<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[  X  ]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [Fee Required]

For the fiscal year ended           June 30, 2000           or
                          ---------------------------------

[       ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)

For the transition period from               to
Commission file number 001-14065
                       ---------

                          BLC FINANCIAL SERVICES, INC.
                  (Exact name of registrant as specified in its charter)

              Delaware                                         75-1430406
         ------------------                           -------------------------
(State or other jurisdiction of                          (I.R.S. Employer
incorporation or organization                             Identification No.)

c/o Jennifer M. Goldstein
Business Loan Center, Inc.
645 Madison Avenue, 19th Floor, New York, NY                  10022-1010
------------------------------------------------              ----------
(Address of principal executive offices)                      (Zip Code)

Registrant's telephone number:  (212) 751-5626
                                ---------------

Securities registered pursuant to Section 12(b) of the Act:  NONE

Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, Par Value $.01 Per Share
                                (Title of Class)

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

<PAGE>


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

                  At September 11, 2000 there were outstanding 21,535,514 shares
of the Registrant's Common Stock ("Common Stock"), $.01 par value per share. The
aggregate  market  value  as of  September  11,  2000,  of  the  shares  of  the
Registrant's   Common  Stock  held  by  non-affiliates  of  the  Registrant  was
approximately $27,826,000.

DOCUMENTS INCORPORATED BY REFERENCE:     NONE




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                                     Part I.

                  This  Annual  report  on form  10-K  contains  forward-looking
statements  within the meaning of that term in Section 27A of the Securities Act
of 1933, as amended (the  "Securities  Act"),  and Section 21E of the Securities
Exchange Act of 1934, as amended ( the "Exchange  Act").  Additional  written or
oral forward-looking statements may be made by the Company from time to time, in
filings  with  the  Securities  Exchange  Commission  or  otherwise.  Statements
contained  herein that are not historical facts are  forward-looking  statements
made pursuant to the safe harbor  provisions  described  above.  Forward-looking
statements may include, but are not limited to, projections of revenues,  income
or losses, capital expenditures, plans for future operations, the elimination of
losses under certain  programs and financing  needs or plans.  They also include
compliance with financial covenants in loan agreements, plans for sale of assets
or  businesses,   plans  relating  to  products  or  services  of  the  Company,
assessments of  materiality,  predictions  of future events,  and the effects of
pending  and  possible  litigation,  as  well  as  assumptions  relating  to the
foregoing. In addition,  when used in this discussion,  the words "anticipates,"
"estimates,"  "expects,"  "intends,"  "plans" and variations thereof and similar
expressions are intended to identify forward-looking statements.

                  Forward-looking statements are inherently subject to risks and
uncertainties,  some of which cannot be predicted or quantified based on current
expectations.  Consequently,  future  events and  actual  results  could  differ
materially  from  those  set  forth  in,  contemplated  by,  or  underlying  the
forward-looking  statements contained herein.  Statements in this Annual Report,
particularly in "Item 1. Business of the Company",  "Item 3. Legal Proceedings",
the Notes to Consolidated Financial Statements, "Item 7. Management's Discussion
and Analysis of Financial  Condition and Results of  Operations,"  and "Item 7A.
Qualitative and Quantitative  Disclosure  About Market Risk." describe  factors,
among others, that could contribute to or cause such differences.  Other factors
that could contribute to or cause such differences  include, but are not limited
to, increases in borrowing costs,  government regulations and other risk factors
detailed in the Company's Securities and Exchange Commission filings.

                  Readers  are  cautioned  not to place  undue  reliance  on any
forward-looking  statements  contained  herein,  which speak only as of the date
hereof.  The Company  undertakes no obligation to publicly release the result of
any revisions to these  forward-looking  statements  that may be made to reflect
events or  circumstances  after the date hereof or to reflect the  occurrence of
unexpected events.
                                       3
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Item 1.  BUSINESS OF THE COMPANY.

                  BLC  Financial  Services,  Inc., a Delaware  corporation  (the
"Company"),  is primarily engaged, through its subsidiaries,  in the business of
originating,   selling  and  servicing  loans  to  small  businesses  under  two
government guaranteed loan programs.

                  The Company was  originally  incorporated  in Texas on October
30, 1973 under the name Crawford  Energy,  Inc., and was involved in the oil and
gas drilling  business.  On August 10, 1990, the Company was  reincorporated  in
Delaware,  ceased its oil and gas drilling business, and changed its name to BLC
Financial  Services,  Inc.  The  Company  became  listed on the  American  Stock
Exchange  (AMEX) on April 30,  1998,  after  previously  being listed on the OTC
Bulletin Board.

Business Loan Center, Inc.

                  Background.   Business  Loan  Center,  Inc.,  ("Business  Loan
Center"),  a Small Business Lending  Company,  as defined in and under the Small
Business  Administration Act (the "SBA Act"), is authorized by the United States
Small Business Administration (the "SBA") to originate,  sell, and service loans
to small  businesses under the SBA 7(a) Guaranteed Loan Program (the "Guaranteed
Loan  Program" or the "SBA 7(a)  Program").  Business  Loan  Center's  principal
office is located at 645 Madison Avenue, New York, New York.

                  The SBA (7a) Program.  The SBA offers financial  assistance to
eligible small businesses in the form of partial government  guarantees on loans
made to such  businesses by  participating  lenders such as Business Loan Center
under the Guaranteed Loan Program.

                  To qualify for an  SBA-guaranteed  loan, a small business must
meet certain size  criteria  established  by the SBA on an  industry-by-industry
basis  and  must  demonstrate  that  the  requested  financing  will be used for
specific  business  purposes  and cannot be obtained  from the  resources of the
business,  conventional  financing sources or through the personal  resources of
the owners of the business.  In evaluating a loan application,  the SBA attaches
importance  to many  factors  including  the  character  and  reputation  of the
applicant  and its  principals,  the  experience  and depth of  management,  the
inherent stability of the business enterprise,  the past earnings record, future
prospects  for  the  business,   the  long-range   possibilities  of  successful
operations, and the soundness of the loan purpose.  Applications are rejected if
there is not reasonable  assurance that the loan can be repaid from the earnings
of the  business  (based  upon  demonstrated  or  projected  cash  flows) or the
applicant has sufficient  equity to operate on a sound financial basis. The loan
is typically  secured by real estate  collateral  and may also include  liens on
inventory, machinery, equipment, and accounts receivable.  Generally, the owners
of 20% or  more  of the  business  are  required  to  personally  guarantee  the
repayment of the loan and may be required to pledge their personal assets.

                                       4
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                  The  SBA-guaranteed  loans have  maturities  of up to 25 years
depending on the intended use of the loan proceeds. Funds to be used for working
capital purposes generally may not exceed a seven-year maturity,  while funds to
be used for  machinery  and equipment  generally  have  maturities of ten years.
Funds  to be used  for  leasehold  improvements  or the  acquisition  of land or
buildings may have  maturities up to 25 years.  Loan principal is amortized over
the term of the loan. A participating lender is permitted to establish any legal
and  reasonable  rate  of  interest,  subject  to  the  maximum  interest  rates
established by the SBA. Loans with maturities of seven years or greater may bear
a maximum  interest  rate not  exceeding  2-3/4%  over the base rate  (discussed
below).  Of those  variable rate loans,  the interest rate may adjust monthly or
quarterly  with the base rate  established  as the lowest New York prime rate in
effect on the  first day of each  adjustment  period  as  published  in The Wall
Street Journal.  In general,  the loans made by Business Loan Center are made on
an  adjustable  rate basis,  bear the maximum  allowable  interest  rate and are
adjusted on a quarterly basis.

                  The SBA presently  guarantees  80% of the loan amount in those
cases  where  the  aggregate  sum  of  all  loans   (including  the  loan  under
consideration)  made to a borrower and its affiliates  under the Guaranteed Loan
Program and related SBA-sponsored  financial assistance programs does not exceed
$100,000.  The SBA's maximum guaranty percentage for loans in excess of $100,000
is 75% with a maximum guaranty dollar amount of $750,000.  As consideration  for
the  issuance  of its  guarantee,  the SBA charges  participating  lenders a fee
ranging from 3% to 3.875% of the SBA-guaranteed  portion of the loan,  depending
on the total loan amount.  The  participating  lenders may, in turn, charge this
fee to the borrower upon initial disbursement of the loan.

                  The SBA has established  three levels of lender  participation
within  the   Guaranteed   Loan  Program.   Under  the  first  level  of  lender
participation,   known  as  "General   Participation",   each  loan  made  by  a
participating  lender  under the  Guaranteed  Loan  Program must be reviewed and
approved by the SBA.

                  The second level of lender participation,  known as "Certified
Lender  Participation," is similar to the General  Participation in that the SBA
must review a lender's credit analysis and  independently  approve the loan. The
SBA's review,  however,  is expedited with completion,  generally,  within three
business days.  Lenders may apply to be designated as "Certified  Lenders" after
one year of lending activity and such status is granted at the discretion of the
SBA.

                  Under the third  level of lender  participation,  known as the
"Preferred  Lender  Program," the lender is granted the authority to approve the
loan and  issue a  guaranty  on behalf of the SBA  without  submitting  the loan
application for SBA review and approval,  thereby expediting the lending process
significantly.  Business Loan Center has been granted Preferred Lender status in
63 SBA offices throughout the Country.



                                       5
<PAGE>

                  Sales in the Secondary Market. The SBA-guaranteed  portions of
loans are sold by Business Loan Center on a non-recourse  basis in the secondary
market.  Broker-dealer  firms  establish a secondary  market by  purchasing  the
SBA-guaranteed  portions  of the loans  from  participating  lenders  (including
Business Loan Center),  and then reselling  them,  individually  or in pools, to
banks, pension funds, institutions,  or individual investors.  Immediately prior
to or upon closing a loan, Business Loan Center generally will solicit bids from
several  broker-dealers active in the secondary market. The secondary market for
the  SBA-guaranteed  portion of loans is active and provides an immediate source
of funds enabling  Business Loan Center to expand its loan  portfolio.  Business
Loan Center's  ability to sell in the  secondary  market is not dependent on any
one or several of such broker-dealers because there are numerous  broker-dealers
in the  secondary  market.  During the fiscal year ended June 30, 2000  ("Fiscal
Year 2000"),  not more than 25% of Business Loan Center's loans were sold to any
one broker-dealer. The SBA facilitates the existence of this secondary market by
maintaining  a Fiscal and Transfer  Agent (the "FTA") which  maintains a central
registry of all such loans sold in the secondary market and issues  certificates
representing  fractional or undivided  interests in pools  consisting  solely of
SBA-guaranteed  portions  of loans  for a fee.  The FTA also  acts as a  central
repository for funds collected on the  SBA-guaranteed  portion of loans and as a
disbursement  agent to distribute  such funds to the purchasers in the secondary
market.

