<PAGE>   1
                                    FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

          (Mark One)
          [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                       SECURITIES AND EXCHANGE ACT OF 1934

                  For the Quarterly Period Ended June 30, 2001

                                       OR

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

                           Commission File No. 1-14771

                           MICROFINANCIAL INCORPORATED
             (Exact name of Registrant as specified in its Charter)

         Massachusetts                                   04-2962824
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 Incorporation or Organization)

                      950 Winter Street, Waltham, MA 02451
                    (Address of Principal Executive Offices)

                                 (781) 890-0177
              (Registrant's Telephone Number, Including Area Code)


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

     As of August 10, 2001, 12,819,946 shares of the registrant's common stock
were outstanding.


<PAGE>   2


                           MICROFINANCIAL INCORPORATED
                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                    Page
Part I                         FINANCIAL INFORMATION

<S>                                                                                 <C>
     Item 1    Financial Statements (unaudited):
                 Condensed Consolidated Balance Sheets
                   December 31, 2000 and June 30, 2001                               3
                 Condensed Consolidated Statements of Operations
                   Three and six months ended June 30, 2000 and 2001                 4
                 Condensed Consolidated Statements of Cash Flows
                   Three and six months ended June 30, 2000 and 2001                 5
                 Notes to Condensed Consolidated Financial Statements                7

     Item 2      Management's Discussion and Analysis of Financial
                   Condition and Results of Operation                                12

     Item 3      Quantitative and Qualitative Disclosures about Market Risk          15

Part II                      OTHER INFORMATION

     Item 1      Legal Proceedings                                                   16
     Item 6      Exhibits and Reports on Form 8-K                                    20

     Signatures                                                                      21
</TABLE>


                                       2
<PAGE>   3


                           MICROFINANCIAL INCORPORATED
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                    December 31,          June 30,
                                                                                    ------------         ---------
                                                                                        2000                2001
                                                                                        ----                ----
<S>                                                                                  <C>                 <C>
                                     ASSETS

Net investment in leases and loans:
     Receivables due in installments                                                 $ 405,437           $ 401,977
     Estimated residual value                                                           35,368              37,859
     Initial direct costs                                                                9,321               8,561
     Loans receivable                                                                   12,080               4,474
     Less:
        Advance lease payments and deposits                                               (400)               (406)
        Unearned income                                                               (132,687)           (121,485)
        Allowance for credit losses                                                    (40,924)            (34,454)
                                                                                     ---------           ---------
Net investment in leases and loans                                                   $ 288,195           $ 296,526
Investment in service contracts                                                         12,553              13,103
Cash and cash equivalents                                                               17,957              19,333
Property and equipment, net                                                             11,505              20,313
Other assets                                                                            12,392              12,533
                                                                                     ---------           ---------
          Total assets                                                               $ 342,602           $ 361,808
                                                                                     =========           =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Notes payable                                                                        $ 201,991           $ 206,968
Subordinated notes payable                                                               4,785               4,662
Capitalized lease obligations                                                              859                 944
Accounts payable                                                                         1,605               2,128
Dividends payable                                                                          573                 640
Other liabilities                                                                        5,433               6,137
Income taxes payable                                                                     2,333                 566
Deferred income taxes payable                                                           29,000              33,776
                                                                                     ---------           ---------
          Total liabilities                                                            246,579             255,821
                                                                                     ---------           ---------

Commitments and contingencies                                                               --                  --
Stockholders' equity:
     Preferred stock, $.01 par value; 5,000,000 shares authorized;
        0 shares issued at 12/31/00; 0 shares issued at 6/30/01                             --                  --
     Common stock, $.01 par value; 25,000,000 shares authorized; 13,410,646
        shares issued at 12/31/00; 13,410,646 shares issued at 6/30/01                     134                 134
     Additional paid-in capital                                                         47,900              47,769
     Retained earnings                                                                  55,291              64,676
     Treasury stock (669,700 shares of common stock at 12/31/00,
        603,938 shares of common stock at 6/30/01), at cost                             (7,234)             (6,524)
     Notes receivable from officers and employees                                          (68)                (68)
                                                                                     ---------           ---------
          Total stockholders' equity                                                    96,023             105,987
                                                                                     ---------           ---------
          Total liabilities and stockholders' equity                                 $ 342,602           $ 361,808
                                                                                     =========           =========
</TABLE>

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


                                       3
<PAGE>   4


                           MICROFINANCIAL INCORPORATED
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (In thousands, except share and per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                      For the three months ended                  For the six months ended
                                                                June 30,                                   June 30,
                                                    --------------------------------          --------------------------------
                                                       2000                  2001                 2000                2001
                                                       ----                  ----                 ----                ----

<S>                                                 <C>                  <C>                  <C>                  <C>
Revenues:
     Income on financing leases and loans           $    16,946          $    18,060          $    32,490          $    36,791
     Income on service contracts                          2,183                2,099                4,373                4,234
     Rental income                                        6,861                9,252               12,671               18,387
     Loss and damage waiver fees and other                1,485                2,683                2,955                5,526
     Service fees                                         3,467                3,682                7,094                7,633
                                                    --------------------------------          --------------------------------
          Total revenues                                 30,942               35,776               59,583               72,571
                                                    --------------------------------          --------------------------------

Expenses:
     Selling general and administrative                   6,839                8,105               13,168               17,709
     Provision for credit losses                          9,040               11,819               17,569               22,085
     Depreciation and amortization                        2,554                3,640                4,587                7,082
     Interest                                             3,650                3,271                6,725                7,393
                                                    --------------------------------          --------------------------------
          Total expenses                                 22,083               26,835               42,049               54,269
                                                    --------------------------------          --------------------------------

Income before provision for income taxes                  8,859                8,941               17,534               18,302
Provision for income taxes                                3,728                3,762                7,433                7,704
                                                    --------------------------------          --------------------------------

Net income                                          $     5,131          $     5,179          $    10,101          $    10,598
                                                    ================================          ================================

Net income per common share - basic                 $      0.40          $      0.41          $      0.79          $      0.83
                                                    ================================          ================================

Net income per common share - diluted               $      0.40          $      0.40          $      0.78          $      0.82
                                                    ================================          ================================

Weighted-average shares used to compute:
        Basic net income per share                   12,707,898           12,759,548           12,748,238           12,750,299
                                                    --------------------------------          --------------------------------
        Fully diluted net income per share           12,780,334           12,981,450           12,941,357           12,933,339
                                                    --------------------------------          --------------------------------
</TABLE>

