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

                                   FORM 10-KSB

  X     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
-----   ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

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

                         COMMISSION FILE NUMBER: 0-24220

                             KBK CAPITAL CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


                        DELAWARE                                 75-2416103
            (STATE OR OTHER JURISDICTION OF                   (I.R.S. EMPLOYER
             INCORPORATION OR ORGANIZATION)                  IDENTIFICATION NO.)

2200 CITY CENTER II, 301 COMMERCE ST., FORT WORTH, TEXAS            76102
        (ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)                  (ZIP CODE)


       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (817) 258-6000

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:


       TITLE OF EACH CLASS           NAME OF EACH EXCHANGE ON WHICH REGISTERED
       -------------------           -----------------------------------------
  COMMON STOCK, $.01 PAR VALUE   AMERICAN STOCK EXCHANGE, PACIFIC STOCK EXCHANGE
9.50% TRUST PREFERRED SECURITIES             AMERICAN STOCK EXCHANGE


           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                      NONE

CHECK WHETHER THE ISSUER (1) FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION
13 OR 15(d) OF THE EXCHANGE ACT DURING THE PAST 12 MONTHS (OR FOR SUCH SHORTER
PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN
SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.

                                  YES  X   NO
                                      ---     ---

CHECK IF DISCLOSURE OF DELINQUENT FILERS IN RESPONSE TO ITEM 405 OF REGULATION
S-B IS NOT CONTAINED IN THIS FORM, AND NO DISCLOSURE WILL BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-KSB OR ANY AMENDMENT TO
THIS FORM 10-KSB [ ]

ISSUER'S REVENUES FOR ITS MOST RECENT FISCAL YEAR:  $18,042,647
                                                    -----------

THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT, BASED UPON THE CLOSING SALE PRICE OF THE COMMON STOCK ON MARCH 20,
2002, AS REPORTED ON THE AMERICAN STOCK EXCHANGE, WAS APPROXIMATELY $1,770,616.
SHARES OF COMMON STOCK HELD BY EACH OFFICER AND DIRECTOR AND BY EACH PERSON WHO
OWNS 10% OR MORE OF THE OUTSTANDING COMMON STOCK HAVE BEEN EXCLUDED IN THAT SUCH
PERSONS MAY BE DEEMED TO BE AFFILIATES. THIS DETERMINATION OF AFFILIATE STATUS
IS NOT NECESSARILY A CONCLUSIVE DETERMINATION FOR OTHER PURPOSES.

AS OF MARCH 20, 2002 THE REGISTRANT HAD OUTSTANDING 2,179,237 SHARES OF COMMON
STOCK.

                       DOCUMENT INCORPORATED BY REFERENCE

      PORTIONS OF THE DEFINITIVE PROXY STATEMENT FOR THE REGISTRANT'S 2001
          ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 15, 2002, ARE
                      INCORPORATED BY REFERENCE PART III.


                                     Page 1

<PAGE>


                                      INDEX

<Table>
<Caption>

                                                                             PAGE NUMBER
<S>      <C>                                                                 <C>
ITEM 1.  DESCRIPTION OF BUSINESS                                                 3

         PRODUCTS AND MARKETS                                                    3
         SEGMENTS                                                                4
         CLIENTS                                                                 4
         ACCOUNT DEBTORS                                                         5
         COMPETITION                                                             6
         GOVERNMENT REGULATION                                                   6
         EMPLOYEES                                                               6

ITEM 2.  DESCRIPTION OF PROPERTY                                                 7

ITEM 3.  LEGAL PROCEEDINGS                                                       7

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                     7

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                7

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS                                               8

ITEM 7.  FINANCIAL STATEMENTS                                                   14

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE                                               28

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS:
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT                      28

ITEM 10. EXECUTIVE COMPENSATION                                                 28

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT         28

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                         28

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K                                       29

         (a) EXHIBITS                                                           29
         (b) REPORTS ON FORM 8-K                                                30
</Table>



                                     Page 2
<PAGE>


                                     PART I

         CERTAIN OF THE STATEMENTS INCLUDED BELOW, INCLUDING THOSE REGARDING
FUTURE FINANCIAL PERFORMANCE OR RESULTS OR THAT ARE NOT HISTORICAL FACTS, ARE OR
CONTAIN "FORWARD-LOOKING" INFORMATION AS THAT TERM IS DEFINED IN THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED. THE WORDS "EXPECT," "BELIEVE," "ANTICIPATE,"
"PROJECT," "ESTIMATE," AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY
FORWARD-LOOKING STATEMENTS. THE COMPANY CAUTIONS READERS THAT ANY SUCH
STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE OR EVENTS AND THAT SUCH
STATEMENTS INVOLVE RISKS, UNCERTAINTIES AND ASSUMPTIONS, INCLUDING BUT NOT
LIMITED TO INDUSTRY CONDITIONS, GENERAL ECONOMIC CONDITIONS, INTEREST RATES,
COMPETITION, ABILITY OF THE COMPANY TO SUCCESSFULLY MANAGE ITS GROWTH, AND OTHER
FACTORS DISCUSSED OR INCLUDED BY REFERENCE IN THIS ANNUAL REPORT ON FORM 10-KSB.
SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE OR SHOULD THE
UNDERLYING ASSUMPTIONS PROVE INCORRECT, THOSE ACTUAL RESULTS AND OUTCOMES MAY
DIFFER MATERIALLY FROM THOSE INDICATED IN THE FORWARD-LOOKING STATEMENTS.


ITEM 1.  DESCRIPTION OF BUSINESS

         KBK Capital Corporation (the "Company") was incorporated in Delaware in
1992 to acquire its wholly owned subsidiary, KBK Financial, Inc. ("KBK"), a
commercial financial institution. KBK, in operation since 1962, is principally
engaged in providing financing to middle-market businesses through loans secured
by accounts receivable, inventory, equipment, owner-occupied real estate or
other assets of the borrower and through the discounted purchase of accounts
receivable. KBK or its predecessors have been engaged in the purchase of
accounts receivable for over thirty-nine years. During 2000, KBK closed a
transaction to sell its entire portfolio of purchased receivables and loans to
KBK Acceptance Company LP ("SPV"), a wholly-owned, consolidated subsidiary, also
known as a special purpose vehicle. Under this structure, SPV pledges this
portfolio of receivables and loans to a multi-user conduit, which is sponsored
by a bank, to obtain the funds to purchase the assets from KBK.

         In 1993, KBK expanded the then-existing Houston, Texas marketing office
and established corporate, regional and national marketing headquarters in Fort
Worth, Texas. Through the acquisition of Coastal Financial Resources, Inc.
("Coastal") in December of 1994, a marketing office was established in New
Orleans, Louisiana, giving expanded market coverage across the Gulf Coast. In
addition, the Company established offices in Los Angeles, California in 1996 and
St. Louis, Missouri in 1998. The Company's Louisiana office was combined into
the Houston office during 2001.

         The Company's plan for continued growth in 2002 is based primarily on
growth in earning assets from the markets currently served. Another element of
the Company's growth plan is the introduction of new products and services. The
Company's strategy also includes the pursuit of opportunistic acquisitions and
formation of key partnerships.

         Unless otherwise noted, all references to the "Company" include KBK
Capital Corporation, KBK, SPV and its predecessors. The principal executive
offices of the Company are located at 2200 City Center II, 301 Commerce Street,
Fort Worth, Texas 76102 and the telephone number is (817) 258-6000.


Products and Markets

         The Company's business is providing financing to middle-market
businesses through loans secured by accounts receivable, inventory, equipment,
owner-occupied real estate or other assets of the borrower and through the
discounted purchase of accounts receivable. During 1998, the Company expanded
its product line to include a mezzanine product, which offers an attractive
financing alternative from traditional senior debt sources for clients whose
growth has outpaced their borrowing capacity. The Company believes it offers a
comprehensive product line of financing to commercial businesses in the
middle-market in order to provide a single source of financing for these
businesses. The Company may also generate fees and revenues through the
cross-selling of third party products to existing customers. These products
include lease financing and structuring and brokering asset securitizations.

         The Company has traditionally marketed its services, in part, by
soliciting referrals from providers of financial services to small businesses,
such as commercial bankers, lawyers and accountants. Management believes these
sources refer quality clients who are more likely to have the financial
information and reporting systems required for the Company's purchase of
accounts receivable. In addition, the Company relies on referrals from current
and former clients and direct inquiries from potential clients resulting from
the Company's reputation established over its long tenure in the business. The
Company has developed a formal network of referral sources who bring prospective
client packages to KBK for consideration. Such sources receive a fee when the
Company actually advances funds to the client referred.


                                     Page 3
<PAGE>

Segments

         The Company operates as one segment. The operating information used by
the Company's chief operating decision maker for purposes of assessing
performance and making operating decisions about the Company is the consolidated
financial statements presented herein. KBK management believes the only
significant activity of the Company is financing provided to its clients through
loans and purchase of accounts receivable.

Clients

         The Company's client portfolio of purchased receivables totaled 161
clients in twenty-five states and Canada during 2001 compared to 199 clients in
twenty-three states during 2000. As of December 31, 2001, no client exceeded 5%
of total receivables. The Company requires Board of Directors' approval of any
client facility (loan and/or working capital facility) in excess of $5,000,000
of committed funds.

         The Company's general policy has been to limit its exposure in a single
client to an amount which does not exceed the greater of the Company's allowance
for credit losses ($8.5 million at December 31, 2001, and $2.4 million at
December 31, 2000) or 15% of KBK's primary capital ($5.6 million at December 31,
2001 and $6.4 million at December 31, 2000). Based on facts and circumstances,
exceptions are made to this policy, with Board of Directors' approval, and there
can be no assurance that the Company's exposure to a particular client at any
time will not exceed such limits. At December 31, 2001, there were no clients
which exceeded this limitation. At December 31, 2000, there was one client which
exceeded this limitation, with a balance of $6.9 million, or 28.9% of the
Company's net worth.

         The following table indicates the composition of the Company's total
volume of purchased receivables under management by type of client business for
the year ended December 31, 2001, as well as outstanding receivables under
management by type of client business at December 31, 2001, and December 31,
2000, and the related percentages thereon. The Company purchased $590.3 million
of receivables in 2001, a $146.5 million decrease from the $736.8 million
purchased in 2000.


<Table>
<Caption>

                                                                     Gross Purchased                   Gross Purchased
                                      Total Volume                     Receivables                       Receivables
                                     of Receivables       Percent    Under Management      Percent    Under Management     Percent
                                     Under Management        of       Outstanding at         of        Outstanding at        of
Business of Client (Receivables)    Purchased in 2001      Total     December 31, 2001      Total     December 31, 2000     Total
--------------------------------  ----------------------  -------  ----------------------  -------  ---------------------- -------
                                  (dollars in thousands)           (dollars in thousands)           (dollars in thousands)
<S>                               <C>                     <C>      <C>                     <C>      <C>                    <C>
Manufacturing                          $219,129             37.1%        $ 22,780            35.1%        $ 21,756          31.0%
Services                                 64,690             11.0           13,571            20.9            8,043          11.5
Wholesale and Retail Sales               81,000             13.7           11,469            17.7            5,664           8.1
Agriculture                              11,489              2.0              840             1.3            2,793           4.0
Engineering and Construction             26,688              4.5            1,613             2.5            3,095           4.4
Transportation                           15,290              2.6            1,401             2.1              936           1.3
Energy Related                            6,202              1.0            1,438             2.2              191           0.3
Other                                        --               --              407             0.6              364           0.5
Pool Purchases*                         165,840             28.1           11,463            17.6           27,248          38.9
                                       --------           ------         --------          ------         --------        ------
      Total                            $590,328            100.0%        $ 64,982           100.0%        $ 70,090         100.0%
                                       ========           ======         ========          ======         ========        ======
</Table>

----------

* Pool purchases are not recorded as individual invoice purchases but as a
collection of invoices which have been purchased and recorded as the aggregate
sum of receivables purchased.


                                     Page 4
<PAGE>


         The following table indicates the composition of the Company's loan
balances under management by type of client business for the years ended
December 31, 2001 and 2000, and the related percentages thereon. The Company's
outstanding loan balance as of December 31, 2001 was $53.0 million, a $31.2
million decrease from the $84.2 million balance at December 31, 2000.

<Table>
<Caption>

                                 Loan Balance            Percent             Loan Balance            Percent
                               Outstanding as of            of              Outstanding at             of
Business of Client (Loans)     December 31, 2001          Total            December 31, 2000          Total
--------------------------   ---------------------       -------         ---------------------       ------
                             (dollars in thousands)                      (dollars in thousands)
<S>                          <C>                         <C>             <C>                         <C>
Manufacturing                       $19,276               36.4%                  $32,558               38.7%
Wholesale and Retail Sales           11,122               21.0                    19,484               23.1
Services                              9,836               18.6                     8,744               10.4
Transportation                        4,798                9.1                    13,703               16.3
Energy Related                        4,579                8.6                     3,656                4.3
Engineering and Construction          2,386                4.5                     2,555                3.0
Agriculture                             561                1.0                     2,050                2.4
Other                                   425                0.8                     1,469                1.8
                                    -------              -----                     -----            -------
      Total                         $52,983              100.0%                  $84,219              100.0%
                                    =======              =====                   =======              ======
</Table>

Account Debtors

         During 2001 and 2000, the accounts receivable under management
underlying the Company's portfolio represented 7,720 and 6,089 different debtor
entities, respectively. The most significant concentration in 2001 and 2000 was
debtors in the wholesale and retail sales industry. This category of debtors
made up 26.7% of the total balance of purchased receivables under management
outstanding at December 31, 2001, as compared to 20.0% at December 31, 2000. Due
to the diversity of products in this industry, management does not feel this
level of industry concentration is a significant negative concentration.

