to the leases having scheduled payments that are fixed at the time the
leases are originated. When we acquire or originate leases, we base our pricing
on the "spread" we expect to achieve between the implicit yield to us on each
lease and the effective interest cost we will pay when we sell or refinance such
lease through a public securitization transaction. Increases in interest rates
between the time the leases are acquired or originated by us and the time they
are sold or refinanced through a public securitization transaction could narrow
or eliminate the spread, or result in a negative spread.


                                       27
<PAGE>   28
     We mitigate the volatility of interest rate movement between the time we
acquire or originate a lease and the time such lease is sold or refinanced
through a public securitization transaction by hedging movements in interest
rates using interest rate swap derivatives which match the underlying cash flow
associated with the leases originated. Under these swap agreements, we receive
interest on the notional amount at either the 30-day LIBOR or the 30-day AA
Corporate Commercial Paper Index, as applicable, and we pay a fixed rate which
is equal to a spread over the yield to maturity of U.S. Treasury securities
similar to the maturities of the specific leases being held for securitization.
Such hedging arrangements are generally implemented when our portfolio of
unhedged leases reaches $10.0 million.

     At certain times, changes in the interest rate market present favorable
conditions to hedge against future rate movement. We may, from time to time,
enter into hedges against interest rate movement in anticipation of future
origination volume in order to take advantage of unique market conditions, but
this activity is generally limited to levels where we are confident of
origination in the near term.

                                    YEAR 2000

     The "Year 2000 problem" exists because many computer programs, embedded
systems and components were designed to refer to a year by the last two digits
of the year, such as "99" for "1999." As a result, some of these systems may not
properly recognize that the year that follows "1999" is "2000" and not "1900."
If those problems are not corrected, the systems could fail or produce erroneous
results. Our computer systems experienced no significant Year 2000 problems and
no business interruptions were experienced related to the Year 2000 problem. If
any of our significant customers or other counter-parties do not successfully
and timely achieve Year 2000 compliance it could have a material effect on our
business, results of operations, or financial condition.

     COSTS TO ADDRESS THE YEAR 2000 ISSUES

     We incurred costs approximating $300,000, exclusive of internal costs,
during 1999 to complete our resolution of Year 2000 issues. We did not
separately track internal Year 2000 costs that were largely salaries and
benefits of our personnel working on the project and were not incremental costs.
We did not incur any material costs to address Year 2000 issues during the year
ended December 31, 1998.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The nature of our business exposes us to market risk arising from changes
in interest rates, credit spreads, and exchange rates. We have instituted risk
management policies to monitor and limit these exposures as follows:

INTEREST RATE RISK

     To manage our interest rate risk, we have implemented policies that are
designed to minimize changes in our cost of funds associated with changes in
benchmark interest rates after lease receivables have been funded. The
measurement of market risk associated with financial instruments is meaningful
when all related and offsetting transactions are aggregated, and the resulting
net positions are identified.


                                       28
<PAGE>   29
     Our implicit yield on all of our leases is based on a fixed interest rate.
We generally obtain initial funding for lease acquisitions and originations
through borrowings under our securitized warehouse facilities and, from time to
time, depending on market conditions, we include the lease receivables in a
securitization transaction or portfolio sale. Because the securitized warehouse
facilities bear interest at floating rates, whereas the permanent
securitizations or portfolio sales bear interest at a spread over the benchmark
Treasury rate which is fixed at the time the transaction is completed, we are
exposed to the risk of an increase in the cost of funds from adverse interest
rate movements during the period from the date of borrowing through the date
that the underlying leases are included in a securitization transaction or
otherwise sold. We seek to minimize our exposure by entering into amortizing
interest swap transactions under which the notional amount of the contract
changes monthly to match the anticipated amortization of the underlying leases.
As of December 31, 1999, we were engaged in various interest rate swap
transactions. The total notional amount involved in these transactions closely
matched our outstanding balance of lease receivables that were not permanently
securitized.

     The following earnings sensitivity analysis assumes an immediate closing of
a permanent securitization transaction on lease receivables outstanding as of
December 31, 1999 and an increase of 50 basis points in the benchmark Treasury.
As indicated in the analysis, an immediate change in the interest rate would
have a minimal impact on our earnings because the increase in our cost of funds
from an increase in the benchmark Treasury would be substantially offset by a
reduction in our cost of funds from the amortization of swap settlement proceeds
received when our swap positions are unwound.

     12-month pre-tax earnings change from increase in benchmark Treasury by 50
basis points:

     (Dollars in thousands)


<TABLE>
                  <S>                                                                            <C>
                  Decrease in pre-tax earnings from increase in interest expense ............    $1,622
                  Increase in pre-tax earnings from decrease in interest expense due
                     to the amortization of swap proceeds ...................................     1,160
                                                                                                 ------
                  Net decrease in pre-tax earnings ..........................................    $  462
                                                                                                 ======
</TABLE>


CREDIT SPREAD RISK

     We are also exposed to the risk of an increase in credit spreads between
the time we borrow money under our securitized warehouse facilities and the time
we securitize or otherwise sell the leases. We can partially offset this type of
increase in our cost of funds by engaging in interest rate swap transactions and
benefiting from an increase in interest rate swap spreads. However, it is not
possible for us to completely offset our credit spread risk through hedging
transactions. Based on our lease receivables outstanding as of December 31,
1999, an increase of 50 basis points in the credit spread would result in a $1.6
million decrease in our pre-tax earnings in the next 12 months, provided that
there is no corresponding increase in the swap spread which would partially
offset the decrease in pre-tax earnings.

FOREIGN EXCHANGE RISK

     We entered the small ticket leasing market in the United Kingdom in the
third quarter of 1998 through our acquisition of Suffolk Street Group. As of
December 31, 1999, our pound sterling denominated lease receivables totaled
approximately $36.4 million. As of the same date, our pound sterling denominated
borrowings had an aggregate outstanding balance of approximately $21.8 million.
We are exposed to changes in exchange rates when translating these pound
sterling denominated revenues and expenses to United States dollars. Based on
lease receivables and borrowings outstanding as of December 31, 1999, a 5%
decrease in the relative value of the British pound compared to the United
States dollar would result in a $138,000 decrease in our pretax earnings in the
next 12 months.

     While the earnings sensitivity analyses presented above represent our best
estimate of the impact on our earnings and balance sheet of various market rate
movements, the actual behavior will likely differ from what we project. From
time to time, we recalibrate our assumptions and adjust our modeling techniques
as needed to improve the accuracy of the risk measurement results. You should
also be aware that actual movements of market


                                       29
<PAGE>   30
interest rates can include changes in the shape of the yield curve and changes
in the basis relationship between various market rates, among other changes,
which are not captured in the sensitivity analyses presented here.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Our Consolidated Financial Statements included in this Report beginning at
page F-1 are incorporated herein by reference.

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

     None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information required by this Item with respect to the identity and
business experience of our directors is set forth in our Proxy Statement for the
Annual Meeting of Stockholders to be held on May 9, 2000 under the caption
"Election of Directors" and is hereby incorporated herein by reference.

     The information required by this Item with respect to the identity and
business experience of our executive officers is set forth in Item 1 of this
Report under the caption "Senior Officers."

     The information required by this Item with respect to compliance with
Section 16(a) of the Securities Exchange Act of 1934, as amended, is set forth
in our Proxy Statement for the Annual Meeting of Stockholders to be held on May
9, 2000 under the caption, "Section 16(a) Beneficial Ownership Reporting
Compliance" and is hereby incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

     The information required by this Item is set forth in our Proxy Statement
for the Annual Meeting of Stockholders to be held on May 9, 2000 under the
captions, "Executive Compensation," "Compensation Committee Interlocks and
Insider Participation," and "Organization and Remuneration of Board of
Directors" and is hereby incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this Item is set forth in our Proxy Statement
for the Annual Meeting of Stockholders to be held on May 9, 2000 under the
caption "Securities Beneficially Owned by Principal Stockholders and Management"
and is hereby incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this Item is set forth in our Proxy Statement
for the Annual Meeting of Stockholders to be held on May 9, 2000 under the
caption "Certain Relationships and Related Transactions" and is hereby
incorporated herein by reference.


                                       30
<PAGE>   31
                                     PART IV

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

     (a) - 1    FINANCIAL STATEMENTS

                See Index to Financial Statements on Page F-1 of this report.

     (a) - 2    FINANCIAL STATEMENT SCHEDULES

     The following Financial Statement Schedule and the Report of Independent
Accountants on Financial Statement Schedule are included in this report on the
pages indicated:


<TABLE>
<CAPTION>
                                                                                             PAGE
                                                                                             ----
         <S>                                                                                 <C>
         Report of Independent Public Accountants on Financial Statement Schedule ....       F-34
         Financial Statement Schedule II - Valuation and Qualifying Accounts .........       F-35
</TABLE>


     The supplemental schedules other than the one listed above are omitted as
the required information is inapplicable or the required information is included
in the consolidated financial statements or related notes.


     (a) - 3    EXHIBITS

<TABLE>
<CAPTION>
  EXHIBIT NO.                                                DOCUMENT
  -----------                                                --------
<S>                  <C>  <C>
     3.1             -    Restated Certificate of Incorporation of First Sierra, as amended (incorporated by
                          reference to Exhibit 3.1 to the Registrant's Form 10-K for the year ended December 31,
                          1998, Commission File No. 0-22525)
     3.2             -    Amended and Restated Bylaws of First Sierra (incorporated by reference to Exhibit 3.2
                          to the Registrant's Registration Statement on Form S-1 No. 333-22629)
     4.1             -    Rights Agreement, dated December 30, 1998, between First Sierra and Harris Trust and
                          Savings Bank, as Rights Agent, together with the Form of Certificate of Designations of
                          Preferred Stock attached thereto as Exhibit A, the Form of Rights Certificate attached
                          thereto as Exhibit B and the Summary of Rights to Purchase Preferred Stock attached
                          thereto as Exhibit C (incorporated by reference to Exhibit 4.1 to Registrant's Form 8-A
                          filed December 31, 1998)
     10.1            -    1997 Stock Option Plan (incorporated by reference to Exhibit 10.1 to Amendment No. 2 to
                          the Registrant's Registration Statement on Form S-1 No. 333-22629)*
     10.2            -    Amendment to 1997 Stock Option Plan (incorporated by reference to Exhibit 10.2 to the
                          Registrant's Form 10-K for the year ended December 31, 1998, Commission File No.
                          0-22525)*
     10.3            -    Reserved
     10.4            -    Form of Registration Rights Agreement (incorporated by reference to Exhibit 10.3 to
                          Amendment No. 2 to the Registrant's Registration Statement on Form S-1 No. 333-22629)
     10.5            -    Asset Purchase Agreement dated June 28, 1996 between First Sierra Financial, Inc.,
                          First Sierra Acquisition, Inc. and General Interlease Corporation and Eric Barash and
                          Daniel Dengate (incorporated by reference to Exhibit 10.4 to the Registrant's
                          Registration Statement on Form S-1 No. 333-22629)
     10.6            -    Agreement and Plan of Reorganization dated October 15, 1996 among Valerie A. Hayes,
                          Corporate Capital Leasing Group, Inc., First Sierra Financial, Inc., and First Sierra
                          Pennsylvania, Inc. (incorporated by reference to Exhibit 10.5 to the Registrant's
                          Registration Statement on Form S-1 No. 333-22629)
</TABLE>


                                       31
<PAGE>   32
<TABLE>
<S>                  <C>  <C>
     10.7            -    Asset Purchase Agreement, dated February 4, 1997, between Lease Pro, Inc., Charles E.
                          Lester and First Sierra Financial, Inc. (incorporated by reference to Exhibit 10.6 to
                          the Registrant's Registration Statement on Form S-1 No. 333-22629)
     10.8            -    First Amendment to Agreement and Plan of Reorganization dated February 27, 1997 among
                          Valerie A. Hayes, Corporate Capital Leasing Group, Inc., First Sierra Financial, Inc.
                          and First Sierra Pennsylvania, Inc. (incorporated by reference to Exhibit 10.7 to the
                          Registrant's Registration Statement on Form S-1 No. 333-22629)
     10.9            -    Agreement and Plan of Merger between Oren M. Hall, Charles E. Brazier, Greg E.
                          McIntosh, Brent M. Hall, Heritage Credit Services, Inc., First Sierra Financial, Inc.,
                          and First Sierra California, Inc., dated as of February 1, 1997 (incorporated by
                          reference to Exhibit 10.8 to the Registrant's Registration Statement on Form S-1 No.
                          333-22629)
     10.10           -    Form of Registration Rights Agreement between First Sierra Financial, Inc. and Oren M.
                          Hall (incorporated by reference to Exhibit 10.9 to the Registrant's Registration
                          Statement on Form S-1 No. 333-22629)
     10.11           -    Employment Agreement between Thomas J. Depping and First Sierra Financial, Inc.
                          (incorporated by reference to Exhibit 10.11 to Amendment No. 2 to the Registrant's
                          Registration Statement on Form S-1 No. 333-22629)*
     10.12           -    Employment Agreement between Sandy B. Ho and First Sierra Financial, Inc. (incorporated
                          by reference to Exhibit 10.12 to the Registrant's Form 10-K for the year ended December
                          31, 1998, Commission File No. 0-22525)*
     10.13           -    Employment Agreement between Robert H. Quinn, Jr. and First Sierra Financial, Inc.
                          (incorporated by reference to Exhibit 10.12 to Amendment No. 2 to the Registrant's
                          Registration Statement on Form S-1 No. 333-22629)
     10.14           -    Employment Agreement between Oren M. Hall and First Sierra Financial, Inc.
                          (incorporated by reference to Exhibit 10.13 to Amendment No. 1 to Registrant's
                          Registration Statement on Form S-1 No. 333-41833)*
     10.15           -    Employment Agreement between Michael A. Sabel and First Sierra Financial, Inc.
                          (incorporated by reference to Exhibit 10.1 to Registrant's Form 10-Q for the quarter
                          ended September 30, 1998)
     10.16           -    Agreement and Plan of Merger dated as of June 24, 1998 by and among First Sierra
                          Financial, Inc., Sierra Acquisition Corporation II, The Republic Group, Inc., James T.
                          Raeder and Mark G. McQuitty (incorporated by reference to Exhibit 2.1 to Registrant's
                          Form 8-K filed as of July 24, 1998)
     10.17           -    Employment Agreement between David L. Pederson and First Sierra Financial, Inc.
                          (incorporated by reference to Exhibit 10.17 to the Registrant's Form 10-K for the year
                          ended December 31, 1998, Commission File No. 0-22525)*
     10.18(+)        -    Employment Agreement between Fred Van Etten and First Sierra Financial, Inc. *
     10.19(+)        -    Employment Agreement between Roger Gebhart and First Sierra Financial, Inc. *
     21(+)           -    List of Subsidiaries of SierraCities.com Inc.
     23(+)           -    Consent of Arthur Andersen, LLP
     27(+)           -    Financial Data Schedule
</TABLE>

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

*    Indicates management contract or compensatory plan or arrangement.
(+)  Filed herewith

     (b) REPORTS ON FORM 8-K - There were no reports on Form 8-K filed during
the quarter ended December 31, 1999.