                  Business   Loan   Center  is   generally   able  to  sell  the
SBA-guaranteed portions of its loans at a premium due to the lengthy maturity of
the underlying  loan, the rate of return as compared to other  investment  paper
backed by the United  States  Government  and the service fees to be received by
Business Loan Center from the purchaser. Under the SBA Act, Business Loan Center
is  required  to pay to the SBA  one-half of any premium in excess of 10% on the
sale of the  SBA-guaranteed  portion  of any  loans.  During  Fiscal  Year 2000,
Business Loan Center  obtained an average premium of  approximately  7.4% on the
sale of the  SBA-guaranteed  portion of the loans sold in the secondary  market.
The premium paid on loans that default prior to the third  monthly  payment must
be repaid to the  purchaser of the loan.  Under certain  limited  circumstances,
Business  Loan  Center may be liable,  on loans that it  originated,  for losses
incurred by the SBA.  This  contingency  has been  accounted for with respect to
determining the adequacy of the allowance for credit losses.

                  After Business Loan Center sells the SBA-guaranteed portion of
a loan in the secondary  market,  Business Loan Center  continues to service the
loan  for an  annual  fee.  Although  the fee is  subject  to  negotiation,  the
regulatory  minimum  fee which must be  received  by  Business  Loan  Center for
servicing  any  loan  equals  1%  per  year  of  the  principal  amount  of  the
SBA-guaranteed portion of such loan.  Participating lenders under the Guaranteed
Loan  Program are  required to pay to the SBA an annual fee equal to one half of
1% of the outstanding principal amount of the SBA-guaranteed portion of any loan
closed after October 12, 1995.  This fee is generally  borne by the purchaser of
the SBA-guaranteed portion of a loan sold in the secondary market. Business Loan
Center has obtained net servicing fees (after deducting the fee paid to the SBA)
ranging  from 1.0% to 4.41%,  with an average  service fee for loans  originated
during Fiscal Year 2000 of 1.12%.




                                       6
<PAGE>
                  Revenues.  Business Loan Center derives its revenues primarily
from three sources:  (i) interest  earned on loans retained for its own account;
(ii) gains from the sale of the SBA-guaranteed  portion and unguaranteed portion
of loans;  and (iii)  servicing  fees paid and interest  earned  relating to the
residual interest of the  SBA-guaranteed  portion of loans sold in the secondary
market  and  servicing  fees on the  unguaranteed  portion  of loans  sold.  See
Management's  Discussion  and  Analysis of Financial  Conditions  and Results of
Operations  - Results of  Operations  and the  Company's  Financial  Statements,
starting on page F-1.

                  Loan  Portfolio.  At  June  30,  2000,  Business  Loan  Center
serviced a loan portfolio of 608 loans in the  approximate  aggregate  principal
amount of  $328,609,000.  Of this  amount,  approximately  $238,033,000  (72.4%)
consisted of the SBA-guaranteed  portion of these loans, of which  approximately
$17,420,000 consisted of the SBA-guaranteed portion of loans that had not as yet
been sold or were sold pending settlement on the secondary market. Approximately
$90,576,000  (27.6%)  consisted of the  unguaranteed  portion of loans, of which
approximately  $14,644,000 in unguaranteed  loans were retained by Business Loan
Center for its own account.  The original principal amounts of these loans range
from $20,000 to $1,583,000 and the contractual  maturities range from 7 years to
25 years.  At June 30, 2000,  Business  Loan  Center's  portfolio had a weighted
average contractual  maturity of approximately 22.5 years and a weighted average
remaining  maturity of  approximately  20.7 years.  The interest  rates on these
loans are adjustable and substantially all are 2.75% over the prime rate.

                  Of  the  $328,609,000  in  Business  Loan  Center's   serviced
portfolio  at June  30,  2000,  delinquent  loans  accounted  for  approximately
$10,251,000 (3.12%) of which,  approximately  $769,000 represented Business Loan
Center's proportionate share. These figures represent delinquencies greater than
60 days.  Loans in liquidation  serviced by Business Loan Center's  portfolio at
June  30,  2000  accounted  for  approximately  $12,246,000  (3.73%)  of  which,
approximately $1,879,000 represented Business Loan Center's proportionate share.

                  An  estimation  of  the   liquidated   value  of  real  estate
collateral  and other  collateral  securing  loans in  liquidation  is performed
regularly  based on recent  evaluations of collateral.  All loans in liquidation
are reviewed on a weekly basis to determine  changes in status.  Of the loans in
liquidation,  approximately  26% were in the gas and convenience store industry,
17% were in the hotel/motel  industry,  and 13% were in the restaurant industry.
No other industry  accounted for more than 10% of the loans in  liquidation.  At
June 30, 2000, Business Loan Center had allowances for credit loss and estimated
future losses on loans in liquidation of approximately $538,000 on its financial
statements which incorporates management's assessment of these loans.

                  Due to a variety of  circumstances  relating to the borrower's
business or personal  matters,  certain  loans made by Business  Loan Center are
repaid, in part or in their entirety, on an accelerated basis. These prepayments
generally  arise from excess cash  generated  by the  borrower's  operations,  a
refinancing  of the loan,  cash from the proceeds of the sale of the  borrower's
business or personal real estate or the  liquidation of other  business  assets.
During  Fiscal  Year  2000,   Business  Loan  Center   collected   approximately
$23,569,000 of loan prepayments of which  approximately  $2,276,000  represented
Business Loan Center's proportionate share.



                                       7
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                  At  June  30,  2000,  35  proposed  loans  in the  approximate
aggregate principal amount of $21,877,000 had received both Business Loan Center
and SBA approval and were awaiting  closing.  In addition,  59 proposed loans in
the  approximate  aggregate  principal  amount of  $30,363,000  were approved by
Business Loan Center and awaiting submission to the SBA or waiting SBA approval.
Business Loan Center's existing capital resources should enable it to fund these
loans and additional loans in process. See Management's  Discussion and Analysis
of Financial Conditions and Results of Operations - Results of Operations.

                  Service marks.  The Company believes that the distinctive logo
used  by  Business  Loan  Center  is an  important  element  of  continued  name
recognition  in the industry.  The Business Loan Center logo which  includes its
name  within a  distinctive  design,  was  registered  as a service  mark on the
principal  register of the United States  Patent and Trademark  Office on August
10, 1993.

                  Government  Regulations.  The  level  of SBA  funding  for the
Guaranteed  Loan  Program is subject to the federal  budgeting  process for each
federal  fiscal  year  ending  September  30  (each a  "Federal  Fiscal  Year").
Accordingly,  the  availability  of funds for SBA  guarantees  could increase or
decrease each year. The budget for the Federal Fiscal Year 2000 is $10.3 billion
under the Guaranteed  Loan Program in which  Business Loan Center  participates.
The  actual  usage of funds  for  Federal  Fiscal  Year 1999 $ 10.1  billion  as
compared  to $9.0 and $9.5  billion  for  Federal  Fiscal  Years  1998 and 1997,
respectively.  Beginning in Federal  Fiscal Year 2001, the Senate has approved a
$10.8 billion program level for participants in the Guaranteed Loan Program. The
Conference Committee will determine the final appropriation amount.

                  The qualification of a Small Business Lending Company, such as
Business Loan Center,  to participate in the Guaranteed  Loan Program is subject
to  termination  by the SBA  based on  violation  of law or SBA  regulations  or
violation of any agreement with the SBA.  Management of Business Loan Center has
no reason to believe  that its license to  participate  in the  program  will be
terminated.

                  SBA approval of loans is  dependent,  in part,  upon the SBA's
determination   that  Business  Loan  Center's   facilities  and  personnel  can
adequately  support the servicing of the loan.  Based upon the experience of its
personnel and the present staffing of Business Loan Center in its offices in New
York,  New York,  Panama City Beach,  Florida,  Richmond  and  Alexandria  (near
Washington D.C.),  Virginia,  Manalapan and Mt. Arlington,  New Jersey,  Boston,
Massachusetts, Hartford, Connecticut, Wichita, Kansas, McKinney, Texas, Phoenix,
Arizona,  Oklahoma City, Oklahoma,  Omaha,  Nebraska,  and Seattle,  Washington.
Business Loan Center reasonably  believes that it satisfies this criteria in the
states in which it is currently operating.

                  As a Small Business  Lending  Company,  Business Loan Center's
operations  are  subject to  extensive  local,  state and  federal  regulations,
including,  but not limited to, the following  federal  statutes and regulations
promulgated  thereunder:  the Small Business Act, the Small Business  Investment
Act of 1958, as amended,  Title 1 of the Consumer Credit Protection Act of 1968,
as  amended   (including  certain  provisions  thereof  commonly  known  as  the
"Truth-in-Lending  Act"), the Equal Credit  Opportunity Act of 1974, as amended,


                                       8
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the Fair  Credit  Reporting  Act of 1970,  as  amended,  Title IV of the  Higher
Education Act of 1965, as amended,  the Fair Debt  Collection  Practices Act, as
amended, and the Real Estate Settlement Procedures Act, as amended. In addition,
Business  Loan Center is subject to state laws and  regulations  with respect to
the amount of  interest  and other  charges  which  lenders can collect on loans
(e.g., usury laws).  Business Loan Center believes it is in material  compliance
with all applicable rules and regulations.

                  Competition.   The  commercial   lending  business  is  highly
competitive and the Company  competes with many banks and other non-bank lending
institutions, most of which are substantially larger, and have greater financial
resources and name recognition.  There are currently  fourteen licensed non-bank
lenders  which  compete  within the  Guaranteed  Loan  Program  lending  market.
Additionally,  certain banks and non-bank lending institutions which participate
in the  Guaranteed  Loan Program have also been  designated  as  "Preferred"  or
"Certified  Lenders".  There is no  assurance  that the Company  will be able to
compete  successfully in the future or that competition will not have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.

                  Seasonality.  Business Loan Center's business is not seasonal.

