FRANKLIN CREDIT MANAGEMENT CORPORATION AND SUBSIDIARIES


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


                                   FORM 10-QSB


[X]  QUARTERLY  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE  SECURITIES
     EXCHANGE ACT OF 1934
              For the quarterly period ended June 30, 2001

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     For the transition period from _____________ to _____________

                    Commission file number 0-17771



                     FRANKLIN CREDIT MANAGEMENT CORPORATION
    (Exact name of small business issuer as specified in its charter)

                           Delaware
     (State or other jurisdiction of incorporation or organization)

                         75-2243266

       (I.R.S. Employer identification No.)


                               Six Harrison Street
                            New York, New York 10013
                                 (212) 925-8745

(Address of principal  executive  offices,  including  zip code,  and  telephone
number, including area code)



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

         Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes X No .

As of August 14, 2001 the issuer had 5,916,527 of shares of Common Stock, par
value $0.01 per share, outstanding.


<PAGE>


                     FRANKLIN CREDIT MANAGEMENT CORPORATION


                                   FORM 10-QSB

                                  June 30, 2001


                                 C O N T E N T S


PART I. FINANCIAL INFORMATION                                        Page
                                                                     ----

Item 1.
Financial Statements

  Consolidated Balance Sheets June 30, 2001 (unaudited)
  and December 31, 2000                                                3

  Consolidated Statements of Income (unaudited) for the three
  months and six months ended June 30, 2001 and 2000                   4

  Consolidated Statements of Stockholders' Equity June 30,
  2001 (unaudited)                                                     5

  Consolidated Statements of Cash Flows (unaudited) for the
  six months ended June 30, 2001 and 2000                              6

  Notes to consolidated Financial Statements                         7-11


Item 2.
Management's Discussion and Analysis of Financial Condition
and Results of Operations                                           12-19

PART II.     OTHER INFORMATION

Item 1.  Legal Proceedings                                             20

Item 2.  Changes in Securities                                         21

Item 3.  Defaults Upon Senior Securities                               21

Item 4.  Submission of Matters to a Vote of Security Holders           21

Item 5.  Other Information                                             21

Item 6.  Exhibits and Reports on Form 8-K                              22

SIGNATURES                                                             23

<PAGE>
<TABLE>
<CAPTION>

CONSOLIDATED BALANCE SHEETS
JUNE 30, 2001 AND DECEMBER 31, 2000
--------------------------------------------------------------------------------

ASSETS                                               6/30/2001       12/31/2000
                                                     Unaudited
<S>                                               <C>               <C>
CASH AND CASH EQUIVALENTS                        $ 8,884,143        $ 7,212,346

RESTRICTED CASH                                      648,414            932,574

NOTES RECEIVABLE:
  Principal                                       308,498,428       255,055,677
  Purchase discount                               (25,620,928)     (23,392,400)
  Allowance for loan losses                       (28,052,057)     (24,086,322)
                                                  ------------     ------------
   NET NOTES RECEIVABLE                           254,825,443       207,576,955

LOANS HELD FOR SALE                                16,947,152         8,670,691

ACCRUED INTEREST RECEIVABLE                         4,074,611         3,396,405

OTHER REAL ESTATE OWNED                             4,242,922         5,290,053

OTHER RECEIVABLES                                   2,490,056         1,934,443

DEFERRED TAX ASSET                                  2,117,086         3,481,002

OTHER ASSETS                                        1,846,994         1,442,687

BUILDING, FURNITURE AND FIXTURES - Net                980,841           868,471

DEFERRED FINANCING COSTS- Net                       2,970,816         2,429,661

TOTAL ASSETS                                    $ 300,028,478     $ 243,235,288
                                                =============     =============

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
  Accounts payable and accrued expenses            $ 3,231,908      $ 2,932,611
  Financing agreements                               2,440,355        2,021,334
  Notes payable                                    287,361,586      231,050,485
  203(k) rehabilitation escrows payable                     -             2,186
  Subordinated debentures                               48,524           72,525
  Notes payable, affiliates and stockholders            64,730          146,835
  Deferred tax liability                             2,197,145        3,561,061
                                                  ------------      -----------
           TOTAL LIABILITIES                       295,344,248      239,787,037
                                                  ------------      -----------

STOCKHOLDERS' EQUITY
  Common stock, $.01 par value, 10,000,000 authorized shares; issued and
  outstanding:
  5,916,527 and 5,916,527                               59,167           59,167
  Additional paid-in capital                         6,985,968        6,985,968
  Accumulated deficit                               (2,360,905)      (3,596,884)
                                                  -------------     -----------
           TOTAL STOCKHOLDERS' EQUITY                4,684,230        3,448,251
                                                  -------------   -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY       $ 300,028,478    $ 243,235,288
                                                 =============    =============

</TABLE>

<PAGE>







CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
 <S>                              <C>        <C>          <C>         <C>
                                   Three Months Ended       Six Months Ended
                                 30-Jun-01   30-Jun-00    30-Jun-01   30-Jun-00
                               ----------  ----------   ----------  -----------
REVENUES:
 Interest Income              $6,627,907    $4,737,847 $12,734,080   $9,633,548
 Purchase discount earned      1,025,345       904,095   1,971,080    1,885,608
 Gain on sale of portfolios      417,463       500,000     879,127      575,756
 Gain on sale of originated
        loans                    125,800        35,668     192,220       84,854
 Gain on sale of other real
 estate owned                    695,336        87,608     846,610      174,795
 Rental Income                    85,780       168,001     196,767      355,781
 Other                           352,087       236,537     674,858      457,872
                              -----------   ----------  -----------  ----------
                               9,329,717     6,669,756  17,494,742   13,168,214
                              -----------   ----------  -----------  ----------

OPERATING EXPENSES:
 Interest expense              4,806,002     4,366,994  10,122,134    8,787,794
 Collection, general and
 administrative                2,610,519     1,931,040   4,891,669    3,959,064
 Provision for loan losses       462,440       156,556     689,963      171,706
 Amortization of deferred
 financing costs                 278,046       159,558     466,894      282,693
 Depreciation                     48,778        31,683      88,104       63,852
                              ----------     ---------  ----------   ----------
                               8,205,785     6,645,831  16,258,763   13,265,109
                              ----------     ---------  ----------   ----------

OPERATING INCOME (LOSS)        1,123,932        23,925   1,235,979     (96,895)
                             -----------     ---------  ----------   ----------


GAIN (LOSS)INCOME BEFORE
PROVISION FOR INCOME TAXES     1,123,932        23,925   1,235,979     (96,895)
                              ----------     ---------  ----------   ----------

BENEFIT(PROVISION)
FORINCOME TAXES                        0             0          0             0
                              ----------     ---------  ----------   ----------

NET INCOME (LOSS)             $1,123,932       $23,925  $1,235,979    $(96,895)
                              ==========    ==========  ==========   ==========

NET INCOME(LOSS) PER
COMMON SHARE:
  Basic                             0.19          0.00        0.21       (0.02)
  Dilutive                          0.19          0.00        0.21       (0.02)
                              ==========    ==========  ==========   ==========
WEIGHTED AVERAGE NUMBER
OF SHARES                      5,916,527     5,916,527   5,916,527    5,916,527
 OUTSTANDING
                              ==========    ==========  ==========   ==========