                                       32
<PAGE>   33
                          INDEX TO FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                                                                               PAGE
                                                                                                               ----
<S>                                                                                                            <C>
Report of Independent Public Accountants .................................................................     F-2
Consolidated Balance Sheets, December 31, 1999 and 1998 ..................................................     F-3
Statements of Consolidated Operations for the Three Years Ended December 31, 1999 ........................     F-4
Statements of Consolidated Comprehensive Income (Loss) for the Three Years Ended December 31, 1999 .......     F-5
Statements of Consolidated Stockholders' Equity for the Three Years Ended December 31, 1999 ..............     F-6
Statements of Consolidated Cash Flows for the Three Years Ended December 31, 1999 ........................     F-7
Notes to Consolidated Financial Statements ...............................................................     F-8
</TABLE>


                                      F-1
<PAGE>   34
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To SierraCities.com Inc.:

     We have audited the accompanying consolidated balance sheets of
SierraCities.com Inc. and subsidiaries (formerly First Sierra Financial, Inc.)
as of December 31, 1999 and 1998, and the related statements of consolidated
operations, comprehensive income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of SierraCities.com Inc. and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with generally accepted accounting principles
in the United States.


/s/  ARTHUR ANDERSEN, LLP

Houston, Texas
February 17, 2000


                                      F-2
<PAGE>   35
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)

                                     ASSETS


<TABLE>
<CAPTION>
                                                                                     DECEMBER 31,
                                                                             --------------------------
                                                                                1999           1998
                                                                             -----------    -----------
<S>                                                                          <C>            <C>
Lease financing receivables, net .........................................   $   871,948    $   337,162
Cash and cash equivalents ................................................        57,083          7,928
Other receivables ........................................................         7,613         11,596
Investment in trust certificates .........................................         9,808          7,288
Marketable securities ....................................................         3,460          5,042
Goodwill and other intangible assets, net ................................        43,500         39,202
Property and equipment, net ..............................................        11,723          9,909
Other assets .............................................................         8,627          6,923
Current tax receivables ..................................................           590          3,243
                                                                             -----------    -----------
     Total assets ........................................................   $ 1,014,352    $   428,293
                                                                             ===========    ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Debt:
   Nonrecourse debt ......................................................   $   766,095    $   276,511
   Other debt ............................................................        27,425         23,026
   Subordinated notes payable ............................................         1,000          3,250
Other liabilities:
   Accounts payable and accrued liabilities ..............................        23,620         23,283
   Holdback reserves payable .............................................        27,883         16,682
   Income taxes payable ..................................................          --              523
   Deferred income taxes .................................................           375            501
                                                                             -----------    -----------

     Total liabilities ...................................................       846,398        343,776
                                                                             -----------    -----------

  Redeemable preferred stock .............................................            70            469

  Stockholders' equity:
   Common stock, $.01 par value, 100,000,000 shares authorized, 19,025,311
     shares and 14,223,915 shares issued and outstanding, respectively ...           190            142
   Additional paid-in capital ............................................       158,654         76,855
   Retained earnings .....................................................         9,147          6,859
   Accumulated other comprehensive income ................................          (107)           192
                                                                             -----------    -----------

     Total stockholders' equity ..........................................       167,884         84,048
                                                                             -----------    -----------

     Total liabilities and stockholders' equity ..........................   $ 1,014,352    $   428,293
                                                                             ===========    ===========
</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                      F-3
<PAGE>   36
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
                      STATEMENTS OF CONSOLIDATED OPERATIONS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


<TABLE>
<CAPTION>
                                                                                          YEAR ENDED DECEMBER 31,
                                                                                     -------------------------------
                                                                                       1999       1998        1997
                                                                                     --------   --------    --------
<S>                                                                                  <C>        <C>         <C>
Gain on sale of lease financing receivables through securitization transactions ..   $    811   $ 16,291    $ 18,164
Gains from direct sales of lease financing receivables ...........................     16,473     18,434      17,095
Interest income ..................................................................     72,343     17,315       9,193
Servicing income .................................................................      7,455      5,112       3,095
Other income .....................................................................      5,268      3,991       4,052
                                                                                     --------   --------    --------
   Total revenues ................................................................    102,350     61,143      51,599
                                                                                     --------   --------    --------

Salaries and benefits ............................................................     23,313     29,509      15,554
Interest expense .................................................................     37,554      6,027       5,180
Provision for credit losses on lease financing receivables and investment
   in trust certificates .........................................................     11,756     10,364       2,101
Depreciation and amortization ....................................................      5,505      3,752       1,525
Other general and administrative .................................................     19,211     14,173      11,595
Research and development costs of acquired companies .............................       --        2,550        --
Merger and acquisition expenses ..................................................       --        1,742        --
Relocation of operations center ..................................................       --        1,593        --
                                                                                     --------   --------    --------
   Total expenses ................................................................     97,339     69,710      35,955
                                                                                     --------   --------    --------

Income (loss) before provision (benefit) for income taxes ........................      5,011     (8,567)     15,644
Provision (benefit) for income taxes .............................................      2,723     (2,665)      5,107
                                                                                     --------   --------    --------
Net income (loss) ................................................................   $  2,288   $ (5,902)   $ 10,537
                                                                                     ========   ========    ========
Earnings (loss) per common share, basic ..........................................   $   0.14   $  (0.43)   $   1.11
                                                                                     ========   ========    ========
Earnings (loss) per common share, diluted ........................................   $   0.13   $  (0.43)   $   1.03
                                                                                     ========   ========    ========
</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                      F-4
<PAGE>   37
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
             STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31,
                                                               -----------------------------
                                                                 1999       1998       1997
                                                               -------    -------    -------
<S>                                                            <C>        <C>        <C>
Net income (loss) ..........................................   $ 2,288    $(5,902)   $10,537
Other comprehensive income
   Foreign currency translation adjustment, net of tax .....      (299)       192       --
                                                               -------    -------    -------
Comprehensive income (loss) ................................   $ 1,989    $(5,710)   $10,537
                                                               =======    =======    =======
</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                      F-5
<PAGE>   38
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
                 STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
                             (DOLLARS IN THOUSANDS)



<TABLE>
<CAPTION>
                                              COMMON STOCK                                   ACCUMULATED
                                        -----------------------   ADDITIONAL                   OTHER          TOTAL
                                           NUMBER                  PAID-IN      RETAINED    COMPREHENSIVE  STOCKHOLDERS'
                                         OF SHARES     AMOUNT      CAPITAL      EARNINGS       INCOME         EQUITY
                                        ----------   ----------   ----------   ----------   -------------  -------------
<S>                                     <C>          <C>          <C>          <C>          <C>            <C>
BALANCE, DECEMBER 31, 1996 ..........    7,461,799   $       74   $      802   $    3,461    $     --       $    4,337
  Net income ........................         --           --           --         10,537          --           10,537
  Issuance of common stock for:
     Initial public offering ........    2,300,000           23       16,183         --            --           16,206
     Business acquisitions ..........      871,781            9        8,373         --            --            8,382
     Exchange for warrants ..........      198,352            2         --           --            --                2
     Exchange for preferred stock ...      238,989            2        2,185         --            --            2,187
  Distribution to stockholders
     (Note 4) .......................         --           --           --           (944)         --             (944)
  Preferred stock dividends .........         --           --           --           (120)         --             (120)
                                        ----------   ----------   ----------   ----------    ----------     ----------
BALANCE, DECEMBER 31, 1997 ..........   11,070,921          110       27,543       12,934          --           40,587
  Net loss ..........................         --           --           --         (5,902)         --           (5,902)
  Issuance of common stock for:
     Public offering, net ...........    2,567,084           26       39,644         --            --           39,670
     Exchange for preferred stock ...      255,123            3        2,168         --            --            2,171
     Business acquisitions ..........      293,949            3        7,205          148          --            7,356
     Stock options exercised ........       36,838         --            295         --            --              295
  Distribution to stockholders
   (Note 4) .........................         --           --           --           (255)         --             (255)
  Preferred stock dividends .........         --           --           --            (66)         --              (66)
  Foreign currency translation
   adjustment .......................         --           --           --           --             192            192
                                        ----------   ----------   ----------   ----------    ----------     ----------
BALANCE, DECEMBER 31, 1998 ..........   14,223,915          142       76,855        6,859           192         84,048
  Net income ........................         --           --           --          2,288          --            2,288
  Issuance of common stock for:
     Public offering, net ...........    4,600,000           46       78,707         --            --           78,753
     Exchange for preferred stock ...       48,856            1          398         --            --              399
     Additional equity issued related
         to a business combination ..       26,660         --            326         --            --              326
     Conversion of convertible
         promissory note ............      112,500            1        2,249         --            --            2,250
     Stock options exercised ........       13,380         --            119         --            --              119
  Foreign currency translation
    adjustment ......................         --           --           --           --            (299)          (299)
                                        ----------   ----------   ----------   ----------    ----------     ----------
BALANCE, DECEMBER 31, 1999 ..........   19,025,311   $      190   $  158,654   $    9,147    $     (107)    $  167,884
                                        ==========   ==========   ==========   ==========    ==========     ==========
</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                      F-6
<PAGE>   39
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
                      STATEMENTS OF CONSOLIDATED CASH FLOWS
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                                           YEAR ENDED DECEMBER 31,
                                                                                     -----------------------------------
                                                                                       1999         1998          1997
                                                                                     ---------    ---------    ---------
<S>                                                                                  <C>          <C>          <C>
Cash Flows from Operations:
   Net income (loss) .............................................................   $   2,288    $  (5,902)   $  10,537
   Reconciliation of net income (loss) to cash provided by operations:
     Depreciation and amortization ...............................................       5,505        3,752        1,525
     Provision for credit losses on lease financing receivables and
         investment  in trust certificates .......................................      11,756       10,364        2,101
     Gain on sale of lease financing receivables .................................     (17,284)     (34,725)     (35,259)
     Funding of lease financing receivables, held for sale .......................    (265,575)    (422,495)    (398,833)
     Research and development costs of acquired companies ........................        --          2,550         --
     Merger and acquisition expenses .............................................        --          1,742         --
     Principal payments received on lease financing receivables, held for sale ...      15,598        7,624       55,944
     Proceeds from sales of lease financing receivables, net of trust certificates
         and marketable securities retained, if any ..............................     240,434      446,496      442,707
     Repayments of securitized warehouse facilities, net of proceeds, for
         leases held for sale ....................................................        --         (6,118)     (83,775)
     Deferred income taxes .......................................................         968       (2,194)       3,923
     Accumulated translation adjustments .........................................        (299)         192         --
     Changes in assets and liabilities, net of effects from acquisitions:
         Decrease (increase) in other receivables ................................       3,986       (7,509)        --
         Increase in other assets ................................................      (1,820)      (1,006)        (519)
         Increase in accounts payable and accrued liabilities ....................         282        8,809        2,188
         Increase in holdback reserve payable ....................................      10,857        5,348        6,283
         Increase (decrease) in income taxes .....................................       1,517       (5,616)       1,176
                                                                                     ---------    ---------    ---------
                  Net Cash Provided by Operations ................................       8,213        1,312        7,998
                                                                                     ---------    ---------    ---------
Cash Flows from Investing Activities:
     Funding of lease financing receivables, net of repayments,
         held for investment .....................................................    (616,973)    (295,206)        --
     Proceeds from sale of lease financing receivables, held for investment ......     159,459         --           --
     Expenditures for property and equipment .....................................      (4,891)      (5,292)      (3,712)
     Expenditures for acquisitions, including acquisition costs, less cash
         acquired ................................................................     (69,507)     (20,926)      (4,535)
     Available-for-sale securities, net ..........................................        --           --           (239)
                                                                                     ---------    ---------    ---------
                  Net Cash Used in Investing Activities ..........................    (531,912)    (321,424)      (8,486)
                                                                                     ---------    ---------    ---------
Cash Flows from Financing Activities:
     Proceeds from securitized warehouse facilities, net of repayments ...........     493,983      276,511         --
     Repayment of subordinated notes payable, net of issuances ...................        --         (2,750)      (9,000)
     Advances under subordinated revolving credit facility .......................        --           --          5,000
     Proceeds from issuance of common stock, net and exercise of stock
         options and convertible warrants ........................................      78,871       39,965       16,208
     Distributions to stockholders ...............................................        --           (255)        (944)
                                                                                     ---------    ---------    ---------
                  Net Cash Provided by Financing Activities ......................     572,854      313,471       11,264
Net Increase (Decrease) in Cash and Cash Equivalents .............................      49,155       (6,641)      10,776
Cash and Cash Equivalents at January 1, ..........................................       7,928       14,569        3,793
                                                                                     ---------    ---------    ---------
Cash and Cash Equivalents at December 31, ........................................   $  57,083    $   7,928    $  14,569
                                                                                     =========    =========    =========
</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                      F-7
<PAGE>   40
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   THE COMPANY

     Organization

     SierraCities.com Inc. ("SierraCities.com"), formerly First Sierra
Financial, Inc., is a leading provider of e-finance solutions for small
businesses. Through our Internet-based technology platform, we offer on-line
end-to-end business financing fulfillment solutions for specific equipment
purchases and for general corporate purposes. We were formed in June 1994 to
acquire, originate, sell and service equipment leases relating to a wide range
of equipment, including computers and peripherals, software, telecommunications
and diagnostic equipment as well as other specialized equipment for the
healthcare, automotive, food and hospitality industries. The equipment we
finance generally has a purchase price of less than $250,000, with an average of
approximately $20,000 for leases originated in 1997, $31,000 for leases
originated in 1998 and $30,000 for leases originated in 1999. We fund the
acquisition or origination of our leases from working capital or through our
securitized warehouse facilities. From time to time, depending on market
conditions, we securitize the leases in our portfolio that meet pre-established
eligibility criteria by packaging them into a pool and selling beneficial
interests in the leases through public offerings and private placement
transactions.