                  Loan  Production  Subsidiaries.  The Company,  recognizing the
need to centralize its loan  originations,  has established  three regional loan
production   subsidiaries  to  coordinate  loan   originations  and  to  process
applications  received from Business Loan Center's  network of independent  loan
referral  sources.  Business Loan Center's three  wholly-owned  loan  production
subsidiaries  are BLC  Financial  Network Inc.  ("BLC  Network"),  BLC Financial
Network of Mid-America,  Inc. ("BLC Mid-America"),  and BLC Financial Network of
Florida, Inc. ("BLC Florida").

                  During  Fiscal  Year  2000,  Business  Loan  Center  generated
approximately  90% of its loan volume  directly  and  indirectly,  through  loan
referral sources  constituting the  representative  network.  Generally,  a loan
referral source is compensated  after the closing of a loan.  During the current
fiscal  year,  no one loan source  accounted  for more than 8% of Business  Loan
Center's volume.

Acquisitions

                  EBLC, Inc. On May 4, 1990, the Company,  through Business Loan
Center,  acquired an 80% interest in a New York general  partnership  ("BLC-GP")
from  Business Loan Center,  Inc.,  an  unaffiliated  New York  corporation.  On
September  16, 1996,  Business Loan Center  purchased  the minority  interest of
BLC-GP for $380,000.  Prior to that purchase, the Company owned the existing 88%
of the  partnership.  In  February  1997,  BLC-GP  transferred  its  assets  and
liabilities to Business Loan Center, a wholly owned subsidiary of the Company.

                  Southeastern  First  Financial  Network,  Inc.  On February 5,
1996, the Company, through its wholly-owned  subsidiary,  BLC Financial Network,


                                       9
<PAGE>

Inc. ("BLC Network")  acquired all of the issued and outstanding common stock of
Southeastern First Financial Network,  Inc., in exchange for 1,808,821 shares of
the Company's Common Stock.

BLC Commercial Capital Corporation

                  Background.  BLC  Commercial  Capital  Corporation,  a Florida
corporation ("BLC Commercial"),  is a wholly owned subsidiary of the Company. On
November, 4, 1997 BLC Commercial was granted the authority to participate in the
United States Department of Agriculture  ("USDA") Business & Industry Guaranteed
Loan Program (the "B&I Program").

                  BLC Commercial has offices in New York, New York and McKinney,
Texas. In addition, BLC Network, BLC Mid-America,  and BLC Florida originate B&I
loans for the Company within their respective regions.

                  The B&I  Program.  The B&I Program was designed to create jobs
and  stimulate  rural  economies  by  providing   financial  backing  for  rural
businesses.  The assistance is available in rural areas, which include all areas
other than  cities of more than  50,000  people and their  immediately  adjacent
urbanized  fringe areas.  The program provides for guarantees by the USDA of 80%
for loan  amounts up to  $5,000,000  and 70% for loans  between  $5,000,000  and
$10,000,000.  Interest rates are negotiated between the borrower, the lender and
the USDA,  but typically  range between 1% and 2% above the prime rate. Of those
variable rate loans,  the interest rate may adjust monthly or quarterly with the
base rate  established  as the lowest New York prime rate in effect on the first
day of each  adjustment  period as  published in The Wall Street  Journal.  Each
lender is required to pay a guarantee fee equal to 2% of the  guaranteed  amount
of its loan to the USDA. The participating lenders may, in turn, charge this fee
to the borrower upon initial disbursement of the loan.

                  Loans  typically  have  maturities  between seven and 30 years
depending  upon the use of proceeds.  The types of businesses  eligible are less
restrictive  than the SBA (7a) Program and there is an active  secondary  market
for the  guaranteed  portion  of the  loan  with  premiums  comparable  to those
received by Business Loan Center in the SBA (7a) Program.  This lending business
is still  relatively new to the Company,  however,  the Company  believes it can
generate significant volume through its origination offices and independent loan
originators, which are located near rural areas.

                  Revenues.  BLC Commercial  derives its revenues primarily from
three sources:  (i) interest earned on loans retained for its own account;  (ii)
gain  on the  sale  of the  USDA-guaranteed  portion  of the  loans;  and  (iii)
servicing  fees  paid  on the  USDA-guaranteed  portion  of  loans  sold  in the
secondary  market.  See  Management's  Discussion  and  Analysis  -  Results  of
Operations.

                  B&I Program Loan  Portfolio.  At June 30, 2000, BLC Commercial
serviced  a loan  portfolio  of  eighteen  loans  in the  approximate  aggregate
principal  amount of  $47,398,000.  Of this  amount,  approximately  $38,047,000
consisted  of the  USDA  guaranteed  portion  of  the  loans  and  approximately
$9,350,000  consisted of the  unguaranteed  portion of the loans. BLC Commercial


                                       10
<PAGE>

has sold a $300,000  participation in the  unguaranteed  portion of one loan and
has retained the entire unguaranteed  portion of the remaining loans for its own
account.  The original  principal amounts of these loans ranged between $150,000
and $5,000,000  with maturities  between 15 and 30 years.  The interest rates on
these loans are adjustable and range between 1% and 2.25% over prime.

                  At  June  30,  2000,  one  loan  in the  principal  amount  of
$1,196,000 was delinquent or in liquidation, of which BLC Commercial's share was
$239,000.

                  At June 30, 2000, six loans totaling $20,010,000 were approved
by BLC Commercial and awaiting submission to the USDA or awaiting USDA approval.
BLC  Commercial's  existing  capital  resources should enable it to fund each of
these loans.

                  Government  Regulation.  The  level  of  funding  for  the B&I
Program is subject to the  federal  budgeting  process for each  Federal  Fiscal
Year.  Accordingly,  the availability of funds for USDA guarantees under the B&I
Program  could  increase or decrease each year.  The federal  budget for Federal
Year 2000 is $1.0 billion.

                  Seasonality - BLC Commercial's business is not seasonal.




                                       11
<PAGE>


BLC Capital Corporation

                  Background.  BLC Capital  Corporation,  a Delaware corporation
("BLC  Capital"),  is a  wholly-owned  subsidiary  of the Company  whose primary
function  is  to  complement  the  Guaranteed   Loan  Program  by   originating,
underwriting,  closing and  servicing  loans which may exceed the SBA's  maximum
guaranteed portion. In addition,  BLC Capital's lending program makes loans, the
proceeds  of which  are used for  purposes  that  are not  permitted  under  the
Guaranteed Loan Program, such as acquisition of rental real estate.

                  Companion Loan Program.  BLC Capital originates first mortgage
loans in  conjunction  with its SBA  loans.  These  loans are  funded by various
financial  institutions from which BLC Capital receives a fee. In addition,  the
Company has negotiated an agreement with a major  financial  institution to fund
qualified  companion  loans  originated  by the  Company  from which BLC Capital
receives a fee for both originating and servicing these loans.

                  Revenues.  BLC Capital derives its revenue from servicing fees
on those loans in its portfolio that it services, as well as from commissions on
loan referrals to outside financial institutions.  The referral fees received on
these loans ranges from 3% to 9.75% of the loan amount and totaled  $905,000 for
the fiscal year ended June 30, 2000. See Management's  Discussion and Analysis -
Results of Operations.

                  Loan  Portfolio.  At June 30,  2000,  BLC Capital  through its
Companion Loan Program serviced 27 loans, in the approximate aggregate principal
amount of  $17,500,000.  During the fiscal year ended June 30, 2000, BLC Capital
originated  19 loans  totaling  $12,675,000.  See  Management's  Discussion  and
Analysis - Liquidity and Capital Resources.

Environmental

                  Compliance with federal,  state and local laws and regulations
governing the discharge of materials  into the  environment  and noise levels is
not expected to have any material adverse effect upon the Company.

                  Business  Loan  Center  and BLC  Commercial  may in the future
acquire, through foreclosure, properties that secure defaulted loans. There is a
risk that hazardous  substances or wastes,  contaminants,  pollutants or sources
thereof could be  discovered on properties  acquired by Business Loan Center and
BLC  Commercial.  In such an event,  the Company could be required under certain
environmental  laws to remove such substances and clean up the affected property
at its sole cost and expense,  which could have a material adverse effect on the
Company. To date, neither Business Loan Center nor BLC Commercial has been named
as a  potentially  responsible  party under any  federal or state  environmental
laws. In most cases where  commercial  properties  secure  loans,  Business Loan
Center and Commercial will obtain an  environmental  evaluation to ascertain the
existence of toxic wastes prior to making the loan.

                                       12
<PAGE>

Employees

                  The Company,  through its  subsidiaries,  currently employs 79
full-time and three part-time employees.  Of these employees, 12 are employed in
executive  or  managerial  capacities,  17 are  employed  in  administrative  or
clerical  capacities,  12 are employed in loan  servicing  capacities and 41 are
employed in loan origination,  processing and underwriting  capacities.  None of
the Company's  employees are  represented by a collective  bargaining  unit. The
Company considers its employee relations to be satisfactory.

Item  2. PROPERTIES.

                  The Company, through its subsidiaries, currently leases office
space for all of its general business  purposes in New York, New York,  Richmond
and Alexandria,  Virginia (near Washington D.C.), Indianapolis,  Indiana, Panama
City Beach, Florida, Wichita, Kansas, Albuquerque,  New Mexico, McKinney, Texas,
Phoenix,   Arizona,   Omaha,   Nebraska,   and  Oklahoma  City,  Oklahoma.   See
"Consolidated Financial Statements - Note 8".

<TABLE>
<CAPTION>


------------------ --------------- --------------------- --------------- ---------------
                   New York,                                             Panama City
                   New York        Richmond, Virginia    Wichita,        Beach, Florida
                                                         Kansas
------------------ --------------- --------------------- --------------- ---------------
<S>                     <C>             <C>             <C>              <C>
Approximate
Square Footage     11,800          7,100                 3,000           2,400
------------------ --------------- --------------------- --------------- ---------------

------------------ --------------- --------------------- --------------- ---------------
                   Indianapolis,   Alexandria,           Albuquerque,
                   Indiana         Virginia (near        New Mexico      Mckinney,
                                   Washington, D.C.)                     Texas
------------------ --------------- --------------------- --------------- ---------------
Approximate
Square Footage     1,300           1,000                 800             600
------------------ --------------- --------------------- --------------- ---------------


------------------ --------------- --------------------- ---------------
                                   Oklahoma City,        Omaha,
                   Phoenix,        Oklahoma              Nebraska
                   Arizona
------------------ --------------- --------------------- ---------------
Approximate
Square Footage     209             195                   128
------------------ --------------- --------------------- ---------------

</TABLE>


Item 3.  LEGAL PROCEEDINGS.