<Table>
<Caption>

                                                            Gross Purchased
                           Total Volume                    Receivables Under                    Gross Purchased
                           Of Receivables                     Management                       Receivables Under
                          Under Management    Percent of    Outstanding at     Percent of  Management Outstanding at   Percent of
  Account Debtors         Purchased in 2001      Total     December 31, 2001      Total        December 31, 2000          Total
--------------------      -----------------   ----------   -----------------   ----------  -------------------------   -----------
                       (dollars in thousands)            (dollars in thousands)             (dollars in thousands)
<S>                    <C>                    <C>        <C>                   <C>         <C>                         <C>
Wholesale and Retail
  Sales                     $  131,300           22.3%      $   17,378              26.7%        $   14,008                  20.0%
Transportation                  73,167           12.4            5,761               8.9              5,351                   7.6
Federal, State Local
  Govt                          60,392           10.2            2,599               4.0              4,189                   6.0
Manufacturing                   58,697            9.9            9,537              14.7              7,320                  10.5
Services                        57,636            9.8           13,918              21.4              3,865                   5.5
Energy Related                  21,441            3.6            2,513               3.9              2,122                   3.0
Engineering and
  Construction                  17,129            2.9            1,082               1.7              3,938                   5.6
Agriculture                      4,726            0.8              324               0.5              1,470                   2.1
Other                               --             --              407               0.6                579                   0.8
Pool Purchases*                165,840           28.1           11,463              17.6             27,248                  38.9
                            ----------         ------       ----------            ------         ----------                ------
        Totals              $  590,328          100.0%      $   64,982             100.0%        $   70,090                 100.0%
                            ==========         ======       ==========            ======         ==========                ======
</Table>

* Pool purchases are not recorded as individual invoice purchases but as a
collection of invoices, which have been purchased and recorded as the aggregate
sum of receivables purchased.

         During 2001, one individual account debtor's total receivables
purchased by the Company reached 5.5% of the total volume of receivables
purchased during the year. During 2000, one individual account debtor's total
receivables purchased by the Company reached 7.9% of the total volume of
receivables purchased during such year. Due to the constantly changing nature of
the Company's clients and the changing volume and nature of receivables that
clients may offer the Company for purchase, the receivables purchased from the
Company's clients may result in the Company holding receivables from one account
debtor which constitute 5% to 10% of outstanding receivables then held by the
Company. There may also be times when a related group of debtors exceed such
levels of concentration. These concentrations are in excess of the Company's
allowance for credit losses and can be a significant percentage of the Company's
net worth. This account debtor concentration exposes the Company to credit risk
with respect to particular account debtors which could have a material negative
effect on the Company's operations. Although specific exposure limits are set
for each account, which at any time does not generally exceed 20% of the
Company's net worth, exceptions are regularly made to this policy, and there can
be no assurance that the Company's exposure to a particular account debtor (or
group of affiliated account debtors) will not at any time exceed such
percentage.


                                     Page 5
<PAGE>


Competition

         The Company encounters significant competition from factoring
companies, asset based lenders, commercial banks and other financial
institutions engaged in secured lending. Due to the size of facilities offered
by the Company and the size of target clients, the Company competes with a large
number of local and regional sources of financing, as well as large national
competitors. Many of these competitors have significantly greater financial and
other resources than the Company and have access to capital markets at a lower
cost than the Company is currently able to obtain.

         The Company's competitors include BayView Financial, Capital Business
Credit, a subsidiary of Union Planters Bank, Coast Business Credit, GE Capital
Commercial Credit, TYCO International, Inc., and Wells Fargo Business Credit.

Government Regulation

         Federal Assignment of Claims Act. In connection with certain of its
clients whose account debtors include the United States or departments or
agencies thereof (the "Federal Government"), certain receivables sold or pledged
to the Company are subject to the Federal Assignment of Claims Act ("FACA").
FACA provides that an assignment of a client's contractual claim for monies due
from the Federal Government will be enforceable against the Federal Government
by a third party assignee of such client only under limited circumstances.
Certain aspects of the Company's purchased or pledged receivables make
compliance with FACA impractical or impossible, or make the protections afforded
by FACA unavailable to the Company. As a result, the Company does not always
comply with FACA when it purchases or receives a pledge of receivables where the
Federal Government is the account debtor, causing all assignments of receivables
purchased by the Company to which the Federal Government is the account debtor
to be unenforceable by the Company as regards the Federal Government. Such
failure to comply with FACA has no effect on the validity of assignment or
pledge among the Company, the client and third parties other than the Federal
Government. Non-compliance with FACA causes the Company to lose any right it may
have to receive payments directly from the Federal Government or cause the
Federal Government to acknowledge the Company's claim in such receivables.
However, FACA does not limit the Company's ability to require its clients to
direct payments made by the Federal Government to a lockbox controlled by the
Company. The Federal Government also has significant rights of setoff in
connection with its contractual payments. Typically, the Company can protect
itself from certain rights of setoff by account debtors, either by pursuing its
rights against clients for breach of representation regarding the absence of
setoffs with respect to purchased receivables, or sending the account debtors a
notice of assignment pursuant to the Uniform Commercial Code. In cases where the
Federal Government is the account debtor, an assignee must comply with FACA in
order to protect itself from such setoffs, thus the Company is unable to avail
itself of such protection (other than by pursuing its rights against clients for
breach of representations). The Federal Government has broad setoff rights,
including setoffs for unpaid taxes and setoffs arising from other contracts
between the client and the Federal Government. During 2001 and 2000,
respectively, the Federal Government comprised 4.1% and 10.3% of the account
debtors for the Company's total volume of purchased receivables under
management. The Company has not experienced a disproportionate dilution rate
with respect to such receivables compared to other of the Company's receivables.

         State Usury Laws. Usury laws generally limit the amount of interest
that a creditor may contract for, charge or receive in connection with the loan
of money. In the State of Texas (in which the Company's primary offices are
presently located), state law prohibits creditors from contracting for,
charging, reserving, taking or receiving interest at a rate in excess of a
varying index. For loans in which the interest rate is fixed, the usury ceiling
is equal to the index preceding the week in which the contract is entered into.
For varying rate loans, the index floats. Under the provisions of Texas law, the
index may never exceed 24% per year (or, in the case of business purpose loans
exceeding $250,000, 28% per year). If the amount of the index is less than 18%
per year, the creditor may, nevertheless, charge interest pursuant to a written
agreement at the rate of 18% per year. Because of the low interest rate
environment, the Texas usury ceiling has, since early in 1985, prohibited a
business creditor from contracting for, charging, reserving, taking or receiving
interest at a rate in excess of 18% per year. Section 306.103 of the Texas
Finance Code defines an "account purchase transaction" as an agreement in which
a commercial enterprise sells accounts receivable at a discount with or without
a related repurchase obligation. This law provides that the amount of any
discount associated with the purchase or any fees paid to an account service
provider is not interest. Also, the law provides that the parties'
characterization of an account purchase transaction is conclusive that the
transaction is not a loan.

Employees

         The Company had 73 full-time employees at December 31, 2001, of whom
five were employed in executive and administrative positions and 9 were employed
in marketing. None of the Company's employees are a party to any collective
bargaining agreement, and the Company considers its relations with employees to
be satisfactory.


                                     Page 6
<PAGE>


ITEM 2.  DESCRIPTION OF PROPERTY

         The Company leases its offices at each of its locations in Fort Worth
and Houston, Texas, Pasadena, California, and St. Louis, Missouri under lease
agreements expiring at various dates through 2004. The Company believes that its
facilities are adequate to meet the Company's needs in these markets; however,
space will be required at the location of any new marketing office opened by the
Company.

ITEM 3.  LEGAL PROCEEDINGS

         The Company is not a party to any litigation other than routine
proceedings incidental to its business, and the Company does not expect that
these proceedings will have a material adverse effect on the Company.

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

         None.

                                     PART II


ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The Company's common stock is traded on the American Stock Exchange and
the Pacific Stock Exchange. At March 20, 2002 there were 117 holders of record
of the Company's common stock. The Company has not paid or declared dividends on
its common stock during the two most recent fiscal years and does not currently
intend to pay cash dividends on its common stock in the foreseeable future. The
following table provides market data for the Company's common stock based on
closing prices:


PER SHARE MARKET DATA


<Table>
<Caption>

                                      2001                        2000
                                      ----                        ----
         QUARTER                High          Low           High          Low
         -------                ----          ----          ----          ----
<S>                           <C>           <C>           <C>           <C>
         First                $  5.90       $  3.00       $  4.50       $  3.38

         Second                  5.00          3.60          4.38          3.25

         Third                   3.80          2.70          4.38          4.00

         Fourth                  2.70          1.60          4.13          3.00
</Table>



                                     Page 7
<PAGE>



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

The following commentary presents management's discussion and analysis of the
Company's consolidated financial condition and results of operations. Certain of
the statements included below, including those regarding future financial
performance or results or that are not historical facts, are or contain
"forward-looking" information as that term is defined in the Securities Act of
1934, as amended. The words "expect," "believe," "anticipate," "project,"
"estimate," and similar expressions are intended to identify forward-looking
statements. The Company cautions readers that any such statements are not
guarantees of future performance or events and such statements involve risks,
uncertainties and assumptions, including, but not limited to, industry
conditions, general economic conditions, interest rates, competition, ability of
the Company to successfully manage its growth, and other factors discussed
below. Should one or more of these risks or uncertainties materialize or should
the underlying assumptions prove incorrect, those actual results and outcomes
may differ materially from those indicated in the forward-looking statements.
This review should be read in conjunction with information provided in the
consolidated financial statements, accompanying notes and selected financial
data appearing elsewhere in this report.

OVERVIEW

The Company, through its wholly-owned, consolidated subsidiaries, KBK Financial,
Inc. ("KBK"), KBK Capital Trust I (the "Trust"), and KBK Acceptance Company LP
("SPV"), is an independent financial services company that provides a broad line
of financial products and services to middle market commercial businesses with
credit needs of less than $10 million. KBK was founded in 1962 as a factoring
company for energy-related receivables in Texas. Factoring has served as the
cornerstone of KBK's growth. In 1995, KBK began introducing new products in an
effort to expand its client base and to meet the needs of its existing clients
as their credit quality improves. These products include purchase revolvers,
working capital loans, term loans and mezzanine loans.

KBK's client base consists primarily of businesses with annual revenues ranging
from $1 million to $50 million. The Company's clients typically have rapidly
expanding operations that drive their need for capital. KBK strives to provide
fast, flexible and creative solutions that are tailored to meet these needs.
This approach has provided KBK with a strong reputation in the middle market and
a well-diversified client base. The Company's clients are located in twenty-five
states and Canada and are engaged in a range of businesses, including
energy-related, manufacturing, and wholesale and retail distribution.

The Company's factoring facilities generally involve an on-going or revolving
agreement to purchase eligible new receivables. Factoring involves the Company's
purchase and the clients' true sale of accounts receivable, which usually are
individually ledgered, invoice-by-invoice, on the Company's books. The Company
offers a full range of factoring products and services, including notification,
non-notification, verification, non-verification and non-recourse factoring as
well as several other hybrid variations. The obligors or "debtors" of the
factored receivables typically represent large, financially strong businesses,
many of which are ranked in Fortune Magazine's Fortune 1000 list. As of December
31, 2001, KBK's portfolio of owned and managed receivables purchased under
factoring facilities totaled $53.1 million. The Company's yield on its factoring
portfolio was 22.4% in 2001 and 23.8% in 2000.

In addition to factoring or purchasing accounts receivable on a specific
"invoice-by-invoice" ledgered basis, the Company also purchases accounts
receivable as a revolving "pool." Under this arrangement, the client sells all
receivables, and when they are generated by the client, KBK makes periodic
advances upon request by the client, in aggregate amounts up to the client's
maximum availability limit. As of December 31, 2001, KBK's portfolio of owned
and managed purchased revolvers totaled $11.5 million. The Company's yield on
purchased revolvers was 11.1% in 2001 and 12.7% in 2000.

KBK's commercial loan portfolio includes working capital and term loan
facilities that are typically secured by a first lien on accounts receivable,
inventory, equipment, owner-occupied real estate or other assets. The working
capital lines of credit have maturities of up to two years, while term loans are
structured with monthly payments and maturities, which typically range from one
to five years. Most of the Company's commercial loan products are priced on a
floating rate basis over the Company's announced base rate. During 2001 and
2000, the Company's yield on its commercial loan portfolio was 10.9% and 12.7%,
respectively.

The Company's mezzanine loan product, which was introduced in 1998, offers an
attractive financing alternative for customers whose growth has outpaced their
borrowing capacity from senior debt sources. The Company's strategy with respect
to mezzanine loans is to extend the duration of its current relationships and
offer the Company's traditional products to new customers. KBK's mezzanine
financings typically have fixed interest rates as well as warrants to acquire
equity in the borrower. As of December 31, 2001 the Company had outstanding
mezzanine loans for an aggregate investment of $6.8 million.


                                     Page 8
<PAGE>


In 1992, in connection with the formation of the Company, the Company sold
warrants to two former directors and one current director to purchase a total of
500,000 shares of the Company's common stock. During 1999, the Company
repurchased from a former director warrants to purchase 160,000 shares. The
remaining 340,000 warrants are exercisable at $5 per share, with 160,000
expiring on February 25, 2002 and 180,000 expiring on February 25, 2005.