     Prior to July 1, 1998, we structured our securitization transactions to
meet the criteria for sales of lease financing receivables under generally
accepted accounting principles. Thus, for all securitizations completed prior to
such date, we recorded a gain on sale of lease financing receivables when the
receivables were included in a securitization. Effective as of July 1, 1998, we
made a strategic decision to alter the structure of our future securitization
transactions so as to retain leases we acquired and originated on our balance
sheet as long-term investments rather than selling such leases through
securitization transactions. As discussed further in Note 8, we also modified
the structure of our securitized warehouse facilities such that they would be
considered debt under generally accepted accounting principles. The primary
effect from this move to emphasize portfolio lending is a shift from the
recognition of an immediate gain upon sale of the lease receivables to the
recognition of net interest margin over the lives of the receivables. In the
fourth quarter of 1999, with our planned conversion to a national bank, we began
to de-emphasize the origination channels that generate lower return on equity
and to reduce the amount of lower yielding assets on our balance sheet. We did
this in order to utilize our capital more effectively and to reduce the amount
of capital we would be required to carry related to these assets when we become
a bank. In connection with this strategy, in December 1999, we modified a
securitization facility which was set up for certain lower yielding Private
Label assets to meet the criteria for sales of lease financing receivables under
generally accepted accounting principles. The cash flows available to us, which
are generally based on the advance rates and discount rates set forth in the
agreements, were unaffected by these modifications.

     We acquire and originate leases primarily through our Private Label,
Retail, Wholesale and Captive Finance programs. Under the Private Label program,
we are provided protection from credit losses on defaulted leases through a
first lien security interest in the underlying equipment, recourse to the source
of the lease (the "Source"), which is generally supported by holdback reserves
withheld from amounts paid to the Source upon purchase of the lease, or a
combination of the above. Leases acquired through the Retail, Wholesale and
Captive Finance programs are originated through relationships with lease
brokers, equipment vendors and individual lessees. In addition, we have in the
past generated, and may in the future generate, income through the acquisition
of lease portfolios and the subsequent sale of such portfolios at a premium.

     Since inception, our collection, customer service and underwriting staff
had been located in our Jupiter, Florida office. In order to consolidate our
operations and maximize administrative efficiencies, we relocated our operations
center from Jupiter, Florida to our headquarters in Houston, Texas. The
relocation commenced in late 1997 and was completed in the first half of 1998.
During 1998, we incurred approximately $1.6 million of pre-tax expenses related
to the relocation, or $0.08 per diluted share.


                                      F-8
<PAGE>   41
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     All dollar amounts in the tabulations in the notes to the consolidated
financial statements are stated in thousands unless otherwise indicated. All
dollar amounts included in the text are in whole dollars, unless otherwise
indicated. Certain reclassifications have been made in the 1997 and 1998
consolidated financial statements to conform with the 1999 presentation.

     Basis of Presentation

     The consolidated financial statements include the accounts of
SierraCities.com and our wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation. These
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles and conform to practices within the
equipment leasing industry.

     Use of Estimates in the Preparation of Financial Statements

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

     Lease Financing Receivables

     We record the sum of the future minimum lease payments, estimated
unguaranteed residual value and initial direct costs as the gross investment in
the lease. The difference between gross investment in the lease and the cost of
the lease is defined as "unearned income." Unearned income and initial direct
costs incurred in connection with the acquisition or origination of the lease
are amortized over the related lease term using the interest method.
Amortization of unearned income is suspended if, in the opinion of management,
full payment of the contractual amount due under the lease agreement is
doubtful, typically upon a payment becoming 90 days past due, unless such
payment is guaranteed pursuant to recourse or holdback provisions of the lease
acquisition agreements.

     In conjunction with the acquisition and origination of leases, we may
retain a residual interest in the underlying equipment upon termination of the
lease. The value of such interests is estimated at inception of the lease and
evaluated periodically for impairment.

     Gain on Sale of Lease Financing Receivables

     On January 1, 1997, we adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." Under SFAS No. 125, we
recognize the financial and servicing assets we control and the liabilities we
have incurred, derecognize financial assets when control has been surrendered
and derecognize liabilities when extinguished. Additionally, SFAS No. 125
requires that servicing assets and other retained interests in the transferred
assets be measured by allocating the previous carrying amount between the assets
sold, if any, and retained interests, if any, based on relative fair values at
the date of transfer.

     Gain on sale of leases sold through securitization transactions is recorded
as the difference between the proceeds received from the sale of senior and
subordinated securities, net of related issuance expenses, and the cost basis of
the leases allocated to the securities sold. The cost basis of the lease is
allocated to the senior and subordinated securities, the trust certificate (as
defined herein) and the servicing asset on a relative fair value basis on the
date of sale. The fair value of the senior and subordinated securities which
have been sold is based on the price at which such securities are sold through
public issuances and private placement transactions, while the fair market value
of the trust certificate, the


                                      F-9
<PAGE>   42
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


subordinated securities which have been retained and the servicing asset is
based on our estimate of our fair value using a discounted cash flow approach.

     Gain on portfolio sales of leases is calculated as the difference between
the proceeds received, net of related selling expenses, and the carrying amount
of the related leases adjusted for our ongoing recourse obligations, if any. At
December 31, 1999, we believe that we do not have any material recourse
obligations related to receivables sold through portfolio sales.

     Marketable Securities

     We consider rated subordinated securities retained in securitization
transactions as trading securities under the provisions of SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" and
unrealized holding gains and losses are reflected currently in earnings. During
the years ended December 31, 1999, 1998, and 1997, we recognized unrealized
gains of $0, $0, and $183,000, respectively, representing estimated appreciation
in subordinated securities held.

     Exposure to Credit Losses

     Management evaluates the collectibility of leases acquired or originated
based on the level of recourse provided, if any, delinquency statistics,
historical loss experience, current economic conditions and other relevant
factors. For leases and loans that are securitized using the criteria for sales
of lease financing receivables under generally accepted accounting principles,
we provided an allowance for credit losses for loans and leases that were
considered impaired during the period from the funding of the loans and leases
through the date such loans and leases were sold through our securitization
program. When the securitization took place, we reduced the allowance for credit
losses for any provision previously recorded for such leases. Any losses
expected to be incurred on leases sold were taken into consideration in
determining the fair value of any Trust Certificates retained and recourse
obligations accrued, if any. For loans and leases that we retain on our balance
sheet, we provide an allowance for credit losses for retained leases which we
consider impaired based on management's assessment of the risks inherent in the
lease receivables. Management monitors the allowance on an ongoing basis based
on our current assessment of the risks and losses identified in the portfolio.

     Our allowance for credit losses on lease receivables and our valuation of
the Trust Certificates retained in our securitization transactions are based on
management's current assessment of the risks inherent in our lease receivables
from national and regional economic conditions, industry conditions,
concentrations, financial conditions of the obligors, historical experience of
certain origination channels and other factors. These estimates are reviewed
periodically and as additional provisions or write-downs become necessary, they
are reported as a reduction of earnings in the period in which they become
known.

     In assessing our exposure to credit losses, management generally segregates
the leases acquired under our Private Label program from those acquired or
originated under our Retail and Wholesale programs due to the differing levels
of credit protection available to us under the various lease funding programs.

     Income Taxes

     We are subject to both U.S. and foreign income taxes. We account for income
taxes based upon SFAS No. 109 "Accounting for Income Taxes" which requires
recognization of deferred income tax liabilities and assets for the expected
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates applied to taxable income in the years in which those
temporary differences are expected to be recovered or settled.


                                      F-10
<PAGE>   43
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


     Goodwill and Other Intangible Assets

     Goodwill and other intangible assets, net totaling $43.5 million and $39.2
million at December 31, 1999 and 1998, respectively. Goodwill represents the
cost in excess of fair value of the net assets of companies acquired (see Note
4) and is amortized using the straight-line method over 20 years. The carrying
amount of unamortized goodwill is reviewed for potential impairment loss when
events or circumstances indicate that the carrying amount of goodwill may not be
recoverable. Other intangible assets consist of amounts paid for noncompete
agreements, which are amortized using the straight-line method over the term of
the agreement. Amortization of goodwill and other intangibles amounted to $2.4
million for 1999, $1.7 million for 1998, and $0.7 million for 1997. At December
31, 1999 and 1998, accumulated amortization of goodwill and other intangible
assets was $4.9 million and $2.5 million, respectively.

     Property and Equipment

     Property and equipment are carried at cost, less accumulated depreciation.
Such assets are depreciated using the straight-line method over the estimated
useful lives of the respective assets, with leasehold improvements depreciated
over the term of the associated leases.

     Cash and Cash Equivalents

     We consider all significant investments which mature within three months of
the date of purchase to be cash equivalents.

     Interest Rate Management Activities

     Leases acquired and originated by us require payments to be made by the
lessee at fixed rates for specified terms. The rates we charge are based on
interest rates prevailing in the market at the time of lease approval. We
generally obtain funding for lease acquisitions and originations through
borrowings from our securitized warehouse facilities or sales to our securitized
funding facilities. Since the securitized warehouse facilities bear interest at
floating rates, we are exposed to risk of loss from adverse interest rate
movements during the period from the date of borrowing through the date the
underlying leases are securitized or otherwise sold. We seek to minimize our
exposure to adverse interest rate movements during this period through entering
into amortizing interest rate swap transactions under which the notional amount
of the contract changes monthly to match the anticipated amortization of the
underlying leases. Settlements with counterparties are accrued at period-end and
either an increase or a decrease in interest expense is reported in the
consolidated statement of operations. The terms of the securitized warehouse
facilities require the trust to enter into amortizing swap transactions with
notional principal amounts of at least 90% of the aggregate principal amount of
the senior certificates issued by the trust.

     Earnings Per Share

     Earnings per share are presented for all periods in accordance with SFAS
No. 128, "Earnings per Share." SFAS No. 128 requires a dual presentation of
basic and diluted earnings per share. Basic earnings per share excludes dilution
and is computed by dividing net income available to common stockholders by the
weighted average number of common shares outstanding for the period. Diluted
earnings per share reflect the potential dilution that could occur if securities
to issue common stock were exercised or converted into common stock.

     Comprehensive Income

     In January 1998, we adopted the provisions of SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes standards of reporting and
display of comprehensive income and its components of net income and "other
comprehensive income" in a full set of general-purpose financial statements.
"Other Comprehensive Income" refers to revenues, expenses, gains and losses that
are not included in net income but rather are recorded directly in


                                      F-11
<PAGE>   44
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


stockholders' equity. At December 31, 1999 and 1998, the only component of
comprehensive income other than net income was foreign currency translation
adjustments that commenced with the acquisition of our first foreign subsidiary
in July 1998 (see Note 4).

     Foreign Currency Translation

     The financial statements of our foreign subsidiaries were prepared in their
local currency and translated into U.S. dollars based on the current exchange
rate at the end of the period for the balance sheet and a weighted-average
exchange rate for the period for the statement of operations. Balance sheet
translation adjustments, net of related deferred taxes, are reflected as other
comprehensive income (loss) in the stockholders' equity section of our
consolidated balance sheet and, accordingly, have no impact on net income or
loss.

     Stock Compensation Plan

     We account for stock option grants to employees using the intrinsic value
method of accounting prescribed by APB Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25"). Under our stock option plan, the price of the
stock on the grant date is equal to the amount an employee must pay to exercise
the option to acquire the stock; accordingly, the options have no intrinsic
value at grant date, and in accordance with the provisions of APB 25, no
compensation cost is recognized.

     In October 1995, the Financial Accounting Standards Board (the "FASB")
issued SFAS No. 123, "Accounting for Stock Based Compensation," which sets forth
alternative accounting and disclosure requirements for stock-based compensation
arrangements. SFAS 123 does not rescind the existing accounting for stock based
compensation under APB 25. We have elected, as permitted under SFAS No. 123, to
continue to follow the intrinsic value based method of accounting for stock
options consistent with APB 25 and to provide the pro forma net income and pro
forma earnings per share disclosures as if the fair value based method defined
in SFAS No. 123 had been applied (see Note 12).

     Recent Accounting Pronouncement

     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, certain derivative instruments
imbedded in other contracts, and hedging activities. In particular, SFAS No. 133
requires a company to record every derivative instrument on the company's
balance sheet as either an asset or liability measured at fair value. In
addition, SFAS No. 133 requires that changes in the fair value of a derivative
be recognized currently in earnings unless specific hedge accounting criteria
are satisfied. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate and
assess the effectiveness of transactions that receive hedge accounting.
Management has not quantified the effect that SFAS No. 133 will have on our
financial statements, however, the Statement could increase volatility in
earnings and other comprehensive income. In June 1999, the FASB issued SFAS No.
137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of FASB Statement No. 133" which amends the effective date of
SFAS No. 133. SFAS No. 133 is now effective for fiscal years beginning after
June 15, 2000. We will adopt SFAS No. 133 as of January 1, 2001 and are
currently evaluating the impact of such adoption on our consolidated financial
statements.


                                      F-12
<PAGE>   45
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


3.   EARNINGS PER SHARE

     The reconciliation of the numerators and denominators used in the
computation of basic and diluted earnings (loss) per share is as follows
(dollars in thousands, except per share amounts):


<TABLE>
<CAPTION>
                                                            1999           1998            1997
                                                        ------------   ------------    ------------
<S>                                                     <C>            <C>             <C>
Earnings (loss) per common share, basic:
   Net income (loss) ................................   $      2,288   $     (5,902)   $     10,537
   Preferred stock dividends ........................           --               66             120
                                                        ------------   ------------    ------------
   Net income (loss) available to common stockholders   $      2,288   $     (5,968)   $     10,417
                                                        ============   ============    ============
   Weighted average shares outstanding ..............     16,714,983     13,724,695       9,427,042
                                                        ============   ============    ============
   Earnings (loss) per common share, basic ..........   $       0.14   $      (0.43)   $       1.11
                                                        ============   ============    ============
   Earnings (loss) per common share, diluted:
     Net income (loss) ..............................   $      2,288   $     (5,968)   $     10,537
                                                        ============   ============    ============
     Weighted average shares outstanding ............     16,714,983     13,724,695       9,427,042
     Dilutive securities:
        Options .....................................        569,291           --           249,943
        Warrants ....................................           --             --            78,452
        Redeemable preferred stock ..................         53,598           --           429,418
                                                        ------------   ------------    ------------
     Weighted average shares outstanding, diluted ...     17,337,872     13,724,695      10,184,855
                                                        ============   ============    ============
     Earnings (loss) per common share, diluted ......   $       0.13   $      (0.43)   $       1.03
                                                        ============   ============    ============
</TABLE>


     The computation of diluted earnings per share for the year ended December
31, 1999 excludes options to purchase approximately 680,000 shares of common
stock at an exercise price of $11.25 per share that were outstanding during the
first three months of 1999 and excludes options to purchase approximately
335,000 shares of common stock that have exercise prices ranging from $18.375 to
$24.00 per share that were outstanding during 1999, because such options were
anti-dilutive.