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


                                       4
<PAGE>   5


                           MICROFINANCIAL INCORPORATED
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                              For the three months ended                For the six months ended
                                                                       June 30,                                 June 30,
                                                             -----------------------------           -----------------------------
                                                                2000                2001                2000                2001
                                                                ----                ----                ----                ----
<S>                                                          <C>                 <C>                 <C>                 <C>
Cash flows from operating activities:
     Cash received from customers                            $  43,941           $  47,500           $  85,828           $  95,127
     Cash paid to suppliers and employees                       (7,191)            (13,423)            (18,257)            (23,459)
     Cash paid for income taxes                                 (3,792)             (4,572)             (7,637)             (4,708)
     Interest paid                                              (3,862)             (3,605)             (6,959)             (8,040)
     Interest received                                             406                 365                 771                 769
                                                             -----------------------------           -----------------------------
          Net cash provided by operating activities             29,502              26,265              53,746              59,689
                                                             -----------------------------           -----------------------------

Cash flows from investing activities:
     Investment in lease contracts                             (46,716)            (24,813)            (81,942)            (48,651)
     Investment in direct costs                                 (2,162)             (1,399)             (4,682)             (2,883)
     Investment in service contracts                            (1,054)             (1,631)             (2,368)             (2,959)
     Investment in Resource Leasing Corporation                      0                   0                   0              (6,900)
     Investment in fixed assets                                   (722)               (432)             (1,121)               (857)
     Repayment of notes from officers                                1                   0                   3                   0
     Investment in notes receivable                                (39)                (24)                (70)                (47)
     Repayment of notes receivable                                  23                   2                 262                   6
                                                             -----------------------------           -----------------------------
          Net cash used in investing activities                (50,669)            (28,297)            (89,918)            (62,291)
                                                             -----------------------------           -----------------------------

Cash flows from financing activities:
     Proceeds from secured debt                                 51,764              22,473             115,382              57,852
     Repayment of secured debt                                 (26,410)            (22,565)            (51,309)            (53,689)
     Proceeds from refinancing of secured debt                  92,000             104,500             233,557             209,000
     Prepayment of secured debt                                (92,000)           (104,500)           (248,557)           (209,000)
     Proceeds from short term demand notes payable                   0                 889                 144                 889
     Repayment of short term demand notes payable                  (47)                (75)               (446)                (75)
     Proceeds from issuance of subordinated debt                     0               1,075                   0               2,875
     Repayment of subordinated debt                             (1,000)                  0              (2,000)             (3,000)
     Proceeds from exercise of common stock options                  0                 529                  49                 529
     Repayment of capital leases                                  (118)               (116)               (257)               (256)
     Purchase of treasury stock                                    (50)                  0              (1,595)                  0
     Payment of dividends                                         (508)               (574)             (1,022)             (1,147)
                                                             -----------------------------           -----------------------------
          Net cash provided by financing activities             23,631               1,636              43,946               3,978
                                                             -----------------------------           -----------------------------

Net increase in cash and cash equivalents:                       2,464                (396)              7,774               1,376
Cash and cash equivalents, beginning of period:                 16,372              19,729              11,062              17,957
                                                             -----------------------------           -----------------------------

Cash and cash equivalents, end of period:                    $  18,836           $  19,333           $  18,836           $  19,333
                                                             =============================           =============================
</TABLE>

                          (continued on following page)
    The accompanying notes are an integral part of the consolidated financial
                                   statements.


                                       5
<PAGE>   6


                           MICROFINANCIAL INCORPORATED
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Continued)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                For the three months ended             For the six months ended
                                                                          June 30,                             June 30,
                                                                ---------------------------           ---------------------------
                                                                   2000              2001               2000               2001
                                                                   ----              ----               ----               ----
<S>                                                             <C>                <C>                <C>                <C>
Reconciliation of net income to net cash provided
     by operating activities:

     Net Income                                                 $  5,131           $  5,179           $ 10,101           $ 10,598
     Adjustments to reconcile net income to cash
        provided by operating activities
        Depreciation and amortization                              2,554              3,640              4,587              7,082
        Provision for credit losses                                9,040             11,819             17,569             22,085
        Recovery of equipment cost and residual value,
          net of revenue recognized                               12,031              7,039             22,824             16,306
        Decrease in current taxes                                    (40)            (1,647)              (159)            (1,767)
        Increase in deferred income taxes                             78                837                232              4,776
     Change in assets and liabilities:
        Decrease (increase) in other assets                          379                 (9)            (1,594)                92
        (Decrease) increase in accounts payable                      362               (683)               230               (518)
        Increase (decrease) in accrued liabilities                   (33)                90                (44)             1,035
                                                                ---------------------------           ---------------------------
          Net cash provided by operating activities             $ 29,502           $ 26,265           $ 53,746           $ 59,689
                                                                ===========================           ===========================


Supplemental disclosure of noncash activities:
     Property acquired under capital leases                     $     71           $      0           $     71           $    341
     Accrual of common stock dividends                          $    572           $    640           $    572           $    640
</TABLE>

                                                                     (Concluded)

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


                                       6
<PAGE>   7


                           MICROFINANCIAL INCORPORATED
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             (tables in thousands, except share and per share data)
                                   (Unaudited)


(A)  Nature of Business:

     MicroFinancial Incorporated (the "Company") which operates primarily
through its wholly-owned subsidiary, Leasecomm Corporation, is a specialized
commercial finance company that primarily leases and rents "microticket"
equipment and provides other financing services in amounts generally ranging
from $400 to $3,000 with an average amount financed of approximately $1,500 and
an average lease term of 44 months. The Company does not market its services
directly to lessees but sources leasing transactions through a network of
independent sales organizations and other dealer based origination networks
nationwide. The Company funds its operations primarily through borrowings under
its credit facilities, issuances of subordinated debt and on balance sheet
securitizations.

(B)  Summary of Significant Accounting Policies:

Basis of Presentation:

     The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and the
rules and regulations of the Securities and Exchange Commission for interim
financial statements. Accordingly, the interim statements do not include all of
the information and disclosures required for the annual financial statements. In
the opinion of the Company's management, the condensed consolidated financial
statements contain all adjustments, consisting only of normal recurring
adjustments, considered necessary for a fair presentation of these interim
results. These financial statements should be read in conjunction with the
consolidated financial statements and notes included in the Company's Annual
Report and Form 10-K for the year ended December 31, 2000. The results for the
six-month period ended June 30, 2001 are not necessarily indicative of the
results that may be expected for the full year ended December 31, 2001.

     The balance sheet at December 31, 2000 has been derived from the audited
financial statements included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2000.