Pursuant to the Stock Repurchase Plan initiated in 1995, the Company holds
1,400,839 shares of Treasury Stock at a cost of $7,712,094, as of December 31,
2001. During October, 1999, the Company entered into an agreement to repurchase
483,795 shares of its common stock over an 18-month period. The per share prices
were fixed, ranging from $5.00 to $5.53, depending on the timing of the
purchase. The stock was acquired from the previous shareholders of Coastal
Financial Resources Inc., which was acquired by the Company in December, 1994.
Pursuant to the agreement, the purchase was completed during 2001 for an
aggregate cost of $2,557,609.

During 2000, KBK transferred all of its purchased receivables and loan
receivables to SPV on a non-recourse basis. Under this structure (the
"Facility"), SPV pledges these receivables to a multi-user conduit sponsored by
a bank. This revolving Facility replaced KBK's "off-balance sheet"
securitization as well as the multi-bank revolving line of credit which was
executed in 1993. The Facility initially carries a five-year commitment of $200
million, which may be increased up to $350 million upon request by SPV and
consent by the conduit sponsor. The Facility matures December 15, 2005 and bears
interest at the conduit's commercial paper rate plus 1.28%. At December 31,
2001, the outstanding indebtedness under the Facility was $95,416,050 (at a
weighted average interest rate of 3.62%). The terms of the Facility require SPV
and KBK to comply with certain financial covenants including the maintenance of
a certain tangible net worth. The Facility also provides for a borrowing base
against eligible receivables and loans pursuant to the terms of the Facility.
KBK was in compliance with the financial covenants and borrowing base
limitations and there was approximately $547,000 in available credit under this
line at December 31, 2001. At December 31, 2000, the outstanding indebtedness
under the Facility was $122,533,454 (at a weighted average interest rate of
7.93%). KBK was in compliance with the financial covenants and borrowing base
limitations, and there was approximately $25.3 million in available credit under
the line at December 31, 2000.

In 1998, the Company issued 1,725,000 shares of 9.50% mandatorily redeemable
Trust Preferred Securities through its subsidiary, KBK Capital Trust I. The
principal assets of the Trust are 9.50% subordinated debentures of the Company
due 2028. The approximately $16.0 million in net proceeds from the sale of the
securities were invested by the Trust in the debentures. The Company in turn
utilized the funds from the debentures as an equity investment in KBK, and KBK
repaid approximately $16.0 million of short-term indebtedness.

STRATEGY

The Company's long-term goal is to be a leader in providing financial products
and services to middle market businesses in the United States. By serving the
financial and capital needs of this growing segment, the Company believes that
it can achieve strong growth and generate a return on assets above that of other
financial institutions. The Company believes that it has been very successful in
achieving an appropriate balance between asset growth, asset quality and
profitability through strict adherence to proven systems for origination,
underwriting and monitoring. During the course of the past five years, the
Company has leveraged its existing market presence into new product lines to
enable its clients to transition into lower-priced financial products and
services as their businesses expanded and credit quality improved. The Company
remains committed to focusing on its core middle market commercial finance
business. Going forward, KBK's growth strategies include increasing market
penetration, introducing additional products and services, and pursuing
strategic acquisitions and partnerships.

         Increase Market Penetration. A critical aspect of KBK's long-term
growth objective is to increase its earning asset base from existing markets.
The Company's strategy is to (i) continue improving the productivity of its
marketing force through extensive market planning and a compensation program
tied directly to targeted objectives, (ii) add additional marketing
professionals and (iii) train its marketing force to cross-sell existing and new
products. Each year, KBK's account officers are required to develop a marketing
plan with respect to existing customer business and new business prospects. This
active business development program is designed to enable KBK account officers
to identify an ample number of new high-quality business opportunities, thereby
improving selectivity and increasing market penetration. In order to meet their
objectives, account officers are provided with on-going training in the areas of
credit analysis, product application and relationship development and retention.

         Expand Product Line. Another element of KBK's growth plan is the
continued introduction of new products and services. Since 1995, the Company has
introduced a variety of commercial finance products and services designed to
meet the needs of its core middle market clients, broaden its client base and
diversify its portfolio mix. Many of these products enable KBK's former
factoring clients to transition to other financial products and services as
their credit quality improves and, accordingly, have allowed the Company to
lengthen the duration of its relationships. In addition, a growing component of
KBK's portfolio is comprised of conventional commercial loans extended to
clients with more than two years of tenure with the Company. The mezzanine
market has also generated a number of high quality conventional commercial loan
prospects.


                                     Page 9
<PAGE>


         Pursue Strategic Acquisitions and Partnerships. Also important to the
Company's strategy is the pursuit of opportunistic acquisitions and formation of
key partnerships. The Company focuses on acquisition candidates that can expand
KBK's origination capabilities, product line, cross-selling potential and market
penetration, as well as those which add to its asset base. Given current
conditions in the specialty finance market, the Company's management continually
evaluates potential acquisition opportunities. Accordingly, at any particular
time, the Company may be involved in negotiations (at various stages) to acquire
other companies.

         KBK will continue to explore partnerships that complement or leverage
the Company's product portfolio or client relationships. During the past several
years, KBK has formed a number of important partnerships. For example, KBK
currently offers equipment lease financing through third party equipment leasing
companies. KBK also originates real estate loans to its clients and may
participate or sell such loans to an unaffiliated real estate lender. KBK
collects an origination or placement fee from its client or the third party.

RESULTS OF OPERATIONS ANALYSIS
2001 COMPARED TO 2000

<Table>
<Caption>

                                             YEAR ENDED                                  YEAR ENDED
                                          DECEMBER 31, 2001                          DECEMBER 31, 2000
                                          ------------------------------------------------------------
                                                               (dollars in thousands)
<S>                                       <C>              <C>               <C>             <C>
Average Net Earning Assets
  Managed and Owned                       $ 107,840                          $ 142,247
  Owned                                   $ 107,840                          $  85,191

Total revenue                             $  18,042              100%        $  22,348             100%
Interest expense                              7,469               41             7,049              32
Provision for credit losses                  10,470               58             2,773              12
Losses on other loan-related assets           1,635                9                40              --
Restructuring costs                             389                2                --              --
Gain on sale of other assets                     --               --               291               1
Operating expenses                           11,497               64            10,726              48
Income taxes                                 (4,482)             (25)              813               3
                                          ---------             ----         ---------             ---
Net income (loss)                         $  (8,936)             (49)%       $   1,238               6%
                                          =========             ====         =========             ===
</Table>

Average net earning assets owned increased 26.6% to $107.8 million for the year
ended December 31, 2001, from $85.2 million for the year ended December 31,
2000. Although assets increased significantly, revenue decreased 19.3%, or $4.3
million, for the year ended December 31, 2001, from year ended December 31,
2000, in which the Company reported total revenue of $22.3 million. The
decreased revenue results primarily from declining market rates during 2001 as
the Company's discount and interest rates vary with prime rate, which averaged
6.91% in 2001 compared to 9.24% in 2000.

Interest expense increased 6.0% to $7.5 million for the year ended December 31,
2001, compared to $7.0 million for the year ended December 31, 2000. This
increase resulted primarily from the $41.1 million increase in average funded
debt required to fund the $22.6 million increase in net average earning assets
owned, the $12.0 million increase in nonperforming assets and the $1.5 million
cost of treasury stock purchases. The interest expense increase related to the
increased borrowing was largely offset by the decreasing interest rates during
2001. The net effect of the $4.3 million decrease in revenue and the $420,000
increase in interest expense resulted in a $4.7 million decrease in income after
interest expense for the year ended December 31, 2001 compared to the year ended
December 31, 2000.

The provision for credit losses was $10.5 million for 2001 compared to $2.8
million for 2000, representing a 277.6% increase. The Company experienced
significant deterioration in its loan portfolio due in part to the sluggish
economy. Several large loans became nonperforming during the year and the
Company was forced to liquidate the collateral pledged against these loans. The
valuation of these loans and other loan-related assets resulted in the
significant increases to the loss provision during 2001. Also related to these
liquidations, the Company recorded other loan-related assets of $6.9 million
which represents the Company's valuation of a Boeing jet which was foreclosed
during the year and owned by the Company as of December 31, 2001. Based upon the
review and valuation of its portfolio, the Company believes that the allowance
for credit losses is adequate at year-end 2001.

During 2001, the Company had charge-offs of $4.6 million while recovering
$203,000. Net charge-offs for 2001 of $4.4 million and a provision of $10.5
million for 2001 resulted in an allowance for credit losses of $8.5 million, or
7.2% of gross receivables outstanding as of December 31, 2001 (7.9% of average
owned receivables outstanding during 2001).

In addition, during 2001 the Company recorded losses of $1.6 million, related
primarily to the chargeoff of the Company's ownership interest in a business
enterprise which was dissolved during 2001. The ownership interest resulted from
a settlement


                                    Page 10
<PAGE>


related to fraudulent invoices purchased by the Company during 1998. As of
December 31, 2000, the Company estimated this investment's net fair value as
$1.2 million, and this balance was charged off during 2001 following the
dissolution of the entity. The Company also charged off $425,000 related to the
carrying value of a patent which the Company had foreclosed during 1999.
Although the rights to the patent were sold during 1999 with an initial payment
received by the Company, the buyer subsequently repudiated the contract; and as
a result during 2001, the Company deemed the patent to be worthless.

During 2000, the Company had charge-offs of $2.6 million while recovering
$180,000, resulting in net charge-offs of $2.4 million. The Company's 2000
provision for credit losses of $2.8 million brought the allowance for credit
losses to $2.4 million, or 1.5% of gross receivables outstanding as of December
31, 2000 (2.8% of average owned receivables outstanding during 2000).

Operating expenses increased $771,000, or 7.2%, to $11.5 million, or 63.7% of
total revenue for 2001 compared with $10.7 million, or 48.0% of total revenue
for 2000. This increase was primarily a result of increased salaries and
benefits and other employment expenses of $440,000, related to increases in
marketing staff in 2001. In addition, other expenses increased $502,000,
resulting primarily from marketing costs related to a direct advertising
campaign.

The decreased income after interest expense, combined with increased operating
expenses, and the provision for losses, resulted in a $15.5 million decrease in
income before income taxes compared to the prior year. The Company recorded an
income tax benefit of $4.5 million compared to income tax expense of $813,000
for the prior year.

As a result of the above, net loss of the Company for 2001 totaled $8.9 million
compared to net income of $1.2 million for 2000.

LIQUIDITY AND CAPITAL RESOURCES

The Company's capital requirements generally increase proportionately to the
increase in earning assets. The method of funding the portfolio changed
significantly during 2000 with the implementation of the Facility. Total average
net earning assets owned increased by $22.6 million, from $85.2 million in 2000
to $107.8 million in 2001. The Company continues to search for ways to employ
its capital and to expand its portfolio through increased market penetration,
expansion of its current product line, expansion of market presence, and pursuit
of strategic partnerships which enable the Company to provide complete financial
services to middle-market businesses.

As discussed in the overview, KBK's financing is provided through a $350 million
revolving Facility. The Facility currently carries a commitment of $200 million,
expiring in December 2005, which may be increased up to $350 million upon
request by SPV and consent by the conduit sponsor. Continued availability of
funds from the Facility depends upon the Company's continued compliance with its
loan covenants. At December 31, 2001, KBK and SPV were in compliance with all of
the Facility covenants.

The Company has not paid dividends on its common stock and currently does not
intend to pay cash dividends; rather, it intends to retain its cash for the
continued expansion of its business and the continuation of the stock repurchase
program initiated in November 1995.

Under the Company's stock repurchase program, the Company may buy back in open
market transactions, block trades or private transactions, up to 1,500,000
shares (41.9% of the issued shares at year end 2001) of the Company's common
stock at the current market price. At December 31, 2001 and 2000, 1,400,839 and
813,081 shares of common stock were held in the treasury at a cost of $7.7
million and $5.4 million, respectively. All of such purchases have been funded
out of the general funds of the Company, which may have had the result of
increasing advances under credit facilities.

The $36.3 million decrease in outstanding loans and accounts receivable
purchased, combined with the $5.7 million increase in other investments as of
December 31, 2001, resulted in a $27.1 million decrease in the balance
outstanding under the Facility.

The Company expended $1,037,558 and $174,000 on premises and equipment in 2001
and 2000, respectively, principally in connection with upgrades to its
management information systems, computer equipment, office furniture and
equipment, and leasehold improvements. The Company funded such expenditures from
internally generated funds or advances under the credit facility. The Company
plans to continue enhancements of its management information systems for
providing tracking and supporting new products.

CHANGES IN FINANCIAL CONDITION

Total assets decreased 21.4% to $135.6 million as of December 31, 2001. This
decrease is primarily related to the run-off and liquidation of the loan
portfolio during 2001. The portfolio decrease resulted in a $27.1 million
decrease in the outstanding balance under the Facility. The Company's allowance
for credit losses was $8.5 million on December 31, 2001, 7.2% of gross
outstanding accounts receivable, or 7.9% of average owned receivables
outstanding, during 2001. At year-end 2000, the allowance for credit


                                    Page 11
<PAGE>


losses was $2.4 million, 1.5% of gross outstanding accounts receivable, or 2.8%
of average owned receivables outstanding, during 2000. Management believes that
the Company's allowance for credit losses is adequate as of December 31, 2001
and 2000.