                  None.




                                       13
<PAGE>


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

                  On March 30,  2000,  the  Company  held its Annual  Meeting of
Stockholders.  The total number of shares voted at the meeting were  17,016,381,
including proxies. At the meeting,  stockholders voted on and approved:  (1) the
election of two directors of the Company  (Robert F.  Tannenhauser  and Peter D.
Blanck), (2) the ratification of the appointment of Richard A. Eisner & Company,
LLP as  auditors  of the Company for the fiscal year ending on June 30, 2000 and
(3) the amendment to the Amended 1995 Management  Incentive Plan to increase the
number of shares of common  stock that may be subject to options  granted  under
the Plan. Votes were cast in the following manner:


<TABLE>
<CAPTION>

----------------------------------------- ------------- ---------------- ------------ ------------
Issue                                      For           Against          Abstain       Not Voted
----------------------------------------- ------------- ---------------- ------------ ------------

<S>                                       <C>            <C>                <C>         <C>
1. Election of Directors

           Robert F. Tannenhauser         16,965,010                                      51,371
           Peter D. Blanck                16,965,110                                      51,271
----------------------------------------- ------------- ---------------- ------------ ------------
2. Ratification of Auditors               16,983,971       5,410           27,000

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

3. Amendment to
   Amended                                16,734,447     250,298           31,636
   1995 Management Incentive Plan

----------------------------------------- ------------- ---------------- ------------ ------------
</TABLE>

The  following  directors  were not up for  re-election  at the meeting and they
continued in office after the meeting: Irwin Redlener,  Kenneth Schwartz, Jerome
B. Alenick, Robert W. D'Loren and Robert W. Wien.




                                       14
<PAGE>



Part II.

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

                  On April 30, 1998, the Company's Common Stock began trading on
the American Stock Exchange.  Prior to that date, the Company's Common Stock was
listed for trading on the  over-the-counter  market  through the OTC  Electronic
Bulletin  Board.  During Fiscal Year 1999, the AMEX and NASDAQ merged and became
the NASDAQ AMEX.  The following  table lists the high and low sales  prices,  as
reported by the AMEX from April 30, 1998  through  June 30,  2000,  and prior to
that date,  the range of high and low sale prices as  reported  by the  National
Quotation Bureau from January 1, 1998 through March 31, 1998.


<TABLE>
<CAPTION>

                                 2000                                  High Sale        Low Sale
                                 ----                                  ---------        --------
<S>                                                                     <C>                 <C>
                           Second Quarter (AMEX)                        2.313             1.625
                           First Quarter  (AMEX)                        3.25              1.625

                                 1999
                                 ----
                           Fourth Quarter (AMEX)                       2.125              1.50
                           Third Quarter  (AMEX)                       2.50               1.813
                           Second Quarter (AMEX)                       2.188              1.75
                           First Quarter  (AMEX)                       2.935              2.0


                                    1998
                           Fourth Quarter (AMEX)                        2.875             1.8125
                           Third Quarter  (AMEX)                        3.75              2.188
                           Second Quarter (AMEX)                        5.25              3.0625
                           First Quarter                                3.0625            1.375

</TABLE>

                  Quotations represent prices between dealers and do not include
retail  mark-up,  mark-down or  commission,  and may not  necessarily  represent
actual transactions.

                  The Company has never paid cash  dividends on the Common Stock
and it is managment's present intention to reinvest future earnings,  if any, in
the  business of the  Company.  The  Company's  ability to pay  dividends in the
future,  should  management so determine,  will be dependent  upon the Company's
earnings, financial condition and other relevant factors.

                  As of September 11, 2000, there were approximately 791 holders
of record of the Common Stock of the Company.

                  Throughout  the fiscal  years ended June 30, 1999 and June 30,
2000,  the  Company  has  raised,  through  private  placements,  $6,486,000  in
convertible  debentures.  See Management's  Discussion and Analysis of Financial
Conditions  and Results of Operations - Results of Operations  and the Company's
Financial Statements, starting on page F-1.

                                       15
<PAGE>


Item 6.SELECTED FINANCIAL DATA.

The following  selected  financial data should be read in  conjunction  with the
financial statements included in this Report.

<TABLE>
<CAPTION>
                                                    Year Ended June 30,

                                2000            1999          1998             1997           1996
                                ----            ----          -----            -----          ----
Summary of Operations:
<S>                             <C>             <C>             <C>             <C>             <C>


Total revenues            26,366,000     $19,422,000      $15,729,000     $7,168,000     $4,997,000

Income before
 extraordinary items       5,282,000       3,103,000        3,226,000      1,702,000        553,000

Extraordinary item                                                           245,000         91,000

Net Income                 5,282,000      $3,103,000       $3,226,000     $1,947,000       $644,000
Income per share (basic)
before extraordinary  item       .26             .16              .18            .10            .04

Income per share
from extraordinary item            -               -                -            .01            .01
Net income per
share (basic)                    .26             .16              .18            .11            .05

Net income per share             .22             .14              .15            .11            .04
(diluted)


As of June 30:

Total assets             $85,896,000     $68,037,000      $53,281,000    $20,086,000    $10,983,000

Total liabilities        $60,805,000     $48,890,000      $39,012,000    $12,896,000     $5,657,000

Shareholders' equity     $25,091,000     $19,147,000      $14,269,000     $7,190,000     $4,601,000

Shareholders' equity
per share                       1.23             .94              .72            .41            .27



                                       16
<PAGE>




Selected Quarterly Financial Data (Unaudited)
Summarized Quarterly data was as follows:                              Three Months Ended
                                                                       ------------------

                                                       September 30      December 31      March 31          June 30
                                                       ------------      -----------      --------          -------

Year ended June 30, 2000

Revenues                                                 $4,513,000       $8,326,000    $6,247,000       $7,280,000

Expenses                                                  3,731,000        4,763,000     4,567,000        5,167,000

Provision for Income Taxes                                  310,000        1,410,000       691,000          445,000

Net income                                                 $472,000       $2,153,000     $ 989,000       $1,668,000

Earnings Per Share:

Basic:

Net income                                                      .02              .11           .05              .08

Diluted:

Net income                                                      .02              .09           .04              .07



Year ended June 30, 1999

Revenue                                                  $4,626,000       $6,868,000    $4,430,000       $3,498,000

Expenses                                                  3,649,000        3,959,000     3,423,000        3,237,000

Provision for Income Taxes                                  410,000        1,144,000       398,000           99,000

Net Earnings                                               $567,000      $ 1,765,000      $609,000        $ 162,000

Earnings Per Share:

Basic:

Net income                                                      .03              .09           .03              .01

Diluted:

Net income                                                      .03              .07           .03              .01



</TABLE>


                                       17
<PAGE>



Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATION.

                  The  following  discussion  and  analysis  should  be  read in
conjunction with the Company's financial  statements included in this report and
the notes  accompanying  the financial  statements.  The  discussion of results,
causes and trends  should not be  construed  to imply any  conclusion  that such
results or trends will necessarily continue in the future.

Liquidity and Capital Resources

                  The Company  actively  engages in commercial  lending  through
Business  Loan Center,  BLC  Commercial,  and BLC Capital,  and  therefore,  the
Company has a constant need for debt financing. Cash used by the Company and its
subsidiaries to fund loans,  repay existing debt and to fund operating  expenses
is currently  provided only partially through  collections on loans and proceeds
from loan sales.  The remainder of the Company's  cash  requirements  is derived
from existing capital and short and long-term borrowing.

                  The Company currently  maintains a $50,000,000 credit facility
to fund both the  guaranteed  and  unguaranteed  portion  of 7(a)  Program  loan
originations,  as  well as a  $15,000,000  credit  facility  to  fund  both  the
guaranteed  and  unguaranteed  portions  of  B&I  loans.  Borrowings  under  the
guaranteed line are repaid  immediately upon the sale of the guaranteed  portion
on the secondary market.

                  During the fiscal  year  ending June 30,  2000,  the  Company,
through its subsidiary Business Loan Center,  Inc.,  successfully  completed the
closing of a revolving  securitization  facility totaling $75 million. This type
of  securitization  structure  provides for periodic  sales of the  unguaranteed
portion of SBA loans into a conduit  facility on a revolving  basis. The initial
sales, which took place in December 1999, consisted of two pools of unguaranteed
SBA loans approximating $23.2 million. During the subsequent quarters,  Business
Loan Center,  sold an additional  pool  totaling  approximately  $15.9  million.
Proceeds from the sale were used to reduce the credit lines.

                  In  addition,  the  Company,  through a private  placement  of
convertible  debentures,  raised approximately  $1,621,000 during the year ended
June 30, 2000. The debentures  were initially  convertible  into common stock at
$3.50 per share.  However,  during the year ended June 30, 2000,  the conversion
price was reduced to $2.75 per share.  The debentures  have a four-year term and
pay interest quarterly at the rate of 9% per annum.

                  At June 30, 2000, sales of the guaranteed portions of loans in
the aggregate  amount of  $13,926,000  were pending  settlement in the secondary
market,   while   $7,494,000  were  pending   construction   and/or   renovation
completions.  Upon the completion of these funding  projects,  participation  in
these loans may be sold in the  secondary  market,  providing the Company with a
source of revenues.  Subsequent to June 30, 2000, the Company  received net cash
premiums,  after repayment of  indebtedness,  of  approximately  $1,195,000 from
those loans pending settlement at June 30, 2000.

                                       18
<PAGE>

                  Pursuant to a loan participation agreement entered into with a
purchaser during the fiscal year ended June 30, 1996,  Business Loan Center,  at
its option,  in respect to loans which are  delinquent  for more than 60 days is
required  to either  (i)  repurchase  the loan or (ii)  substitute  interest  in
another  loan of equal  value.  During  Fiscal  Year  2000,  four  loans with an
aggregate value of approximately $223,000 were repurchased.

                  The Company  believes that its current  capital  resources and
future cash flows will be  sufficient to meet its future  financial  obligations
and  projected  capital  requirements,  based on the  resources  provided by the
credit facilities  described above, the anticipated  proceeds from sales of both
the guaranteed and unguaranteed  portion of loans in the secondary  market,  the
cash generated from the existing portfolio in the form of interest and servicing
income,  and the regular principal  repayments on loans  receivable.  Management
believes  that  Business  Loan  Center  and  BLC  Commercial  should  be able to
originate  and fund at least $190 million in new loans during  Fiscal Year 2001.
However,  there can be no  assurances  that the Company  will be able to achieve
this level.