</TABLE>

<PAGE>





<TABLE>
<CAPTION>


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY(Unaudited)
JUNE 30, 2001
-------------------------------------------------------------------------------
<S>                         <C>     <C>      <C>           <C>              <C>
                                              Additional    Retained
                             Common Stock      Paid-In      Earnings
                            ---------------
                            Shares   Amount    Capital      (Deficit)     Total
-------------------------------------------------------------------------------

Balance,December 31,1999 5,916,527 $59,167  $6,985,968  $(4,167,547) $2,745,740

 Net Income                                                 570,663     570,663
                         ------------------------------------------------------
Balance,December 31,2000 5,916,527 $59,167  $6,985,968  $(3,596,884) $3,448,251
                         ======================================================

Net Income                                                1,235,979   1,235,979
                        -------------------------------------------------------
Balance,June 30,2001    5,916,527  $59,167  $6,985,968  $(2,360,905) $4,684,230

                        =======================================================

See notes to consolidated financial statements.
</TABLE>


<PAGE>

<TABLE>
<CAPTION>


CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)
SIX MONTHS ENDED JUNE 30, 2001 AND 2000
-------------------------------------------------------------------------------
                                                    30-Jun01          30-Jun-00

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                               <C>                 <C>
 Net income (loss)                                $1,235,979          $(96,895)
  Adjustments to reconcile net income
  (loss) to Net cash provided (used)
   by operating activities:
    Depreciation                                      88,104            63,852
    Amortization                                     466,894           282,693
    Purchase discount earned                      (1,971,080)       (1,885,608)
    Gain on Sale of OREO                            (846,610)         (174,795)
    Provision for loan loss                          689,963           171,706
   (Increase) decrease in:
    Accrued interest receivable                     (678,206)           59,320
    Loans held for sale                           (8,276,461)       (1,408,952)
    Other receivables                               (555,613)        1,708,203
    Other assets                                    (404,306)         (184,698)
   Increase (decrease) in:
    Accounts payable and accrued expenses            299,298          (569,378)
    203(k) rehabilitation escrow                      (2,186)               (0)
    Due to affiliates                                (82,106)          (46,402)
                                                 ------------       -----------
   Net cash used by operating activities         (10,036,330)       (2,080,954)
                                                 ------------       -----------

CASH FLOWS FROM INVESTING ACTIVITIES
  Acquisition and loan fees                       (1,235,402)         (325,038)
  Acquisition of notes receivable                (91,330,701)      (23,104,622)
  Proceeds from sale of REO                        5,063,710         3,367,479

  Proceeds from the sale of notes                 14,620,531           235,937
  Reclassification of notes receivable for          (686,777)          179,427
  foreclosures
  Acquisition of furniture & equipment              (212,776)          (11,366)
  Principal collection on notes receivable        28,499,265        21,308,400
  (Increase) decrease in restricted cash             284,160          (837,347)
                                                -------------     -------------
Net cash (used by) from investing activities     (44,997,990)          812,870
                                                -------------     -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Payments on debenture notes payable                (24,001)          (235,928)
 Payments on financing agreements               (11,147,878)        (2,974,751)
 Proceeds from financing agreements              11,566,895          3,012,575
 Proceeds from notes payable                     97,117,724         23,287,331
 Payments on notes payable                      (40,806,623)       (21,761,704)
                                               -------------      -------------
Net cash provided by financing activities        56,706,117          1,327,523
                                               -------------      -------------

NET INCREASE IN CASH                              1,671,797             59,439

CASH, BEGINNING OF PERIOD                         7,212,346          6,015,567

CASH, ENDED                                      $8,884,143         $6,075,006
                                               ============        ============

</TABLE>



<PAGE>



      FRANKLIN CREDIT MANAGEMENT CORPORATION AND SUBSIDIARIES

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      QUARTER ENDING JUNE 30, 2001

      1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

      Nature of Business - Franklin Credit Management Corporation (the
      "Company"), incorporated under the laws of the State of Delaware, acquires
      performing, subperforming, nonperforming, nonconforming and notes
      receivable and promissory notes from financial institutions, and mortgage
      and finance companies. The Company services and collects such notes
      receivable through enforcement of terms of original note, modification of
      original note terms and, if necessary, liquidation of the underlying
      collateral.

      In January 1997, a wholly owned subsidiary was formed, to originate or
      purchase, sub prime residential mortgage loans to individuals whose credit
      histories, income and other factors cause them to be classified as
      nonconforming borrowers.

      Summary of the Company's significant accounting policies. Basis of
      Consolidation - The consolidated financial statements include the accounts
      of the Company and its wholly-owned subsidiaries. All significant
      Intercompany accounts and transactions have been eliminated in
      consolidation.

      Condensed Consolidated Financial Statements - Certain information and
      footnote disclosure normally included in financial statements prepared in
      accordance with accounting principles generally accepted in the United
      States of America (hereafter "generally accepted accounting principles)
      have been condensed or omitted. These condensed consolidated financial
      statements should be read in conjunction with the financial statement and
      footnotes thereto included in the Company's annual form 10-KSB for the
      year ended December 31, 2000 as filed with the Securities and Exchange
      Commission (the "SEC"). The results of operations for the six months ended
      June 30, 2001 are not necessarily indicative of operating results for the
      year ending December 31, 2001.

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

      Cash and Cash Equivalents - Cash and cash equivalents include all cash
      accounts, with the exception of restricted cash, and money market funds.
      The Company maintains amounts due from banks, which at times may exceed
      federally insured limits. The Company has not experienced any losses from
      such concentrations.

      Notes Receivable and Income Recognition - The notes receivable portfolio
      consists primarily of secured real estate mortgage loans purchased from
      financial institutions, and mortgage and finance companies. Such notes
      receivable are generally performing, and in some cases nonperforming or
      underperforming at the time of purchase and, accordingly, are usually
      purchased at a discount from the principal balance remaining. Notes
      receivable are stated at the amount of unpaid principal, reduced by
      purchase discount and an allowance for loan losses. The Company has the
      ability and intent to hold its notes until maturity, payoff or liquidation
      of collateral. Impaired notes are measured based on the present value of
      expected future cash flows discounted at the note's effective interest
      rate or, as a practical expedient, at the observable market price of the
      note receivable or the fair value of the collateral if the note is
      collateral dependent. A note receivable is impaired when it is probable
      the Company will be unable to collect all contractual principal and
      interest payments due in accordance with the terms of the note agreement.

      In general, interest on the notes receivable is calculated based on
      contractual interest rates applied to daily balances of the principal
      amount outstanding using the simple-interest method. Accrual of interest
      on notes receivable, including impaired notes receivable, is discontinued
      when management believes, after considering economic and business
      conditions and collection efforts, that the borrowers' financial condition
      is such that collection of interest is doubtful. When interest accrual is
      discontinued, all unpaid accrued interest is reversed. Subsequent
      recognition of income occurs only to the extent payment is received
      subject to management's assessment of the collectibility of the remaining
      interest and principal. A nonaccrual note is restored to an accrual status
      when it is no longer delinquent and collectibility of interest and
      principal is no longer in doubt and past due interest is recognized at
      that time.