     In periods where there exist a net loss rather than income available to
common stockholders, potentially dilutive securities are antidilutive and,
therefore, should not be considered. Accordingly, there is no difference between
basic and diluted loss per share for the year ended December 31, 1998.

4.   ACQUISITIONS

     1999 Acquisitions

     During 1999, we completed two acquisitions. Both were recorded under the
purchase method of accounting, and accordingly, the results of operations of
each acquired entity have been included in the accompanying consolidated
financial statements from the date such entity was acquired. The purchase price
of each acquisition was allocated based on the estimated fair market value of
the assets acquired and liabilities assumed at the date of acquisition. Such
allocations resulted in goodwill of approximately $5.2 million, which is being
amortized on a straight-line basis over 20 years.

     In June 1999, we acquired the small ticket leasing division of Fifth Third
Leasing Company, a subsidiary of Fifth Third Bank, for $12.3 million in cash.


                                      F-13
<PAGE>   46
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


     In December 1999, we acquired Capital Alliance Financial Services, located
in Chicago, Illinois, which specializes in the leasing of specialty vehicles,
such as hearses, limousines and shuttle buses, for approximately $57.1 million
in cash.

     1998 Acquisitions

     During 1998, we completed eleven acquisitions. Five of these acquisitions
were recorded under the purchase method of accounting, and accordingly, the
results of operations of each of these five acquired entities have been included
in the accompanying consolidated financial statements from the date each such
entity was acquired. The purchase price of each acquisition was allocated based
on the estimated fair market value of the assets acquired and liabilities
assumed at the date of acquisition. Such allocations resulted in goodwill of
approximately $19.8 million, which is being amortized on a straight-line basis
over 20 years. The aggregate consideration in 1998 for acquisitions accounted
for as purchases consisted of approximately $15.8 million in cash, a $2.3
million subordinated note payable and 293,949 shares of our common stock valued
at approximately $6.5 million. Following is a brief description of each purchase
method acquisition completed in 1998:

     In April 1998, we acquired OMNI Leasing, Inc., located in Hatfield,
Pennsylvania which is active in the arbor, automotive, landscaping, sanitation,
and trucking industries in the greater Pennsylvania area.

     We also acquired Nexsoft, Inc. ("Nexsoft") of Denver, Colorado in April
1998. Nexsoft is a software development firm specializing in software for the
equipment leasing industry. In connection with the acquisition of Nexsoft, the
purchase price was allocated to the net assets acquired and to purchased
in-process research and development (R&D). Purchased in-process R&D includes the
value of products in the development stage and not considered to have reached
technological feasibility. Accordingly, $2.6 million of the acquisition cost was
expensed during 1998.

     In July 1998, we acquired Suffolk Street Group, PLC of Devon, England,
which provided us with entry into the European leasing market.

     In August 1998, we acquired Booker Montague Leasing Limited, located in
Manchester, England, which specializes in the leasing of computers,
telecommunications systems and other office equipment.

     In October 1998, we acquired Titan Finance Limited of Kent, England, which
specializes in leasing computer hardware and software and other information
technology equipment.

     The six remaining 1998 acquisitions were accounted for under the
pooling-of-interest method. The consolidated financial statements for 1998 and
1997 were restated to include the affects of all material acquisitions accounted
for under the pooling-of-interest method. The merger and acquisition expenses
incurred in 1998 represent costs incurred in connection with the acquisition or
proposed acquisition of companies accounted for or to be accounted for under the
pooling-of-interest method. Approximately $0.6 million of this amount was
incurred in connection with the terminated merger with the Oliver-Allen
Corporation. Distributions to stockholders reflected on the Statement of
Consolidated Stockholders' Equity represent distributions to stockholders of the
pooled companies for taxes due.

     Acquisitions that have been accounted for as poolings of interests include
Independent Capital Corporation ("ICC"), Integrated Lease Management, Inc.
("ILM"), The Republic Group, Inc. ("Republic"), Vendor Leasing, Inc. ("Vendor
Leasing"), TFS, Inc. dba The Money Source ("TFS") and 21st Century Credit
Leasing Services, Inc. ("21st Century"). Following is a brief description of
each acquisition accounted for under the pooling-of-interest method:

     In March 1998, we completed our merger with ICC. ICC focuses on the small
ticket broker market in the northeastern region of the United States and has
offices in Bridgewater and Rutherford, New Jersey. Consideration consisted of
272,727 shares of our common stock.


                                      F-14
<PAGE>   47
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


     In March 1998, we completed our merger with ILM. ILM is based in San Jose,
California and specializes in independent lease origination and consulting
services in the technology marketplace. Consideration consisted of 313,722
shares of our common stock.

     In April 1998, we completed our merger with Vendor Leasing. Vendor Leasing
is located in Roswell, Georgia and provides us with greater penetration in the
eastern United States. Consideration consisted of 18,954 shares of our common
stock.

     In June 1998, we completed our merger with TFS, a Redmond, Washington-based
small ticket equipment leasing company. Consideration consisted of 53,707 shares
of our common stock.

     Also in June 1998, we completed our merger with 21st Century. 21st Century
is located in Naples, Florida and is operating as a satellite office of our Ft.
Lauderdale office. Consideration consisted of 6,060 shares of our common stock.

     In July 1998, we completed our merger with Republic, an Anaheim,
California-based private company that originates leases of equipment for small
businesses in a broad range of industries. Republic has a specialization in
small business-direct telemarketing and has a well-developed sales recruiting
and training program. Consideration for the transaction consisted of the
issuance of approximately 1.1 million shares of our common stock.

     The separate results of SierraCities.com and each of the merged companies
through the date that the combinations were consummated are set forth in the
following table (in thousands):


<TABLE>
<CAPTION>
                                 YEAR ENDED DECEMBER 31,
                                 -----------------------
                                    1998        1997
                                  --------    --------
<S>                               <C>         <C>
Revenues
   SierraCities.com ...........   $ 53,216    $ 34,457
   ICC ........................        664       3,484
   ILM ........................        899       3,182
   TFS ........................       --           829
   Republic ...................      6,364       9,647
                                  --------    --------
       Restated revenues ......   $ 61,143    $ 51,599
                                  ========    ========

  Net income (loss)
   SierraCities.com ...........   $ (6,195)   $  7,655
   ICC ........................        176         931
   ILM ........................        106         (12)
   TFS ........................       --             1
   Republic ...................         11       1,962
                                  --------    --------
     Restated net income (loss)   $ (5,902)   $ 10,537
                                  ========    ========
</TABLE>


     Pro-forma results for acquisitions are not presented for 1999 and 1998 due
to the acquisitions not being material.


                                      F-15
<PAGE>   48
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


5.   ALLOWANCE FOR CREDIT LOSSES

     In assessing our exposure to credit losses, management generally segregates
the leases acquired under our Private Label program from those acquired or
originated under our Retail and Wholesale programs due to the differing levels
of credit protection available to us under the various lease funding programs.
The following table sets forth the allowance for credit losses for our Private
Label program and our Retail and Wholesale programs for the years ended December
31, 1999 and 1998:


<TABLE>
<CAPTION>
                                                                              PRIVATE      RETAIL/
                                                                               LABEL      WHOLESALE   TOTAL (2)
                                                                              --------    ---------   ---------
<S>                                                                           <C>         <C>         <C>
Balance at December 31, 1997 ..............................................   $     36    $    945    $    981

   Provision for credit losses ............................................        117       4,247       4,364
   Charge-offs, net of recoveries, on leases acquired or originated .......        (29)       (452)       (481)
   Reduction of allowance for leases sold (1) .............................        (41)     (1,590)     (1,631)
   Allowance related to leases acquired through business combinations .....       --         1,130       1,130
   Recoveries, net of charge-offs, on leases acquired through business
     combinations .........................................................       --           400         400
                                                                              --------    --------    --------
Balance at December 31, 1998 ..............................................         83       4,680       4,763
   Provision for credit losses ............................................        327      11,429      11,756
   Charge-offs, net of recoveries, on leases acquired or originated .......        (25)     (5,373)     (5,398)
   Reduction of allowance for leases sold (1) .............................       --        (2,155)     (2,155)
   Allowance related to leases acquired through business combinations .....       --         1,505       1,505
   Charge-offs, net of recoveries, on leases acquired through business
     combinations .........................................................       --          (350)       (350)
                                                                              --------    --------    --------
Balance at December 31, 1999 ..............................................   $    385    $  9,736    $ 10,121
                                                                              ========    ========    ========
</TABLE>

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

(1)  In connection with the sales of leases, we reduce the allowance for credit
     losses for any provision previously recorded for such leases, since once
     the leases are sold we retain no risk of loss related to the leases sold.

(2)  We began our Captive Finance program in March 1998 through the acquisition
     of ILM. During 1998 and 1999, leases originated through our Captive Finance
     program were approximately $164 million and $153 million, respectively, all
     of which were either acquired with substantial cash holdback from the
     vendor or financed with third parties at the time of originations without
     recourse to us. Therefore, no allowance for credit losses was provided for
     leases originated under the Captive Finance program.


                                      F-16
<PAGE>   49
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


     The following table sets forth certain information regarding our allowance
for credit losses for leases originated under our Private Label program and our
Retail and Wholesale programs:


<TABLE>
<CAPTION>
                                                                         AS OF DECEMBER 31, 1999
                                                                  ------------------------------------
                                                                    PRIVATE       RETAIL/
                                                                    LABEL(1)    WHOLESALE(4)    TOTAL
                                                                  -----------   ------------  --------
<S>                                                               <C>            <C>          <C>
Lease financing receivables, net ..............................   $   326,330    $529,013     $855,343(2)(3)
Allowance for credit losses ...................................           385       9,736       10,121
Allowance as a percentage of lease financing
   receivables, net ...........................................          0.12%       1.84%        1.18%

Credit protection available for leases outstanding under the
   Private Label program:

   Ratio of recourse to Private Label Source to lease financing
     receivables outstanding under the Private Label
     program (1) ..............................................         11.40%
   Ratio of holdback reserves outstanding to total leases
     outstanding under the Private Label program (1) ..........          4.30%
</TABLE>

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

(1)  Under the Private Label program, we seek to minimize our losses through a
     security interest in the equipment and leases funded, recourse to the
     Private Label Source which is generally collateralized by holdback reserves
     withheld from the Private Label Source upon purchase of the lease, or a
     combination of the above. The recourse provisions generally require the
     Private Label Source to repurchase a receivable when it becomes 90 days
     past due. The recourse commitment generally ranges from 10% to 20% of the
     aggregate purchase price of all leases acquired from the Private Label
     Source. Holdback reserves withheld from the purchase price generally range
     from 1% to 10% of the aggregate purchase price of the leases acquired from
     the Private Label Source. In determining whether a lease acquired pursuant
     to the Private Label program which is considered impaired will result in a
     loss to us, management takes into consideration the ability of the Private
     Label Source to honor its recourse commitments and the holdback reserves
     withheld from the Private Label Source upon purchase of the lease, as well
     as the credit quality of the underlying lessee and the related equipment
     value.

(2)  Does not reflect the reduction of allowance for credit losses provided for
     the underlying lease financing receivables.

(3)  Excludes lease financing receivables outstanding under the Captive Finance
     program. As of December 31, 1999, lease financing receivables outstanding
     under the Captive Finance program were $26,726,000. We began our Captive
     Finance program in March 1998 through the acquisition of ILM. Leases
     originated through our Captive Finance program were either acquired with
     substantial cash holdback from the vendor or financed with third parties at
     the time of originations without recourse to us. Therefore no allowance for
     credit losses was provided for leases originated under the Captive Finance
     program.

(4)  Management analyzes the collectibility of leases acquired or originated
     pursuant to its Retail and Wholesale programs based on its underwriting
     criteria, delinquency statistics, historical loss experience, current
     economic conditions and other relevant factors. While we own the underlying
     equipment, we do not have any recourse or holdback reserves with respect to
     any leases acquired or originated pursuant to our Retail and Wholesale
     programs.

     Prior to July 1, 1998, we structured our securitization transactions to
meet the criteria for sale of lease financing receivables under generally
accepted accounting principles. Effective July 1, 1998, we altered the structure
of our securitization transactions so as to retain leases on our balance sheet.
Due to this change, the allowance for credit losses information as of December
31, 1998 is not comparable to the information as of December 31, 1999. As of


                                      F-17
<PAGE>   50
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


December 31, 1998, the allowance as a percentage of lease financing receivables,
net was 0.06% for Private Label, 2.30% for Retail/Wholesale and 1.40% in total.
The ratio of recourse to the Private Label Source to lease financing receivables
outstanding under the Private Label program was 11.01% at December 31, 1998. The
ratio of holdback reserves outstanding to total leases outstanding under the
Private Label program was 3.50% at December 31, 1998.

The following table sets forth our charge-off experience with respect to leases
in our portfolio:


<TABLE>
<CAPTION>
                                                                               FOR THE  YEAR ENDED
                                                                                DECEMBER 31, 1999
                                                                               -------------------
<S>                                                                            <C>
Average balance of leases outstanding during the period ...................         $648,551
                                                                                    ========
Net losses experienced on leases acquired:
   Private Label program ..................................................         $     25
   Retail and Wholesale programs ..........................................            5,373
                                                                                    --------
     Total ................................................................         $  5,398
                                                                                    ========
Net Loss Ratio as a percentage of average balance of leases outstanding ...             0.83%
                                                                                    ========
</TABLE>


     Prior to July 1, 1998, we structured our securitization transactions to
meet the criteria for sale of lease financing receivables under generally
accepted accounting principles. During that period, the majority of the leases
were sold for the same quarter in which the leases were originated. As a result,
the average balance of leases retained on our balance sheet and the related
charge-offs were very low. Effective July 1, 1998, we altered the structure of
our securitization transactions so as to retain leases on our balance sheet. Due
to this change, the net loss ratio information as of December 31, 1998 is not
comparable to the information as of December 31, 1999. The net loss ratio as a
percentage of average balance of leases outstanding for 1998 was 0.40%.

     We may also acquire leases in conjunction with the acquisition of other
leasing companies. For acquisitions accounted for as purchases, management
initially records lease receivables at their estimated fair value at date of
acquisition. In determining such amount, management performs certain due
diligence procedures on the underwriting, collection and servicing functions of
the acquired company as well as evaluates the estimated realizability of the
portfolio of leases itself. During the years ended December 31, 1999 and 1998,
we acquired approximately $64.4 million and $17.9 million, respectively, of
leases through purchase business combinations. Such leases may be retained by
us, sold through our securitization program or sold through portfolio sales. In
conjunction with such sales, management takes into consideration estimated
losses to be incurred on these leases in determining the estimated fair value of
Trust Certificates retained in the securitization transactions or recourse
obligations assumed in portfolio sales, if any.