CRITICAL ACCOUNTING POLICIES

The Company and its subsidiaries have established various accounting policies
which govern the application of accounting principles generally accepted in the
United States of America in the preparation and presentation of the Company's
consolidated financial statements. The significant accounting policies of the
Company are described in footnote 1 of the consolidated financial statements.
Certain accounting policies involve significant judgments, assumptions and
estimates by management that have a material impact on the carrying value of
certain assets and liabilities, which management considers to be critical
accounting policies. The judgments, assumptions and estimates used by management
are based on historical experience, knowledge of the accounts and other factors,
which are believed to be reasonable under the circumstances. Because of the
nature of the judgments and assumptions made by management, actual results could
differ from these judgments and estimates, which could have a material impact on
the carrying values of assets and liabilities and the results of operations of
the Company.

Management analyzes the total receivables portfolio and other loan-related
assets to determine the adequacy of the allowance for credit losses and the
carrying value of other loan-related assets and the appropriate provision
required to maintain an adequate allowance. Estimating the allowance for credit
losses is a critical accounting policy. It is subjective in nature and requires
material estimates that may be subject to revision as facts and circumstances
warrant. In assessing the adequacy of the allowance, management reviews the
size, quality and risks of the assets in the portfolio and considers factors
such as specific known risks, past experience, the status and amount of
nonperforming assets and economic conditions. A specific allowance is provided
for individual loans considered to have specific loss potential. In addition,
the Asset Quality Committee of the Board of Directors reviews the assessments of
management in determining the adequacy of the Company's allowance for credit
losses on a quarterly basis. Based on this review, the provision is recorded to
maintain the allowance at a level deemed appropriate by management based on
probable losses in the portfolio. The same process is applied for evaluation of
the carrying value of other loan-related assets as is applied for estimating the
allowance for credit losses. While management uses available information to
recognize losses on assets, there can be no assurance that future additions to
the allowance will not be necessary.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

The following table presents contractual cash obligations of the Company as of
December 31, 2001 (dollars in thousands):

<Table>
<Caption>


                                                                            Payments due by Period
                                                  -------------------------------------------------------------------------
                                                                  Less than        One to          Four to          After
Contractual Cash Obligations                        Total         One Year       Three Years     Five Years      Five Years
----------------------------                      ---------       ---------      -----------     ----------      ----------
<S>                                               <C>             <C>             <C>             <C>             <C>
Bank Line of Credit                               $  95,416       $      --       $      --       $  95,416       $      --
Mandatorily Redeemable Preferred Securities          17,250              --              --              --          17,250
Operating Leases                                      1,087             702             337              48              --
                                                  ---------       ---------       ---------       ---------       ---------
     Total Contractual Cash Obligations           $ 113,753       $     702       $     337       $  95,464       $  17,250
                                                  =========       =========       =========       =========       =========
</Table>

The following table presents contractual commercial commitments of the Company
as of December 31, 2001 (dollars in thousands):

<Table>
<Caption>


                                                 Amount of Commitment Expiration Per Period
                                      ------------------------------------------------------------------
                                       Unfunded       Less than       One to      Four to       After
Commercial Commitments                Commitments     One Year     Three Years  Five Years    Five Years
----------------------                -----------     --------     -----------  ----------    ----------
<S>                                   <C>             <C>          <C>          <C>           <C>
Lines of Credit                         $39,110       $14,862       $23,078       $ 1,170       $    --
Standby Letters of Credit                   485           485            --            --            --
                                        -------       -------       -------       -------       -------
     Total Commercial Commitments       $39,595       $15,347       $23,078       $ 1,170       $    --
                                        =======       =======       =======       =======       =======
</Table>


EFFECTS OF RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," which
requires derivatives to be recognized in the consolidated balance sheets at fair
value. Changes in such fair value are required to be recognized in operations to
the extent the derivative is not effective as a hedge. SFAS No. 133 was
effective for fiscal years beginning after June 15, 1999 and should be applied
prospectively. However, the FASB had subsequently issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133" which postponed initial application
until fiscal years beginning after June 15, 2000. In June 2000, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 138, "Accounting for
Derivative Instrument and Hedging Activities - an


                                    Page 12
<PAGE>


amendment of FASB Statement No. 133" which amended and superceded certain
provisions of SFAS No. 133. The Company experienced no impact from the adoption
of these standards as of January 1, 2001.

SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," replaces SFAS No. 125, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities," but
carries over most of SFAS No. 125's provisions without change. SFAS No. 140
elaborates on the qualifications necessary for a special-purpose entity,
clarifies sales accounting criteria in certain circumstances, refines accounting
for collateral, and adds disclosures for collateral, securitizations, and
retained interests in securitized assets. This statement should be applied
prospectively and was effective for transactions occurring after March 31, 2001.
Disclosure requirements of this statement and any changes in accounting for
collateral were effective for fiscal years ending after December 15, 2000 or
fiscal 2000 for the Company. Adoption of this standard had no impact on the
Company's consolidated financial statements.

In June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations", and SFAS No. 142. "Goodwill and Other Intangible
Assets". SFAS No. 141 requires that the purchase method of accounting be used
for all business combinations initiated after June 30, 2001. SFAS No. 142
requires that goodwill and intangible assets with indefinite useful lives no
longer be amortized, but instead tested for impairment at least annually. The
Company is required to adopt the provisions of SFAS No. 141 immediately and SFAS
No. 142 effective January 1, 2002.

SFAS No. 141 will require upon adoption of SFAS No. 142, that the Company
evaluate its existing intangible assets and goodwill that were acquired in a
prior purchase business combination, and to make any necessary reclassifications
in order to conform with the new criteria in SFAS No. 141 for recognition apart
from goodwill. Upon adoption of SFAS No. 142, the Company will be required to
reassess the useful lives and residual values of all intangible assets acquired
in purchase business combinations, and make any necessary amortization period
adjustments by the end of the first interim period after adoption. In addition,
to the extent an intangible asset is identified as having an indefinite useful
life, the Company will be required to test the intangible asset for impairment
in accordance with the provisions of SFAS No. 142 within the first interim
period. Any impairment loss will be measured as of the date of adoption and
recognized as the cumulative effect of a change in accounting principle in the
first interim period.

In connection with the transitional goodwill impairment evaluation, SFAS No. 142
will require the Company to perform an assessment of whether there is an
indication that goodwill is impaired as of the date of adoption. To accomplish
this, the Company must identify its reporting units and determine the carrying
value of each reporting unit by assigning the assets and liabilities, including
the existing goodwill and intangible assets, to those reporting units as of the
date of adoption. The Company will then have up to six months from the date of
adoption to determine the fair value of each reporting unit and compare it to
the reporting unit's carrying amount. To the extent a reporting unit's carrying
amount exceeds its fair value, an indication exists that the reporting unit's
goodwill may be impaired and the Company must perform the second step of the
transitional impairment test. In the second step, the Company must compare the
implied fair value of the reporting unit's goodwill, determined by allocating
the reporting unit's fair value to all of its assets (recognized and
unrecognized) and liabilities in a manner similar to a purchase price allocation
in accordance with SFAS No. 141, to its carrying amount, both of which would be
measured as of the date of adoption. This second step is required to be
completed as soon as possible, but no later than the end of the year of
adoption. Any transitional impairment loss will be recognized as the cumulative
effect of a change in accounting principle in the Company's consolidated
statements of operations.

The Company adopted SFAS No. 142 as of January 1, 2002 and will no longer
amortize goodwill. As of the date of adoption, the Company had unamortized
goodwill in the amount of $2.3 million which will be subject to the transition
provisions of SFAS Nos. 141 and 142. Amortization expense related to goodwill
was $394,000 for each of the years ended December 31, 2001 and 2000. Because of
the detailed assessment required to comply with adopting SFAS Nos. 141 and 142,
it is not practicable to reasonably estimate the impact of adopting these
statements on the Company's consolidated financial statements at the date of
this report, including whether any transitional impairment losses will be
required to be recognized as the cumulative effect of a change in accounting
principle.


                                    Page 13
<PAGE>




KBK CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

<Table>
<Caption>

                                                                         Years Ended December 31,
                                                                     --------------------------------
                                                                         2001               2000
                                                                     ------------        ------------
<S>                                                                  <C>                 <C>
Earned discount income                                               $  9,106,986        $  1,574,948
Interest income - Loans                                                 6,305,261           9,186,680
Servicing fees (note 3)                                                        --           7,889,326
Other income - Fees                                                     2,630,400           3,696,971
                                                                     ------------        ------------
      Total revenue                                                    18,042,647          22,347,925
Interest expense (notes 7 and 8)                                        7,468,830           7,049,234
                                                                     ------------        ------------
      Income after interest expense                                    10,573,817          15,298,691
Provision for credit losses (note 5)                                   10,470,104           2,773,000
Provision for losses on other loan-related assets (note 4)              1,635,000              40,000
                                                                     ------------        ------------
Income (loss) after interest expense and provisions for losses         (1,531,287)         12,485,691
                                                                     ------------        ------------
Operating expenses:
    Salaries and employee benefits (note 16)                            6,247,638           5,808,035
    Amortization of intangible assets                                     393,513             393,513
    Occupancy and equipment (note 14)                                   1,389,754           1,473,865
    Professional fees                                                     517,663             602,434
    Other                                                               2,949,349           2,447,515
                                                                     ------------        ------------
      Total operating expenses                                         11,497,917          10,725,362
                                                                     ------------        ------------
Restructuring costs (note 18)                                             388,930                  --
Gain on sale of other assets                                                   --             290,859
                                                                     ------------        ------------
Income (loss) before income taxes                                     (13,418,134)          2,051,188
Income tax expense (benefit):
    Federal (note 10):
      Current                                                          (1,283,749)            924,901
      Deferred                                                         (3,174,217)           (143,880)
    State                                                                 (23,755)             31,771
                                                                     ------------        ------------
      Total income tax expense (benefit)                               (4,481,721)            812,792
                                                                     ------------        ------------
      Net income (loss)                                              $ (8,936,413)       $  1,238,396
                                                                     ============        ============
Earnings (loss) per share - basic (note 11)                          $      (3.61)       $       0.43
                                                                     ============        ============
Weighted-average common shares outstanding - basic (note 11)            2,473,790           2,852,453
                                                                     ============        ============
Earnings (loss) per share - diluted (note 11)                        $      (3.61)       $       0.43
                                                                     ============        ============
Weighted-average common shares outstanding - diluted (note 11)          2,473,790           2,852,819
                                                                     ============        ============
</Table>


See accompanying notes to consolidated financial statements.



                                    Page 14
<PAGE>


KBK CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>

                                                                         December 31,         December 31,
                                                                        -------------        -------------
                                                                             2001                2000
                                                                        -------------        -------------
<S>                                                                     <C>                  <C>
ASSETS
Cash (note 2)                                                           $   8,310,453        $  12,675,230
Receivables (notes 5 and 7):
  Accounts receivable, net                                                 64,981,840           70,089,726
  Loans receivable, net                                                    52,982,983           84,219,170
  Less allowance for credit losses                                         (8,475,641)          (2,389,463)
                                                                        -------------        -------------
  Total receivables, net                                                  109,489,182          151,919,433

Premises and equipment, net of accumulated depreciation
  of $4,314,353 and  $3,730,929 at December 31, 2001
  and 2000, respectively (note 6)                                           1,528,588            1,074,454
Intangible assets, net of accumulated amortization of $3,452,473
  and $3,058,961 at December 31, 2001
  and 2000, respectively                                                    2,305,767            2,699,280
Income taxes receivable (note 10)                                           1,175,840                   --
Deferred tax asset, net (note 10)                                           3,817,797              643,580
Other loan-related assets, net (note 4)                                     6,949,269            1,210,000
Other assets                                                                2,000,931            2,206,743
                                                                        -------------        -------------
      Total assets                                                      $ 135,577,827        $ 172,428,720
                                                                        =============        =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Bank line of credit (note 7)                                            $  95,416,050        $ 122,533,454
Mandatorily redeemable preferred securities (note 8)                       16,107,974           16,056,061
Due to clients (note 9)                                                    10,500,872            8,247,564
Accounts payable and other liabilities (note 8)                               845,069              852,262
Deferred revenue                                                              147,836              106,021
Income taxes payable (note 10)                                                     --              750,857
                                                                        -------------        -------------
      Total liabilities                                                   123,017,801          148,546,219

Stockholders' equity (notes 12, 13, and 17):
  Preferred stock, $.10 par value.  Authorized 100,000 shares;
    no shares issued and outstanding                                               --                   --
  Common stock, $.01 par value.  Authorized 10,000,000 shares;
    issued 3,577,485 shares and outstanding 2,176,646 at
    December 31, 2001 and issued 3,577,485 shares and outstanding
    2,764,404 shares at December 31, 2000                                      35,775               35,775
  Additional paid-in capital                                               16,224,907           16,263,709
  Retained earnings                                                         4,011,438           12,991,900
  Treasury stock, at cost, 1,400,839 shares at December 31, 2001
    and 813,081 shares at December 31, 2000                                (7,712,094)          (5,408,883)
                                                                        -------------        -------------
      Total stockholders' equity                                           12,560,026           23,882,501
Commitments and contingencies (notes 7, 8, 12, 14, 15)
                                                                        -------------        -------------
      Total liabilities and stockholders' equity                        $ 135,577,827        $ 172,428,720
                                                                        =============        =============
</Table>

See accompanying notes to consolidated financial statements.