      Loan purchase discount is amortized to income using the interest method
      over the period to maturity. The interest method recognizes income by
      applying the effective yield on the net investment in the loans to the
      projected cash flows of the loans. Discounts are amortized if the
      projected payments are probable of collection and the timing of such
      collections is reasonably estimable. The projection of cash flows for
      purposes of amortizing purchase loan discount is a material estimate,
      which could change significantly, in the near term. Changes in the
      projected payments are accounted for as a change in estimate and the
      periodic amortization is prospectively adjusted over the remaining life of
      the loans. Should projected payments not exceed the carrying value of the
      loan, the periodic amortization is suspended and either the loan is
      written down or an allowance for uncollectibility is recognized.

      Allowance for Loan Losses - The allowance for loan losses, a material
      estimate which could change significantly in the near-term, is initially
      established by an allocation of the purchase loan discount based on the
      management's assessment of the portion of purchase discount that
      represents uncollectable principal. Subsequently, increases to the
      allowance are made through a provision for loan losses charged to expense
      and the allowance is maintained at a level that management considers
      adequate to absorb potential losses in the loan portfolio.

      Management's judgment in determining the adequacy of the allowance is
      based on the evaluation of individual loans within the portfolios, the
      known and inherent risk characteristics and size of the note receivable
      portfolio, the assessment of current economic and real estate market
      conditions, estimates of the current value of underlying collateral, past
      loan loss experience and other relevant factors. Notes receivable,
      including impaired notes receivable, are charged against the allowance for
      loan losses when management believes that the collectibility of principal
      is unlikely based on a note-by-note review. Any subsequent recoveries are
      credited to the allowance for loan losses when received. In connection
      with the determination of the allowance for loan losses, management
      obtains independent appraisals for significant properties, when considered
      necessary.

      The Company's real estate notes receivable are collateralized by real
      estate located throughout the United States with a concentration in the
      Northeast. Accordingly, the collateral value of a substantial portion of
      the Company's real estate notes receivable and real estate acquired
      through foreclosure is susceptible to changes in market conditions.

      Management believes that the allowance for loan losses is adequate. While
      management uses available information to recognize losses on notes
      receivable, future additions to the allowance or write-downs may be
      necessary based on changes in economic conditions.

      Other Real Estate Owned - Other real estate owned consisting of properties
      acquired through, or in lieu of, foreclosure or other proceedings are held
      for sale and are carried at the lower of cost or fair value less estimated
      costs of disposal. Any write-down to fair value, less cost to sell, at the
      time of acquisition is charged to the allowance for loan losses.
      Subsequent write-downs are charged to operations based upon management's
      continuing assessment of the fair value of the underlying collateral.
      Property is evaluated regularly to ensure that the recorded amount is
      supported by current fair values and valuation allowances are recorded as
      necessary to reduce the carrying amount to fair value less estimated cost
      to dispose. Revenue and expenses from the operation of other real estate
      owned and changes in the valuation allowance are included in operations.
      Costs relating to the development and improvement of the property are
      capitalized, subject to the limit of fair value of the collateral, while
      costs relating to holding the property are expensed. Gains or losses are
      included in operations upon disposal.

      Building, Furniture and Fixtures - Building, furniture and fixtures are
      recorded at cost net of accumulated depreciation. Depreciation is computed
      using the straight-line method over the estimated useful lives of the
      assets, which range from 3 to 40 years. Gains and losses on dispositions
      are recognized upon realization. Maintenance and repairs are expensed as
      incurred.

      Deferred Financing Costs - Debt financing costs, which include loan
      origination fees incurred by the Company in connection with obtaining
      financing, are deferred and are amortized based on the principal reduction
      of the related loan.

      Mortgage Servicing Rights - The Company allocates the total cost of the
      mortgage loans purchased or originated, proportionately, to the mortgage
      servicing rights and the loans based on the relative fair value. The
      servicing rights capitalized are amortized in proportion to and over the
      period of, estimated net servicing income including prepayment assumptions
      based upon the characteristics of the underlying loans. Capitalized
      servicing rights are periodically assessed for impairment based on the
      fair value of the rights with any impairment recognized through a
      valuation allowance.

      Retirement Plan - The Company has a defined contribution retirement plan
      (the "Plan") covering all full-time employees who have completed one month
      of service. Contributions to the Plan are made in the form of payroll
      deductions based on employees' pretax wages. Currently, the Company offers
      a company match of 50% of the first 3% of the employees' contribution.

      Income Taxes - The Company recognizes income taxes under an asset and
      liability method. Under this method, deferred tax assets are recognized
      for deductible temporary differences and operating loss or tax credit
      carryforwards and deferred tax liabilities are recognized for taxable
      temporary differences. Temporary differences are the differences between
      the financial statement carrying amounts of existing assets and
      liabilities and their respective basis. 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. Deferred tax assets are reduced by a
      valuation allowance when management determines that it is more likely than
      not that, some portion or all of the deferred tax assets will not be
      realized. Deferred tax assets and liabilities are adjusted for the effects
      of changes in tax laws and rates on the date of the enactment. As of
      December 31, 2000, the Company had approximately $5.6 million of net
      operating loss carry forwards that have been partially applied to June 30,
      2001 income.

      Fair Value of Financial Instruments - Statement of Financial Accounting
      Standards No. 107, Disclosures About Fair Value of Financial Instruments,
      requires disclosure of fair value information about financial instruments,
      whether or not recognized in the balance sheet for which it is practical
      to estimate that value. In cases where quoted market prices are not
      available, fair values are based on estimates using present value or other
      valuation techniques. Those techniques are significantly affected by the
      assumptions used, including the discount rate and estimates of future cash
      flows. In that regard, the derived fair value estimates cannot be
      substantiated by comparison to independent markets and, in many cases,
      could not be realized in immediate settlement of the instruments.
      Statement No. 107 excludes certain financial instruments and all
      nonfinancial assets and liabilities from its disclosure requirements.
      Accordingly, the aggregate fair value amounts do not represent the
      underlying value of the Company.

     The following methods and assumptions were used by the Company in
     estimating the fair value of its financial instruments:
          a. Cash, Restricted Cash, Accrued Interest Receivable, Other
             Receivable and Accrued Interest Payable - The carrying values
             reported in the balance sheet are a reasonable estimate of fair
             value.
          b. Notes Receivable - Fair value of the net note receivable  portfolio
             is estimated  by  discounting  the future  cash flows  using the
             interest method.  The  carrying  amounts of the notes  receivable
              approximate fair value.
          c. Short-Term Borrowings - The carrying amounts of the financing
             agreement and other short-term borrowings approximate their fair
             value.
          d. Long-Term Debt - Fair value of the Company's long-term
             debt(including notes payable, subordinated debentures and notes
             payable, affiliate) is estimated using discounted cash flow
             analysis based on the Company's current incremental borrowing rates
             for similar types of borrowing arrangements. The carrying amounts
             reported in the balance sheet approximate their fair value.
      Comprehensive Income - SFAS No. 130, Reporting Comprehensive Income
      defines comprehensive income as the change in equity of a business
      enterprise during a period from transactions and other events and
      circumstances, excluding those resulting from investments by and
      distributions to stockholders. The Company had no items of other
      comprehensive income in 2001 and 2000; therefore net income (loss) was the
      same as its comprehensive income (loss).