Allowance for Credit Losses:

     The Company maintains an allowance for credit losses on its investment in
leases, loans and service contracts at an amount that it believes is sufficient
to provide an adequate provision against losses in its portfolio. The allowance
is determined principally on the basis of the historical loss experience of the
Company and the level of recourse provided by such leases, loans and service
contracts, if any. In addition, the allowance reflects management's judgment of
the additional loss potential considering current economic conditions and the
nature and characteristics of the underlying lease portfolio. The Company
determines the necessary periodic provision for the credit losses taking into
account actual and expected losses in the portfolio as a whole and the
relationship of the allowance to the net investment in leases, loans and service
contracts.

     The following table sets forth the Company's allowance for credit losses as
of December 31, 1999, 2000 and June 30, 2001 and the related provision,
charge-offs and recoveries for the year ended December 31, 2000 and the six
months ended June 30, 2001.


                                       7
<PAGE>   8


                           MICROFINANCIAL INCORPORATED
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             (tables in thousands, except share and per share data)
                                   (Unaudited)


<TABLE>
<S>                                                                  <C>         <C>
Balance at December 31, 1999                                                     $41,719
Provision for credit losses                                           36,029
Provision for other asset credit losses                                2,883
                                                                     -------
 Total provisions for credit losses                                               38,912
Charge-offs (including $1,064 in other asset charge-offs)             57,145
Recoveries                                                            19,257
                                                                     -------
 Charge-offs, net of recoveries                                                   37,888
                                                                                 -------

Balance of allowance for credit losses at December 31, 2000                      $40,924
                                                                                 =======
Balance of other asset reserve at December 31, 2000                              $ 1,819
                                                                                 =======
Provision for credit losses                                           22,085
Provision for other asset credit losses                                    0
                                                                     -------
 Total provisions for credit losses                                               22,085
Charge-offs (including $27 in other asset charge-offs)                38,921
Recoveries                                                            10,339
                                                                     -------
 Charge-offs, net of recoveries                                                   28,582
                                                                                 -------

Balance of allowance for credit losses at June 30, 2001                          $34,454
                                                                                 =======
Balance of other asset reserve at June 30, 2001                                  $ 1,792
                                                                                 =======
</TABLE>


     At December 31, 2000 and June 30, 2001, other assets included prepayments
and deposits of $6,394,000 and $3,519,000 respectively, and receivables totaling
$7,817,000 and $10,806,000, respectively. The other asset reserve reflects
management's judgement of loss potential considering current economic conditions
and the nature of the underlying receivables.

Earnings Per Share:

     The Company applies the principles set forth in Statement of Financial
Accounting Standard No. 128, "Earnings Per Share." ("SFAS No.128") which
specifies the computation, presentation and disclosure requirements for net
income per share. Basic net income per common share is computed based upon the
weighted-average number of common shares outstanding during the period. Dilutive
net income per common share gives effect to all dilutive potential common shares
outstanding during the period. Under SFAS No. 128, the computation of dilutive
earnings per share does not assume the issuance of common shares that have an
antidilutive effect on the net income per share. Options to purchase 830,000 and
40,609 shares of common stock were not included in the computation of diluted
earnings per share for the three months ended June 30, 2000 and 2001
respectively because their effects were antidilutive. Options to purchase
832,637 and 393,384 shares of common stock were not included in the computation
of diluted earnings per share for the six months ended June 30, 2000 and 2001
respectively because their effects were antidilutive.


                                       8
<PAGE>   9


                           MICROFINANCIAL INCORPORATED
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             (tables in thousands, except share and per share data)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                   For three months ended                      For six months ended
                                                           June 30,                                  June 30,
                                              --------------------------------          --------------------------------
                                                  2000                 2001                 2000                 2001
                                                  ----                 ----                 ----                 ----

<S>                                           <C>                  <C>                  <C>                  <C>
Net Income                                    $     5,131          $     5,179          $    10,101          $    10,598
Shares used in computation:
  Weighted average common shares
     outstanding used in computation
     of net income per common share            12,707,898           12,759,548           12,748,238           12,750,299
   Dilutive effect of common stock
     options                                       72,437              221,902              193,119              183,040
Shares used in computation of net
   income per common share -
   assuming dilution                           12,780,335           12,981,450           12,941,357           12,933,339
                                              --------------------------------          --------------------------------

Net income per common share                   $      0.40          $      0.41          $      0.79          $      0.83
Net income per common share
      assuming dilution                       $      0.40          $      0.40          $      0.78          $      0.82
</TABLE>

Notes Payable:

     On December 21, 1999, the Company entered into a revolving line of credit
and term loan facility with a group of financial institutions whereby it may
borrow a maximum of $150,000,000 based upon qualified lease receivables, loans,
rentals and service contracts. On August 22, 2000, the revolving line of credit
and term loan facility was amended and restated where by the Company may now
borrow a maximum of $192,000,000 based upon qualified lease receivables, loans,
rentals and service contracts. Outstanding borrowings with respect to the
revolving line of credit bear interest based at Prime minus 0.25% for Prime Rate
Loans, the prevailing rate per annum as offered in the London Interbank Offered
Rate (LIBOR) plus 1.75% for LIBOR Loans or the seven day Money Market rate plus
2.00% for Swing Line advances. If the LIBOR Loans are not renewed upon their
maturity they automatically convert into prime rate loans. Swing Line advances
have a 7-day maturity and upon their maturity they automatically convert into
prime rate loans. In addition, the Company's aggregate outstanding principal
amount of Swing Line advances shall not exceed $10 million. The prime rates at
December 31, 2000, and June 30, 2001 were 9.50% and 6.75% respectively. The
90-day LIBOR rates December 31, 2000, and June 30, 2001 were 6.403% and 3.71%,
respectively. The 7-day Money Market rates December 31, 2000, and June 30, 2001
were 6.63% and 4.13%, respectively.

The Company had borrowings outstanding under these agreements with the following
terms:

<TABLE>
<CAPTION>
                               December 31, 2000                    June 30, 2001
                             --------------------                -------------------
Type                         Rate         Amount                 Rate         Amount
----                         ----         -------                ----         ------
                                      (in thousands)                      (in thousands)

<S>                         <C>         <C>                     <C>         <C>
Prime                       9.2500%     $ 17,260                6.5000%     $ 25,137
Swing Line                  8.8100%        5,076
LIBOR                       8.2500%       12,000                5.5625%       87,000
LIBOR                       8.5625%       17,500                6.5625%       17,500
LIBOR                       8.2500%       50,000

                                        --------                            --------
      Total Outstanding                 $101,836                            $129,637
                                        ========                            ========
</TABLE>


                                       9
<PAGE>   10


                           MICROFINANCIAL INCORPORATED
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             (tables in thousands, except share and per share data)
                                   (Unaudited)


     Outstanding borrowings are collateralized by leases, loans, rentals and
service contracts pledged specifically to the financial institutions. All
balances under the revolving line of credit will be automatically converted to a
term loan on September 30, 2002 provided the line of credit is not renewed and
no event of default exists at that date. All converted term loans are payable
over the term of the underlying leases, loans, rentals and service contracts,
but in any event not to exceed 36 monthly installments. The most restrictive
covenants of the agreement have minimum net worth and income requirements.