                                    Page 15
<PAGE>


KBK CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the Years ended December 31, 2001 and 2000

<Table>
<Caption>
                                          Common Stock
                                 -----------------------------     Additional                                         Total
                                     Shares                         paid-in        Retained         Treasury      stockholders'
                                  outstanding        Amount         capital        earnings          stock            equity
                                 ------------     ------------    ------------   ------------     ------------    -------------
<S>                              <C>              <C>             <C>            <C>              <C>             <C>
Balance at December 31, 1999        2,985,829     $     35,775    $ 16,326,919   $ 11,833,443     $ (4,298,139)   $ 23,897,998
Purchase of stock for treasury
  (note 12)                          (237,000)              --              --             --       (1,219,360)     (1,219,360)
Issuance of common stock from
  treasury (note 17)                   15,575               --              --        (79,939)         108,616          28,677
Forfeiture of stock options
  (note 12)                                --               --         (63,210)            --               --         (63,210)
Net income                                 --               --              --      1,238,396               --       1,238,396
                                 ------------     ------------    ------------   ------------     ------------    ------------
Balance at December 31, 2000        2,764,404           35,775      16,263,709     12,991,900       (5,408,883)
                                                                                                                    23,882,501
Purchase of stock for treasury
  (note 12)                          (600,255)              --              --             --       (2,381,708)     (2,381,708)
Issuance of common stock
  from treasury (note 17)              12,497               --              --        (44,049)          78,497          34,448
Forfeiture of stock options
  (note 12)                                --               --         (38,802)            --               --         (38,802)
Net loss                                   --               --              --     (8,936,413)              --      (8,936,413)
                                 ------------     ------------    ------------   ------------     ------------    ------------
Balance at December 31, 2001        2,176,646     $     35,775    $ 16,224,907   $  4,011,438     $ (7,712,094)   $ 12,560,026
                                 ============     ============    ============   ============     ============    ============
</Table>

See accompanying notes to consolidated financial statements.


                                    Page 16
<PAGE>



KBK CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>


                                                                              YEARS ENDED DECEMBER 31
                                                                         -----------------------------------
                                                                             2001                 2000
                                                                         -------------       ---------------
<S>                                                                      <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)                                                        $ (8,936,413)       $  1,238,396
Adjustments to reconcile net income (loss) to net cash provided by
  (used in) operating activities:
    Depreciation and amortization                                             976,937           1,101,060
    Accretion on mandatorily redeemable preferred securities                   51,913              47,439
    Provision for credit losses                                            10,470,104           2,773,000
    Provision for losses on other loan-related assets                       1,635,000              40,000
    Changes in operating assets and liabilities:
      Deferred income tax benefit                                          (3,174,217)           (143,880)
      Accounts receivable, net                                              4,732,052         (58,016,800)
      Retained interest in sold assets                                             --           9,418,528
      Other assets                                                           (219,188)           (213,814)
      Due to clients                                                        2,253,308          (6,813,281)
      Accounts payable and other liabilities                                   (7,193)           (117,979)
      Interest payable for the sold assets                                         --            (267,536)
      Income taxes payable/receivable                                      (1,926,697)            894,737
      Deferred revenue                                                         41,815            (233,835)
                                                                         ------------        ------------
      Net cash provided by (used in) operating activities                   5,897,421         (50,293,965)

CASH FLOWS FROM INVESTING ACTIVITIES
    Net change in loans receivable, net                                    20,278,826          (6,890,913)
    Purchases of premises and equipment                                    (1,037,558)           (174,433)
                                                                         ------------        ------------
      Net cash provided by (used in) investing activities                  19,241,268          (7,065,346)

CASH FLOWS FROM FINANCING ACTIVITIES
    Net (repayments to) borrowings from the bank                          (27,117,404)         66,533,454
    Decrease in commercial paper                                                   --            (100,000)
    Repurchase of common stock                                             (2,381,708)         (1,219,360)
    Forfeiture of stock options                                               (38,802)            (63,210)
    Issuance of common stock                                                   34,448              28,677
                                                                         ------------        ------------
      Net cash (used in) provided by financing activities                 (29,503,466)         65,179,561
                                                                         ------------        ------------
      Net (decrease) increase in cash                                      (4,364,777)          7,820,250
Cash at beginning of year                                                  12,675,230           4,854,980
                                                                         ------------        ------------
Cash at end of year                                                      $  8,310,453        $ 12,675,230
                                                                         ============        ============
Supplemental disclosure of cash flow information:
  Cash paid for interest                                                 $  6,135,393        $  6,321,203
  Income taxes paid                                                      $    750,000        $         --
  Other loan-related assets                                              $  6,949,269        $         --
  See note 4 for additional supplemental cash flow information.
                                                                         ============        ============
</Table>

See accompanying notes to consolidated financial statements.



                                    Page 17
<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements presented herein reflect the consolidated financial
statements for KBK Capital Corporation (the "Company") and its wholly owned
subsidiaries, KBK Financial, Inc., ("KBK"), KBK Receivables Corporation,
("SPC"), KBK Capital Trust I, (the "Trust") and KBK Acceptance Company LP
("SPV"). All material intercompany balances and transactions have been
eliminated in consolidation.

The accounting and reporting policies of the Company conform to accounting
principles generally accepted in the United States of America and to practices
within the finance industry. In preparing the consolidated financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the consolidated
balance sheets and revenues and expenses for the period, and actual results
could differ from those estimates. The Company provides financial services
through the extension of secured loans and the discounted purchase of accounts
receivable.

Discount Income and Interest Income

Variable discount income from purchased receivables and interest income from
loans receivable are recorded on an accrual basis in accordance with the terms
of the agreements. Fixed discounts from accounts receivable are earned in the
month in which the receivables are purchased. The financial result of this
method of recognizing such fixed discounts does not differ materially from the
accrual method utilized in recognizing variable discounts.

Receivables

Receivables are recorded at cost, less the related allowance for estimated
impairment and credit losses. Management, considering current information and
events regarding the borrowers' ability to repay their obligations, considers a
receivable to be impaired when it is probable that the Company will be unable to
collect all amounts due according to the contractual terms of the receivable.
When a receivable is considered to be impaired, the amount of the impairment is
measured based on the present value of expected future cash flows discounted at
the receivables' effective interest rate. Impairment losses are included in the
allowance for credit losses through a charge to provision for credit losses.
Cash receipts on impaired receivables are applied to reduce the principal amount
of such receivables until the principal has been recovered and are recognized as
interest or discount income, thereafter.

Allowance for Credit Losses

The allowance for credit losses represents the provision charged to operations,
less accounts receivable or loans receivable charged off, net of recoveries. The
allowance for credit losses is an amount which, in the judgment of management,
is adequate to absorb the estimated losses of accounts receivable or loans
receivable. The amount of provision for credit losses is set with reference to
the adequacy of the allowance. Management's periodic evaluation of the adequacy
of the allowance is based upon the Company's past credit loss experience, known
and inherent risks in the receivables, adverse situations that may affect
repayment, the potential for additional costs to perfect title to collateral and
current and prospective economic situations.

Management regularly reviews the portfolio of earning assets to identify
accounts which have or may become collection problems. When any account becomes
doubtful as to collection of discount or interest income, the account is placed
on non-accrual status. Any discount or interest income accrued during the
current year, but not received at the time its collectability becomes doubtful,
is reversed in that year to the extent deemed uncollectable. Additional
discounts and interest accrued in prior years, which are subsequently determined
to have doubtful collectability, are charged to the allowance for credit losses.
Payments of discount and interest income subsequently received on accounts or
relationships classified as non-accrual are recognized as received. After an
account relationship is placed on non-accrual status, no income is accrued until
circumstances indicate that such income is collectable.

Segment Information

Segment information has been considered in accordance with the management
approach as a basis for identifying reportable segments. The management approach
is based on the way that management organizes the segments within the enterprise
for making operating decisions and assessing performance. KBK management views
its operations as one segment, and believes the only significant activity is
financing provided to its clients through loans and purchase of accounts
receivable.


                                    Page 18
<PAGE>


Premises and Equipment

Premises and equipment are carried at cost, net of accumulated depreciation.
Depreciation is computed primarily using the straight-line method over the
useful lives of the assets. When assets are retired or otherwise disposed of,
the cost and related accumulated depreciation are removed from the accounts and
any resulting gain or loss is recognized in income for the period. The cost of
maintenance and repairs is charged to expense as incurred.

Intangible Assets

The Company adopted SFAS No. 142, "Goodwill and Other Intangible Assets," as of
January 1, 2002 and will no longer amortize goodwill. As of the date of
adoption, the Company had unamortized goodwill in the amount of approximately
$2.3 million, which will be subject to the transition provisions of SFAS Nos.
141, "Business Combinations" (adopted in 2001), and 142. Amortization expense
totaled approximately $394,000 for each of the years ended December 31, 2001 and
2000. Because of the extensive effort needed to comply with adopting SFAS Nos.
141 and 142, it is not practicable to reasonably estimate the impact of adopting
these statements on the Company's consolidated financial statements at the date
of this report, including whether any transitional impairment losses will be
required to be recognized as the cumulative effect of a change in accounting
principle.

In connection with the transitional goodwill impairment evaluation, SFAS No. 142
will require the Company to perform an assessment of whether there is an
indication that goodwill is impaired as of the date of adoption. To accomplish
this, the Company must identify its reporting units and determine the carrying
value of each reporting unit by assigning the assets and liabilities, including
the existing goodwill and intangible assets, to those reporting units as of the
date of adoption. The Company will then have up to six months from the date of
adoption to determine the fair value of each reporting unit and compare it to
the reporting unit's carrying amount. To the extent a reporting unit's carrying
amount exceeds its fair value, an indication exists that the reporting unit's
goodwill may be impaired and the Company must perform the second step of the
transitional impairment test. In the second step, the Company must compare the
implied fair value of the reporting unit's goodwill, determined by allocating
the reporting unit's fair value to all of its assets (recognized and
unrecognized) and liabilities in a manner similar to a purchase price allocation
in accordance with SFAS No. 141, to its carrying amount, both of which would be
measured as of the date of adoption. This second step is required to be
completed as soon as possible, but no later than the end of the year of
adoption. Any transitional impairment loss will be recognized as the cumulative
effect of a change in accounting principle in the Company's consolidated
statements of operations.

Mandatorily Redeemable Preferred Securities

In 1998, the Company issued 1,725,000 shares of 9.50% mandatorily redeemable
Trust Preferred Securities ("Preferred Securities") through its subsidiary, the
Trust. The principal assets of the Trust are 9.50% subordinated debentures from
the Company due in 2028. The Preferred Securities are recorded at total proceeds
from the sale, less the related offering costs and accretion of liquidation
value. The Preferred Securities are classified as debt in the accompanying
consolidated balance sheets (note 8).

Income Taxes

The Company accounts for income taxes using the asset and liability method.
Deferred tax assets and liabilities are recognized for the 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
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

The Company files a consolidated Federal income tax return and reflects a
consolidated tax provision.

Stock Option Plan

Prior to January 1, 1996, the Company accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, "Accounting for Stock Issued to Employees," and related interpretations.
As such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. SFAS
No. 123, "Accounting for Stock-Based Compensation," permits entities to
recognize as expense over the vesting period the fair value of all stock-based
awards on the date of grant. Alternatively, SFAS No. 123 allows entities to
continue to apply the provisions of APB Opinion No. 25 and provide pro forma net
income (loss) and pro forma earnings (loss) per share disclosures for employee
stock option grants made in 1996 and future years as if the fair-value-based
method defined in SFAS No. 123 had been applied. The Company has elected to
continue to apply the provisions of APB Opinion No. 25 and provides the pro
forma disclosure provisions of SFAS No. 123 (note 13).


                                    Page 19
<PAGE>


Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of

The Company reviews for impairment of long-lived assets and certain identifiable
intangibles whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceed the fair value of
the assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.

Fair value of Financial Instruments

The carrying amount of cash, accounts receivable, due to clients, accounts
payable and other liabilities approximates fair value because of the short
maturity of these instruments. The carrying value of loans receivable
approximates fair value because the loans are earning interest at floating
rates, which approximate rates currently offered by local lending institutions
for loans of similar terms to companies with comparable credit risk. The
carrying value of the Company's bank debt approximates fair value because it
bears interest at floating rates that are similar to current borrowing rates for
loans of comparable maturity and credit risk and because of the short maturities
of the commercial paper issued in conjunction with the line of credit. The fair
market value of the mandatorily redeemable preferred stock, which approximates
carrying value, is estimated using rates offered on similar types of risk
commensurate instruments, considering the risks associated with those
instruments.

Reclassification

Certain 2000 amounts have been reclassified to conform to the 2001 presentation.

(2) LETTERS OF CREDIT

The Company provides letters of credit to its clients through its banking
relationship with Bank One Texas NA. These letters of credit, totaling $485,000,
are secured by the Company's cash collateral account at that bank. As of
December 31, 2001, approximately $500,000 was held in the collateral account.

(3) SALE OF ASSETS

During 2000, KBK transferred all its purchased receivables and loan receivables
to a newly formed special purpose vehicle, KBK Acceptance Company LP (SPV),
which is a Texas limited partnership. Under this structure, SPV pledges these
receivables to a multi-user conduit which is sponsored by a bank (note 7). The
assets and liabilities of SPV are included in the consolidated balance sheets.

As of December 31, 1999, KBK had approximately $55.9 million of receivables and
loans outstanding in a previously deployed conduit facility. During 2000 the
Company had recorded approximately $7.9 million in fees related to managing and
servicing such assets.