      Recent Pronouncements - Statement of Financial Accounting Standards (SFAS)
      No. 133, Accounting for Derivative Instruments and Hedging Activities, is
      effective for all fiscal years beginning after June 15, 2000. SFAS 133, as
      amended, establishes accounting and reporting standards for derivative
      instruments, including certain derivative instruments embedded in other
      contracts and for hedging activities. Under SFAS 133, certain contracts
      that were not formerly considered derivatives may now meet the definition
      of a derivative. The Company adopted SFAS 133 effective January 1, 2001.
      The adoption of SFAS 133 did not have a significant impact on the
      financial position, results of operations, or cash flows of the Company.

      Comparative Balance- Certain prior balances have been reclassified to
      conform with current period presentation.


<PAGE>


BUSINESS SEGMENTS

         The Company has two reportable operating segments: (i) portfolio asset
acquisition and resolution; and (ii) mortgage banking. The portfolio asset
acquisition and resolution segment acquires performing, nonperforming,
nonconforming and sub performing notes receivable and promissory notes from
financial institutions, mortgage and finance companies, and services and
collects such notes receivable through enforcement of terms of original note,
modification of original note terms and, if necessary, liquidation of the
underlying collateral. The mortgage-banking segment originates or purchases, sub
prime residential mortgage loans for individuals whose credit histories, income
and other factors cause them to be classified as nonconforming borrowers.

The Company's management evaluates the performance of each segment based on
profit or loss from operations before unusual and extraordinary items and income
taxes. The accounting policies of the segments are the same as those described
in the summary of significant accounting policies (see Note 1).

<TABLE>
<CAPTION>

MORTGAGE BANKING

                                                   30-Jun-01           30-Jun-00
                                                   Unaudited           Unaudited
CONSOLIDATED REVENUE
<S>                                                <C>                 <C>
 Portfolio asset acquisition and resolution     $ 16,587,373      $ 12,844,790
 Mortgage banking                                    907,369           323,424
                                                ------------      ------------
 Consolidated Revenue                           $ 17,494,742      $ 13,168,214
                                                ============      ============

CONSOLIDATED NET INCOME (LOSS)
 Portfolio asset acquisition and resolution
 asset                                           $ 1,176,439           $ 7,395
 Mortgage banking assets                              59,540          (104,290)
                                                 -----------         ----------
 Consolidated Net Income (Loss)                  $ 1,235,979         $ (96,895)
                                                 ===========         ==========


</TABLE>



<PAGE>


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

General

         Forward-Looking Statements. When used in this report, press releases
and elsewhere by the Company from time to time, the words "believes",
"anticipates", and "expects" and similar expressions are intended to identify
forward-looking statements that involve certain risks and uncertainties.
Additionally, certain statements contained in this discussion and the Form
10-QSB may be deemed forward-looking statements that involve a number of risks
and uncertainties. Among the factors that could cause actual results to differ
materially are the following: unanticipated changes in the U.S. economy,
business conditions and interest rates and the level of growth in the finance
and housing markets, the availability for purchase of additional loans and the
quality of such additional loans, the status of relations between the Company
and its Senior Debt Lender, the status of relations between the Company and its
sources for loan purchases, unanticipated difficulties in collections under
loans in the Company's portfolio, prepayments of notes in the Company's
portfolio and other risks detailed from time to time in the Company's SEC
reports. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date thereof. The Company
undertakes no obligation to release publicly the results on any events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

         Loan and OREO Acquisitions. During the six months ended June 30, 2001,
the Company purchased 2,406 loans consisting primarily of first and second
mortgages, with an aggregate face value of $105 million at an aggregate purchase
price of $92 million or 88% of the face value, compared with the purchase during
the six months ended June 30, 2000 of 1,115 loans with an aggregate face value
of $27.6 million at an aggregate purchase price of $23.1 million or 86% of
aggregate face value. Acquisition of these portfolios was fully funded through
Senior Debt in the amount equal to the purchase price plus a 1% loan origination
fee.

         The Company believes these acquisitions of high yielding coupon loans
will result in increases in the level of interest income during future periods.
Payments streams are generated once the loans are incorporated into the
Company's loan tracking system.

         Management intends to continue to expand the Company's earning asset
base through the acquisition of additional loans including performing first and
second mortgages at a positive interest rate spread based upon the Company's
cost of funds. The Company believes that its current infrastructure is adequate
to service additional loans without any material increases in collection,
general and administrative expenses excluding personnel expenses. There can be
no assurance the Company will be able to acquire any additional loans on
favorable terms or at all.


         Single-Family Residential Lending. In January 1997, the Company formed
a wholly owned subsidiary, Tribeca Lending Corp. ("Tribeca"), to originate
primarily sub prime residential mortgage loans made to individuals whose credit
histories, income and other factors cause them to be classified as
non-conforming borrowers. Management believes that lower credit quality
borrowers present an opportunity for the Company to earn superior returns for
the risks assumed. Tribeca provides first and second mortgages that are
originated on a retail basis through marketing efforts that include utilization
of the FCMC database. Tribeca is currently licensed as a mortgage banker in
Alabama, California, Colorado, Connecticut, District of Columbia, Florida,
Georgia, Kentucky, Illinois, Maryland, Massachusetts, Michigan, Missouri, New
York, New Jersey, North Carolina, Ohio, Oklahoma, South Carolina, Tennessee,
Texas, Virginia, Washington State, and West Virginia and is a Department of
Housing and Urban Development FHA Title I and Title II approved lender. Tribeca
originated loans are typically expected to be sold in the secondary market
through whole-loan, servicing-released sales. Tribeca anticipates holding
certain of its mortgages in its portfolio when it believes that the return from
holding the mortgage, on a risk-adjusted basis, outweighs the return from
selling the mortgage in the secondary market.
<PAGE>

         During the six months ending June 30, 2001, Tribeca originated 159
mortgages with an aggregate initial principal amount of $13,791,854 compared to
47 mortgages with an aggregate principal amount of $2,639,466 in mortgages
during the six months ending June 30 2000. During the six months ending June 30,
2001, Tribeca realized an operating gain of $59,540 compared to an operating
loss of $104,290 during the six months ended June 30, 2000. The increase in
originations was achieved through the use of the FCMC database as a source of
refinancing leads and thereby increase originations and reorganizing the
operating branch by hiring more experienced management and personnel. As of June
30, 2001, Tribeca had approximately $16.9 million face value of loans held for
sale. Revenues and expenses related to such loans, other than periodic interest
payments, and fee income are expected to be realized upon sale of such loans.

         Cost of Funds. The decreases in the prime rate during the three months
ending June 30, 2001, from 8.0% to 7.5% and 7.0% in April and May respectively
and then once again in June to 6.75%, decreased the benchmark rate for the cost
of funds on Senior Debt used to fund loan portfolio acquisitions directly
increasing net income. The weighted average interest rate on borrowed funds for
the Senior Debt based on the balances as of June 30, 2001 and June 30, 2000 were
6.98% and 9.3%, respectively. As of June 30, 2001, the Company had Senior Debt
outstanding with an aggregate principal balance of $287 million. Additionally,
the Company with has financing agreements with the Senior Debt Lender, which had
an outstanding balance of $2.4 million at June 30, 2001. The cost of funds on
these financing agreements is prime plus 2%.