                                      F-18
<PAGE>   51
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


6.   DELINQUENCY STATISTICS

     The following table sets forth certain information with respect to leases
which were held by us in our portfolio or serviced by us pursuant to our
securitization program. Delinquency statistics are calculated based on
application of amounts received in accordance with payment hierarchies
established within our accounting system. Based on the payment hierarchies, a
lease could be considered current even though a portion of a scheduled
payment was unpaid, due to prior application of amounts to fees.

<TABLE>
<CAPTION>
                                       AS OF DECEMBER 31, 1999                          AS OF DECEMBER 31, 1998
                            ---------------------------------------------    ---------------------------------------------
                            PRIVATE      RETAIL/    CAPTIVE                  PRIVATE     RETAIL/     CAPTIVE
                             LABEL      WHOLESALE  FINANCE(1)   TOTAL (2)     LABEL     WHOLESALE   FINANCE(1)    TOTAL
                            --------    ---------  ----------  ----------    --------   ---------   ----------  ----------
<S>                         <C>         <C>         <C>        <C>           <C>         <C>         <C>        <C>
Gross leases outstanding .. $794,503    $747,191    $28,864    $1,570,558    $590,825    $478,139    $1,610     $1,070,574
31-60 days past due .......     1.03%       1.75%      0.60%         1.36%       1.36%       1.30%     0.00%          1.33%
61-90 days past due .......     0.42%       0.89%      0.99%         0.66%       0.63%       0.69%     0.00%          0.65%
Over 90 days past due .....     0.41%       1.50%      0.47%         0.93%       0.40%       0.81%     0.00%          0.58%
                            --------    --------    -------    ----------    --------    --------    ------     ----------
     Total past due .......     1.86%       4.14%      2.06%         2.95%       2.39%       2.80%     0.00%          2.56%
                            ========    ========    =======    ==========    ========    ========    ======     ==========
</TABLE>
----------------

(1)  We began our Captive Finance program in March 1998 through the acquisition
     of ILM. Leases originated through our Captive Finance program were either
     acquired with substantial cash holdback from the vendor (included in
     holdback reserves payable on the consolidated balance sheet) or financed
     with third parties at the time of originations without recourse to us.

(2)  As the portfolio of leases owned and serviced by us matures, we expect
     delinquency rates to approach levels of delinquencies of our earlier
     securitization pools, which are currently in the range of 4% to 6%.

7.   LEASE FINANCING RECEIVABLES

     Lease financing receivables consisted of the following as of December 31,
1999 and 1998:


<TABLE>
<CAPTION>
                                                   1999            1998
                                                -----------    -----------
<S>                                             <C>            <C>
Minimum lease payments ......................   $ 1,072,183    $   417,116
Estimated unguaranteed residual value .......        17,788          4,120
Initial direct costs ........................        16,677          6,729
Unearned income .............................      (224,579)       (86,040)
Allowance for credit losses .................       (10,121)        (4,763)
                                                -----------    -----------
         Lease financing receivables, net ...   $   871,948    $   337,162
                                                ===========    ===========
</TABLE>


     Future scheduled minimum payments on our lease portfolio as of December 31,
1999, are as follows:


<TABLE>
              <S>                                                                       <C>
              2000 ...............................................................      $  277,374
              2001 ...............................................................         251,674
              2002 ...............................................................         199,450
              2003 ...............................................................         149,683
              2004 ...............................................................          91,803
              Thereafter .........................................................         102,199
                                                                                        ----------
                      Total minimum payments .....................................      $1,072,183
                                                                                        ==========
</TABLE>


     At December 31, 1999, the weighted average remaining life of leases in our
lease portfolio is 57 months and the weighted average implicit rate of interest
is 11.28%.


                                      F-19
<PAGE>   52
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


8.   SECURITIZATION PROGRAM

     We initially fund the acquisition or origination of leases from working
capital or through our securitized warehouse facilities. From time to time,
depending on market conditions, we securitize the leases in our portfolio that
meet pre-established eligibility criteria by packaging them into a pool and
selling beneficial interests in the leases through public offerings and private
placement transactions.

     In these securitization transactions, we transfer a pool of leases to a
wholly-owned, bankruptcy remote, special purpose subsidiary. This subsidiary in
turn simultaneously transfers its interest in the leases to a trust, or trusts,
which issues beneficial interests in the leases in the form of senior and
subordinated securities which may include certificates of beneficial interest or
notes. These securitization transactions typically employ a multi-tranched
structure of either beneficial interests or notes. We generally retain the right
to receive any excess cash flows of the trust (the "Trust Certificate"). We also
retain the right to service leases sold through our securitization program and
receive a fee for doing so.

     For leases that were securitized using a structure that meets the criteria
for sales of lease financing receivables under generally accepted accounting
principles, gain on sale of lease receivables was recorded based upon the excess
of the sales proceeds received on the certificates or notes over the book
balance calculated based on the relative fair value discussed in Note 2. We
recorded a servicing asset representing the excess of the estimated servicing
revenues to be received over our costs to be incurred. As of December 31, 1999
and 1998, the balances of servicing assets outstanding were $1.5 and $1.3
million, respectively. The amount of the Trust Certificates was amortized over
the estimated lives of the underlying leases using the interest method. The cash
flows allocable to the Trust Certificate were calculated as the difference
between (a) cash flows received from the leases and (b) the sum, as applicable,
of (i) interest and principal payable to the holders of the senior and
subordinated securities, (ii) trustee fees, (iii) third-party credit enhancement
fees, (iv) service fees, and (v) backup service fees, as the case may be. Our
right to receive this excess cash flow is subject to certain conditions
specified in the related trust documents designed to provide additional credit
enhancement to holders of the senior and subordinated securities. We estimate
the expected levels of cash flows to the Trust Certificate taking into
consideration estimated defaults, recoveries and other factors which may affect
the cash flows to the holder of the Trust Certificate. For purposes of
calculating the estimated fair value of the Trust Certificates as of the date of
sale or transfer of the leases to the trusts, and on an ongoing basis,
management has used a discount rate of 11%. Management has also used a range of
expected losses arising from defaults, net of recoveries, of 0.00% to 2.00% per
annum, depending on the level of recourse available, if any, from the lease
sources and the program under which the lease was acquired or originated. Other
factors, such as prepayments, do not have a significant impact on the gain on
sale calculation due to the non-cancelable and full-payout nature of the
underlying leases. The cash flows ultimately available to the Trust Certificate
are largely dependent upon the actual default rates and recoveries experienced
on the leases held by the Trust. Increases in default rates above, or reductions
in recoveries below, our estimates could reduce the cash flows available to the
Trust Certificate. To the extent events occur which cause actual Trust
Certificate cash flows to be materially below those originally estimated, we
would be required to reduce the carrying amount of our Trust Certificates and
record a charge to earnings. Such charge would be recorded in the period in
which the event occurred or became known to management.

     For leases that were securitized using a structure where we retain leases
on our balance sheet, we finance these leases through beneficial interests or
notes issued by the trust, retain the right to receive any excess cash flows
allocable to the Trust Certificates, and continue to retain the right to service
leases financed through our securitization program and receive a servicing fee
for doing so. As these securitization transactions meet the criteria for
financing of lease receivables under generally accepted accounting principles,
we record as financings the amount of proceeds received related to the issuance
of beneficial interests or notes by the trust. Interest expense is recorded
based on interest accrued on each class of certificates or notes financed by us.
Any cash flow allocable to the Trust Certificates and servicing fees received
are recorded as reduction of interest expense.

                                      F-20
<PAGE>   53
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

     These securitization transactions are structured such that once the leases
are transferred from us to the special purpose subsidiary and ultimately to the
trust, the amount of the certificates of beneficial interest or notes purchased
or financed by investors in such securities is nonrecourse to us. Investors
purchasing the certificates of beneficial interests or notes look solely to the
defined cash flow from leases included in the special purpose entity for
repayment of principal and interest associates with their particular investment.

     Public Securitization Transactions

     As of December 31, 1999, we had completed six permanent securitization
transactions involving the issuance of $1.1 billion of senior and subordinated
securities. We completed the Series 1996-1 and 1996-2 transactions in 1996, the
Series 1997-1 transaction in September 1997, the Series 1998-1 transaction in
December 1998, Series 1999-1 transaction in April 1999 and the Series 1999-2
transaction in September 1999.

     In connection with the Series 1996-1 and 1996-2 transactions, Class A
certificates, rated AAA by Standard and Poor's, Aaa by Moody's Investor Services
and AAA by Duff & Phelps Credit Rating Co., were sold in the public market. The
Class B-1 and Class B-2 Certificates were rated BBB and BB, respectively, by
Duff & Phelps Credit Rating Co., and were sold on a non-recourse basis in the
private market.

     In connection with the Series 1997-1 transaction, four tranches of Class A
Notes, rated AAA by Standard and Poor's, Aaa by Moody's Investor Services, Inc.
and AAA by Duff & Phelps Credit Rating Co., were sold in the public market. The
Class B-1 and Class B-2 Notes were rated BBB and AA, respectively, by Duff &
Phelps Credit Rating Co., and were sold on a non-recourse basis in the private
market. The Class B-2 Note was enhanced through a letter of credit with Dresdner
Bank AG, which resulted in the higher ratings. We retained a Class B-3 Note,
which was rated B by Duff & Phelps Credit Rating Co., for future sale in the
private market.

     In connection with the Series 1998-1 transaction, four tranches of Class A
Notes, rated AAA by Standard and Poor's, Aaa by Moody's Investor Services, Inc.,
AAA by Duff & Phelps Credit Rating Co. and AAA by Fitch IBCA, Inc. were sold in
the public market. The Class B-1 and Class B-2 Notes were rated BBB and BB by
Duff & Phelps Credit Rating Co. and Fitch IBCA, Inc., and were sold and financed
on a non-recourse basis in the private market. A Class B-3 Note was rated B by
Duff & Phelps Credit Rating Co. and Fitch IBCA, Inc. which we retained for
future sale in the private market.

     In connection with the Series 1999-1 transaction, four tranches of Class A
Notes, rated AAA by Standard and Poor's, Aaa by Moody's Investor Services, Inc.,
AAA by Duff & Phelps Credit Rating Co. and AAA by Fitch IBCA, Inc. were sold in
the public market. The Class B-1 and Class B-2 Notes were rated BBB and BB by
Duff & Phelps Credit Rating Co. and Fitch IBCA, Inc., and were sold and financed
on a non-recourse basis in the private market. A Class B-3 Note was rated B by
Duff & Phelps Credit Rating Co. and Fitch IBCA, Inc., which we retained for
future sale in the private market.

     In connection with the Series 1999-2 transaction, four tranches of Class A
Notes, rated AAA by Standard and Poor's, Aaa by Moody's Investor Services, Inc.,
AAA by Duff & Phelps Credit Rating Co. and AAA by Fitch IBCA, Inc. were sold in
the public market. Class B Notes rated A by Standard and Poor's, A by Duff &
Phelps Credit Rating Co., A by Fitch IBCA, Inc. and A2 by Moody's Investor
Services, Inc. were also sold in the public market. The Class C Note, rated BBB
by Duff & Phelps Credit Rating Co. and Fitch IBCA, Inc. and the Class D Note,
rated BB by Duff & Phelps Credit Rating Co. and Fitch IBCA, Inc., were sold and
financed on a non-recourse basis in the private market. A Class E Note was rated
B by both Duff & Phelps Rating Co. and Fitch IBCA, Inc. and was retained by us
for future sale in the private market.

     We were able to realize approximately 94% of the present value of the
remaining scheduled payments of the equipment leases included in our Series
1996-1 and 1996-2 securitizations, approximately 96% of the present value of the
remaining scheduled payments of the equipment leases included in our Series
1997-1 securitization, and


                                      F-21
<PAGE>   54
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


approximately 95% of the present value of the remaining scheduled payments of
the equipment leases in our Series 1998-1, 1999-1 and 1999-2 securitizations.

     Hedging Strategy

     The implicit yield to us on all of our leases is on a fixed interest rate
basis due to the leases having scheduled payments that are fixed at the time of
origination of the lease. When we acquire or originate leases, we base our
pricing in part on the "spread" we expect to achieve between the implicit yield
rate to us on each lease and the effective interest cost we will pay when we
sell such leases through securitization or otherwise. Increases in interest
rates between the time the leases are acquired or originated by us and the time
they are securitized or otherwise sold could narrow or eliminate the spread, or
result in a negative spread. We have adopted a policy that is designed to
provide a level of protection against the volatility of interest rate movement
between the time we acquire or originate a lease and the time such lease is sold
or financed through a securitization or otherwise sold. Such hedging
arrangements generally are implemented when our portfolio of unhedged leases
reaches $10.0 million. Such hedges typically match the amount of debt we
anticipate we will fund with respect to such leases. At certain times, changes
in the interest rate market present favorable conditions to hedge against future
rate movement. We may, from time to time, enter into hedges against interest
rate movement in anticipation of future origination volume in order to take
advantage of unique market conditions, but this activity is generally limited to
levels where we are confident of origination in the near term.

9.   DEBT

     Total debt consisted of the following as of December 31, 1999 and 1998:


<TABLE>
<CAPTION>
                                                            1999       1998
                                                          --------   --------
<S>                                                       <C>        <C>
Nonrecourse Debt
    Securitized Warehouse Facilities:
      First Union National Bank of North Carolina .....   $148,104   $ 86,467
      Merrill Lynch Mortgage Capital, Inc. ............     90,259       --
      PNC Bank ........................................     53,777     82,720
      Nesbitt Burns Securities, Inc. ..................     51,318       --
      Prudential Securities Credit Corporation ........       --        4,580
                                                          --------   --------
             Total Securitized Warehouse Facilities ...    343,458    173,767
                                                          --------   --------
    Public Securitized Transactions:
      Series 1998-1 securitization ....................     71,110    101,247
      Series 1999-1 securitization ....................    176,429       --
      Series 1999-2 securitization ....................    159,257       --
                                                          --------   --------
             Total Public Securitized Transactions ....    406,796    101,247
                                                          --------   --------
    Other Nonrecourse Debt ............................     15,841      1,497
                                                          --------   --------
             Total Nonrecourse Debt ...................    766,095    276,511
                                                          --------   --------

Other Debt (acquired through business combinations) ...     27,425     23,026
Subordinated Notes Payable ............................      1,000      3,250
                                                          --------   --------
             Total Debt ...............................   $794,520   $302,787
                                                          ========   ========
</TABLE>


     We classify our indebtedness as either nonrecourse debt or debt based on
the structure of the debt instrument that defines our obligations. Nonrecourse
debt includes amounts outstanding related to leases included in securitized
warehouse facilities, public securitized transactions, or individual or groups
of leases funded under nonrecourse funding arrangements with specific financing
sources. Amounts outstanding in these instances are


                                      F-22
<PAGE>   55
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


classified as nonrecourse debt because we have no obligation to ensure that
investors or funding sources receive the full amount of principal and interest
which may be due to them under their funding arrangement. In these instances,
the investors or financing sources may only look to specific leases and the
associated cashflows for the ultimate repayment of amounts due to them. In the
event the cashflow associated with specific leases funded under circumstances
are insufficient to fully repay amounts due, the investor or financing source
withstands the full risk of loss. Other debt and subordinated notes payable
includes amounts due to financing sources for which we are responsible for full
repayment of principal and interest.