(4) SUPPLEMENTAL CASH FLOW INFORMATION

During 1998, a receivable balance of the Company was deemed non-performing due
to alleged fraudulent invoices being sold to KBK. To partially offset the
unsecured portion of the receivables purchased balance, KBK was offered and
accepted an ownership interest in a newly formed entity, which took over the
operations of the company selling KBK the invoices. The ownership interest of
this newly formed entity, amounting to $1,750,000, was included in other
loan-related assets as an equity investment in the new entity. As of December
31, 2000, the Company estimated the net fair value of this asset as $1,210,000.
The value was determined by reference to the present value of the estimated
future cash flows of the asset. During 2001, the new entity was dissolved;
therefore, the Company charged off the net balance. The chargeoff is included in
provision for losses on other loan-related assets.

During 2001, the Company foreclosed on a loan which was secured by a Boeing 727
jet. As of December 31, 2001, the Company valued this airplane at approximately
$6.9 million and classified it as other loan-related assets on the consolidated
balance sheets. The Company is actively marketing the airplane for sale.


                                    Page 20
<PAGE>

(5) RECEIVABLES

Receivables at December 31, 2001 and 2000 are summarized as follows:

<Table>
<Caption>

                                                2001                   2000
                                             -------------        -------------
<S>                                          <C>                  <C>
Accounts receivable                          $  69,319,338        $  76,306,797
  Less participation                            (4,337,498)          (6,217,071)
Loans receivable                                53,981,959           86,211,853
  Less participation                            (1,485,297)          (2,540,428)
Employee advances                                  486,321              547,745
                                             -------------        -------------
                                               117,964,823          154,308,896
Less allowance for credit losses                 8,475,641            2,389,463
                                             -------------        -------------
                                             $ 109,489,182        $ 151,919,433
                                             =============        =============
</Table>

Accounts receivable are purchased from clients engaged in a variety of
industries including, but not limited to, wholesale and retail sales,
engineering and construction, energy, manufacturing, transportation, and
marketing related companies. At December 31, 2001, the two largest clients
represented 4.2% and 4.0%, respectively, of total receivables, or 39.8% and
37.1%, respectively, of stockholders' equity. At December 31, 2000, the two
largest clients represented 4.4% and 3.2%, respectively, of total receivables,
or 28.7% and 20.9%, respectively, of stockholders' equity.

At December 31, 2001, approximately 35.1% and 20.9% of the outstanding accounts
receivable were purchased from clients in manufacturing related and services
related industries, respectively. At December 31, 2000, approximately 31.0 % and
11.5% of the outstanding accounts receivable were purchased from clients in
manufacturing related and services related industries, respectively.

The two largest debtors at December 31, 2001, had outstanding accounts
receivable of $3.4 million and $2.2 million, which represented approximately
5.3% and 3.4%, respectively, of the total outstanding accounts receivables at
that date. The two largest debtors at December 31, 2000, had outstanding
accounts receivable of $2.7 million and $2.2 million, which represented
approximately 3.8% and 3.2%, respectively, of the total outstanding accounts
receivables at that date.

Accounts receivable generally have terms of 30 days and are normally collected
within 30 to 60 days from the date of purchase. Loans receivable are secured by
accounts receivable, inventory, and equipment, and generally guaranteed by the
individual or corporate owners of the business.

The following is an analysis of the activity in the allowance for credit losses:


<Table>
<Caption>

                                                      Year Ended December 31
                                                --------------------------------
                                                    2001                2000
                                                ------------        ------------
<S>                                             <C>                 <C>
Balance at beginning of year                    $  2,389,463        $  2,018,787
Provision for credit losses                       10,470,104           2,773,000
Charge-offs                                       (4,586,697)         (2,582,387)
Recoveries                                           202,771             180,063
                                                ------------        ------------
Balance at end of year                          $  8,475,641        $  2,389,463
                                                ============        ============
</Table>


(6) PREMISES AND EQUIPMENT

Premises and equipment at December 31, 2001 and 2000 are summarized as follows:


<Table>
<Caption>
                                                                          Estimated
                                                                        useful lives
                                            2001           2000           in years
                                        ------------    ------------    ------------
<S>                                     <C>             <C>             <C>
Office equipment                        $  4,751,964    $  4,111,024             3-7
Airplane/Automotive                          393,656          21,352               5
Leasehold improvements                       697,321         673,007            2-10
                                        ------------    ------------    ------------
                                           5,842,941       4,805,383
Less accumulated depreciation              4,314,353       3,730,929
                                        ------------    ------------
                                        $  1,528,588    $  1,074,454
                                        ============    ============
</Table>



                                    Page 21
<PAGE>


(7) LINE OF CREDIT

During 2000, KBK transferred all its purchased accounts receivable and loans
receivable to SPV on a non-recourse basis. Upon transfer to SPV, the assets were
pledged as security for a $350 million facility ("Facility") to a multi-user
conduit sponsored by a bank. This revolving Facility replaced KBK's "off-balance
sheet" securitization as well as the multi-bank revolving line of credit which
was executed in 1993. The Facility initially carries a five-year commitment of
$200 million, which may be increased up to $350 million upon request by SPV and
consent by the conduit sponsor. The Facility matures December 15, 2005 and bears
interest at the sponsor's commercial paper rate plus 1.28%. At December 31,
2001, the outstanding indebtedness under the Facility was $95,416,050 (at a
weighted average interest rate of 3.62%). At December 31, 2000 the outstanding
indebtedness under the Facility was $122,533,454. The terms of the Facility
require SPV and KBK to comply with certain financial covenants including the
maintenance of a certain tangible net worth. The Facility also provides for a
borrowing base against eligible receivables and loans pursuant to the terms of
the Facility. KBK was in compliance with the financial covenants and borrowing
base limitations, and there was approximately $547,000 in available credit under
this line at December 31, 2001.

The following is an analysis of the activity under the Facility for the periods
indicated:

<Table>
<Caption>
                                                                                December 15
                                                         Year Ended        (inception of Facility)
                                                         December 31,        through December 31,
                                                            2001                   2000
                                                        -------------      -----------------------
<S>                                                     <C>                <C>
Average amount outstanding                              $  98,776,887          $ 116,408,642
Maximum outstanding as of any month-end                   108,500,000            122,533,454
Weighted-average interest rate                                   5.72%                  7.87%
</Table>

Prior to execution of the Facility, KBK maintained a $72,875,000 multi-bank
revolving line of credit ("Credit Facility"), maturing on April 30, 2001 and
bearing interest at the agent bank's prime rate or LIBOR plus 1.75% at the
election of KBK, and secured by substantially all of KBK's assets.

The following is an analysis of the activity under the Credit Facility for the
year ended December 31, 2000:


<Table>
<S>                                                             <C>
Average amount outstanding                                      $ 57,706,967
Maximum outstanding as of any month-end                         $ 66,000,000
Weighted-average interest rate                                           7.9%
</Table>

(8) MANDATORILY REDEEMABLE PREFERRED SECURITIES

In 1998, the Trust issued 1,725,000 shares of mandatorily redeemable Trust
Preferred Securities. The principal assets of the Trust are approximately $16.0
million in subordinated debentures issued by the Company. The subordinated
debentures, which are eliminated upon consolidation of the Trust with the
Company, bear interest at a rate of 9.50% and mature in 2028, subject to
extension or earlier redemption in certain events. The Company owns all of the
common securities of the Trust.

The Preferred Securities are redeemable for cash, at the option of the Trust, in
whole or in part, at a redemption price of $10.00 per share plus accumulated and
unpaid distributions thereon. The Preferred Securities will also be redeemable
upon the repayment either at maturity of the Debentures or as a result of the
acceleration of the Debentures upon an event of default.

Distributions on the Preferred Securities are cumulative and accrue at 9.50% per
annum on the sum of liquidation value thereof, plus unpaid distributions, which
have been accrued in prior quarters. Accrued and unpaid distributions are
reflected in accounts payable and other liabilities in the accompanying
consolidated balance sheets.

The obligations of the Company with respect to the issuance of the Preferred
Securities constitute an irrevocable guarantee by the Company of the Trust's
obligation with respect to the Preferred Securities.

Subject to certain limitations, the Company may, from time to time, defer
subordinated debenture interest payments to the Trust, which would result in a
deferral of distribution payments on the related Preferred Securities. In such
case, the distributions on the Preferred Securities will accumulate and compound
quarterly at 9.50% per annum.

The difference between the carrying value and liquidation value of the Preferred
Securities, $1,142,026 and $1,193,939 as of December 31, 2001 and 2000,
respectively, is being accreted over 15 years by making periodic charges to the
Company's operations.



                                    Page 22
<PAGE>



(9) DUE TO CLIENTS

The Company typically pays less than the face value of the invoice at the time a
receivable is purchased from a client. Upon collection of the purchased
invoices, amounts collected in excess of discount income and the initial payment
are remitted to clients. Such amounts may, in some instances, be applied to
offset uncollected account balances due to clients' breach of representations or
warranties.

(10) INCOME TAXES

The tax effects of temporary differences that give rise to the deferred tax
assets and liabilities at December 31, 2001 and 2000 are as follows:

<Table>
<Caption>
                                                               2001              2000
                                                          --------------    --------------
<S>                                                       <C>               <C>
Deferred tax assets:
      Allowance for credit losses                         $    2,862,335    $      578,430
      Allowance for impairment losses                                 --           180,985
      Premises and equipment, due to differences
         in depreciation                                         110,778            10,360
      Loss carry forward                                         994,916                --
Deferred tax liabilities:
      Amortization of non-compete agreement                     (150,232)         (126,195)
                                                          --------------    --------------
      Net deferred tax asset                              $    3,817,797    $      643,580
                                                          ==============    ==============
</Table>

No valuation allowance has been established for the deferred tax assets at
December 31, 2001 or 2000 as management believes that realizability of such
assets is more likely than not. The primary factor in not providing for a
valuation allowance is the expectation that future taxable income and the
reversal of temporary differences will be sufficient for the Company to realize
the deferred tax assets. Such estimate could change in the future based on the
occurrence of one or more future events. The loss incurred during 2001 generated
net operating loss carryback of $6,044,000 as of December 31, 2001. The income
tax (benefit) expense was different than the amount computed by using the U.S.
Federal income tax rate of 34.0% as a result of the following:


<Table>
<Caption>
                                                                 Years Ended December 31
                                                          ------------------------------------
                                                                2001                2000
                                                          ----------------    ----------------
<S>                                                       <C>                 <C>
Computed "expected" tax (benefit) expense                 $     (4,562,166)   $        697,404
Nondeductible amortization                                          81,453              81,453
Nondeductible, other                                                11,184              14,293
State income tax, net                                              (21,770)             20,968
Other, net                                                           9,578              (1,326)
                                                          ----------------    ----------------
                                                          $     (4,481,721)   $        812,792
                                                          ================    ================
</Table>


(11) EARNINGS (LOSS) PER SHARE

Following is a reconciliation between the weighted average shares outstanding
used in the basic and diluted EPS computations:

<Table>
<Caption>
                                                                  Years Ended December 31
                                                          --------------------------------------
                                                                 2001                 2000
                                                          -----------------    -----------------
<S>                                                       <C>                  <C>
Net income (loss)                                         $      (8,936,413)   $       1,238,396
                                                          =================    =================

Weighted average shares outstanding - basic                       2,473,790            2,852,453
                                                          =================    =================
Earnings (loss) per share - basic                         $           (3.61)   $             .43
                                                          =================    =================

Weighted average shares outstanding - basic                       2,473,790            2,852,453
Effect of dilutive securities:
      Assumed exercise of stock options and warrants                     --                  366
                                                          -----------------    -----------------
Weighted average shares outstanding - diluted                     2,473,790            2,852,819
                                                          =================    =================
Earnings (loss) per share - diluted                       $           (3.61)   $             .43
                                                          =================    =================
</Table>


For the year ended December 31, 2001, 1,337 stock options were excluded from the
calculation of diluted weighted average shares outstanding because their
inclusion would have been antidilutive.



                                    Page 23
<PAGE>



(12) STOCKHOLDERS' EQUITY

In 1992, in connection with the formation of the Company, the Company sold
warrants to two former directors and one current director to purchase 500,000
shares of the Company's common stock. During 1999, the Company repurchased from
a former director warrants to purchase 160,000 shares. The remaining 340,000
warrants are exercisable at $5 per share, with 160,000 expiring on February 25,
2002 and 180,000 expiring on February 25, 2005.

Pursuant to the Stock Repurchase Plan initiated in 1995, the Company held
1,400,839 shares of Treasury Stock at a cost of $7,712,094 as of December 31,
2001, and 813,081 shares of Treasury Stock at a cost of $5,408,883 as of
December 31, 2000. During October, 1999, the Company entered into an agreement
to repurchase 483,795 shares of its common stock over an 18-month period. The
per share prices were fixed, ranging from $5.00 to $5.53, depending on the
timing of the purchase. The stock was acquired from the previous shareholders of
Coastal Financial Resources Inc., which was acquired by the Company in December,
1994. Pursuant to the agreement, the purchase was completed during 2001, for an
aggregate cost of $2,557,609. During 2001 and 2000, $38,802 and $63,210,
respectively, in deferred compensation was reversed from other assets into
additional paid-in capital as a result of stock options which were issued in the
money at the time of grant and were forfeited during the period.

(13) STOCK OPTION PLANS

In 1994, the stockholders approved the 1994 Stock Option Plan for the benefit of
the employees and non-employee directors. Such plan replaced both plans
previously adopted by the Board and the stockholders. This plan authorizes the
Company to grant incentive options or options which do not constitute incentive
options and an automatic grant of options which do not constitute incentive
options to non-employee directors. This plan is administered by the Compensation
Committee of the Board of Directors. The aggregate number of shares which may be
issued under this plan shall not exceed 400,000 shares of common stock of the
Company. Such options become exercisable ratably over five years from the date
of grant and expire ten years from the grant date if not exercised.