           The majority of the loans purchased by the Company bear interest at a
fixed rate, Senior Financing is at a variable rate adjusted with the prime rate.
Consequently, changes in market interest rate conditions have caused direct
corresponding changes in interest income. Management and its Senior Debt Lender
have agreed to a variable rate on Senior Debt based on prime, for the 12-month
period April 1, 2001 through March 31, 2002. Any increases, in the prime rate
during this period will negatively impact the net income of the Company.

         Inflation. Inflation had no impact on the Company's operations during
the six months ended June 30, 2001 and 2000.



Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000.

         Total revenue, which is comprised of interest income, purchase discount
earned, gains on bulk sale of notes, gain on sale of notes receivable
originated, gain on sale of OREO, rental income and other income, increased by
$2,659,961 or 40%, to $9,329,717 during the three months ended June 30, 2001,
from $6,669,756 during the three months ended June 30, 2000.

         Interest income on notes receivable increased by $1,890,060 or 40%, to
$6,627,907 during the three months ended June 30, 2001 from $4,737,847 during
the three months ended June 30, 2000. The Company recognizes interest income on
notes included in its portfolio based upon three factors: (i) interest on
performing notes, (ii) interest received or committed with settlement payments
on non-performing notes and (iii) the balance of settlements in excess of the
carried face value. This increase resulted primarily from the $190 million in
high yielding performing notes acquired by the Company between July 2000 through
June 2001, which was only partially offset by collections, prepayments, and loan
sales.

<PAGE>

         Purchase discount earned increased by $121,249 or 13%, to $1,025,345
during the three months ended June 30, 2001, from $904,095 during the three
months ended June 30, 2000. This increase similarly reflected the growth in size
of the Company's portfolio.

         Gain on bulk sale of notes receivable decreased by $82,537 or 17% to
$417,463 during the three months ended June 30, 2001 from $ 500,000 during the
three months ended June 30, 2000. The Company consummated two bulk sales
totaling $5.7 million during the three months ending June 30, 2001, as compared
to the sale of one single $1.0 re-performing loan for a large gain, during the
three months ending June 30, 2001.

         Gain on sale of notes originated by Tribeca increased by $90,132 or
253% to $125,800 during the three months ended June 30, 2001, from $35,668
during the three months ended June 30, 2000. This increase reflected an increase
in originations by Tribeca over time which resulted in a larger inventory
available for sale during the three months ended June 30, 2001, compared to that
available for sale during the three months ended June 30, 2000.

         Gain on sale of OREO increased by $607,728 or 694% to $695,336 during
the three months ended June 30, 2001 from $87,608 during the three months ended
June 30, 2000. This increase reflected increases in both the volume of OREO
properties sold and the increased gain realized on the sales. The Company sold
51 and 33 OREO properties during the three months ended June 30, 2001 and June
30, 2000.

         Rental income decreased by $82,221 or 49% to $85,780 during the three
months ended June 30, 2001, from $168,001 during the three months ended June 30,
2000. Rental income decreased due to the sale of several rental properties where
it was more advantageous to sell than continue to hold for rent, during the
three months ended June 30, 2001 as compared to the three months ended June 30,
2000. The Company had 30 and 68 rental properties during the three months ended
June 30, 2001 and June 30, 2000.

         Other income increased by $115,550 or 49%, to $352,087 during the three
months ended June 30, 2001 from $236,537 during the three months ended June 30,
2000. This increase reflected increases in prepayment penalties due to an
increase in the rate of prepayments, and loan fees associated with Tribeca loans
sold.

         Total operating expenses increased by $1,559,954 or 23% to $8,205,785
during the three months ended June 30, 2001 from $6,645,831 during the three
months ended June 30, 2000. Total operating expenses includes interest expense,
collection, general and administrative expenses, provisions for loan losses,
amortization of deferred financing costs and depreciation expense.

         Interest expense increased by $439,008 or 10%, to $4,806,002 during the
three months ended June 30, 2001, from $4,366,994 during the three months ended
June 30, 2000. This increase resulted primarily from a 55% increase in debt,
which was offset by reductions in costs funds due to three decreases in the
prime rate. Costs of funds were 6.98% and 9.3% during the three months ended
June 30, 2001 and June 30, 2000, respectively. Total debt increased by $103
million or 55%, to $290 million as of June 30, 2001, from $187 million as of
June 30, 2000. Total debt consists principally of Senior Debt, and also includes
debentures, financing agreements and loans from affiliates.

         Collection, general and administrative expenses increased by $679,479
or 35% to $2,610,519 during the three months ended June 30, 2001 from $1,931,040
during the three months ended June 30, 2000. Collection, general and
administrative expense consists primarily of personnel expense, and all other
collection expenses including OREO related expense, litigation expense, and
miscellaneous collection expense.
<PAGE>

           Personnel expenses increased by $458,482 or 49% to $1,398,916 during
the three months ended June 30, 2001 from $940,434 during the three months ended
June 30, 2000. This increase resulted largely from increases in staffing and the
experience level of personnel in the Company's core business. All other
collection expenses increased by $220,997 to $1,211,603 during the three months
ended June 30, 2001 from $990,606 during the three months ended June 30, 2000.
This increase resulted primarily from increased travel for marketing, increased
legal fees due to the growth in the portfolio, and additional rent associated
with new office space at 6 Harrison Street.

         Provisions for loan loss increased by $305,884 or 195% to $462,440 due
to the maturation of older portfolios where there is no longer purchase discount
available to increase reserves.

         Amortization of deferred financing costs increased by $118,488 or 74%
to $278,046 during the three months ended June 30, 2001, from $159,558 during
the three months ended June 30, 2000. This increase resulted primarily from an
increase in the number and dollar amount of assets sold, which sales generally
accelerate the amortization of financing costs, prepayments, and increased
collections due to the growth of the portfolio. On June 30, 2001 and June 30,
2000, deferred financing costs, as a percentage of Senior Debt outstanding was
1.03% and 1.06%, respectively

         Depreciation expense increased by $17,095 or 54%, to $48,778 during the
three months ended June 30, 2001, from $31,683 during the three months ended
June 30, 2000. This increase resulted from the purchase of computer equipment,
and the renovations of office space for the Company's subsidiary Tribeca
Lending.

         Operating income increased by $1,100,007 to $1,123,932 during the three
months ended June 30, 2001 from $23,925 during the three months ended June 30,
2000.

         During the three months ended June 30, 2001 and June 30, 2000, there
was no provision for income tax due to a loss carry-forward.

         Net income increased by $1,100,007 to $1,123,932 during the three
months ended June 30, 2001 from $23,925 during the three months ended June 30,
2000.


Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000.

         Total revenue, increased by $4,326,528 or 33%, to $17,494,742 during
the six months ended June 30, 2001, from $13,168,214 during the six months ended
June 30, 2000.

         Interest income on notes receivable increased by $3,100,532 or 32%, to
$12,734,080 during the six months ended June 30, 2001 from $9,633,548 during the
six months ended June 30, 2000. This increase resulted primarily from the $190
million in high yielding performing notes acquired by the Company between July
2000 and June 2001, which was only partially offset by collections, prepayments,
and loan sales.

         Purchase discount earned increased by $85,472 or 5%, to $1,971,080
during the six months ended June 30, 2001 from $1,885,608 during the six months
ended June 30, 2000. This increase similarly reflected the growth in size of the
portfolio. Purchase discount increased at a lower rate than the growth in the
portfolio due to the maturation of the portfolio, and the purchase of performing
assets for yield spread as opposed to purchase discount during the six months
ended June 30, 2001.