     BLT III has one series of notes outstanding, the 1998-A Notes. In November
1998, BLT III issued the 1998-A Notes in aggregate principal amount of
$40,769,000. MFI I has two series of notes outstanding, the 2000-1 Notes and the
2000-2 Notes. In March 2000, MFI I issued the 2000-1 Notes in aggregate
principal amount of $50,056,686. In December 2000, MFI I issued the 2000-2 Notes
in aggregate principal amount of $50,561,633. Outstanding borrowings are
collateralized by a specific pool of lease receivables.

     At December 31, 2000 and June 30, 2001, BLT III and MFI I had borrowings
outstanding under the series of notes with the following terms:

<TABLE>
<CAPTION>
                               December 31, 2000                    June 30, 2001
                             --------------------                -------------------
Series                       Rate         Amount                 Rate         Amount
------                       ----         -------                ----         ------
                                      (in thousands)                      (in thousands)
<S>                         <C>           <C>                   <C>          <C>
BLT III
1998-A Notes                6.0300%       $12,252               6.0300%      $ 5,239

MFI I
2000-1 Notes                7.3750%        36,995               7.3750%       28,278
2000-2 Notes                6.9390%        50,562               6.9390%       42,654
                                          -------                            -------
      Total Outstanding                   $99,809                            $76,171
                                          =======                            =======
</TABLE>

     The Company also had other notes payable which totaled $346,000 and
$271,000 at December 31, 2000 and June 30, 2001, respectively. The notes are due
on demand and bear interest at a rate of prime minus 1.00%. The Company also
borrowed $889,000 against the cash surrender value of the life insurance
policies held on key officers. The interest rates on these loans range from
5.05% to 8.00%.

Stock Options:

     Under the 1998 Equity Incentive Plan (the "1998 Plan") which was adopted on
July 9, 1998 the Company had reserved 2,000,000 shares of the Company's common
stock for issuance pursuant to the 1998 Plan. The Company granted a total of
400,000 options during the six months ended June 30, 2001. A total of 1,816,238
options were outstanding at June 30, 2001 of which 444,238 were vested.

Dividends:

     On June 18, 2001 the Company's Board of Directors approved a dividend of
$.050 per common share for all outstanding common shares as of June 29, 2001
which was paid on July 13, 2001.

Acquisition of Resource Leasing Corporation:

     On January 3, 2001, the Company acquired the rental and lease portfolio,
along with certain other assets and assumed certain liabilities of Resource
Leasing Corporation ("Resource"), for $10,700,000 subject to a $1,000,000
holdback on deliverables in connection with certain software included in the
acquired assets. In December 2000, the


                                       10
<PAGE>   11


                           MICROFINANCIAL INCORPORATED
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             (tables in thousands, except share and per share data)
                                   (Unaudited)


Company made a prepayment on that purchase of $2,800,000 which was reflected in
other assets at December 31, 2000. The remaining $6,900,000 was paid on January
3, 2001.

     This transaction was accounted for under the purchase method of accounting,
and accordingly, the results of operations of Resource, for the period from the
acquisition date, are included in the consolidated financial statements. The
purchase price was allocated to the assets purchased and liabilities assumed
based on fair values at the date of acquisition and did not result in the
recording of excess costs over the fair value of assets acquired.

     Since the acquisition did not have a material impact on the Company's
consolidated financial statements, and Resource does not meet the quantitative
thresholds for disclosure as a separate operating segment, segment reporting as
required under Statement of Financial Accounting Standards No. 131, is not
applicable.

New Accounting Pronouncements:

     In June 2001, the FASB issued Statement of Financial Accounting Standards
No. 141, "Business Combinations"("SFAS No. 141"). SFAS No. 141 addresses
financial accounting and reporting for business combinations and amends or
supercedes a number of interpretations concerning business combinations. SFAS
No. 141 requires companies to use the purchase method of accounting for all
business combinations, whereas previous interpretations provided for the use of
another method (pooling of interests method) if certain criteria were met. This
statement also amends the recognition policies of intangible assets and goodwill
and provides for additional disclosure requirements for business combinations.
The provisions for this statement apply to all business combinations initiated
after June 30, 2001.

     In June 2001, the FASB issued Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets"("SFAS No. 142"). This statement
supercedes APB Opinion No. 17, "Intangible Assets"("APB No. 17") and addresses
financial accounting and reporting for intangible assets, but not those acquired
in a business combination at acquisition. SFAS No. 142 addresses financial
accounting and reporting of goodwill and other intangible assets subsequent to
their acquisition, assigning a definite or indefinite useful life to these
assets. Goodwill and other intangible assets having an indefinite useful life
will not be amortized, but rather tested at least annually for impairment. It
also provides guidance on how to define, measure and record impairment losses on
goodwill and other intangible assets and provides for additional disclosures
regarding these assets in years subsequent to their acquisition. The provisions
for this statement are required to be applied for fiscal years beginning after
December 15, 2001, although earlier adoption is permitted.

     The Company has not completed its evaluation of SFAS No. 141 and SFAS No.
142 and has not yet determined their effect on it's consolidated financial
statements.

Reclassification of Prior Year Balances:

     Certain reclassifications have been made to prior years' consolidated
financial statements to conform to the current presentation.

Commitments and Contingencies:

     Please refer to Part II Other Information, Item 1 Legal Proceedings for
information about pending litigation of the Company.


                                       11
<PAGE>   12


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

Three months ended June 30, 2001 as compared to the three months ended June 30,
2000.

     Net income for the three months ended June 30, 2001 was approximately $5.2
million, an increase of $48,000 or 1% from the three months ended June 30, 2000.
This represents diluted earnings per share for the three months ended June 30,
2001 of $0.40 per share on weighted average outstanding shares of 12,981,450 as
compared to $0.40 per share on weighted average outstanding shares of 12,780,334
for the three months ended June 30, 2000.

     Total revenues for the three months ended June 30, 2001 were $35.8 million,
an increase of $4.8 million, or 16%, from the three months ended June 30, 2000.
The increase was primarily due to an increase of $1.1 million, or 7%, in income
on financing leases, $2.3 million, or 26%, in rental and service contract
income, and $1.4 million, or 29% in fee and other income. The increase in income
on financing leases and loans was due to the increased number of leases
originated. The increase in rental and service contract income is a result of
the increased number of lessees that have continued to rent their equipment
beyond their original lease term, and an increase in the rental business
originated through our Resource Leasing division. The increase in fee income and
other income is the result of increased fees from the lessees related to the
collection and legal process employed by the Company, and the addition of a new
line of business of selling new and refurbished equipment.