     Securitized Warehouse Facilities

     As of December 31, 1999, we maintained six securitized warehouse facilities
(the "Securitized Warehouse Facilities") which had an aggregate funding capacity
of $871.0 million. In June 1997 we entered into two separate facilities with
First Union National Bank of North Carolina (the "First Union Facilities"), in
March 1998 and in December 1999 we entered into separate facilities with PNC
Bank (the "PNC Facilities"), in December 1998 we entered into a facility with
Nesbitt Burns Securities, Inc., an affiliate of Bank of Montreal, (the "Nesbitt
Burns Facility") and in August 1999 we entered into a facility with Merrill
Lynch Mortgage Capital, Inc. (the "Merrill Lynch Facility"). As of December 31,
1999, the amount available under the First Union Facilities was $49.9 million,
the amount available under the Merrill Lynch Facility was $159.7 million, the
amount available under the PNC Facilities was $46.2 million, and the amount
available under the Nesbitt Burns Facility was $98.7 million.

     The structure of all of the facilities is essentially the same. The
facilities allow us to transfer and sell lease receivables first to a bankruptcy
remote special purpose entity and then to a trust. The trust issues either
senior certificates or notes to the senior investor, and a Certificate of
Seller's Interest, which represents a subordinate beneficial interest in the
trust, to the bankruptcy remote special purpose entity. The senior certificate
or note is owned by either First Union National Bank of North Carolina, Merrill
Lynch Mortgage Capital, Inc., PNC Bank, or Nesbitt Burns Securities, Inc., or
its assignees, as the case may be, and the residual certificate, or Certificate
of Seller's Interest, is owned by our special purpose subsidiary.

     The amount outstanding at any time on any of the senior certificates or
notes issued to senior investors in the Securitized Warehouse Facilities is
nonrecourse to us. Principal and interest which is due any investor under the
senior certificates or notes is paid to them based on the available cash flow
from only the leases included in the particular facility. We have no obligation
to ensure that the investor who holds the senior certificate or note receives
the full amount of principal and interest due.

     As of December 31, 1999, the amount of First Union National Bank of North
Carolina's investment in the senior certificate was $150.1 million, of which
$148.1 million was recorded as non-recourse debt; the amount of PNC Bank's
investment was $224.8 million, of which $53.8 million was financed after July 1,
1998 and thus was recorded as non-recourse debt; the amount of Merrill Lynch's
investment was $90.3 million, all of which was recorded as non-recourse debt and
the amount of Nesbitt Burns Securities Inc.'s investment was $51.3 million, all
of which was recorded as non-recourse debt.

     The Securitized Warehouse Facilities provide several significant advantages
to us, including providing us with favorable interest rates and greater
flexibility with respect to the timing and size of permanent securitizations,
thereby reducing related transaction costs.

     The lease receivables included in the Securitized Warehouse Facilities may
be transferred by the trust to other trusts in which we have a minority
interest.



                                      F-23
<PAGE>   56
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


     Public Securitization Transactions

     Effective July 1, 1998, consistent with our strategy to retain our leases
on balance sheet, senior and subordinated notes financed related to lease
receivables originated after July 1, 1998 under our Series 1998-1, Series
1999-1 and Series 1999-2 securitizations were recorded as nonrecourse debts.
As of December 31, 1999 and 1998, the amount of nonrecourse debt outstanding
under the Series 1998-1, Series 1999-1 and Series 1999-2 securitizations was
$406.8 million and $101.2 million, respectively. See Note 8 for further
discussion.

     Affiliated Debt

     In May 1997, we entered into a $5.0 million subordinated revolving credit
facility with an affiliate. Due to availability of funds under other facilities,
it was determined that this revolving credit facility was no longer needed and
was terminated in 1999, based upon mutual agreements of all parties involved.
Advances under this facility bore interest at 11% per annum.

     Interest Rate Swap Agreements

     Pursuant to the terms and conditions of our Securitized Warehouse
Facilities, we are required to maintain a specified level of interest rate swaps
relative to the amount outstanding under the facilities. The hedged amount, or
notional amount of the hedge, is required to be no less than 90% but no greater
than 100% of the amount outstanding. As of December 31, 1999, we were in
compliance with such hedging requirement.

     At December 31, 1999 and 1998, we had entered into interest rate swap
agreements with aggregate notional amounts of $282.3 million and $166.2 million,
respectively. These interest rate swap agreements effectively modify the
interest rate specific to each facility from a floating rate of LIBOR or
commercial paper rates, as the case may be, to a fixed rate and the notional
amount amortizes in proportion to the leases included in each facility. The
fixed rates associated with these interest rate swap agreements as of December
31, 1999 and 1998 range from 5.025% to 6.744% and 4.79% to 6.135%, respectively.
The counterparties to our swap agreements were First Union National Bank of
North Carolina, Prudential Global Funding, Inc., Merrill Lynch Mortgage Capital,
Inc., Bank of Montreal and PNC Bank.

10.  INCOME TAXES

     The provision (benefit) for income taxes is summarized below:


<TABLE>
<CAPTION>
                                                  1999     1998       1997
                                                -------   -------    -------
<S>                                             <C>       <C>        <C>
Current:
   Federal ..................................   $   984   $  (751)   $ 1,080
   State ....................................       249       (77)       134
   Foreign ..................................       522       357       --
                                                -------   -------    -------
          Total current .....................     1,755      (471)     1,214
                                                -------   -------    -------
Deferred:
   Federal ..................................       867    (1,950)     3,581
   State ....................................       101      (201)       312
   Foreign ..................................      --         (43)      --
                                                -------   -------    -------
        Total deferred ......................       968    (2,194)     3,893
                                                -------   -------    -------
   Provision (benefit) for income taxes .....   $ 2,723   $(2,665)   $ 5,107
                                                =======   =======    =======
</TABLE>


     The 1999 current federal provision includes approximately $0.9 million in
alternative minimum tax ("AMT"). As AMT is effectively a prepayment of regular
income taxes, a corresponding deferred tax benefit was also recorded.


                                      F-24
<PAGE>   57
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


     Temporary differences and carryforwards which gave rise to deferred tax
assets and liabilities as of December 31, 1999 and 1998 were as follows:


<TABLE>
<CAPTION>
                                                  1999        1998
                                                --------    --------
<S>                                             <C>         <C>
Accruals and reserves not yet deductible ....   $  5,598    $    202
Depreciation and amortization ...............    (19,597)     (6,892)
Cash to accrual adjustment ..................         14         120
Net operating loss carryforward .............      1,836       1,030
Securitization transactions .................      9,851       6,290
AMT credit carryforward .....................      1,568        --
Other .......................................        355      (1,251)
                                                --------    --------
    Total deferred income tax liabilities ...   $   (375)   $   (501)
                                                ========    ========
</TABLE>


     The $1.6 million AMT credit carryforward at December 31, 1999 is primarily
from 1999 and can be carried forward indefinitely to reduce U.S. federal regular
income taxes in future years. At December 31, 1999, we have U.S. federal net
operating loss ("NOL") carryforwards of approximately $4.9 million, which, if
not used, will expire in the years 2018 and 2019. No valuation allowance has
been provided for such NOL carryforwards due to management believing that it
will earn sufficient U.S. income to utilize the NOLs within the carryforward
period.

     A reconciliation between income taxes computed at the U.S. federal
statutory rate and our income taxes for financial reporting purposes is shown
below:


<TABLE>
<CAPTION>
                                                                       1999     1998     1997
                                                                       ----     ----     ----
<S>                                                                    <C>     <C>       <C>
U.S. federal statutory rate .....................................      34.0%   (34.0%)   34.0%
State income taxes, net of federal benefit ......................       3.5%    (3.5%)    3.2%
Earnings of subsidiary not subject to federal income tax (1) ....       --       --      (7.2%)
Foreign taxes ...................................................      4.57%     1.0%     --
Non-deductible expenses and other ...............................     12.27%     5.4%     2.6%
                                                                      -----    -----     ----
Effective income tax (benefit) rate .............................     54.34%   (31.1%)   32.6%
                                                                      =====    =====     ====
</TABLE>

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

(1)  A company we acquired in March 1998, which was accounted for under the
     pooling-of-interest method, was not subject to federal income taxes. As
     discussed in Note 4, our financial statements were restated to reflect the
     results of operations of the merged companies.

     Undistributed earnings of our foreign subsidiaries amounted to
approximately $1.5 million at December 31, 1999. Those earnings are considered
to be indefinitely invested outside the United States and, accordingly, no
provision for U.S. federal and state income taxes has been provided thereon.
Upon distribution of those earnings in the form of dividends or otherwise, we
would be subject to both U.S. income taxes (subject to an adjustment for foreign
tax credits) and withholding taxes payable to the foreign country.

11.  REDEEMABLE PREFERRED STOCK

     At December 31, 1997, 56,718 shares of Series A Preferred Stock (the
"Series A Preferred Stock") were issued and outstanding. Each share of the
Series A Preferred Stock is convertible at the holder's option at any time into
5.47 shares of our common stock. Holders of the Series A Preferred Stock are
entitled to an annual, non-cumulative dividend of $1.86 per share. Each
outstanding share of Series A Preferred Stock entitles the holder thereof to
5.47


                                      F-25
<PAGE>   58
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


votes on any matter submitted to a vote of the stockholders. If not
previously converted, we are required to redeem all outstanding Series A
Preferred Stock on December 31, 2001, at a redemption price of $46.54607 per
share. During 1998, 46,640 shares of the Series A Preferred Stock were converted
into 255,123 shares of common stock and during 1999, 8,566 shares of the Series
A Preferred Stock were converted into 48,856 shares of common stock.
Consequently, at December 31, 1999 and 1998, 1,512 shares and 10,078 shares,
respectively, of Series A Preferred Stock were outstanding. The Series A
Preferred Stock has been reflected as redeemable preferred stock in the
accompanying consolidated financial statements.

     At December 31, 1996, 43,691 shares of Series B Convertible Preferred Stock
(the "Series B Preferred Stock") were issued. The Series B Preferred Stock was
subject to an escrow agreement which provided that 21,845 shares would be
released if one of our divisions, Corporate Capital Leasing Group, Inc. ("CCL"),
a company acquired in 1996, met or exceeded certain targeted income amounts set
forth in the escrow agreement. In connection with a restructuring of our
operational divisions during 1997, the shares previously held under escrow were
released and we recorded an adjustment to the purchase price of CCL of $937,000
in 1997. In December 1997, all outstanding shares of the Series B Preferred
Stock were converted into 238,989 shares of common stock and a cumulative
dividend of $29,000 was paid to the holder of such stock.

     Concurrent with the issuance of the Series A Preferred Stock and the Series
B Preferred Stock, irrevocable standby letters of credit, issued by a financial
institution and guaranteed by one of our affiliates, were given to the holders
of the preferred stock and could be drawn upon if certain events occur,
including our failure to pay dividends when due, our failure to redeem the
shares on the designated mandatory redemption date or the occurrence of our
liquidation, dissolution or winding up. As of December 31, 1997, all letters of
credit had been returned to the financial institution and cancelled.

     We are authorized to issue 1,000,000 shares of preferred stock. The number
of shares to be issued, classes designated, voting rights, dividend rates,
liquidation and other rights, preferences and limitations may be set
by our Board of Directors without stockholder approval. We may issue one or more
series of preferred stock in the future in conjunction with our acquisition
strategy or otherwise. Any such issuances may adversely affect, among other
things, the voting power of holders of our common stock and the then outstanding
preferred stock.

12.  STOCKHOLDERS' EQUITY

     Common Stock

     In May 1995, we issued warrants to purchase a total of 198,397 shares of
our common stock to a senior lender in connection with a Securitized Warehouse
Facility entered into at such time. The exercise price of the warrants was
$.0018 per share which approximated the estimated fair value of the underlying
common stock at the date of issuance of the warrants. All warrants were
exercised in May 1997.

     In February 1997, we increased the authorized shares of our common stock to
25,000,000 shares and our Board of Directors approved a stock split whereby 5.47
shares of common stock were issued for each outstanding share of common stock.
All share and per share amounts included in the accompanying financial
statements and footnotes have been restated to reflect the stock split.

     On May 20, 1997, we consummated our initial public offering of common stock
through the sale of 2,000,000 shares of common stock (the "Offering"). In June
1997, the underwriters of our offering exercised their over-allotment option and
purchased an additional 300,000 shares of our common stock. We received net
proceeds of approximately $16.2 million from the Offering and the exercise of
the underwriters' option related thereto. The proceeds therefrom were used to
partially fund an acquisition which closed concurrently with the Offering, to
repay in full a subordinated note payable outstanding at such time and for
general corporate purposes.


                                      F-26
<PAGE>   59
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


     In February and March 1998, we sold a total of 2,567,084 shares of our
common stock, including the exercise of the underwriter's over-allotment option,
in a public equity offering and received net proceeds of approximately $39.7
million, net of expenses. Approximately $5.0 million of the net proceeds were
used to repay the outstanding balance under a subordinated revolving credit
facility, while the remaining funds were used for other general corporate
purposes, including acquisitions and the repayment of other borrowings.

     In August 1998, we increased the authorized shares of our common stock to
100,000,000 shares.

     In connection with the acquisition of Titan Finance Limited in October
1998, we issued $2.3 million in cash and $2.3 million in convertible
subordinated promissory notes as consideration for the transaction. The notes
were converted into 112,500 shares of our common stock in May 1999 in accordance
with their terms.

     In June and July 1999, we sold to the public a total of 4,600,000 shares of
our common stock, including the exercise of the underwriter's over-allotment
option, from which we received cash proceeds of approximately $78.8 million, net
of expenses. We used the net proceeds from the offering for general corporate
purposes, including the funding of net asset originations and other working
capital needs.