         Gain on sale of notes receivable increased by $303,371 or 53% to $
879,127 during the six months ended June 30, 2001, from $575,756 during the six
months ended 2000. This increase reflected an increase in aggregate bulk sales
during the six months ended June 30, 2001. The Company sold $5.7 million in
loans during the six months ended June 30, 2001, and $1.4 million during the six
months ended June 30, 2000.
<PAGE>

         Gain on sale of notes originated by Tribeca increased by $107,366 or
127% to $192,220 during the six months from $ 84,854 during the six months ended
June 30, 2000. This increase reflected an increase in the number of Tribeca
loans originated and sold and higher margins on sales during the six months
ending June 30, 2001, as compared to the six months ending June 30, 2000.
Tribeca closed 159 and 61 loans during the six months ending June 30, 2001 and
June 30, 2000.

         Gain on sale of OREO increased by $671,815 or 384% to $846,610 during
the six months ended June 30, 2001, from $174,795 during the six months ended
June 30, 2000. This increase reflected increases in both the volume of OREO
properties sold and the increase gain realized on the sales during the six
months ended June 30, 2001, as compared to the six months ended June 30, 2000.
The Company sold 81 OREO properties during the six months ended June 30, 2001,
and 74 OREO properties during the six months ended June 30, 2000.

          Rental income decreased by $159,014 or 45% to $196,767 during the six
months ended June 30, 2001, from $355,781 during the six months ended June 30,
2000. This decrease reflected a decrease in the number of rental properties
during the six months ended June 30, 2001 as compared to the six months ended
June 30, 2000. The Company had 30 and 68 rental properties during the six months
ended June 30, 2001 and June 30, 2000.

         Other income increased by $216,986 or 47%, to $674,858 during the six
months ended June 30, 2001 from $457,872, during the six months ended June 30,
2000. This increase reflected increases in prepayment penalties, and late
charges, resulting from the increase in size of the Company's portfolio and loan
fees associated with Tribeca loans sold.

         Total operating expenses increased by $2,993,654 or 23%, to $16,258,763
during the six months ended June 30, 2001, from $13,265,109 during the six
months ended June 30, 2000.

         Interest expense increased by $1,334,340 or 15%, to $10,122,134 during
the six months ended June 30, 2001 from $8,787,794 during the six months ended
June 30, 2000. This increase resulted primarily from the increase in Senior Debt
reflecting the acquisition of $190 million in notes receivables and was
partially offset by decreases in costs of funds due to three decreases in the
Prime Rate. Costs of funds were 6.98% and 9.3% during the six months ended June
30, 2001 and June 30, 2000. Total debt increased by $103 million or 55%, to $290
million as of June 30, 2001 from $187 million as of June 30, 2000. Total debt
includes Senior Debt, debentures, and financing agreements and loans from
affiliates.

         Collection, general and administrative expenses increased by $932,605
or 24%, to $4,891,669 during the six months ended June 30, 2001 from $ 3,959,064
during the six months ended June 30, 2000.

         Personnel expenses increased by $691,854 or 38%, to $2,530,744 during
the six months ended June 30, 2001 from $1,838,889 during the six months ended
June 30, 2000. The increase reflected the staffing and the experience level of
personnel in the Company's core business during the six months ended June 30,
2001. All other collection expenses increased by $240,751 or 11% to $2,360,925
during the six months ended June 30, 2001 from $2,120,175 during the six months
ended June 30, 2000. This increase resulted primarily from increased travel for
marketing, increased legal fees due to the growth in the portfolio, and
additional rent associated with new office space at 6 Harrison Street.

         Provisions for loan losses increased by $518,257 or 301% to $689,963
during the six months ended June 30, 2001 from $171,706 during the six months
ended June 30, 2000. This was due to the maturation of older portfolios where
there is no longer purchase discount available to increase reserves. Provision
for loan losses are incurred as soon as the valuation of the asset diminishes
and there is no unamortized discount remaining associated with that asset.
<PAGE>


         Amortization of deferred financing costs increased by $184,201 or 65%,
to $466,894 during the six months ended June 30, 2001, from $282,693 during the
six months ended June 30, 2000. This increase resulted primarily from an
increase in the number and dollar amount of assets sold, which sales generally
accelerate the amortization of financing costs and increased collections due to
the growth of the portfolio.

         Depreciation expense increased by $24,252 or 38%, to $88,104 during six
months ended June 30, 2001, from $63,852 during the six months ended June 30,
2000.

         Operating income increased by $1,332,874 to a gain of $1,235,979 during
the six months ended June 30, 2001, from a loss of $96,895 during the six months
ended June 30, 2000.

         During the six months ended June 30, 2001 or the six months ended June
30,2000, there were no provisions for income taxes due to the operating loss
carry-forward.

         Net income increased by $1,332,874 to gain of $1,235,979 during the six
months ended June 30, 2001 from a loss of $96,895 during the six months ended
June 30, 2000.



Liquidity and Capital Resources

          General. During the six months ended June 30, 2001 the Company
purchased 2,406 loans with an aggregate face value of $105 million at an
aggregate purchase price of $92 million or 88% of face value. During the six
months ended June 30, 2000 the Company purchased 1,115 loans in eleven
portfolios with an aggregate face value of $27.6 million at an aggregate
purchase price of $23.1 million or 84% of aggregate face value. The Company's
portfolio acquisitions during the six months ended June 30, 2001 included a
$40.9 million purchase of loans from one source. This increase in acquisitions
was due to increased marketing by the Company and lower cost of funds, which
enabled the Company to be more competitive in the bidding process.

         The Company's portfolio of notes receivable at June 30, 2001 had a face
value of $308 million and included net notes receivable of approximately $255 as
compared with a face value of $207.3 million and net notes receivable of
approximately $167 million as of June 30, 2000. Net notes receivable are stated
at the amount of unpaid principal, net of purchase discount and allowance for
loan losses. The Company has the ability and intent to hold its notes until
maturity, payoff or liquidation of collateral or, where deemed to be
economically advantageous, sale.

         During the six months ended June 30, 2001, the Company used cash in the
amount of $10,036,330 in its operating activities primarily for interest
expense, and increased infrastructure in the Company's core business, litigation
expense incidental to its ordinary collection activities and for the foreclosure
and improvement of OREO. The Company used $44,997,990 in its investing
activities, primarily reflecting purchases of notes receivable which purchases
were only partially offset by principal collections upon its notes receivable
and proceeds from sales of loans and OREO. The amount of cash used in operating
and investing activities was funded by $56,706,117 of net cash provided by
financing activities, including primarily, a net increase in Senior Debt of
$97,117,724 million. The above activities resulted in a net increase in cash at
June 30, 2001 over December 31, 2000 of $1,671,797.

         In the ordinary course of its business, the Company accelerates and
forecloses upon real estate securing non-performing notes receivable included in
its portfolio. As a result of such foreclosures and selective direct purchases
of OREO, at June 30, 2001 and 2000, the Company held OREO recorded on the
financial statements at $4.2 million and $5.3 million, respectively. OREO is
recorded on the financial statements of the Company at the lower of cost or fair
market value. The Company estimates, based on third party appraisals and broker
price opinions, that the OREO inventory held at June 30, 2001, in the aggregate,
had a net realizable value (market value less estimated commissions and legal
expenses associated with the disposition of the asset) of approximately $4.7
million. There can be no assurance, however, that such estimate is substantially
correct or that an amount approximating such amount would actually be realized
upon liquidation of such OREO. The Company generally holds OREO as rental
property or sells such OREO in the ordinary course of business when it is
economically beneficial to do so.