Year 2000 Update

         The Company has not had any Year 2000  problems  subsequent to December
31, 1999 and does not anticipate any in the future.  However,  the Company plans
to continue to conduct analyses of the Company's information  technology systems
and Year 2000 testing  procedures.  To date, the Company's costs associated with
Year 2000 issues have not been material, and management does not anticipate that
the costs which may be incurred subsequent to June 30, 2000 to exceed $50,000.

         The  Company's  loan  servicing   system  has  continued  to  be  fully
operational  subsequent to January 1, 2000 after having received assurances from
the vendor of its servicing  system,  that their system is Year 2000  compliant.
However,  in the event that the servicing system does not operate properly,  the
Company could service each loan manually,  which would entail  additional  labor
costs. These costs have been estimated to be no greater than $70,000.

         There can be no assurance that other  companies'  computer  systems and
applications  on which the  Company's  operations  rely will  continue to remain
unaffected by the Year 2000 functions,  or that any such operational  failure by
another  company  would not have a  material  adverse  effect  on the  Company's
systems and operations.

                                       19
<PAGE>


Results of Operations

                  General.  Demand for long-term commercial loans throughout the
United States has continued to remain at substantially high levels over the last
several years. The Guaranteed Loan Programs have assisted  participating lenders
in providing  record  amounts of  guaranteed  loans over the past three  federal
fiscal years.  Business Loan Center and BLC Commercial  have  contributed to the
success of the Guaranteed  Loan Programs by  originating  loans in the principal
amount of  approximately  $163,568,000,  for Fiscal  Year 2000,  resulting  in a
serviced loan portfolio approximating $376,007,000. By establishing an effective
loan origination  network spanning the United States,  management  believes that
the Company has positioned  itself to achieve ongoing growth,  both with respect
to the amount of loans originated and the geographic areas in which it operates.
The  origination  network is currently  comprised of loan referral  sources that
service several broad geographic regions and provide customers with a variety of
financial products.

                  Management  of  the  Company  is  sensitive  to  industry  and
geographical  trends,  including  failure rates in various  industries,  general
condition of local  economies,  and the resultant  effect on businesses and real
estate values.  Generally, the Company's current lending pattern, both regarding
industry  and  geographic  location,  is  extremely  diverse.  At June 30, 2000,
businesses in over 145 distinct  industries in approximately 45 different states
had received loans from Business Loan Center.  The largest  industry  sectors in
Business Loan Center's serviced portfolio include: lodging, approximating 33% of
the aggregate loan portfolio, gas stations and convenience stores, approximating
10% and restaurants, approximating 11% of the aggregate loan portfolio.


                                       20
<PAGE>


                  Fiscal Year 2000 vs.  Fiscal Year 1999.  The Company  recorded
net income of  $5,282,000  (or $.26 per basic  share) for the fiscal  year ended
June 30, 2000 ("Fiscal  Year 2000") as compared to net income of $3,103,000  (or
$.16 per basic share) for the year ended June 30, 1999 ("Fiscal Year 1999"). Net
income before provision for income taxes ("Operating Income") was $8,138,000 for
Fiscal Year 2000, as compared to $5,154,000 for Fiscal Year 1999.

                   Revenues  for  Fiscal  Year  2000  grew  from   approximately
$19,422,000  at June 30, 1999 to  $26,366,000  at June 30, 2000,  an increase of
36%. This increase in revenues  resulted  primarily  from an increase in gain on
sale of loans and interest income,  which arose from increased loan originations
as well as increased loan sales during the fiscal year. During Fiscal Year 2000,
the Company  originated  $163,568,000 in new loans as compared to  $112,142,000,
which  represents  an  increase of over 45%.  As of June 30,  2000,  the Company
maintained  a  serviced  loan  portfolio  of  626  loans,   which   approximated
$376,007,000 as compared to 454 loans, which  approximated  $248,544,000 at June
30, 1999.

                  Gain on sale of loans  increased from  $11,868,000  for Fiscal
Year 1999 to  $16,687,000  for Fiscal Year 2000,  an  increase  of 41%.  This is
attributable to increases sales of both the guaranteed and unguaranteed portions
of loans  originated.  The Company sold  $120,983,000 in guaranteed loans during
Fiscal  Year  2000  as  compared  to   $79,240,000  in  Fiscal  Year  1999.  The
unguaranteed  portion of loans  securitized  and sold  during  Fiscal  Year 2000
increased to $39,191,000  from $24,317,000 for Fiscal Year 1999. These increases
were partially offset by an overall reduction in the average premium received on
the sale of the  guaranteed  portion of the loans in the secondary  marketplace.
During  Fiscal  Year  1999,  the  average  premium  received  on the sale of the
guaranteed portion of loans was 109% as compared to 108% for Fiscal Year 2000.

                  Interest income  increased from  approximately  $3,550,000 for
Fiscal Year 1999 to  approximately  $4,654,000  for Fiscal Year 2000, or by 31%.
This  increase  resulted  from both an increase in the prime rate,  which is the
base rate for all of the Company's loan originations,  as well as an increase in
the overall loan originations experienced during the fiscal year. The prime rate
increased to 9.5% as of June 30, 2000, as compared to 8% at June 30, 1999.

                  Service  fee  income  was  $2,355,000  as of June 30,  1999 as
compared to  $2,896,000  at June 30, 2000, an increase of 23%. This increase was
primarily  due to an  increase in the  serviced  and sold loan  portfolio  which
approximated  $315,340,000 at June 30, 2000 compared to $195,773,000 at June 30,
1999.  The increase was partially  offset by an overall  decrease in the service
fee rates  earned on the sale of  guaranteed  portion of SBA loans as well as an
increase in the  amortization or principal  payments on the residual  interests.
The  average  service  fee earned on the sale of the  guaranteed  portion of SBA
loans  originated  during  Fiscal  Year 2000 was 1.12% as  compared to 1.54% for
Fiscal Year 1999.  Service fees and residual  interest  rates earned on both the
SBA and USDA guaranteed  loans sold in the secondary  market ranged between .25%
and approximately 4.41%.

                  Miscellaneous  income  increased  from  $1,649,000 at June 30,
1999 to  $2,129,000  at June 30, 2000,  an increase of 29%. This increase can be


                                       21
<PAGE>

attributed  to  increased  fees earned on the  origination  and sales of non-SBA
loans,  as well as fees earned in connection  with packaging these and other SBA
and B&I loans.

                  Operating expenses increased from approximately $8,636,000 for
Fiscal Year 1999 to approximately  $11,237,000 for Fiscal Year 2000, an increase
of 30%. This increase resulted from increases in payroll, commissions and travel
associated with continued growth and expansion.

                  General and administrative expenses increased to approximately
$3,126,000  for Fiscal Year 2000  compared to $2,746,000 at Fiscal Year 1999, an
increase of 14%.  This was due to increases in corporate  and legal  services as
well as amortization of costs  associated  with  additional  financing  obtained
throughout the past fiscal year.

                  Interest expense  increased by approximately 34% during Fiscal
Year 2000 as  compared  to the prior  year's  period.  The  increase  was due to
increased  borrowing to meet the continued growth in loan production  activities
as well as an increase in the base borrowing rate.

                  The number and aggregate  principal amount of the loans in the
Company's  portfolio  at the end of  Fiscal  Year  2000  may be  classified  and
compared  to the  loans  in its  portfolio  at the end of  Fiscal  Year  1999 as
follows:


<TABLE>
<CAPTION>

                        YEAR ENDED 6/30/00                                      YEAR ENDED 6/30/99
                -------------------------------                         -------------------------------
                    Total          Guaranteed    Ungteed.                    Total       Guaranteed   Ungteed.
                    Amount         Amount        Amount      # Loans         Amount        Amount       Amount    # Loans
          -----------------------------------------------------------   -------------------------------------------------
<S>                  <C>           <C>           <C>            <C>         <C>            <C>            <C>       <C>


Performing Loans   $352,314,000   $258,867,000   $93,447,000   578      $238,586,000    $173,610,000  $64,976,000    418

Delinquent Loans     11,447,000      8,293,000     3,154,000    15           870,000         653,000      217,000      1

Loans in
 liquidation         12,246,000      8,921,000     3,325,000    33         9,088,000       7,415,000    1,673,000     35
                   ------------   ------------  ------------   ---      ------------    ------------  ------------   ----

Total Loans        $376,007,000   $276,081,000   $99,926,000   626      $248,544,000    $181,678,000  $66,866,000    454
                   =============  ============                ====      ============    ============                 ====

LESS:

Loans Sold                                       $75,934,000                                          $42,878,000

Allowance for Credit Losses                        1,153,000                                              914,000

Deferred Income & Other                              548,000                                            1,138,000
                                                ------------                                          -----------

Loans Receivable Net                             $22,291,000                                          $21,936,000
                                                =============                                        ============

</TABLE>



                                       22
<PAGE>


                Loans for which  interest and  principal  payments are due for a
period  greater  than 60 days are  categorized  by the Company as  "delinquent."
Delinquent loans generally are a result of various factors,  including temporary
downturns in the borrower's  business,  seasonal  working  capital  constraints,
changes in business location or products, and other factors specifically related
to each  borrower.  The borrowers  often regain current status after a period of
time.

                In certain cases,  when the  aforementioned  factors prevent the
borrower from making any payments for a prolonged  period of time,  and the loan
falls  beyond  90  days  past  due,  the  loan  may  then be  categorized  as in
"liquidation."  After  formal  request  is made  by the  Company  or the  fiscal
transfer agent ("FTA"), the SBA honors its guaranty by purchasing the guaranteed
portion of the loan,  as well as all interest  that is due for a period of up to
120 days. In general,  loans in liquidation are serviced  through the efforts of
Business Loan Center.

                  Fiscal Year 1999 vs.  Fiscal Year 1998.  The Company  recorded
net income of  $3,103,000  (or $.16 per basic  share)  for  Fiscal  Year 1999 as
compared  to net  income of  $3,226,000  (or $.18 per basic  share) for the year
ended June 30, 1998 ("Fiscal Year 1998"). Net income before provision for income
taxes and extraordinary item ("Operating Income") was $5,154,000 for Fiscal Year
1999, as compared to $5,337,000 for Fiscal Year 1998.