In 1996, the stockholders approved the 1996 Long-Term Incentive Plan for the
benefit of employees, consultants and advisors of the Company. This plan did not
replace or affect the 1994 Stock Option Plan. The 1996 Plan is administered by
the Compensation Committee of the Board of Directors. The Committee is
authorized to grant to key employees, consultants and advisors of the Company
and its subsidiaries and affiliates, awards in the form of stock options,
performance shares, and restricted stock. In addition, the Committee will have
the authority to grant other stock-based awards in the form of stock
appreciation rights, restricted stock units, and stock unit awards. The types of
awards and terms of their issuance will be determined by the Committee and
specified in the option agreement evidencing the grant. A maximum of 675,000
shares of common stock may be issued under this Plan (as amended in 1999), with
a 200,000 share limitation for any individual. The 1996 Plan will expire ten
years from the effective date unless terminated earlier or extended by the Board
of Directors.

Since the adoption of these plans, 25,200 options have been exercised through
December 31, 2001, and there were 514,050 shares available for grant under the
two plans as of that date. The per share weighted-average fair value of stock
options granted during 2001 and 2000 was $2.71 and $2.51 on the date of grant
using the Black Scholes option-pricing model with the following weighted-average
assumptions: expected dividend yield of 0%, expected volatility of 49% in 2001
and 32% in 2000, risk-free interest rate of 1.25% in 2001 and 6% in 2000, and an
expected life of 9 years.

The Company applies APB Opinion No. 25 in accounting for its plans and,
accordingly, no compensation cost has been recognized for its stock options in
the consolidated financial statements. Had the Company determined compensation
cost based on the fair value at the grant date for its stock options under SFAS
No. 123, the Company's net income (loss) would have been reduced to the proforma
amounts indicated below:

<Table>
<Caption>
                                               2001                    2000
                                          ------------             -----------
<S>                                       <C>                       <C>
Net income (loss)   As reported           $ (8,936,413)            $ 1,238,396
                    Pro Forma             $ (8,946,463)            $ 1,225,050
Earnings (loss) per share - basic
                    As reported           $      (3.61)            $       .43
                    Pro Forma             $      (3.62)            $       .43
Earnings (loss) per share - diluted
                    As reported           $      (3.61)            $       .43
                    Pro Forma             $      (3.62)            $       .43
</Table>

Pro forma net income (loss) reflects only options granted in 2001 and 2000.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma net income (loss) amounts
presented above because


                                    Page 24
<PAGE>


compensation cost is reflected over the options' vesting period of 10 years and
compensation cost for options granted prior to January 1, 2000 is not
considered.

Stock option activity during the periods indicated is as follows:

<Table>
<Caption>
                                          Number of       Weighted-Average
                                           Shares          Exercise Price
                                          ---------       ----------------
<S>                                       <C>                 <C>
Balance at December 31, 1999                708,250           $  6.42
Granted                                      73,396              4.63
Exercised                                        --                --
Forfeited                                  (106,396)             5.85
                                          ---------           -------
Balance at December 31, 2000                675,250              6.31
                                          ---------           -------
Granted                                      51,305              4.81
Exercised                                        --                --
Forfeited                                   (90,805)             6.60
Expired                                    (100,000)             5.38
                                          ---------           -------
Balance at December 31, 2001                535,750           $  6.27
                                          =========           =======
</Table>

The following table summarizes information about stock options outstanding at
December 31, 2001:

<Table>
<Caption>
                              Options Outstanding
----------------------------------------------------------------------------------------
                                  Number          Weighted Average
        Range of                Outstanding           Remaining        Weighted-Average
     Exercise Prices            at 12/31/01       Contractual Life      Exercise Price
-------------------------       ------------      ----------------     ----------------
<S>                             <C>               <C>                  <C>
$3.80 to $4.25                      60,000           6.83 years            $  4.07
$5.00 to $5.94                     259,000                 4.41               5.19
$6.00 to $7.75                     123,000                 4.02               6.85
$9.00 to $9.94                      63,750                 4.21               9.27
$11.00 to $12.00                    30,000                 6.00              11.33
                                  --------           ----------            -------
$3.80 to $12.00                    535,750                 4.66            $  6.27
                                  ========           ==========            =======
</Table>


<Table>
<Caption>
                         Options Exercisable
--------------------------------------------------------------------
                                      Number            Weighted
         Range of                 Exercisable at        Average
     Exercise Prices                 12/31/01        Exercise Price
-------------------------         ---------------   ----------------
<S>                              <C>                <C>
$3.80 to $4.25                        44,000            $  4.00
$5.00 to $5.94                       109,000               5.36
$6.00 to $7.75                       121,800               6.85
$9.00 to $9.94                        48,650               9.21
$11.00 to $12.00                      30,000              11.33
                                    --------            -------
$3.80 to $12.00                      353,450            $  6.74
                                    ========            =======
</Table>


At December 31, 2001 and 2000, the number of options exercisable was 353,450 and
325,900, respectively, and the weighted-average exercise price of those options
was $6.74 and $7.01, respectively.

(14) COMMITMENTS

The Company has several noncancelable operating leases for office space. Total
rent expense incurred was $722,000 and $723,000, during 2001 and 2000. At
December 31, 2001, future minimum payments on noncancelable operating leases are
as follows:

<Table>
<Caption>
                    Year Ending
                    December 31
                  --------------
<S>               <C>
2002              $      701,779
2003                     337,221
2004                      48,176
Thereafter                    --
</Table>



                                    Page 25
<PAGE>



(15) FINANCIAL OBLIGATIONS WITH OFF-BALANCE SHEET RISK

The Company may have limited off-balance sheet risk due to agreements with
clients. In certain circumstances, the Company may have a commitment to continue
purchasing accounts receivable from a client during a 30-day notice period. A
notice of termination of the agreement is required, under some conditions,
before the agreement may be terminated.

The Company's exposure to credit loss with respect to future purchases of
accounts receivable, in the event of nonperformance by the other party, does not
exceed the amounts to be considered for purchase. The Company uses its
established credit policies to consider committing to purchase accounts
receivable, and all future purchases of receivables are contingent on the
individual clients maintaining specific credit and other standards at the time
of the purchase funding.

In the normal course of business, the Company accepts warrants to acquire equity
in its borrowers. As these warrants have no ready market and are thinly traded,
the Company does not recognize unrealized gains or losses relative to the
warrants' value.

The Company's average receivable purchases in a 30-day period (considered to be
the maximum future purchase commitment, although not a contractual obligation)
pursuant to its normal business practice were approximately $49,194,000 and
$61,400,000 for 2001 and 2000, respectively. In addition, the Company has
outstanding loan commitments, subject to certain restrictions, totaling $39.1
million as of December 31, 2001.

(16) INVESTMENT PLAN

In 1996, the Company adopted a defined contribution plan ("the "Plan") that is a
qualified plan under Section 401(k) of the Internal Revenue Code for the benefit
of KBK employees. The Plan is available to substantially all employees with at
least six months of employment. Employee contributions are voluntary. The
Company may, at the discretion of the Board, annually elect to match some
portion of employee contributions to this Plan. The Company currently matches
50% of every employee contribution subject to a 6% salary limit. The Company's
contributions to the Plan totaled $104,000 for 2001 and $91,000 for 2000.

(17) EMPLOYEE STOCK PURCHASE PLAN

In 1998, the Company adopted the 1998 Employee Stock Purchase Plan, ("the Stock
Plan") which subsequently received shareholder approval. The Stock Plan provides
eligible full-time employees with an opportunity to purchase common stock of the
Company through payroll deductions. The aggregate number of shares of common
stock which may be purchased under the Stock Plan shall not exceed 150,000
(subject to adjustment in the event of stock dividends, stock splits,
combinations of shares, recapitalizations or other changes in the outstanding
common stock). The exercise price for the stock purchase shall be 90% of the
lower of the fair market value of the stock on the first day or the last day of
the calendar quarter of the applicable option period. The shares purchased by
employees through the Stock Plan totaled 12,497 in 2001 and 8,675 in 2000. In
addition, during 2000, employees of the Company received 6,900 shares of common
stock as a part of a marketing incentive program.

(18) RESTRUCTURING COSTS

The Company incurred approximately $389,000 in restructuring costs related to a
reorganization and centralization of its underwriting function. The Company
received management and Board of Director approval for the restructuring plan,
and it was communicated to the employees during the quarter ended September 30,
2001. The restructuring is specific, and the Company does not anticipate any
significant changes to the restructuring through the full implementation
process. Costs of the restructuring included closing certain offices, incurring
lease penalties and employee severance pay. Management believes this
reorganization will result in processing efficiencies and decreased costs in
future periods.



                                    Page 26
<PAGE>



INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders

KBK Capital Corporation:

We have audited the accompanying consolidated balance sheets of KBK Capital
Corporation and subsidiaries as of December 31, 2001 and 2000, and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of KBK Capital
Corporation and subsidiaries as of December 31, 2001 and 2000, and the results
of their operations, and their cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States of America.


                                                   KPMG LLP

Fort Worth, Texas
January 24, 2002






KBK CAPITAL CORPORATION and SUBSIDIARIES
QUARTERLY SUMMARY RESULTS (Unaudited)
(dollars in thousands except per share amounts)

<Table>
<Caption>
                                                                     2001
                                     YTD       ----------------------------------------------------
                                    2001        4TH QTR       3RD QTR       2ND QTR       1ST QTR
                                 ----------    ----------    ----------    ----------    ----------
<S>                              <C>           <C>           <C>           <C>           <C>
Average Net Earning Assets
   Managed and Owned             $  107,840    $  100,062    $   86,386    $  103,892    $  122,008
   Owned                            107,840       100,062        86,386       103,892       122,008
                                 ==========    ==========    ==========    ==========    ==========

Revenue                          $   18,043    $    3,978    $    4,133    $    4,506    $    5,426
Interest expense                      7,469         1,442         1,589         1,983         2,455
Operating expenses                   11,498         3,113         2,771         2,831         2,783
                                 ----------    ----------    ----------    ----------    ----------
Operating profit (loss)                (924)         (577)         (227)         (308)          188
Gain on sale of  other assets            --            --            --            --            --
Restructuring costs                     389            --           389            --            --
Provision for credit losses          10,470           315         4,500         1,100         4,555
Provision for losses on other
   loan-related assets                1,635            --            --            --         1,635
                                 ----------    ----------    ----------    ----------    ----------
Income (loss) before
   income taxes                     (13,418)         (892)       (5,116)       (1,408)       (6,002)
Tax expense (benefit)                (4,482)         (247)       (1,720)         (457)       (2,058)
                                 ----------    ----------    ----------    ----------    ----------
Net income (loss)                $   (8,936)   $     (645)   $   (3,396)   $     (951)   $   (3,944)
                                 ==========    ==========    ==========    ==========    ==========
Earnings (loss)
   per share - basic             $    (3.61)   $     (.30)   $    (1.43)   $     (.36)   $    (1.46)
Earnings (loss)
   per share - diluted           $    (3.61)   $     (.30)    $   (1.43)   $     (.36)   $    (1.46)
                                 ==========    ==========    ==========    ==========    ==========

<Caption>

                                                                     2000
                                     YTD       -------------------------------------------------
                                     2000       4TH QTR      3RD QTR      2ND QTR      1ST QTR
                                  ----------   ----------   ----------   ----------   ----------
<S>                               <C>          <C>          <C>          <C>          <C>
Average Net Earning Assets
   Managed and Owned              $  142,247   $  136,417   $  141,088   $  147,328   $  144,231
   Owned                              85,191       81,285       79,245       89,766       90,576
                                  ==========   ==========   ==========   ==========   ==========

Revenue                               22,348   $    5,801   $    5,213   $    5,680   $    5,654
Interest expense                       7,049        1,763        1,650        1,841        1,795
Operating expenses                    10,726        2,604        2,556        2,782        2,784
                                  ----------   ----------   ----------   ----------   ----------
Operating profit (loss)                4,573        1,434        1,007        1,057        1,075
Gain on sale of  other assets            291           --           --           --          291
Restructuring costs                       --           --           --           --           --
Provision for credit losses            2,773          875          550          438          910
Provision for losses on other
   loan-related assets                    40           --           --           --           40
                                  ----------   ----------   ----------   ----------   ----------
Income (loss) before
   income taxes                        2,051          559          457          619          416
Tax expense (benefit)                    813          256          179          214          164
                                  ----------   ----------   ----------   ----------   ----------
Net income (loss)                 $    1,238   $      303   $      278   $      405   $      252
                                  ==========   ==========   ==========   ==========   ==========
Earnings (loss)
   per share - basic              $      .43   $      .11   $      .10   $      .14   $      .09
Earnings (loss)
   per share - diluted            $      .43   $      .11   $      .10   $      .14   $      .09
                                  ==========   ==========   ==========   ==========   ==========
</Table>



                                    Page 27
<PAGE>



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

         None.

                                    PART III


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

         The information required by this item is included in the Company's
Proxy Statement to be filed pursuant to Regulation 14A in connection with the
Company's 2002 Annual Meeting of Stockholders, under the captions "Election of
Directors," "Information Concerning Executive Officers" and "Section 16(a)
Beneficial Ownership Reporting Compliance" and is incorporated herein by
reference.