     Selling, general and administrative expenses increased by $1.3 or 19%, for
the three months ended June 30, 2001, as compared to the three months ended June
30, 2000. Compensation and personnel related expenses increased by $900,000 or
24%, due to an increase in overall compensation levels and an increase in the
number of employees needed to maintain the Company's portfolio, including the
addition of the personnel employed by Resource Leasing Corporation. Also, cost
of goods sold increased by $900,000, or 100%, due to the Company's acquisition
of Resource Leasing Corporation, and the addition of a new line of business of
selling new and refurbished equipment.

     Depreciation and amortization increased by $1.1 million, or 43%, due to the
increased number of rental contracts, including the addition of the Resource
Leasing portfolio of rental contracts, and amortization of the Company's
investment in service contracts.

     The Company's provision for credit losses increased by $2.8 million or 31%,
for the three months ended June 30, 2001 as compared to the three months ended
June 30, 2000. This increase is a result of the Company's historical policy,
based on experience, of providing a provision for credit losses based upon the
dealer fundings and revenue recognized in any period and reflects management's
judgement of loss potential considering current economic conditions and the
nature of the underlying receivables. Total revenues increased by $4.8 million,
or 16% for the three months ended June 30, 2001 as compared to the three months
ended June 30, 2000.

     Net interest expense decreased by $380,000, or 10%, for the three months
ended June 30, 2001 as compared to the three months ended June 30, 2000. This
decrease resulted primarily from the Company's declining cost of funds, offset
by an increased level of borrowings on its revolving line of credit.

     Dealer fundings were $27.4 million for the three months ended June 30,
2001, down $19.9 million, or 42% as compared to the three months ended June 30,
2000. This decrease is a result of the Company's decision during the second
quarter of 2000 to increase pricing and tighten its credit approval standards.
The new credit policies were put into place in August of 2000. This is an
ongoing effort, and is expected to continue going forward. Total cash from
customers increased by $3.6 million or 8% to a total of $47.5 million. This
increase is primarily the result of an increase in the size of the overall
portfolio. Investment in lease and loan receivables due in installments,
estimated residuals, and service contracts were down from $465.4 million in
December of 2000 to $457.4 million in June of 2001, representing a 2% decrease.


                                       12
<PAGE>   13


Six months ended June 30, 2001 as compared to the six months ended June 30,
2000.

     Net income for the six months ended June 30, 2001 was approximately $10.6
million, an increase of $500,000 or 5% from the six months ended June 30, 2000.
This represents diluted earnings per share for the six months ended June 30,
2001 of $0.82 per share on weighted average outstanding shares of 12,933,339 as
compared to $0.78 per share on weighted average outstanding shares of 12,941,357
for the six months ended June 30, 2000.

     Total revenues for the six months ended June 30, 2001 were $72.6 million,
an increase of $13.0 million, or 22%, from the six months ended June 30, 2000.
The increase was primarily due to an increase of $4.3 million, or 13%, in income
on financing leases and loans, $5.6 million, or 33%, in rental and service
contract income, and $3.1 million, 31% in fee and other income. The increase in
income on financing leases and loans was due to the increased number of leases
originated. The increase in rental and service contract income is a result of
the increased number of lessees that have continued to rent their equipment
beyond their original lease term, and the acquisition of the rental portfolio of
Resource Leasing Corporation. The increase in fee income and other income is the
result of increased fees from the lessees related to the collection and legal
process employed by the Company, and the addition of a new line of business of
selling new and refurbished equipment out of existing inventory.

     Selling, general and administrative expenses increased by $4.5 or 34%, for
the six months ended June 30, 2001, as compared to the six months ended June 30,
2000. Compensation and personnel related expenses increased by $2.7 million or
36%, due to an increase in overall compensation levels and an increase in the
number of employees needed to maintain the Company's portfolio, including the
addition of the personnel employed by Resource Leasing Corporation. Also, cost
of goods sold increased by $1.8 million, or 100%, due to the Company's
acquisition of the assets of Resource Leasing Corporation, and the addition of a
new line of business of selling new and refurbished equipment.

     Depreciation and amortization increased by $2.5 million, or 54%, due to the
increased number of rental contracts, including the addition of the Resource
Leasing portfolio of rental contracts, and amortization of the Company's
investment in service contracts.

     The Company's provision for credit losses increased by $4.5 million or 26%,
for the six months ended June 30, 2001 as compared to the six months ended June
30, 2000. This increase is a result of the Company's historical policy, based on
experience, of providing a provision for credit losses based upon the dealer
fundings and revenue recognized in any period and reflects management's
judgement of loss potential considering current economic conditions and the
nature of the underlying receivables.

     Net interest expense increased by $670,000, or 10%, for the six months
ended June 30, 2001 as compared to the six months ended June 30, 2000. This
increase resulted primarily from the Company's increased level of borrowings on
its revolving line of credit, offset by a lower cost of funds.

     Dealer fundings were $61.3 million for the six months ended June 30, 2001,
down $23.3 million, or 28% as compared to the six months ended June 30, 2000.
This decrease is a result of the Company's decision during the second quarter of
2000 to increase pricing and tighten its credit approval standards. The new
credit policies were put into place in August of 2000. This is an ongoing
effort, and is expected to continue going forward. Total cash from customers
increased by $9.3 million or 11% to a total of $95.1 million. This increase is
primarily the result of an increase in the size of the overall portfolio.


                                       13
<PAGE>   14


EXPOSURE TO CREDIT LOSSES

     The following table sets forth certain information as of December 31, 1999
and 2000 and June 30, 2001 with respect to delinquent leases, service contracts
and loans. The percentages in the table below represent the aggregate on such
date of the actual amounts not paid on each invoice by the number of days past
due, rather than the entire balance of a delinquent receivable, over the
cumulative amount billed at such date from the date of origination on all
leases, service contracts, and loans in the Company's portfolio. For example, if
a receivable is 90 days past due, the portion of the receivable that is over 30
days past due will be placed in the 31-60 days past due category, the portion of
the receivable which is over 60 days past due will be placed in the 61-90 days
past due category and the portion of the receivable which is over 90 days past
due will be placed in the over 90 days past due category. The Company
historically used this methodology of calculating its delinquencies because of
its experience that lessees who miss a payment do not necessarily default on the
entire lease. Accordingly, the Company includes only the amount past due rather
than the entire lease receivable in each category.