     Stock Option Plan

     We have adopted a stock option plan (the "1997 Stock Option Plan") to align
the interests of our directors, executives, consultants, and employees with that
of our stockholders. A total of 1,542,003 shares and 2,844,783 shares,
respectively, of our common stock were reserved for issuance pursuant to the
1997 Stock Option Plan as of December 31, 1999 and 1998, respectively.

     The following table summarizes the stock option activity for the 1997 Stock
Option Plan (shares in thousands):


<TABLE>
<CAPTION>
                                        1999               1998               1997
                                  ----------------   ----------------   ----------------
                                          WEIGHTED-          WEIGHTED-          WEIGHTED-
                                          AVERAGE            AVERAGE            AVERAGE
                                          EXERCISE           EXERCISE           EXERCISE
                                  SHARES   PRICE     SHARES   PRICE     SHARES  PRICE
                                  ------  --------   ------  --------   ------  --------
<S>                               <C>     <C>        <C>     <C>        <C>     <C>
Outstanding, January 1 .......    2,357    $10.61    1,035    $ 8.00     --       --
     Granted .................       94    $13.37    2,246    $16.12    1,035    $8.00
     Exercised ...............      (13)   $ 8.85      (37)   $ 8.00     --       --
     Forfeited ...............     (225)   $11.68     (887)   $20.95     --       --
                                  -----              -----              -----
Outstanding, December 31 .....    2,213    $10.89    2,357    $10.61    1,035    $8.00
                                  =====              =====              =====
Exercisable, December 31 .....      665    $11.22      249    $11.92     --       --
</TABLE>


     The following table summarizes information about the stock options
outstanding at December 31, 1999 (shares in thousands):


<TABLE>
<CAPTION>
                                        OPTIONS OUTSTANDING                                 OPTIONS EXERCISABLE
                     ---------------------------------------------------------    --------------------------------------
                     NUMBER OF SHARES    WEIGHTED-AVERAGE                          NUMBER OF SHARES
     RANGE OF         OUTSTANDING AT        REMAINING         WEIGHTED-AVERAGE     EXERCISABLE AT       WEIGHTED-AVERAGE
  EXERCISE PRICE     DECEMBER 31, 1999   CONTRACTUAL LIFE       EXERCISE PRICE     DECEMBER 31, 1999     EXERCISE PRICE
  --------------     -----------------  -------------------   ----------------    -------------------   ----------------
<S>                  <C>                <C>                   <C>                 <C>                   <C>
    $7.75 - $9.75            1,193           7.8 years            $ 8.26                    402              $ 8.14
 $11.25 - $12.875              685           8.9 years            $11.29                    137              $11.25
 $18.375 - $24.00              335           8.3 years            $19.45                    126              $21.00
                         ---------                                                    ---------
                             2,213                                                          665
                         =========                                                    =========
</TABLE>


                                      F-27
<PAGE>   60
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


      Options granted in 1998 included 682,597 options that were canceled and
repriced on November 30, 1998. Options forfeited in 1998 included 835,541
options that were canceled related to repricing of which 682,597 options were
repriced. The repriced options were originally granted between March 2, 1998 and
May 27, 1998 with original exercise prices between $18.375 and $23.9375. These
options were canceled on November 30, 1998 and reissued at an exercise price of
$11.25 per share, which represented 125% of the fair market value of common
stock on that day, with a new five year vesting period.

     We apply the intrinsic value-based method of APB 25 in accounting for our
1997 Stock Option Plan. Accordingly, no compensation expense has been recognized
for any stock options issued. Had compensation expense for stock options granted
been recognized based on the fair value of the grant dates, using the
methodology prescribed by SFAS 123, our net income (loss) would have been
reduced to the pro forma amounts indicated below:


<TABLE>
<CAPTION>
                                                                                      YEAR ENDED DECEMBER 31,
                                                                                 ---------------------------------
                                                                                    1999       1998        1997
                                                                                 --------   ---------    ---------
                                                                               IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
<S>                                                                              <C>        <C>          <C>
   Net income (loss):
     As reported ............................................................    $  2,288   $  (5,902)   $  10,537
     Pro forma ..............................................................       1,479      (8,489)      10,204

   Earnings (loss) per share of common stock:
     As reported - basic ....................................................    $   0.14   $   (0.43)   $    1.11
     As reported - diluted ..................................................        0.13       (0.43)        1.03
     Pro forma - basic ......................................................        0.09       (0.62)        1.07
     Pro forma - diluted ....................................................        0.09       (0.62)        1.00
</TABLE>


   The per-share weighted-average fair value of stock options granted during
1999, 1998 and 1997 was $10.29, $13.19 and $2.47, respectively. The fair value
of each stock option grant included in the above calculations was estimated on
the date of grant using the Black-Scholes option-pricing model based on the
following weighted-average assumptions:


<TABLE>
<CAPTION>
                                                                                           YEAR OF GRANT
                                                                                   ------------------------------
                                                                                    1999       1998         1997
                                                                                   ------     ------       ------
<S>                                                                                <C>        <C>          <C>
   Risk-free interest rate ..................................................        6.07%      4.79%        5.62%
   Expected life of options .................................................      6 years    6 years      6 years
   Expected volatility of our stock price ...................................          87%        70%          22%
   Expected dividend yield ..................................................           0%         0%           0%
</TABLE>


     Stockholder Rights Plan

     On December 15, 1998, our Board of Directors declared a dividend
distribution of one preferred stock purchase right (a "Right") for each share of
our common stock. The dividend was payable on December 30, 1998 to stockholders
of record at the close of business on December 28, 1998 (the "Record Date").
Each Right generally entitles the registered holder to purchase from us one
one-hundredth of a share of our Junior Preferred Stock, Series C, par value
$0.01 per share (the "Preferred Stock"), at a purchase price of $65.25 per one
one-hundredth of a share (the "Purchase Price"). The description and terms of
the Rights are set forth in the Rights Agreement, dated as of December 30, 1998
(the "Rights Agreement"), between us and Harris Trust and Savings Bank, as
Rights Agent.

     The Rights will be evidenced by common stock certificates and not separate
certificates until the earliest of (i) ten days following the date of public
disclosure that a person or group (the "Acquiring Person") has acquired or
obtained the right to acquire beneficial ownership of 15% or more of the
outstanding shares of the common stock,


                                      F-28
<PAGE>   61
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


or (ii) ten business days following the commencement or disclosure of an
intention to commence a tender offer or exchange offer by a person or group
other than us and certain related entities if, upon consummation of such offer,
such person or group would beneficially own 15% or more of the outstanding
shares of common stock (the earlier of such dates being the "Distribution
Date"). Until the Distribution Date (or earlier redemption or expiration of the
Rights), the transfer of common stock will also constitute transfer of the
associated Rights. The Rights will expire at the close of business on December
30, 2008, unless we redeem them earlier.

     If a person acquires beneficial ownership of 20% or more of the common
stock, or if we are the surviving corporation in a merger with an Acquiring
Person and the common stock remains outstanding and unchanged, the Rights will
"flip in" and entitle each holder of a Right, with certain exceptions, to
purchase (upon exercise at the then-current market price) that number of shares
of common stock having a market value of two times the Purchase Price.

     In the event that, following the Distribution Date, we are acquired in a
merger or other business combination in which the common stock does not remain
outstanding or is changed or 50% or more of our consolidated assets or earning
power is sold, leased, exchanged, or otherwise transferred or disposed of
(whether in one transaction or a series of related transactions), the Rights
will "flip over" and entitle each holder of a Right to purchase, upon the
exercise of the Right at the then-current Purchase Price, that number of shares
of common stock of the acquiring company (or, in certain circumstances, one of
its affiliates) which at the time of the transaction would have a market value
of two times the Purchase Price.

     Preferred Stock purchasable upon exercise of the Rights will not be
redeemable. Each share of Preferred Stock will be entitled to a minimum
preferential quarterly dividend payment of $1.00 per share, but will be entitled
to an aggregate dividend payment of 100 times the dividend declared per share of
common stock, if greater. In the event of liquidation, the holders of the
Preferred Stock will be entitled to a minimum preferential liquidation payment
of $100 per share, but will be entitled to an aggregate payment of 100 times the
payment made per share of common stock, if greater. In the event of any merger
or other business combination in which common stock is exchanged, each share of
Preferred Stock will be entitled to receive 100 times the amount received per
share of common stock. Customary anti-dilution provisions protect these rights.

13.  COMMITMENTS AND CONTINGENCIES

     Operating Leases

     We have entered into various operating lease agreements, primarily for
office space. Rental expense incurred under operating leases aggregated $2.3
million in 1999, $2.0 million in 1998 and $1.1 million in 1997. Future minimum
rentals under non-cancelable operating leases aggregate $2.6 million for 2000;
$2.1 million for 2001; $1.8 million for 2002; $1.1 million for 2003; $0.5
million in 2004; and $0.9 million thereafter.

     Concentration of Credit Risks

     At December 31, 1999, leases aggregating approximately 22% of the net
principal balance of leases owned and serviced by us pursuant to our
securitization program were located in California. No other state, nor the
United Kingdom, accounted for more than 10% of the net principal balance of
leases owned and serviced by us as of such date. Although our portfolio of
leases includes lessees located throughout the United States and in the United
Kingdom, such lessees' ability to honor their contracts may be substantially
dependent on economic conditions in these states and in the United Kingdom. All
such contracts are collateralized by the related equipment. The recourse and
holdback provisions of the Private Label program mitigate, but do not eliminate,
a significant portion of any economic risk not recoverable through the sale of
the related equipment.


                                      F-29
<PAGE>   62
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


     Additionally, a substantial portion of our leases are concentrated in
certain industries including the dental, medical, and veterinary industries. To
the extent that the economic or regulatory conditions prevalent in such
industries change, the lessees' ability to honor their lease obligations may be
adversely impacted.

     Employee Benefit Plan

     We established a 401(k) defined contribution plan in October 1996 which is
generally available to all employees. In 1999, employees could contribute up to
20% of their salary on a pre-tax basis up to $10,000, and we matched up to 100%
of the first 3% of salary and 50% of the next 2% of salary, contributed by the
employee. During the years ended December 31, 1999, 1998 and 1997, we recognized
$1.1 million, $0.6 million, and $0.2 million respectively, of expenses related
to the 401(k) plan.

     Employment Agreements

     We have entered into employment agreements with certain key members of
management. The terms of such agreements provide for salaries and bonuses as set
forth in the agreements and upon achieving certain performance objectives.

     Legal Proceedings

     We are routinely involved in litigation incidental to our business which
often involves claims for significant monetary amounts, some, but not all, of
which would be covered by insurance. In the opinion of management, none of the
existing litigation will have a material, adverse effect on us.

14.  FAIR VALUE OF FINANCIAL INSTRUMENTS

     SFAS No. 107, "Disclosures About Fair Value of Financial Instruments,"
defines the fair value of a financial instrument as the amount at which the
instrument could be exchanged in a current transaction between willing parties.
Much of the information used to determine fair value is highly subjective and
judgmental in nature and, therefore, may not be precise. Because the fair value
is estimated as of the balance sheet date, the amounts which will actually be
realized or paid upon settlement or maturity of the various instruments could be
significantly different. The following table summarizes the carrying amounts and
estimated fair values of our financial instruments at December 31, 1999 and
1998:


<TABLE>
<CAPTION>
                                                                        1999                   1998
                                                              ----------------------  ----------------------
                                                               CARRYING      FAIR      CARRYING      FAIR
                                                                AMOUNT       VALUE      AMOUNT       VALUE
                                                              -----------  ---------  ----------   ---------
<S>                                                           <C>          <C>        <C>          <C>
     Financial assets -
         Lease financing receivables, net .................   $   871,948  $ 927,269  $  337,162   $ 346,355
         Investment in trust certificates .................         9,808      9,808       7,288       7,288
         Marketable securities ............................         3,460      3,460       5,042       5,042
         Cash and cash equivalents ........................        57,083     57,083       7,928       7,928

     Financial liabilities -
         Nonrecourse debt .................................       766,095    766,095     276,511     276,511
         Other debt .......................................        27,425     27,425      23,026      23,026
         Subordinated notes payable .......................         1,000      1,000       3,250       3,250

     Off balance sheet instruments -
         Interest rate swap agreements ....................             -      7,910           -      (4,467)
</TABLE>


                                      F-30
<PAGE>   63
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

     Lease Financing Receivables - The fair value was estimated by discounting
expected future cash flows at a risk adjusted rate of return deemed to be
appropriate for investors in such instruments. Expected cash flows take into
consideration management's estimates of prepayments, defaults and recoveries.

     Investment in Trust Certificates - The fair value was estimated by
discounting expected future cash flows allocable to the holder of the Trust
Certificate at a risk adjusted rate of return deemed to be appropriate for
investors in such investment. Expected cash flows take into consideration
management's estimates of defaults, recoveries and other factors.

     Marketable Securities - The fair value was estimated by discounting
expected future cash flows allocable to the holder of the Marketable Securities
at a risk adjusted rate of return deemed to be appropriate for investors in such
investment.

     Cash and Cash Equivalents - The carrying amounts approximate fair value
because of the short maturity and market interest rates of those instruments.

     Nonrecourse Debt - The carrying amounts approximate fair value due to the
short-term nature of the credit facilities.

     Other Debt - The carrying amounts approximate fair value due to the
short-term nature of the credit facilities.

     Subordinated Notes Payable - The carrying amount of the subordinated note
payable approximates its fair value based on estimated yields, which would be
required for similar types of debt instruments.

     Interest Rate Swap Agreements - The fair value represents the payment we
would have made to or received from the swap counterparties to terminate the
swap agreements on the indicated dates.

15.  SUPPLEMENTAL FINANCIAL INFORMATION

     Property and Equipment:

         Following is a summary of property and equipment:


<TABLE>
<CAPTION>
                                                                                 AS OF DECEMBER 31,     ESTIMATED
                                                                                 -------------------     USEFUL
                                                                                   1999      1998         LIFE
                                                                                 -------   ---------    ---------
<S>                                                                              <C>       <C>           <C>
     Buildings ..............................................................    $ 1,855   $   1,929     30 years
     Furniture and fixtures .................................................      3,214       3,115      5 years
     Computer and office equipment ..........................................     10,314       6,126    3-5 years
     Leasehold improvements and other .......................................      2,795       1,910    3-7 years
                                                                                 -------   ---------
                                                                                  18,178      13,080
     Accumulated depreciation ...............................................     (6,455)     (3,171)
                                                                                 -------   ---------
                                                                                 $11,723   $   9,909
                                                                                 =======   =========
</TABLE>


                                      F-31
<PAGE>   64
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


     Supplemental Cash Flow Information:


<TABLE>
<CAPTION>
                                                                              FOR THE YEAR ENDED DECEMBER 31,
                                                                              -------------------------------
                                                                               1999        1998        1997
                                                                              -------     -------     -------
     <S>                                                                      <C>         <C>         <C>
     Federal, state and foreign income tax payments (refunds), net .......... $ 1,962     $ 2,727     $    25
     Interest paid ..........................................................  35,242       6,027       4,916
</TABLE>


16.  SEGMENT INFORMATION

     We have adopted SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information." This statement establishes standards for the way that
public business enterprises report information about operating segments in
interim and annual financial statements. We acquire and originate leases
primarily through our Private Label, Retail/Wholesale, and Captive Finance
programs. Additionally, we conduct business in the continental United States and
the United Kingdom.