ITEM 10. EXECUTIVE COMPENSATION

         The information required by this item is included in the Proxy
Statement to be filed pursuant to Regulation 14A in connection with the
Company's 2002 Annual Meeting of Stockholders, under the captions "Compensation
of Executive Officers" and is incorporated herein by reference.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information required by this item is included in the Proxy
Statement to be filed pursuant to Regulation 14A in connection with the
Company's 2002 Annual Meeting of Stockholders, under the captions "Share
Ownership of Directors, Executive Officers and Certain Beneficial Owners" and is
incorporated herein by reference.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by this item is included in the Proxy
Statement to be filed pursuant to Regulation 14A in connection with the
Company's 2002 Annual Meeting of Stockholders, under the captions "Certain
Relationships and Related Party Transactions" and is incorporated herein by
reference.



                                    Page 28
<PAGE>



ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

         (a) Exhibits:

       Exhibit Number

              3.1           -- Restated Certificate of Incorporation of the
                            Company (incorporated by reference to Exhibit 3.1 to
                            the Registrant's Registration Statement on form
                            SB-2, Registration No. 33-77378-D).

              3.2           -- Bylaws of the Company and amendment thereto
                            (incorporated by reference to Exhibit 4.5 to the
                            Registrant's Registration Statement on Form S-8,
                            Registration No. 33-89377).

              4.1           -- Specimen Stock Certificate for Common Stock of
                            the Company (incorporated by reference to Exhibit
                            4.1 to the Registrant's Registration Statement on
                            form SB-2, Registration No. 33- 77378-D).

              4.2           -- Form of Registration Rights Agreement between the
                            Company and the parties named therein, as amended
                            (incorporated by reference to Exhibit 4.2 to the
                            Registrant's Registration Statement on Form SB-2,
                            Registration No. 33-77378-D).

         (3) 10.1           -- 1992 Key Employee Stock Option Plan of the
                            Company (terminated), and forms of stock option
                            agreements and amendments thereto (incorporated by
                            reference to Exhibit 10.1 to the Registrant's
                            Registration Statement on Form SB-2, Registration
                            No. 33-77378-D).

         (3) 10.2           -- 1993 Non-Employee Director Stock Option Plan of
                            the Company (terminated), and form of stock option
                            agreement (incorporated by reference to Exhibit 10.2
                            to the Registrant's Registration Statement on form
                            SB-2, Registration No. 33-77378-D).

         (3) 10.3           -- 1994 Stock Option Plan of the Company, and forms
                            of stock option agreements (incorporated by
                            reference to Exhibit 10.3 to the Registrant's
                            Registration Statement on Form SB-2, Registration
                            No. 33-77378-D).

             10.4           -- Form of Indemnification Agreement between the
                            Company and each of its directors (incorporated by
                            reference to Exhibit 10.4 to the Registrant's
                            Registration Statement on form SB-2, Registration
                            No. 33-77378-D).

             10.5           -- Stock Purchase Agreement dated as of April 2,
                            1992 among the Company, KBK, Inc. and R. Doyle
                            Kelley (incorporated by reference to Exhibit 10.5 to
                            the Registrant's Registration Statement on Form
                            SB-2, Registration No. 33-77378-D).

             10.6           -- Employment and Non-Competition Agreement dated
                            Aril 7, 1992 between the Company and R. Doyle Kelley
                            (incorporated by reference to Exhibit 10.6 to the
                            Registrant's Registration statement on form SB-2,
                            Registration No. 33-77378-D).

             10.7           -- documents (incorporated by reference to Exhibit
                            10.7 to the Registrant's registration Statement on
                            form SB-2, Registration No. 33-77378-D).

             10.8           -- Form of Warrants of the Company (incorporated by
                            reference to Exhibit 10.8 to the Registrant's
                            Registration Statement on Form SB-2, Registration
                            No. 33-77378-D).

             10.9           -- Stock Exchange Agreement among the Company and
                            Coastal, Inc. and the Owners of the outstanding
                            capital stock of Coastal Financial Resources, Inc.
                            dated as of December 30, 1994 (incorporated by
                            reference to Exhibit 10.9 to the Registrant's
                            Registration Statement on Form SB-2, Registration
                            No. 33-77378-D).

                            -- Amended and Restated Letter Loan Agreement dated
                            as of August 21, 1997 among KBK, as borrower, and
                            the Company, as guarantor, and the Banks listed on
                            the signature pages thereof and Bank One, Texas,
                            N.A. as Agent (incorporated by reference to Exhibit
                            10.10 to the Registrant's Registration Statement on
                            Form SB-2, Registration No. 33-77378-D).

            10.11           -- Amendment to Third Amended and Restated Loan
                            Agreement (incorporated by reference to Exhibit
                            10.11 to the Registrant's Registration Statement on
                            Form SB-2, Registration No. 33- 77378-D).

                            -- Receivables Purchase Agreement (dated April 11,
                            1997) (incorporated by reference to Exhibit 10.12 to
                            the Registrant's Registration Statement on Form
                            SB-2, Registration No. 33-77378-D).

                            -- Purchase and Sale Agreement (dated April 11,
                            1997) (incorporated by reference to Exhibit 10.13 to
                            the Registrant's Registration Statement on Form
                            SB-2, Registration No. 33-77378-D).

            10.14           -- Stock Purchase Agreement by and between the
                            Company and Sirmon Commercial Finance, L.L.C. dated
                            October 21, 1999.

            10.15           -- Fourth Amended and Restated Letter Loan Agreement
                            dated as of May 21, 1999 among KBK Financial, Inc.,
                            as borrower, and the Company, as guarantor, and the
                            Banks listed on the signature pages thereof and Bank
                            One, Texas, N.A. as Agent.


                                    Page 29
<PAGE>
            10.16           -- Purchase and Sale Agreement dated as of December
                            15, 2000 between KBK and SPV.

            10.17           -- Receivables Financing Agreement dated December
                            15, 2000 among KBK; SPV; and the various financial
                            institutions named therein.

           *10.18           -- First Amendment Dated as of August 31, 2001 to
                            Receivables Financing Agreement dated December 15,
                            2000 among SPV, as borrower, and KBK, as servicer,
                            and the various financial institutions named
                            therein.

             21.1           -- Subsidiary of the Company (incorporated by
                            reference to Exhibit 21.1 to the Registrant's
                            Registration Statement on Form SB-2, Registration
                            No. 33-77378-D).


+ Management contract or compensatory plan or arrangement

* Filed herewith

         (b) Reports on form 8-K

             None.



                                    Page 30
<PAGE>



                                   SIGNATURES

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

                                             KBK CAPITAL CORPORATION
                                                    REGISTRANT

Date: April 1, 2002             By /s/         Deborah B. Wilkinson
                                  ----------------------------------------------
                                  Deborah B. Wilkinson, Executive Vice President
                                            and Chief Financial Officer

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


<Table>
<S>                                            <C>                                                 <C>
By /s/      Robert J. McGee                    Chairman and Chief Executive Officer                 April 1, 2002
   ---------------------------------------
            (Robert J. McGee)


By /s/      Deborah B. Wilkinson               Executive Vice President and                         April 1, 2002
   ---------------------------------------     Chief Financial Officer
            (Deborah B. Wilkinson)


By /s/      Jack R. Roper                      Executive Vice President                             April 1, 2002
   ---------------------------------------
            (Jack R. Roper)


By /s/      Thomas M. Simmons                  Director                                             April 1, 2002
   ---------------------------------------
            (Thomas M. Simmons)


By /s/      Daniel R. Feehan                   Director                                             April 1, 2002
   ---------------------------------------
            (Daniel R. Feehan)


By /s/      Thomas L. Healey
   ---------------------------------------     Director                                             April 1, 2002
            (Thomas L. Healey)


By /s/      Martha V. Leonard                  Director                                             April 1, 2002
   ---------------------------------------
            (Martha V. Leonard)


By /s/      R. Earl Cox, III
   ---------------------------------------     Director                                             April 1, 2002
            (R. Earl Cox, III)


By /s/      Harris A. Kaffie
   ---------------------------------------     Director                                             April 1, 2002
            (Harris A. Kaffie)
</Table>




                                    Page 31
<PAGE>
                               INDEX TO EXHIBITS


<Table>
<Caption>
       EXHIBIT NUMBER       DESCRIPTION
       --------------       -----------
<S>                         <C>
              3.1           -- Restated Certificate of Incorporation of the
                            Company (incorporated by reference to Exhibit 3.1 to
                            the Registrant's Registration Statement on form
                            SB-2, Registration No. 33-77378-D).

              3.2           -- Bylaws of the Company and amendment thereto
                            (incorporated by reference to Exhibit 4.5 to the
                            Registrant's Registration Statement on Form S-8,
                            Registration No. 33-89377).

              4.1           -- Specimen Stock Certificate for Common Stock of
                            the Company (incorporated by reference to Exhibit
                            4.1 to the Registrant's Registration Statement on
                            form SB-2, Registration No. 33- 77378-D).

              4.2           -- Form of Registration Rights Agreement between the
                            Company and the parties named therein, as amended
                            (incorporated by reference to Exhibit 4.2 to the
                            Registrant's Registration Statement on Form SB-2,
                            Registration No. 33-77378-D).

         (3) 10.1           -- 1992 Key Employee Stock Option Plan of the
                            Company (terminated), and forms of stock option
                            agreements and amendments thereto (incorporated by
                            reference to Exhibit 10.1 to the Registrant's
                            Registration Statement on Form SB-2, Registration
                            No. 33-77378-D).

         (3) 10.2           -- 1993 Non-Employee Director Stock Option Plan of
                            the Company (terminated), and form of stock option
                            agreement (incorporated by reference to Exhibit 10.2
                            to the Registrant's Registration Statement on form
                            SB-2, Registration No. 33-77378-D).

         (3) 10.3           -- 1994 Stock Option Plan of the Company, and forms
                            of stock option agreements (incorporated by
                            reference to Exhibit 10.3 to the Registrant's
                            Registration Statement on Form SB-2, Registration
                            No. 33-77378-D).

             10.4           -- Form of Indemnification Agreement between the
                            Company and each of its directors (incorporated by
                            reference to Exhibit 10.4 to the Registrant's
                            Registration Statement on form SB-2, Registration
                            No. 33-77378-D).

             10.5           -- Stock Purchase Agreement dated as of April 2,
                            1992 among the Company, KBK, Inc. and R. Doyle
                            Kelley (incorporated by reference to Exhibit 10.5 to
                            the Registrant's Registration Statement on Form
                            SB-2, Registration No. 33-77378-D).

             10.6           -- Employment and Non-Competition Agreement dated
                            Aril 7, 1992 between the Company and R. Doyle Kelley
                            (incorporated by reference to Exhibit 10.6 to the
                            Registrant's Registration statement on form SB-2,
                            Registration No. 33-77378-D).

             10.7           -- documents (incorporated by reference to
                            Exhibit 10.7 to the Registrant's registration
                            Statement on form SB-2, Registration
                            No. 33-77378-D).

             10.8           -- Form of Warrants of the Company (incorporated by
                            reference to Exhibit 10.8 to the Registrant's
                            Registration Statement on Form SB-2, Registration
                            No. 33-77378-D).

             10.9           -- Stock Exchange Agreement among the Company and
                            Coastal, Inc. and the Owners of the outstanding
                            capital stock of Coastal Financial Resources, Inc.
                            dated as of December 30, 1994 (incorporated by
                            reference to Exhibit 10.9 to the Registrant's
                            Registration Statement on Form SB-2, Registration
                            No. 33-77378-D).

                            -- Amended and Restated Letter Loan Agreement dated
                            as of August 21, 1997 among KBK, as borrower, and
                            the Company, as guarantor, and the Banks listed on
                            the signature pages thereof and Bank One, Texas,
                            N.A. as Agent (incorporated by reference to Exhibit
                            10.10 to the Registrant's Registration Statement on
                            Form SB-2, Registration No. 33-77378-D).

            10.11           -- Amendment to Third Amended and Restated Loan
                            Agreement (incorporated by reference to Exhibit
                            10.11 to the Registrant's Registration Statement on
                            Form SB-2, Registration No. 33- 77378-D).

                            -- Receivables Purchase Agreement (dated April 11,
                            1997) (incorporated by reference to Exhibit 10.12 to
                            the Registrant's Registration Statement on Form
                            SB-2, Registration No. 33-77378-D).

                            -- Purchase and Sale Agreement (dated April 11,
                            1997) (incorporated by reference to Exhibit 10.13 to
                            the Registrant's Registration Statement on Form
                            SB-2, Registration No. 33-77378-D).

            10.14           -- Stock Purchase Agreement by and between the
                            Company and Sirmon Commercial Finance, L.L.C. dated
                            October 21, 1999.

            10.15           -- Fourth Amended and Restated Letter Loan Agreement
                            dated as of May 21, 1999 among KBK Financial, Inc.,
                            as borrower, and the Company, as guarantor, and the
                            Banks listed on the signature pages thereof and Bank
                            One, Texas, N.A. as Agent.

            10.16           -- Purchase and Sale Agreement dated as of December
                            15, 2000 between KBK and SPV.

</Table>



<PAGE>


<Table>
<S>                         <C>
            10.17           -- Receivables Financing Agreement dated December
                            15, 2000 among KBK; SPV; and the various financial
                            institutions named therein.

           *10.18           -- First Amendment Dated as of August 31, 2001 to
                            Receivables Financing Agreement dated December 15,
                            2000 among SPV, as borrower, and KBK, as servicer,
                            and the various financial institutions named
                            therein.

             21.1           -- Subsidiary of the Company (incorporated by
                            reference to Exhibit 21.1 to the Registrant's
                            Registration Statement on Form SB-2, Registration
                            No. 33-77378-D).
</Table>


+ Management contract or compensatory plan or arrangement

* Filed herewith