<PAGE>

Cash Flow

         Substantially all of the assets of the Company are invested in its
portfolios of notes receivable and OREO. Primary sources of the Company's cash
flow for operating and investing activities are borrowings under its Senior Debt
facilities, collections on notes receivable and gain on sale of notes and OREO
properties.

         At June 30, 2001, the Company had unrestricted cash, cash equivalents
and marketable securities of $9 million.

         Management believes that sufficient cash flow from the collection of
notes receivable will be available to repay the Company's secured obligations,
and that sufficient additional cash flows will exist through collections of
notes receivable, the bulk sale of performing loan portfolios, sales and rental
of OREO, continued modifications to the secured debt credit agreements or
additional borrowing, to repay the current liabilities arising from operations
and to repay the long term indebtedness of the Company.

Financing Activities

         Senior Debt.  As of June 30, 2001, the Company owed an aggregate of
$287 million to the Lender of Senior Debt, under 138 loans.

         The Senior Debt is collateralized by first liens on the respective loan
portfolios for the purchase of which the debt was incurred and is guaranteed by
the Company. The monthly payments on the Senior Debt have been, and the Company
intends for such payments to continue to be, met by the collections from the
respective loan portfolios. The loan agreements for the Senior Debt call for
minimum interest and principal payments each month and accelerated payments
based upon the collection of the notes receivable securing the debt during the
preceding month. The Senior Debt accrues interest at variable rates between 0%,
and 2.00% over the prime rate. The accelerated payment provisions of the Senior
Debt are generally of two types: the first requires that all collections from
notes receivable, other than a fixed monthly allowance for servicing operations,
be applied to reduce the Senior Debt, and the second requires a further amount
to be applied toward additional principal reduction from available cash after
scheduled principal and interest payments have been made. As a result of the
accelerated payment provisions, the Company is repaying the amounts due on the
Senior Debt at a rate faster than the minimum scheduled payments. While the
Senior Debt remains outstanding, these accelerated payment provisions may limit
the cash flow that is available to the Company.

         Certain of the Senior Debt credit agreements required establishment of
restricted cash accounts, funded by an initial deposit at the loan closing and
additional deposits based upon monthly collections up to a specified dollar
limit. The restricted cash is maintained in an interest bearing account, held by
the Company's Senior Debt Lender. Restricted cash may be accessed by the Senior
Debt Lender only upon the Company's failure to meet the minimum monthly payment
due if collections from notes receivable securing the loan are insufficient to
satisfy the installment due. Historically, the Company has not called upon these
reserves. The aggregate balance of restricted cash in such accounts was $648,414
and $1,225,318 on June 30, 2001 and June 30, 2000 respectively. The decrease in
the balance of restricted cash at June 30, 2001, was due to funds used to place
bid deposits on perspective new portfolio acquisitions. Such deposits are
returned to restricted cash when the new acquisitions fund, by the Senior Debt
Lender.
<PAGE>

         Total Senior Debt availability was approximately $300 million at June
30, 2001, of which approximately $287 million had been drawn down as of such
date. Additionally the Senior Debt Lender has verbally informed the Company that
it will not deem approximately $4 million of Senior Debt that it had syndicated
to other banks as of such date as outstanding for purposes of determining
availability under of Senior Debt. As a result, the Company has approximately
$17 million available to purchase additional portfolios of notes receivable and
OREO.

           The Company's Senior Debt Lender has provided Tribeca with a
warehouse financing agreement of $2 million. At June 30, 2001, Tribeca had drawn
down $ 2 million on the line.


Harrison First Corporation 12% Debentures. In connection with the acquisition of
a loan portfolio during 1995, the Company offered to investors $800,000 of
subordinated debentures of which $555,000 were issued. As of June 30, 2001 and
December 31, 2000, $48,524 and $72,525, respectively, of these debentures were
outstanding. The Harrison 1st 12% Debentures bear interest at the rate of 12%
per annum and were payable in quarterly installments. The principal was repaid
over three years in ten equal quarterly installments of $22,200 which payments
commenced on September 30, 1997 with the remaining balloon payment of $333,000
due June 30, 2000. On June 30, 2000 the Company made a balloon payment of
$232,952 funded through the incurrence of Senior Debt and agreed with the
holders of $97,048 of 12% Debentures to the extension of payment of such
principal amount to December 31, 2001. The Harrison 1st 12% Debentures are
secured by a lien on the Company's interest in certain notes receivable and are
subordinated to the Senior Debt encumbering the loan portfolio.



OREO Line of Credit. The Company has a line of credit with the Senior Debt
Lender permitting it to borrow a maximum of approximately $1,500,000 at a rate
equal to such lender's prime rate plus two percent per annum. Principal
repayment of the lines is due six months from the date of each cash advance and
interest is payable monthly. The total amounts outstanding under the financing
agreements as of June 30, 2001 and December 31, 2000, were $213,467 and $117,600
respectively. Advances made under the line of credit were used to satisfy senior
lien positions and fund capital improvements in connection with foreclosures of
certain real estate loans financed by the Company. Management believes the
ultimate sale of these properties will satisfy the related outstanding financing
agreements and accrued interest, as well as surpass the collectible value of the
original secured notes receivable. Management has reached an agreement in
principal with its Senior Debt Lender to increase the availability under this
credit facility to cover additional properties foreclosed upon by the Company,
which the Company may be required to hold as rental property to maximize its
return.

         Additionally, the Company has opened a financing agreement with a bank.
The agreement provides the Company with the ability to borrow a maximum of
$150,000 at a rate equal to the bank's prime rate plus one percent per annum. As
of June 30, 2001 and December 31, 2000 $121,746 and $127,014 respectively, were
outstanding on the financing agreement.



<PAGE>





                            Part II Other Information

Item 1.  Legal Proceedings

Asset Purchase Agreement Dispute. On August 19, 1997, the Company commenced a
civil action in the United States District Court for the Southern District of
New York against Preferred Credit Corporation ("PCC") and certain individuals
alleging fraud, breach of contract, and unjust enrichment in connection with the
purchase by the Company of $3.7 million in face value of notes receivable from
PCC for $1.8 million. Through the Complaint, the Company sought rescission of
the asset purchase agreement or damages incurred in connection with the
purchase.

By an order dated September 22, 1999, the Court dismissed one of the Company's
fraud claims against PCC and all of the Company's claims against the individual
Defendants. On October 22, 1998, PCC filed an answer and counterclaim alleging a
breach of the purchase agreement and seeking its costs and fees incurred in
connection with the proceeding.

Trial in this matter was held on the remaining claims during January 2000. At
the conclusion of the trial, the Court orally ruled in favor of the Company and
against PCC. On February 10, 2000, the Court entered judgment in favor of the
Company and against PCC in the amount of $1.7 million plus interest from May 7,
1997. With interest, the amount due under the judgment is approximately $2
million as of February 10, 2000. The Company does not presently known if PCC has
sufficient assets to satisfy the judgment however it has collected $ 60,000
towards this receivable, as of December 31, 2000.