                   Revenues for Fiscal Year 1999 increased  approximately 23% to
$19,422,000  from  Fiscal  Year  1998  primarily  due to  gains  on loan  sales,
servicing  fee  income,  and  interest  income.  This rise is  attributed  to an
increased  serviced loan portfolio of the Company as well as an increase in loan
originations and loan sales during the respective  periods.  As of June 30, 1999
the  Company   maintained  a  serviced  loan  portfolio  of  454  loans,   which
approximated   $248,544,000  as  compared  to  359  loans,   which  approximated
$175,889,000 at June 30, 1998.

                  Interest income  increased from  approximately  $2,439,000 for
Fiscal  Year 1998 to  approximately  $3,550,000  for  Fiscal  Year  1999,  or by
approximately  46%.  This  was  primarily  due to an  increase  in  the  average
outstanding  and  performing  retained loan portfolio held by the Company during
the year, which included both the unguaranteed portions of loans held as well as
the  guaranteed  portion  of  loans  held  for  multiple   disbursements  and/or
construction disbursements.  A portion of this increase can be attributed to the
increase in the Company's  performing  and retained  loan  portfolio at June 30,
1999 which approximated $34,027,000 as compared to $28,971,000 at June 30, 1998.

                  Service fee income  increased by  approximately  105% from the
prior year  primarily  due to the  Company's  increased  serviced  and sold loan
portfolio  which  approximated  $195,773,000  at June 30, 1998.  Servicing  fees
earned by the Company on those  guaranteed  loans sold in the  secondary  market
have ranged between .50% and 4.06% per annum.

                  Operating expenses increased from approximately $6,481,000 for
Fiscal Year 1998 to approximately $8,636,000 for Fiscal Year 1999. This increase
resulted  from  increases in payroll,  commissions  and travel  associated  with
continued  growth and  expansion.  With the  addition of new offices  during the
year, the Company experienced an unusually high rate of operational expenses. It
is expected  that a  corresponding  increase  in loan  origination  levels,  and


                                       23
<PAGE>

therefore,  revenues  should  result from these  production  offices  during the
fiscal year ended June 30, 2000.

                  General   and   administrative   expenses   of   approximately
$2,746,000 for Fiscal Year 1999 increased from approximately  $1,753,000 for the
prior  year's  period  primarily  due to  additional  loan  production  offices,
corporate  services and  amortization  of costs  associated  with the additional
financing obtained throughout the past fiscal year.

                  Interest expense  increased by approximately 34% during Fiscal
Year 1999 as compared to Fiscal Year 1998.  The  increase  was due to  increased
borrowing to meet continued  growth in loan  production  activities  during this
period which was somewhat  offset by an interest rate reduction  obtained by the
Company from its lender.

                  Loans  in  the  approximate   aggregate  principal  amount  of
$112,142,000  were  originated  during Fiscal Year 1999, as compared to loans in
the approximate  aggregate principal amount of $93,854,000 for Fiscal Year 1998,
representing  a 19% increase in  origination  activities  during the  referenced
periods.  The guaranteed  principal amount of the loans originated during Fiscal
Year 1999  approximated  $81,205,000  as  compared to the  aggregate  guaranteed
principal of  $67,357,000  for Fiscal Year 1998. Of those loans  originated  and
fully  funded  during  Fiscal  Year 1999,  substantially  all of the  guaranteed
portions  were sold in the  secondary  market  subsequent to the full funding of
each loan, at premium rates  approximating  109%.  During Fiscal Year 1999,  the
Company  securitized and sold approximately  $24,317,000 in unguaranteed  loans.
Sales of both the  guaranteed  and  unguaranteed  portion of these loans  during
Fiscal Year 1999 resulted in $11,868,000 of gains as compared to $10,583,000 for
Fiscal Year 1998.

                  The number and aggregate  principal amount of the loans in the
Company's  portfolio  at the end of  Fiscal  Year  1999  may be  classified  and
compared  to the  loans  in its  portfolio  at the end of  Fiscal  Year  1998 as
follows:



                                       24
<PAGE>

<TABLE>
<CAPTION>

                        YEAR ENDED 6/30/99                                      YEAR ENDED 6/30/98
                -------------------------------                         -------------------------------
                    Total          Guaranteed    Ungteed.                    Total       Guaranteed   Ungteed.
                    Amount         Amount        Amount      # Loans         Amount        Amount       Amount    # Loans
          -----------------------------------------------------------   -------------------------------------------------
<S>                  <C>           <C>           <C>            <C>         <C>            <C>            <C>       <C>

Performing Loans   $238,586,000   $173,610,000    $64,976,000   418     $164,037,000 $120,298,000   $43,739,000     321

Delinquent Loans        870,000        653,000        217,000     1        2,630,000    2,060,000       570,000       3

Loans in liquidation  9,088,000      7,415,000      1,673,000    35        9,222,000    7,413,000     1,809,000      35
                    ------------- -------------   ------------  -----    ----------- ------------ -------------  ---------
Total Loans        $248,544,000   $181,678,000   $ 66,866,000   454      175,889,000  129,771,000   $46,118,000     359
                    ============   ============                =====     =========== ============                =========

LESS:

Loans Sold                                        $42,878,000                                       $22,289,000

Allowance for Credit Losses                           914,000                                           641,000

Deferred Income & Other                             1,138,000                                         1,148,000
                                                  -----------                                       -----------
Loans Receivable Net                              $21,936,000                                       $22,040,000
                                                  -----------                                       -----------
</TABLE>


                Loans for which  interest and  principal  payments are due for a
period  greater  than 60 days are  categorized  by the Company as  "delinquent."
Delinquent loans generally are a result of various factors,  including temporary
downturns in the borrower's  business,  seasonal  working  capital  constraints,
changes in business location or products, and other factors specifically related
to each  borrower.  The borrowers  often regain current status after a period of
time.

                In certain cases,  when the  aforementioned  factors prevent the
borrower from making any payments for a prolonged  period of time,  and the loan
falls  beyond  90  days  past  due,  the  loan  may  then be  categorized  as in
"liquidation."  After formal  request is made by the Company or the FTA, the SBA
honors its guaranty by purchasing the guaranteed portion of the loan, as well as
all interest  that is due for a period of up to 120 days.  In general,  loans in
liquidation are serviced through the efforts of the Company's servicing staff.



                                       25
<PAGE>



Item 7A.  QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK.

                  In general, the Company manages its interest rate risk through
the use of  variable-based  interest  rate indices for its borrowing and lending
activities.  Specifically,  the  Company's  borrowing  rates from its lender are
based upon a spread  above Prime Rate and the LIBOR Rate while the lending  rate
to its borrowers is based upon a spread above the Prime Rate. During Fiscal Year
2000 the Company  entered  into a $75  million  revolving  securitization  which
allows  the  Company  to sell the  unguaranteed  portion  of SBA loans  into the
securitization  conduit.  As the  Company  periodically  sells  loans  into  the
conduit,  it reduces  its  exposure to the lender.  Accordingly,  the  potential
interest rate mismatch from the changes in the indices is of short duration.

                  Since the  interest  rates on the loans are based on the Prime
Rate and the interest rate on the conduit is based on LIBOR, the Company,  under
the terms of the  securitization,  concurrently with selling loans,  enters into
interest rate swaps to provide a cash flow hedge, which substantially  mitigates
the interest rate risk. The net charge to operations during Fiscal Year 2000 due
to the  interest  rate  swaps  approximated  $11,700.  As a  result,  management
believes that the Company has substantially  insulated itself from the impact of
a change in interest rates.

                  While the Company's  servicing  assets and residual  interests
have firm  interest  rate  spreads,  these  assets may,  however,  be subject to
impairment  should  interest  rates  increase in a fashion which would cause the
discount rate and estimated fair value interest rate to increase. An increase in
these two variables  could cause the present value of future cash flows from the
servicing and residual interests to be negatively impacted, therefore decreasing
the carrying value of these financial  instruments.  However, it should be noted
that an interest rate change would not  significantly  impact the estimated cash
flows of these assets.


Item 8.         FINANCIAL STATEMENT AND SUPPLEMENTARY DATA.

                The  financial  statements  located in Item 14(a)(1) and (2) are
included in this report starting on page F-1.

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

                None.

                                       26
<PAGE>
Part III

Item 10.        DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES.

                The directors and executive officers of the Company,  their ages
and present positions held in the Company are as follows:

<TABLE>
<CAPTION>

                                 Age (at                                                              Year Term
            Name                 9/11/00)          Positions        Director Since    Officer Since   Will Expire
----------------------------- -------------- -------------------- ----------------- ---------------- ------------
<S>                           <C>            <C>                  <C>               <C>             <C>
Robert F. Tannenhauser (1)    55             President &          September 1986    September 1986   2003
                                             Chairman of the
                                             Board
----------------------------- -------------- -------------------- ----------------- ---------------- ------------
Peter D. Blanck (1)(3)        43             Director             June 1993         N/A              2003
----------------------------- -------------- -------------------- ----------------- ---------------- ------------
Jerome B. Alenick (2)         71             Director             May 1998          N/A              2001
----------------------------- -------------- -------------------- ----------------- ---------------- ------------
Robert W. D'Loren (3)         42             Director             June 1997         N/A              2001
----------------------------- -------------- -------------------- ----------------- ---------------- ------------
Irwin E. Redlener, M.D. (3)   56             Director             June 1997         N/A              2002
----------------------------- -------------- -------------------- ----------------- ---------------- ------------
Kenneth S. Schwartz, M.D.     55             Director             June 1997         N/A              2002
(2)
----------------------------- -------------- -------------------- ----------------- ---------------- ------------
Robert W. Wien (2)            49             Director             June 1997         N/A              2001
----------------------------- -------------- -------------------- ----------------- ---------------- ------------
Leonard Rudolph               53             Executive Vice       N/A               May 1998         N/A
                                             President
----------------------------- -------------- -------------------- ----------------- ---------------- ------------
Jennifer M. Goldstein         28             Chief Financial      N/A               June 1996        N/A
                                             Officer & Treasurer
----------------------------- -------------- -------------------- ----------------- ---------------- ------------
David I. Redlener             32             Secretary            N/A               June 1997        N/A
----------------------------- -------------- -------------------- ----------------- ---------------- ------------
</TABLE>

(1)    Member of the Executive Committee
(2)    Member of the Audit Committee
(3)    Member of the Compensation Committee
------------------------------------

                Each director holds office,  for the term limit set forth above,
until  the next  annual  meeting  of the  Company's  shareholders  and until his
successor has been elected and  qualified.  Since the Company's  reorganization,
annual meetings of its shareholders were held in September 1990, June 1993, June
1997,  May 1998,  April 1999,  and March 2000.  Each of the  executive  officers
serves at the pleasure of the Board of Directors.