<TABLE>
<CAPTION>
                                                                                 1999         1998         1997
                                                                              -----------   ---------   ----------
     <S>                                                                      <C>           <C>         <C>
     Revenues:
        Private Label ....................................................... $    26,120   $  11,917   $   13,460
        Retail/Wholesale ....................................................      71,642      46,014       34,957
        Captive Finance .....................................................       4,588       3,212        3,182
                                                                              -----------   ---------   ----------
             Total .......................................................... $   102,350   $  61,143   $   51,599
                                                                              ===========   =========   ==========

     Depreciation and amortization:
        Private Label ....................................................... $        22   $      18   $        9
        Retail/Wholesale ....................................................       3,745       2,979        1,202
        Captive Finance .....................................................          64         121           83
        Corporate ...........................................................       1,674         634          231
                                                                              -----------   ---------   ----------
             Total .......................................................... $     5,505   $   3,752   $    1,525
                                                                              ===========   =========   ==========

     Interest expense:
        Private Label ....................................................... $    15,022   $   1,929   $    1,993
        Retail/Wholesale ....................................................      21,406       3,915        2,495
        Captive Finance .....................................................       1,126           -            -
        Corporate ...........................................................           -         183          692
                                                                              -----------   ---------   ----------
             Total .......................................................... $    37,554   $   6,027   $    5,180
                                                                              ===========   =========   ==========

     Income (loss) before provision (benefit) for income taxes:
        Private Label ....................................................... $    10,667   $   9,158   $   10,120
        Retail/Wholesale ....................................................      11,782       7,275       11,741
        Captive Finance .....................................................         779          95           (7)
        Corporate ...........................................................     (18,217)    (25,095)      (6,210)
                                                                              -----------   ---------   ----------
             Total .......................................................... $     5,011   $  (8,567)  $   15,644
                                                                              ===========   =========   ==========

     Total assets:
        Private Label ....................................................... $   356,368   $ 158,446   $   17,116
        Retail/Wholesale ....................................................     566,798     255,146       60,606
        Captive Finance .....................................................      26,944         120        1,005
        Corporate ...........................................................      64,242      14,581       14,231
                                                                              -----------   ---------   ----------
             Total .......................................................... $ 1,014,352   $ 428,293   $   92,958
                                                                              ===========   =========   ==========
</TABLE>


                                      F-32
<PAGE>   65
                     SIERRACITIES.COM INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


     The following tables present information by country:


<TABLE>
<CAPTION>
                                                                                  1999        1998         1997
                                                                              -----------   ---------   ----------
     <S>                                                                      <C>           <C>         <C>
     Revenues:
        United States ....................................................... $    94,099   $  56,429   $   51,599
        United Kingdom ......................................................       8,251       4,714            -
                                                                              -----------   ---------   ----------
           Total ............................................................ $   102,350   $  61,143   $   51,599
                                                                              ===========   =========   ==========
     Total assets:
        United States ....................................................... $   978,135   $ 388,149   $   92,958
        United Kingdom ......................................................      36,217      40,144            -
                                                                              -----------   ---------   ----------
           Total ............................................................ $ 1,014,352   $ 428,293   $   92,958
                                                                              ===========   =========   ==========
</TABLE>


17.  QUARTERLY FINANCIAL DATA (UNAUDITED)

     The following is a summary of unaudited quarterly financial data for 1999
and 1998:


<TABLE>
<CAPTION>
                                                            FIRST     SECOND     THIRD      FOURTH
                                                           QUARTER    QUARTER   QUARTER     QUARTER
                                                           -------    -------   -------     -------
                                                           (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                       <C>        <C>        <C>         <C>
1999:
    Revenues ..........................................   $ 19,368   $ 23,724   $ 27,239    $ 32,019
    Income before provision for income taxes ..........        288        665      1,496       2,562
    Net income ........................................         31        252        711       1,294
    Earnings per common share, basic ..................   $   0.00   $   0.02   $   0.04    $   0.07
    Earnings per common share, diluted ................   $   0.00   $   0.02   $   0.04    $   0.07

1998:
    Revenues ..........................................   $ 14,729   $ 19,057   $ 12,000    $ 15,357
    Income (loss) before provision (benefit) for income
       taxes ..........................................      4,368      2,933     (8,150)     (7,718)
    Net income (loss) .................................      2,760      1,674     (4,949)     (5,387)
    Earnings (loss) per common share, basic ...........   $   0.22   $   0.12   $  (0.35)   $  (0.38)
    Earnings (loss) per common share, diluted .........   $   0.21   $   0.11   $  (0.35)   $  (0.38)
</TABLE>


                                      F-33
<PAGE>   66
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
                         ON FINANCIAL STATEMENT SCHEDULE


To SierraCities.com Inc.:

     We have audited in accordance with auditing standards generally accepted in
the United States, the consolidated financial statements of SierraCities.com
Inc. and subsidiaries included in this Form 10-K, and have issued our report
thereon dated February 17, 2000. Our audit was made for the purpose of forming
an opinion on the basic financial statements taken as a whole. The schedule
listed in Part IV, Item 14 (a)(2) for SierraCities.com Inc. and subsidiaries is
the responsibility of SierraCities.com's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.


/s/ ARTHUR ANDERSEN, LLP

Houston, Texas
February 17, 2000



                                      F-34
<PAGE>   67
                                                                     SCHEDULE II


                              SIERRACITIES.COM INC.

                        VALUATION AND QUALIFYING ACCOUNTS
                                AS OF DECEMBER 31
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                        BALANCE AT      ADDITIONS                          BALANCE
                                                        BEGINNING       CHARGED TO                         AT END
                                                         OF YEAR         EXPENSE       DEDUCTIONS (a)      OF YEAR
                                                        ----------      ----------     --------------      -------
<S>                                                     <C>             <C>            <C>                 <C>
Reserve for relocation of operations center to
Houston, Texas from Jupiter, Florida:

         1998 ................................          $  --            $ 1,593          $(1,191)          $   402
         1999 ................................              402             --               (402)             --
</TABLE>


(a) Deductions related to expenses paid for relocation.



                                      F-35
<PAGE>   68
                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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.


                                            SIERRACITIES.COM INC.


                                         By:     /s/ THOMAS J. DEPPING
                                            ------------------------------------
                                                     Thomas J. Depping
                                            President, Chairman of the Board and
                                                  Chief Executive Officer


Date:  March 28, 2000


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


<TABLE>
<CAPTION>
              Signature                                     Title                        Date
<S>                                          <C>                                    <C>
       /s/  THOMAS J. DEPPING                 President, Chairman of the Board      March 28, 2000
----------------------------------------         and Chief Executive Officer
          Thomas J. Depping                     (principal executive officer)

           /s/ SANDY B. HO                   Executive Vice President and Chief     March 28, 2000
----------------------------------------        Financial Officer (principal
             Sandy B. Ho                      financial and accounting officer)

        /s/ RICHARD J. CAMPO                              Director                  March 28, 2000
----------------------------------------
          Richard J. Campo

      /s/ ROBERT TED ENLOE, III                           Director                  March 28, 2000
----------------------------------------
        Robert Ted Enloe, III

        /s/ BRIAN E. MCMANUS                              Director                  March 28, 2000
----------------------------------------
          Brian E. McManus

       /s/ NORMAN J. METCALFE                             Director                  March 28, 2000
----------------------------------------
         Norman J. Metcalfe

     /s/ DAVID C. SHINDELDECKER                           Director                  March 28, 2000
----------------------------------------
       David C. Shindeldecker

        /s/ DAVID L. SOLOMON                              Director                  March 28, 2000
----------------------------------------
          David L. Solomon
</TABLE>

<PAGE>   69
                               INDEX TO EXHIBITS


<TABLE>
<CAPTION>
  EXHIBIT NO.                                                DOCUMENT
  -----------                                                --------
<S>                  <C>  <C>
     3.1             -    Restated Certificate of Incorporation of First Sierra, as amended (incorporated by
                          reference to Exhibit 3.1 to the Registrant's Form 10-K for the year ended December 31,
                          1998, Commission File No. 0-22525)
     3.2             -    Amended and Restated Bylaws of First Sierra (incorporated by reference to Exhibit 3.2
                          to the Registrant's Registration Statement on Form S-1 No. 333-22629)
     4.1             -    Rights Agreement, dated December 30, 1998, between First Sierra and Harris Trust and
                          Savings Bank, as Rights Agent, together with the Form of Certificate of Designations of
                          Preferred Stock attached thereto as Exhibit A, the Form of Rights Certificate attached
                          thereto as Exhibit B and the Summary of Rights to Purchase Preferred Stock attached
                          thereto as Exhibit C (incorporated by reference to Exhibit 4.1 to Registrant's Form 8-A
                          filed December 31, 1998)
     10.1            -    1997 Stock Option Plan (incorporated by reference to Exhibit 10.1 to Amendment No. 2 to
                          the Registrant's Registration Statement on Form S-1 No. 333-22629)*
     10.2            -    Amendment to 1997 Stock Option Plan (incorporated by reference to Exhibit 10.2 to the
                          Registrant's Form 10-K for the year ended December 31, 1998, Commission File No.
                          0-22525)*
     10.3            -    Reserved
     10.4            -    Form of Registration Rights Agreement (incorporated by reference to Exhibit 10.3 to
                          Amendment No. 2 to the Registrant's Registration Statement on Form S-1 No. 333-22629)
     10.5            -    Asset Purchase Agreement dated June 28, 1996 between First Sierra Financial, Inc.,
                          First Sierra Acquisition, Inc. and General Interlease Corporation and Eric Barash and
                          Daniel Dengate (incorporated by reference to Exhibit 10.4 to the Registrant's
                          Registration Statement on Form S-1 No. 333-22629)
     10.6            -    Agreement and Plan of Reorganization dated October 15, 1996 among Valerie A. Hayes,
                          Corporate Capital Leasing Group, Inc., First Sierra Financial, Inc., and First Sierra
                          Pennsylvania, Inc. (incorporated by reference to Exhibit 10.5 to the Registrant's
                          Registration Statement on Form S-1 No. 333-22629)
</TABLE>

<PAGE>   70
<TABLE>
<S>                  <C>  <C>
     10.7            -    Asset Purchase Agreement, dated February 4, 1997, between Lease Pro, Inc., Charles E.
                          Lester and First Sierra Financial, Inc. (incorporated by reference to Exhibit 10.6 to
                          the Registrant's Registration Statement on Form S-1 No. 333-22629)
     10.8            -    First Amendment to Agreement and Plan of Reorganization dated February 27, 1997 among
                          Valerie A. Hayes, Corporate Capital Leasing Group, Inc., First Sierra Financial, Inc.
                          and First Sierra Pennsylvania, Inc. (incorporated by reference to Exhibit 10.7 to the
                          Registrant's Registration Statement on Form S-1 No. 333-22629)
     10.9            -    Agreement and Plan of Merger between Oren M. Hall, Charles E. Brazier, Greg E.
                          McIntosh, Brent M. Hall, Heritage Credit Services, Inc., First Sierra Financial, Inc.,
                          and First Sierra California, Inc., dated as of February 1, 1997 (incorporated by
                          reference to Exhibit 10.8 to the Registrant's Registration Statement on Form S-1 No.
                          333-22629)
     10.10           -    Form of Registration Rights Agreement between First Sierra Financial, Inc. and Oren M.
                          Hall (incorporated by reference to Exhibit 10.9 to the Registrant's Registration
                          Statement on Form S-1 No. 333-22629)
     10.11           -    Employment Agreement between Thomas J. Depping and First Sierra Financial, Inc.
                          (incorporated by reference to Exhibit 10.11 to Amendment No. 2 to the Registrant's
                          Registration Statement on Form S-1 No. 333-22629)*
     10.12           -    Employment Agreement between Sandy B. Ho and First Sierra Financial, Inc. (incorporated
                          by reference to Exhibit 10.12 to the Registrant's Form 10-K for the year ended December
                          31, 1998, Commission File No. 0-22525)*
     10.13           -    Employment Agreement between Robert H. Quinn, Jr. and First Sierra Financial, Inc.
                          (incorporated by reference to Exhibit 10.12 to Amendment No. 2 to the Registrant's
                          Registration Statement on Form S-1 No. 333-22629)
     10.14           -    Employment Agreement between Oren M. Hall and First Sierra Financial, Inc.
                          (incorporated by reference to Exhibit 10.13 to Amendment No. 1 to Registrant's
                          Registration Statement on Form S-1 No. 333-41833)*
     10.15           -    Employment Agreement between Michael A. Sabel and First Sierra Financial, Inc.
                          (incorporated by reference to Exhibit 10.1 to Registrant's Form 10-Q for the quarter
                          ended September 30, 1998)
     10.16           -    Agreement and Plan of Merger dated as of June 24, 1998 by and among First Sierra
                          Financial, Inc., Sierra Acquisition Corporation II, The Republic Group, Inc., James T.
                          Raeder and Mark G. McQuitty (incorporated by reference to Exhibit 2.1 to Registrant's
                          Form 8-K filed as of July 24, 1998)
     10.17           -    Employment Agreement between David L. Pederson and First Sierra Financial, Inc.
                          (incorporated by reference to Exhibit 10.17 to the Registrant's Form 10-K for the year
                          ended December 31, 1998, Commission File No. 0-22525)*
     10.18(+)        -    Employment Agreement between Fred Van Etten and First Sierra Financial, Inc. *
     10.19(+)        -    Employment Agreement between Roger Gebhart and First Sierra Financial, Inc. *
     21 (+)          -    List of Subsidiaries of SierraCities.com Inc.
     23 (+)          -    Consent of Arthur Andersen, LLP
     27 (+)          -    Financial Data Schedule
</TABLE>

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

*    Indicates management contract or compensatory plan or arrangement.
(+)  Filed herewith