<TABLE>
<CAPTION>
                                                                  As of                         As of
                                                               December 31                     June 30
                                                               -----------                     -------
                                                       1999                 2000                 2001
                                                       ----                 ----                 ----

<S>                                                <C>                  <C>                  <C>
Cumulative amounts billed (in thousands)           $  380,380           $  462,011           $  506,760
31-60 days past due                                       1.7%                 1.9%                 2.1%
61-90 days past due                                       1.3%                 1.6%                 1.7%
over 90 days past due                                     7.4%                10.0%                13.1%
                                                   ----------           ----------           ----------
   Total past due                                        10.4%                13.5%                16.9%
                                                   ==========           ==========           ==========
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

GENERAL

     The Company's lease and finance business is capital-intensive and requires
access to substantial short-term and long-term credit to fund new leases, loans
and service contracts. Since inception, the Company has funded its operations
primarily through borrowings under its credit facilities, issuances of
subordinated debt and its on-balance sheet securitizations. The Company will
continue to require significant additional capital to maintain and expand its
volume of leases, loans, rentals and service contracts, as well as to fund
future acquisitions of leasing companies or portfolios.

     The Company's uses of cash include the origination and acquisition of
leases, loans, rentals and service contracts, payment of interest expenses,
repayment of borrowings under its credit facilities, subordinated debt and
securitizations, payment of selling, general and administrative expenses, income
taxes, capital expenditures, and the Company's stock repurchase program.

     The Company utilizes its credit facility to fund the origination and
acquisition of leases, loans, rentals and service contracts that satisfy the
eligibility requirements established pursuant to each facility. All balances
under the revolving line of credit will be automatically converted to a term
loan on September 30, 2002 provided the line of credit is not renewed and no
event of default exists at that date. At June 30, 2001, the Company had an
aggregate maximum of $192 million available for borrowing under its credit
facility, of which approximately $129.6 million was outstanding as of such date.
To date, cash flow from its portfolio and other fees have been sufficient to
repay current amounts due under the credit facilities and subordinated debt.

     The Company believes that the cash flow from its operations and the amounts
available under its credit facilities will be sufficient to fund the Company's
operations for the foreseeable future.


                                       14
<PAGE>   15


Note on Forward Looking Information

     Statements in this document that are not historical facts are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. In addition, words such as
"believes," "anticipates," "expects," and similar expressions are intended to
identify forward-looking statements. The Company cautions that a number of
important factors could cause actual results to differ materially from those
expressed in any forward-looking statements made by or on behalf of the Company.
Such statements contain a number of risks and uncertainties, including but not
limited to: the Company's dependence on point-of-sale authorization systems and
expansion into new markets; the Company's significant capital requirements;
risks associated with economic downturns; higher interest rates; intense
competition; change in regulatory environment and risks associated with
acquisitions. Readers should not place undue reliance on forward-looking
statements, which reflect the management's view only as of the date hereof. The
Company undertakes no obligation to publicly revise these forward-looking
statements to reflect subsequent events or circumstances. The Company cannot
assure that it will be able to anticipate or respond timely to changes which
could adversely affect its operating results in one or more fiscal quarters.
Results of operations in any past period should not be considered indicative of
results to be expected in future periods. Fluctuations in operating results may
result in fluctuations in the price of the Company's common stock. For a more
complete description of the prominent risks and uncertainties inherent in the
Company's business, see the risks factors described in the Company's Form S-1
Registration Statement and other documents filed from time to time with the
Securities and Exchange Commission.

ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market-Rate-Sensitive Instruments and Risk Management

     The following discussion about the Company's risk management activities
includes "forward-looking statements" that involve risk and uncertainties.
Actual results could differ materially from those projected in the
forward-looking statements.

     In the normal course of operations, the Company also faces risks that are
either nonfinancial or nonquantifiable. Such risks principally include country
risk, credit risk and legal risk, and are not represented in the analysis that
follows.

Interest Rate Risk Management

     The implicit yield to the Company on all of its leases, loans, rentals and
service contracts is on a fixed interest rate basis due to the leases, loans,
rentals and service contracts having scheduled payments that are fixed at the
time of origination of the lease, loan, rentals or service contract. When the
Company originates or acquires leases, loans and service contracts it bases its
pricing in part on the "spread" it expects to achieve between the implicit yield
rate to the Company on each lease, loan or service contract and the effective
interest cost it will pay when it finances such leases, loans and service
contracts through its credit facilities. Increases in the interest rates during
the term of each lease, loan or service contract could narrow or eliminate the
spread, or result in a negative spread. The Company has adopted a policy
designed to protect itself against interest rate volatility during the term of
each lease, loan or service contract.

     Given the relatively short average life of the Company's leases, loans,
rentals and service contracts, the Company's goal is to maintain a blend of
fixed and variable interest rate obligations. As of June 30, 2001, the Company's
outstanding fixed rate indebtedness, including indebtedness outstanding under
the Company's securitizations, represented 37.0% of the Company's outstanding
indebtedness.


                                       15
<PAGE>   16


PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     The Company has filed answers denying the allegations included in each of
the lawsuits described below. The first two (2) actions described below have
been filed by the same attorney, on behalf of various plaintiffs. The Company is
vigorously defending each of the allegations, but is unable to predict with
certainty the ultimate outcome of the proceedings. The Company also is subject
to claims and suits arising in the ordinary course of business. At this time, it
is not possible to estimate the ultimate loss or gain, if any, related to these
lawsuits, nor if any such loss will have a material adverse effect on the
Company's results of operations or financial position.

     I. On August 24, 1999, a purported class action lawsuit was filed in
Middlesex Superior Court for the Commonwealth of Massachusetts against the
Company and its wholly-owned subsidiary Leasecomm Corporation ("Leasecomm") (as
amended, the "Clark Complaint"). The purported class would be limited to
individuals and businesses that have been sued by Leasecomm in a Massachusetts
court for allegedly breaching Leasecomm's Non Cancellable Equipment Lease
Agreement or Non Cancellable Lease Agreement (the "Lease Agreements"), and that,
among other things, have been sued in a Massachusetts court for breach of the
Lease Agreements. The Clark Complaint alleges that enforcement of the forum
selection clause is not fair or reasonable because, among other things,
litigation in Massachusetts is prohibitively costly and time consuming for
purported class members, purported class members have no choice but to enter
into the Lease Agreement's because of Leasecomm's greater bargaining power, and
purported class members allegedly have valid defenses to the claims asserted
against them by Leasecomm.

     On August 16, 2000, the Court granted the Company's motion to dismiss,
resulting in the dismissal of all claims against the Company. The Court also
granted Leasecomm's motion to dismiss as to all of the plaintiffs' individual
claims, and as to all but one of the plaintiffs' purported class claims. As a
result, the only claim that remains is a purported class claim against Leasecomm
by plaintiffs against whom Leasecomm has a pending Massachusetts action, for
alleged violations of Chapter 93A of the Massachusetts General Laws arising out
of the inclusion of a forum selection clause in Leasecomm leases. As to this
claim, the plaintiffs are seeking no monetary relief beyond attorneys' fees.