                  Robert  F.  Tannenhauser  has  been a full  time  employee  of
Business Loan Center,  Inc. or its predecessor  Business Loan Center, a New York
general  partnership,  since March 1995.  From January 1992 until February 1995,
Mr.  Tannenhauser was of counsel to the law firm of Hall Dickler Kent Friedman &
Wood,  LLP. Mr.  Tannenhauser  has been or is a principal or general  partner of
various  corporations or partnerships  engaged in the oil and gas or real estate
businesses.   Additionally,  Mr.  Tannenhauser  serves  as  a  Director  of  the
Children's Health Fund, together with Dr. Redlener.

                  Peter  Blanck has been a Professor  of Law since  1993,  and a
Professor of Occupational Medicine since 1997 with the University of Iowa. Since
February  1992,  Dr.  Blanck has been a director and the President of Futuronics
Corporation. Dr. Blanck is the brother-in-law of Robert F. Tannenhauser.

                                       27
<PAGE>

                Robert W.  D'Loren has been  President of CAK  Universal  Credit
Corporation  since  February  1, 1998.  Prior to that he was  self-employed  for
eleven  years and  conducted  business in a company  known as D'Loren,  Levien &
Company,  LLC., which provided  investment  banking services to the mortgage and
asset-backed  industry.  Prior to forming his own company in 1986,  Mr.  D'Loren
served as manager in the accounting firm of Deloitte Touche.

                Irwin Redlener is currently President of the Children's Hospital
at  Montefiore  Medical  Center and has been a Professor  of  Pediatrics  at the
Albert Einstein College of Medicine, Montefiore Medical Center since 1990. Since
1990,  Dr.  Redlener  has also served as Director of the  Division of  Community
Pediatrics  at  Montefiore.  Dr.  Redlener  is  President  and  Director  of the
Children's Health Fund, a not-for-profit  foundation developed to support health
care for homeless and medically  underserved  children.  Dr. Redlener has been a
special  consultant  on health  care  policy for the White House and the federal
Department of Health and Human Services.

                  Kenneth S.  Schwartz is a principal  of S&D Medical  LLP,  New
York.  Prior to this,  he had been Chief  Medical  Officer of  American  Imaging
Management Inc. in Northbrook,  Illinois since December 1998. From 1996 to 1998,
Dr. Schwartz was Senior Executive Vice President of Complete  Management,  Inc.,
New York,  New York.  From 1981 to 1995,  Dr.  Schwartz  served as a Director of
Radiology  at  Hudson  Valley  Hospital,  Peekskill,  New York  and was  Medical
Director at Putnam  Hospital  Center,  Carmel,  New York from 1991 through 1994.
From March 1995 to November  1996,  he was Systems  Director  of  Radiology  and
imaging at St. Francis Hospital in Hartford, Connecticut.

                  Robert W. Wien has been the Managing  Director and Director of
Investment Banking at Josephthal & Co., Inc. (formally Josephthal,  Lyon & Ross,
Incorporated)  since May  1999;  he served as  Managing  Director,  Director  of
Mergers  and  Acquisitions  from May 1996 until May 1999.  From July 1994 to May
1996,  Mr. Wien held the  position of  Director  of  Corporate  Finance and Real
Estate  Advisory  Services  at Coopers & Lybrand,  LLP.  Additionally,  Mr. Wien
served as Senior Vice President of Investment  Banking at Dean Witter  Reynolds,
Inc. from April 1987 to June 1994.  Mr. Wien is a member of the Bar in the State
of New York and a licensed Real Estate Broker in the State of New York.

                Jerome B. Alenick has been sole  proprietor of Jerome B. Alenick
Investments & Financial  Services since 1991.  From 1990 to 1991 Mr. Alenick was
Executive  Vice President of The Kushner  Companies.  Mr. Alenick is a member of
the Bars of the State of New Jersey the  District of Columbia  and is a licensed
Real Estate Broker in the State of New Jersey.  He has been an Adjunct Professor
of Real  Estate at New York  University  since 1993 and has been a member of the
faculty at New York University since 1983.

                Leonard  Rudolph  joined the Company as Executive Vice President
in May of 1998 and currently  serves as President of Business Loan Center,  Inc.
From 1996 until joining Company, Mr. Rudolph served as Executive Vice President,
Senior Credit Officer of Sterling National Bank. Additionally,  between 1991 and
1996,  Mr.  Rudolph  held the  position  of Senior  Vice  President  of Sterling
National Bank.

                                       28
<PAGE>

                Jennifer  Goldstein has been serving as Chief Financial  Officer
since June 1998,  and continues to serve as  Treasurer,  a position she has held
since June 1997.  Jennifer Goldstein was Assistant Secretary of the Company from
February 1996 to June 1997. From June 1994 until the present,  Ms. Goldstein has
been employed by Business Loan Center. Ms. Goldstein  graduated with a degree in
Accounting  from San Diego State  University and received an MBA in Finance from
Pace University.

                  David  Redlener  was elected  Secretary of the Company in June
1997.  From September 1994 until December 1996, Mr.  Redlener was employed as an
Assistant District Attorney in the County of the Bronx, New York. Currently, Mr.
Redlener is employed as Counsel and Vice President of Business Loan Center, Inc.
Mr. Redlener graduated with a degree in Economics from Hunter College and earned
his law degree  from Saint  Louis  University  School of Law in May 1994.  He is
currently pursuing a MBA in Finance at Fordham  University.  Mr. Redlener is the
son of Dr. Irwin Redlener, a Director of the Company.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

                During  fiscal  year  ended  June 30,  2000,  there were no late
filings made by any officers or directors or  beneficial  owner of more than 10%
of the  Common  stock  of the  Company  with  respect  to  Section  16(a) of the
Securities Exchange Act of 1934, as amended.


Item 11.        EXECUTIVE  COMPENSATION.

Summary Compensation Table

                The   following   table  sets   forth  all  plan  and   non-plan
compensation  paid  to  the  named  individual  for  services  rendered  in  all
capacities  to the Company and its  subsidiaries  during the three  fiscal years
ended June 30, 2000.  The  following  salaries  and/or  benefits  are  presently
payable pursuant to employment agreements.

                                        29
<PAGE>

<TABLE>
<CAPTION>


                           SUMMARY COMPENSATION TABLE

------------------------------ --------------------------- ---------------------------- --------------------------
Name and Principal Position    Fiscal Year                 Annual Compensation                Securities Underlying
                                                                                              Options
------------------------------ --------------------------- ---------------------------- --------------------------
<S>                             <C>                             <C>                             <C>
                                                           Salary       Bonus      Other
                                                           ------       -----      -----
Robert F. Tannenhauser         2000                        $300,000     $0         $0           $235,000
President and Director         1999                        $224,285 (1) $50,000    $0            375,000
                               1998                        $208,085 (1) $0         $0            500,000
------------------------------ --------------------------- ---------------------------- --------------------------
Leonard Rudolph                2000                        $179,808     $15,000    $0             20,000
Executive Vice President       1999                        $170,000     $10,000    $0             25,000
                               1998                        $ 36,154(2)  $0         $0             70,000 (3)
------------------------------ --------------------------- ---------------------------- --------------------------
Jennifer Goldstein             2000                        $143,269     $          $0            100,000
Treasurer                      1999                        $124,038     $35,000    $0             75,000
                               1998                         $91,923     $15,000    $0            100,000
------------------------------ --------------------------- ---------------------------- --------------------------
</TABLE>

(1)    Includes premiums for excess health insurance.
(2)    Based upon approximately two months of salary at an annual rate of
       $170,000
(3)    During the year ended June 30, 1999, the exercise price for these options
       were repriced to $3.25 from $4.81.

                  Compensation of Directors.  During Fiscal Year 2000,  pursuant
to  Non-Qualified  Stock Option  Agreements,  each  Director was granted  35,000
options to purchase Common Stock at an exercise price of $2.20, all of which are
exercisable  immediately  or at any time prior to March 29, 2005.  As additional
compensation,  each  Director  is to receive  $1,000 per meeting of the Board of
Directors and/or committee thereof.

                  Executive Employment Agreements.  The Company has entered into
Employment  Agreements  with Robert F.  Tannenhauser,  President,  with  Leonard
Rudolph,  Executive Vice President,  and Jennifer M. Goldstein,  Chief Financial
Officer and Treasurer of the Company.

                  Robert F. Tannenhauser.  Robert F.  Tannenhauser's  Employment
Agreement  provides  that he shall be employed as President  and Chairman of the
Board of the Company  and as Chief  Executive  Officer of  Business  Loan Center
through  January  15, 2001 at an annual  gross  salary of  $200,000.  During the
fiscal year ended June 30, 1999,  the Board of  Directors  voted to increase his
salary to $300,000.  Mr.  Tannenhauser  is also entitled to  participate  in all
benefit  plans  established  from time to time by the Company and Business  Loan
Center on the same basis as all other executive employees.


                  The  agreement  shall   automatically   renew  for  successive
one-year periods until the Company  registers the shares of Common Stock held by
Mr. Tannenhauser under the Securities Act and lists the Common Stock for trading
on NASDAQ  AMEX or  another  recognized  securities  exchange.  Thereafter,  the
agreement shall automatically  renew for additional  successive one-year periods
unless  notice to the contrary is given by any party not less than 90 days prior
to the expiration of the then current term.


                                       30
<PAGE>

                  The agreement  obliges the Company to pay to Mr.  Tannenhauser
the  greater of $200,000 or his annual  gross  salary if (i) Mr.  Tannenhauser's
employment is terminated for any reason other than his death or disability, (ii)
the agreement is not renewed by Business  Loan Center or (iii) Mr.  Tannenhauser
terminates  the  agreement  due to a reduction in Mr.  Tannenhauser's  salary or
benefits or the diminution of his  responsibility,  authority or status as chief
executive.