Other Legal Actions. Since July, 1991, the Company has been a plaintiff in
various actions ("Miramar Litigation") and party to settlements, with the former
directors and officers of Miramar Resources, Inc. ("Miramar"), a company which
the Company merged with in 1994, based upon allegations relating to certain
premerger events. Information regarding the Miramar Litigation, as well as
certain settlements (the "Schultz Settlements"), and the legal status of the
Company's collection efforts is incorporated herein by reference to "Item 3.
Legal Proceedings" included in the Company's Form 10-KSB for the year ended
December 31, 1994, filed with the SEC on March 31, 1995 and included in the
Company's10-KSB for the year ended December 31, 1996, filed with the SEC on
March 31, 1997.


During 1997 the Company initiated efforts to foreclose on its Deed of Trust on a
4,000-acre ranch owned by the parties to the original Shultz Settlement. Trial
in this matter was held in November of 1999 and the Company obtained a judgment
of $600,000. In connection with this judgment, the parties entered into a
Settlement Agreement pursuant to which certain additional collateral was
provided to the Company to secure the payment of the judgment amount.




<PAGE>











Item 2.  Changes in Securities
                  None

Item 3.  Defaults Upon Senior Securities
                  None

Item 4.  Submission of Maters to a Vote of Security Holders



     On May 23, 2001 at the Company's annual meeting the shareholders voted to
ratify the amendment and increase of the Company's 1996 Incentive Plan, to elect
nine directors to the Company's Board of Directors, and to ratify the
appointment of Deloitte & Touche LLP as the Company's independent public
auditors for the fiscal year ended December 31, 2001.
<TABLE>
<CAPTION>

Amend the Company's 1996 Incentive Plan
                          For       Against  Abstain    Not Voting        Total
--------------------------------------------------------------------------------
<S>                      <C>        <C>       <C>       <C>           <C>
Amendment               3,280,752   1,980     3,425     2,631,370      5,917,527
---------

Election of Directors
Director                 For       Against   Abstain    Not Voting        Total

Election of Directors   4,784,809   1,130    5,634      1,125,954      5,917,527

Independent Public
Auditors                 For       Against   Abstain    Not Voting        Total
--------------------------------------------------------------------------------
Deloitte & Touche LLP  3,865,929      615       125     2,050,858      5,917,527





</TABLE>


<PAGE>


Item 5.  Other Information
                  None

Item 6.  Exhibits and Reports on form 8-K
                           None

(a)                                   EXHIBIT TABLE
   Exhibit
   No.          Description
   3(a)         Restated Certificate of Incorporation. Previously filed with,
                and incorporated herein by reference to, the Company's 10-KSB,
                filed with the Commission on December 31, 1994.
   (b)          Bylaws of the Company. Previously filed with, and incorporated
                herein by reference to, the Company's Registration Statement on
                Form S-4, No. 33-81948, filed with the Commission on November
                24, 1994.
   4(a)         15% Convertible Subordinate Debentures. Previously filed with,
                the Company's Registration Statement on Form S-4, No. 33-81948,
                filed with the Commission on November 24, 1994.
   (b)          Warrants associated with principal repayment of the 15%
                Convertible Subordinated Debentures.Previously filed with, the
                Company's Registration Statement on Form S-4, No. 33-81948,
                filed with the Commission on November 24, 1994.
   10(d)        Employment Agreement dated December 4, 1996, between the Company
                and Joseph Caiazzo. Previously filed with, the Company's Form
                10K-SB, filed with the Commission on March 31,1997.
   10(e)        Agreement dated March 29, 1997 between the Company and the
                Citizens Banking Company. Previously filed.
   10(f)        Loan and Real Estate Purchase Agreement dated September 17, 1998
                by and among Franklin credit Management Corporation and Home
                Gold Financial Inc. f/k/a Emergent Mortgage Corp. Previously
                filed with, the Company's Form 8K, filed with the Commission on
                September 30,1998.
   10(g)        Form of Subscription Agreement and Investor Representation,
                dated as of September 8, 1998 between the Company and certain
                subscribers. Previously filed.
   10(h)        Loan Purchase Agreement dated December 31, 1998 between the
                Company and Thomas Axon, corporate General Partner. Previously
                filed with, the Company's Form 10K-SB, filed with the Commission
                on April 16,1999.
   10(i)        Promissory Note between Thomas J. Axon and the Company dated
                December 31, 1998. Filed with the Commission on December 31,
                1998. Previously filed with, the Company's Form 10K-SB, filed
                with the Commission on April 16,1999.
   10(j)        Promissory Note between Steve Leftkowitz, board member, and the
                Company dated March 31, 1999. Filed with the Commission with
                form 10KSB on March 30,2000.
   10(l)        Employment Agreement dated July 17, 2000 between the Company and
                Seth Cohen. Previously filed with the Commission with form 10KSB
                on March 31,2001.

   11           Earnings per share. Filed here with.




<PAGE>



                                   SIGNATURES

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

August 14, 2001
                                    FRANKLIN CREDIT MANAGEMENT
                                                 CORPORATION



                                            By:      THOMAS J. AXON
                                          --------------------------
                                                      Thomas J. Axon
                                                 Chairman of the Board


         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.

Signature                           Title                           Date

SETH COHEN          Chief Executive Officer                    August 14, 2001
-------------                                                  ---------------
Seth Cohen          and Director
Principal executive officer)


JOSEPH CAIAZZO     Senior Vice President, Chief Operating      August 14, 2001
--------------                                                 ---------------
Joseph Caiazzo     Officer, Secretary and Director
(Secretary)


KIMBERLEY SHAW     Vice President, Chief Financial Officer     August 14, 2001
--------------                                                 ---------------
Kimberley Shaw
(Principal financial and accounting officer)





<PAGE>


Exhibit 11.

Computation of earnings per share second quarter 2001.


                                 No. of Shares        Weight


<TABLE>
<CAPTION>

<S>                               <C>                  <C>
 09/30/00 Common stock            5,916,527
                                -------------           25%         1,479,132
                                    5,916,527

 12/31/00 Common stock            5,916,527
                                --------------          25%         1,479,132
                                    5,916,527

 03/31/01 Common stock            5,916,527
                                --------------          25%         1,479,132
                                    5,916,527

 06/30/01 Common stock            5,916,527
                                --------------           25%         1,479,132
                                    5,916,527


                                   23,266,108
</TABLE>

         Weighted average number of shares                           5,916,527

Earnings per Common share:
                 Net Income     $1,235,979                              $.21




<PAGE>
<TABLE>
<CAPTION>

Exhibit 11.

Computation of earnings per share second quarter 2000




                                    No. of Shares       Weight

<S>                                    <C>              <C>              <C>
09/30/99 Common stock                 5,916,527
                                    -------------        25%         1,479,132
                                    5,916,527

12/31/99 Common stock                 5,916,527
                                    -------------        25%         1,479,132
                                    5,916,527


03/31/00 Common stock                 5,916,527
                                   --------------        25%         1,479,132
                                    5,916,527

06/30/00 Common stock                 5,916,527
                                  ---------------        25%         1,479,132
                                    5,916,527

                                   23,266,108

Weighted average number of shares                                    5,916,527

Earnings per Common share:
                 Net Income           $(96,895)                      $   (.02)
</TABLE>

<PAGE>