     The plaintiffs filed a revised motion for class certification in light of
the Court's prior rulings. The Company has filed an opposition to the revised
motion for class certification, which was heard by the Court on May 16, 2001.
The Company is awaiting the decision of the Court.

     Since this matter is in an early stage, there can be no assurance as to its
eventual outcome. However, the forum selection clause at issue in this
litigation has been enforced in other cases.

     II. On October 25, 1999, a purported class action lawsuit was filed in
Middlesex Superior Court in The Commonwealth of Massachusetts against Leasecomm
(the "Lamar Complaint"). The purported class consists of all individuals and
businesses who, on or after September 28, 1996, signed a Leasecomm agreement
which states that it is "non-cancelable" and/or contains certain standard
provisions relating to delivery and acceptance of the leased equipment and
warranties and servicing for the equipment. The plaintiffs contend that these
particular lease terms are contrary to Article 2A of the Uniform Commercial Code
as adopted in Massachusetts and that Leasecomm's use of these terms constitutes
an unfair and deceptive trade practice under Chapter 93A of the Massachusetts
General Laws. The plaintiffs seek a declaration that the lease terms in question
are unfair and deceptive and that Leasecomm's use of those terms is unfair and
deceptive. The plaintiffs also seek a Court order requiring Leasecomm to notify
all purported class members of the Court's ruling in the case; to stop using the
lease terms or similar lease terms which allegedly misstate lessees' rights
under Massachusetts law; to refrain from enforcing those lease terms against any
of the purported class members; to refrain from providing or communicating
incorrect information regarding lessees' rights under Massachusetts law; and to
include in every lease agreement language which conspicuously describes the
rights of lessees under Massachusetts law. Finally, the plaintiffs seek
reimbursement of their costs and attorneys' fees.


                                       16
<PAGE>   17


     By Memorandum and Order dated July 11, 2001, the Court denied plaintiffs
motion for class certification in all respects, effectively limiting the pending
action to the claims of the individual named plaintiffs.

     III.On January 20, 2000, the Company filed suit against Sentinel Insurance
Company Limited ("Sentinel"), in the United States District Court for the
District of Massachusetts (the "Sentinel Complaint"). On August 18, 1999,
Sentinel had issued a Business Performance Insurance Policy (the "Policy") to
the Company as collateral for a Twelve Million Dollar ($12,000,000) loan (the
"Loan") that the Company had made to Premier Holidays International, Inc.
("Premier"). The Loan was personally guaranteed by Premier's President, Daniel
DelPiano ("DelPiano"). Pursuant to the terms of the Policy, Sentinel was
obligated to make payment to the Company for any and all amounts payable under
the terms of the Loan, in the event a default by Premier occurred. After Premier
and DelPiano defaulted on their repayment obligations, the Company made demand
on Sentinel for payment under the Policy. The Company filed the Sentinel
Complaint after Sentinel refused to make payment to the Company under the
Policy. On February 3, 2000, the Company amended its Complaint to assert claims
against Premier and DelPiano arising out of their failure to make payments
required under the Loan and the personal guaranty.

     On January 26, 2000, Premier and DelPiano filed suit against the Company,
its wholly-owned subsidiary, Leasecomm Corporation, and Sentinel in the Superior
Court of Fulton County, Georgia (the "Premier Complaint"). Premier and DelPiano
allege that, notwithstanding the plain wording of both the Loan and the Policy,
Premier agreed to borrow the full amount of the Loan only upon alleged
representations by the Company that it would loan Premier an additional
Forty-Five Million Dollars ($45,000,000). The documents evidencing the Loan, and
the documents evidencing the Policy, refer only to the amount of the Loan
($12,000,000), and not to any greater amount. Premier alleges that, as a result,
it has suffered actual and consequential damages in the amount of Seven Hundred
Sixty-Nine Million Three Hundred Fifty Thousand Dollars ($769,350,000) plus
interest, costs, and attorneys' fees. Premier seeks punitive damages in the
amount of Five Hundred Million Dollars ($500,000,000). Premier also seeks
injunctive relief barring the Company and Leasecomm from making demand on or
commencing court action to collect on the Policy.

     On February 22, 2000, Leasecomm removed this case to federal court for the
Northern District of Georgia. Leasecomm filed a motion to dismiss the Premier
Complaint, or, alternatively, to transfer this case to federal court in
Massachusetts. Leasecomm's motion was granted on July 27, 2000, and the case was
transferred to the District of Massachusetts, where it has been consolidated
with the Massachusetts action.

     The parties have reached a settlement whereby the defendant Sentinel was to
pay the Company a sum of money on or before May 25, 2001, or, alternatively,
judgment for the full amount of $14,000,000 is to be entered against Sentinel,
and the Company may also pursue its claims against other defendants. Pursuant
thereto judgment has been entered against Sentinel in the amount of $14,000,000.
In addition, the Provisional Liquidator of Sentinel, appointed pursuant to an
order of the Supreme Court of Bermuda, has agreed to allow MicroFinancial's
claim against Sentinel in that amount. The amount, if any, which may be paid to
the Company pursuant to this allowed claim is dependent entirely upon the value
of the Sentinel assets recovered by the Provisional Liquidator.

     MicroFinancial is continuing to pursue its claims against the other
defendants, and has expanded these claims to include fraud claims.

     IV. On or about April 30, 2001, a purported class action lawsuit was filed
in Middlesex Superior Court in the Commonwealth of Massachusetts against
Leasecomm. The complaint was amended on or about June 22, 2001 (as amended, the
"Grant Complaint"). The purported class consists of all persons who are not
residents of Massachusetts who entered into a lease agreement with Leasecomm
after April 30, 1997, and who were sued by Leasecomm in Massachusetts courts for
defaults under the Lease Agreements.

     The Grant Complaint was filed by the same attorney who previously filed the
McKenzie-Pollock complaint (reported in the Company's earlier filings), and
closely tracks the amended complaint in that case. On February 7, 2001, the
McKenzie-Pollock case was dismissed with prejudice by agreement of the parties,
with no money having been paid by the Company.

     The Grant Complaint alleges: that Leasecomm causes individuals to enter
into non-cancelable, long-term leases when there is no reasonable expectation
that most of the individuals would need or use the equipment for the


                                       17
<PAGE>   18


duration of the lease term; that Leasecomm conceals or misrepresents the nature
of the terms of its Lease Agreements; that the Lease Agreements are
non-negotiable adhesion contracts which are oppressive and unfair; that the cost
of acquiring the equipment through Leasecomm is often double or triple the
retail cost of the equipment; that Leasecomm disclaims warranties that it
allegedly cannot disclaim; that Leasecomm violates state usury laws; that
Leasecomm engages in unfair debt collection practices; that Leasecomm brings
lawsuits against purported class members in Massachusetts even though it has no
jurisdiction over them in Massachusetts courts; that Leasecomm fails to make
proper service and then files pleadings which state that proper service was
made, thereby obtaining default judgments against certain members of the
purported class; that Leasecomm conspired with its salespersons to cause members
of the purported class to enter into unconscionable leases by concealing and
misrepresenting their terms; and that Leasecomm has engaged in unfair trade
practices in violation of the Massachusetts consumer protection statute.

     Plaintiffs and the members of the purported class seek: unspecified damages
for monetary losses allegedly sustained by them as a result of this conduct by
Leasecomm and reimbursement of costs and attorneys' fees; treble damages and
other punitive damages; unspecified statutory penalties; a declaration that the
Lease Agreements are void, and return of all moneys paid to Leasecomm; an
accounting and reimbursement of alleged excessive interest charges; and
restitutionary damages for unjust enrichment.

     On July 16, 2001, Leasecomm filed a motion to dismiss all counts of the
Grant Complaint. Plaintiffs' Opposition is due on or about July 26, 2001.

     Since this matter is in an early stage, there can be no assurance as to its
eventual outcome.

     V. On or about September 19, 2000, Leasecomm was served with a Subpoena
Duces Tecum from the Office of the Attorney General of the State of Florida. The
nature of the proceeding, if any, against Leasecomm is unclear at this time, but
appears to relate to alleged complaints against Leasecomm by lessees in Florida
and involves the question of whether any of the leases entered into by Leasecomm
with Florida residents is a consumer lease. Leasecomm believes that the
commercial leases it has entered into are in fact commercial leases, and is
attempting to cooperate with the Attorney General's Office on this matter.
Leasecomm has responded to the subpoena and provided documents.

     Since this matter is at an early stage, and the nature of the proceedings
against Leasecomm, if any, are not known, there can be no assurance as to its
eventual outcome.

     VI. On or about May 28, 2001, Leasecomm and the Company were served with
Civil Investigative Demands from the Office of the Attorney General of the
Commonwealth of Massachusetts which requested the production of documents. The
Civil Investigative Demands were issued by the Office of the Attorney General,
Consumer Protection and Anti-Trust Division, pursuant to M.G.L. c. 93A, ss. 6,
in connection with an investigation of potentially unfair or deceptive acts or
practices relating to the sale, solicitation and marketing of lease agreements
and the billing and collection procedures to secure payment pursuant to said
lease agreements. Leasecomm and the Company have provided responsive documents
and are cooperating in the investigation. Because the investigation is ongoing
and has not come to a conclusion, no specific allegations have been asserted as
to which a response may be made.

     Since this matter is at an early stage, and the nature of the proceedings
against Leasecomm or the Company, if any, are not known, there can be no
assurance as to its eventual outcome.

     VII. On April 3, 2000, a purported class action suit was filed in Superior
Court of the State of California, County of San Mateo against Leasecomm and
MicroFinancial as well as a number of other defendants with whom Leasecomm and
MicroFinancial are alleged to have done business, directly or indirectly.

     The action is alleged as a "consumer fraud class action on behalf of
defrauded California small businesses and their owners, who were induced to
purchase services and/or goods from Defendants through false and misleading
representations and material omissions." More specifically, the complaint seeks
certification of a class of California persons and entities who purchased
services or goods from Internet Success Systems, Inc., Fortune Financial
Systems, Inc. (previously known as Fortune 21, Inc.), Fortune Financial Systems
of Nevada, Inc., MarketComm


                                       18
<PAGE>   19


Production; Bizz-e Inc. (also known as Bizz-e.com, Inc.), Cardservice
International Inc. (also known as Cardservice Global Solutions) or Power
Communications, Inc., directly or indirectly, at any time between February 7,
1997 and the present date. The complaint seeks certification of a subclass of
those class members who entered into any lease agreement contracts with
Leasecomm Corporation for the purposes of financing the goods or services
allegedly purchased from these other entities. The class action complaint
alleges ten causes of action for: (1) fraud and deceit; (2) negligent
misrepresentation; (3) violations of California's Business & Professions Code
ss.ss.17200 et seq. (unfair competition); (4) violations of California's
Business & Professions Code ss.ss.17500 et seq. (false advertising); (5)
violations of California's Civil Code ss.ss.1750 et seq. (Consumer Legal
Remedies Act); (6) unjust enrichment; (7) fraud in the inducement of contract;
(8) fraud in the inception of contract; (9) lack of consideration for contact;
and (10) breach of the contractual covenant of good faith and fair dealing.

     The complaint prays for compensatory general and special damages according
to proof; restitution and disgorgement according to proof; rescission of class
member contracts with Leasecomm Corporation; injunctive relief against
enforcement of class member contracts with Leasecomm Corporation; prejudgment
interest; punitive and exemplary damages, costs, attorneys fees and such other
relief as the court deems just.

     On May 31, 2000, Leasecomm filed a motion for an order staying all
litigation in California against Leasecomm Corporation and MicroFinancial
Incorporated on the grounds that the lease contracts at issue contained a forum
selection clause providing that any litigation concerning the leases would be
brought in Massachusetts where Leasecomm Corporation is headquartered. By order
dated August 22, 2000, the Court granted that motion and stayed further
litigation in the California proceedings against Leasecomm Corporation and
MicroFinancial Incorporated. On September 27, 2000, plaintiffs filed an appeal
seeking to overturn that ruling. Plaintiffs filed their appeal brief on December
29, 2000, and Leasecomm filed a response on January 29, 2001. On July 16, 2001,
the parties entered into a letter of intent to settle the class action
litigation. The letter of intent must be reduced to a stipulation of settlement
and will be effective only if and when the stipulation of settlement is approved
by the San Mateo Superior Court as fair and reasonable to the members of the
plaintiff class and as a good faith settlement pursuant to Section 877.6 of the
California Code of Civil Procedure. It is unclear at this point how long this
process will take. The hearing on the appeal filed by the plaintiffs has been
continued until December 18, 2001, while the parties pursue approval of the
proposed settlement.


                                       19
<PAGE>   20


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibit Index

     None

(b)  Not Applicable


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                                   SIGNATURES

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

                                       MicroFinancial Incorporated

                                       By: /s/ Peter R. Bleyleben
                                           ------------------------------------
                                           President and Chief Executive Officer

                                       By: /s/ Richard F. Latour
                                           -------------------------------------
                                           Executive Vice President, Chief
                                           Operating and Chief Financial Officer

Date: August 14, 2001


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