                  Leonard  Rudolph.   Leonard  Rudolph's   Employment  Agreement
provides that he shall be employed as Executive  Vice President and President of
Business Loan Center,  Inc.  through April 30, 2003 at an annual gross salary of
$170,000.  Mr.  Rudolph  was also  granted  a $10,000  signing  bonus as well as
options to purchase 70,000 shares of Common Stock at an exercise price of $4.81,
which shall vest equally over four years. During Fiscal Year 2000, Mr. Rudolph's
salary  was  increased  to  $185,000.  During  Fiscal  Year  1999,  the Board of
Directors of the Company  adjusted the exercise price of the options to purchase
70,000 shares to $3.25 per share. Mr. Rudolph is also entitled to participate in
all benefit plans established from time to time by the Company and Business Loan
Center,  Inc.  on the  same  basis  as all  other  executive  employees.  He may
terminate this Agreement in the event that Robert.  F. Tannenhauser is no longer
affiliated with the Company.  Mr.  Tannenhauser shall be deemed to be affiliated
with the Company as long as he serves as an Officer or Director of the  Company.
A termination  under this provision  shall not be deemed a termination for cause
under his employment agreement.

                  The  agreement  shall   automatically   renew  for  successive
one-year  periods  unless  notice to the contrary is given by any party not less
than 90 days prior to the expiration of the then current term.

                  The  agreement  obliges the Company to pay to Mr.  Rudolph the
greater of $170,000 or his annual gross salary if (i) Mr.  Rudolph's  employment
is  terminated  for any  reason  other  than his death or  disability,  (ii) the
agreement  is not renewed by the  Company or  Business  Loan Center or (iii) Mr.
Rudolph  terminates the agreement due to a reduction in Mr.  Rudolph's salary or
benefits or the  diminution  of his  responsibility,  authority  or status as an
executive.

                  Jennifer Goldstein.  Jennifer Goldstein's employment agreement
provides that she shall be employed as Treasurer and Chief Financial  Officer of
the  Company,  BLC  Commercial,  BLC Capital and  Business  Loan Center  through
September 30, 2002 at an initial  annual gross salary of $100,000.  Effective in
each October beginning in 1998 and ending in 2000, this base salary increases by
$25,000.  Concurrent with the signing of her employment agreement, Ms. Goldstein
was granted  options to purchase  100,000  shares of Common Stock at an exercise
price of $.82,  which shall vest equally over the next five years. Ms. Goldstein
is also entitled to  participate in all benefit plans  established  from time to
time by the  Company  and  Business  Loan  Center on the same basis as all other
executive  employees.  She may terminate this Agreement in the event that Robert
F. Tannenhauser is no longer affiliated with the Company. Mr. Tannenhauser shall
be deemed to be  affiliated  with the Company as long as he serves as an Officer
or Director of the Company.  A  termination  under this  provision  shall not be
deemed a termination for cause under her employment agreement.



                                       31
<PAGE>


                  The  agreement  shall   automatically   renew  for  successive
one-year  periods  unless  notice to the contrary is given by any party not less
than 90 days prior to the expiration of the then current term.

                  The agreement  obliges the Company to pay to Ms. Goldstein the
greater of $100,000 or her annual gross salary if (i) Ms. Goldstein's employment
is  terminated  for any  reason  other  than her death or  disability,  (ii) the
agreement  is not renewed by the  Company or  Business  Loan Center or (iii) Ms.
Goldstein  terminates  the agreement due to a reduction in salary or benefits or
the diminution of her responsibility, authority or status as an executive.

                 AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
                        AND FISCAL YEAR-END OPTION VALUES

                  The following  table sets forth  information  concerning  each
exercise of stock options during Fiscal Year 2000 by the named individual, along
with the year-end value of unexercised options/warrants at June 30, 2000.

<TABLE>
<CAPTION>

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

                                                                Number of Securities     Value of Unexercised
Name                                                            Underlying Unexercised   In-The-Money
                              Shares                            Options at 6/30/00       Options/Warrants at
                              Acquired on                       exercisable /            6/30/00 (4) exercisable /
                              Exercise         Value Realized   unexercisable            unexercisable
<S>                             <C>              <C>                    <C>              <C>
----------------------------- ---------------- ---------------- ------------------------ ---------------------------
Robert F. Tannenhauser
President and Director        0                0                672,500 / 900,000 (1)    $650,652 / 422,000
----------------------------- ---------------- ---------------- ------------------------ ---------------------------
Leonard Rudolph
Executive Vice President      0                0                35,000 / 55,000 (2)      $    0
----------------------------- ---------------- ---------------- ------------------------ ---------------------------
Jennifer Goldstein
Chief Financial Officer       75,000           $103,125         55,000 / 220,000 (3)     $ 42,200 / 63,300
----------------------------- ---------------- ---------------- ------------------------ ---------------------------
</TABLE>

(1) Includes  375,000 options at an exercise price of $2.90 of which 75,000 were
currently  exercisable at June 30, 2000, 500,000 options at an exercise price of
$.82 of which  100,000  shares  were  currently  exercisable  at June 30,  2000,
200,000  options  at an  exercise  price of $1.99 of which  none were  currently
exercisable  at June 30, 2000,  427,500  options at an exercise price of $.60 of
which 427,500 were  exercisable at June 30, 2000 (all of which were exercised on
September  7, 2000),  and  Directors  options of 10,000 at an exercise  price of
$3.31 and 25,000 at an exercise  price of $2.00 and 35,000 at an exercise  price
of $2.20 all of which were currently exercisable at June 30, 2000.
(2)Includes  70,000  options at an exercise  price of $3.25 of which 35,000 were
currently  exercisable at June 30, 2000,  25,000 options at an exercise price of
$2.90 of none of which were  currently  exercisable at June 30, 2000, and 20,000
options at $1.99 of which none were currently exercisable at June 30, 2000.
(3) Includes 75,000 at an exercise price of $2.90 of which 15,000 were currently
exercisable  at June 30, 2000,  100,000  options at an exercise price of $.82 of
which 40,000 were  currently  exercisable  at June 30,  2000,  and 100,000 at an
exercise  price of $1.99 per share none of which were  currently  exercisable at
June 30, 2000.
(4)The  value  realized  equals the market value of the common stock at June 30,
2000 (Closing Bid) minus the exercise price  multiplied by the number of shares.
The price of a share of common  stock at the close of  business on June 30, 2000
was $1.875



                                       32
<PAGE>

<TABLE>
<CAPTION>


                     OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
                                Individual Grants

----------------------- -------------- -------------- ---------- ----------- ------------------- ----------------------
                                                                                      Potential             Potential
                                                                               realizable value      realizable value
                            Number of        % Total                          at assumed annual     at assumed annual
                           securities   Options/SARs                             rates of stock        rates of stock
                           underlying     Granted to   Exercise                           price                 price
                         options/SARs   Employees in      Price  Expiration    appreciation for      appreciation for
Name                          Granted    Fiscal Year  ($/share)        Date    option term 5% ($)    option term 10% ($)
<S>                              <C>            <C>     <C>             <C>             <C>             <C>
----------------------- -------------- -------------- ---------- ----------- ------------------- ----------------------
Robert F. Tannenhauser
President and Director        200,000            34%      $1.99    10/24/04             $73,329            $204,330
                               35,000             6%      $2.20     3/29/04             $12,340             $35,735
----------------------- -------------- -------------- ---------- ----------- ------------------- -------------------
Leonard Rudolph
Executive Vice                 20,000             3%      $1.99    10/24/04              $7,933             $20,433
President
----------------------- -------------- -------------- ---------- ----------- ------------------- -------------------
Jennifer Goldstein
Chief Financial               100,000            17%      $1.99    10/24/04             $39,655            $102,165
Officer
----------------------- -------------- -------------- ---------- ----------- ------------------- -------------------

</TABLE>

                  Reference is made to Item 12 of this Report entitled  "Certain
Relationships  and  Related  Transactions"  for a  description  of fees  paid to
entities that are affiliated with certain  executive  officers and a description
of the employment agreements with officers and employees.

Compensation Committee Interlocks and Insider Participation.

                  At June 30,  2000,  Peter  Blanck,  Robert  D'Loren  and Irwin
Redlener were members of the Compensation Committee of the Board of Directors of
the  Company.  The  Compensation  Committee's  functions  include the review and
approval of compensation and terms of employment for all executive  officers and
administering  the grant of employee stock options  pursuant to the 1995 Amended
Management Incentive Plan. Peter Blanck is a substantial shareholder,  debenture
holder  and  warrant  holder  of the  Company  and  brother-in-law  to Robert F.
Tannenhauser,  who serves as President  and Chairman of the Board.  In addition,
Robert  D'Loren and Irwin Redlener are also warrant and/or option holders and/or
shareholders  of the  Company.  (See  Item  12  Security  Ownership  of  Certain
Beneficial Owners and Management).

Indemnification of Directors and Officers

                  Section 102(b)(7) of the General  Corporation Law of the State
of Delaware  grants  corporations  the right to limit or eliminate  the personal
liability of their directors in certain circumstances and in accordance with the
provisions  therein set forth.  Article 7 of the Company's  Amended and Restated
Certificate of Incorporation  provides for the elimination of personal liability
of a Director to the Corporation or its  stockholders  for monetary  damages for
the breach of the Director's  fiduciary duty to the full extent  allowable under
Section 102 (b) (7).

                  Section  145 of the  General  Corporation  Law of the State of
Delaware grants  corporations the right to indemnify their directors,  officers,
employees  and  agents in  accordance  with the  provisions  therein  set forth.
Article  8  of  the  Company's   Certificate  of   Incorporation   provides  for


                                       33
<PAGE>

indemnification  of such persons to the full extent  allowable under  applicable
law.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT.

                  The  following  table sets  forth  certain  information  as of
September  11,  2000 with  respect to (i) those  persons or groups  known to the
Company to  beneficially  own more than 5% of the Company's  Common Stock,  (ii)
each director of the Company,  (iii) each named  executive  officer and (iv) all
directors and officers of the Company as a group.  The information is determined
in accordance with Rule 13d-3 promulgated  under the Securities  Exchange Act of
1934 ("Rule  13d-3") based upon  information  furnished by the persons listed or
known  to  the  Company.   Except  as  indicated  on  the  following  page,  the
shareholders  listed  possess sole voting and  investment  power with respect to
their shares.

<TABLE>
<CAPTION>

--------------------------------------- ------------------------------------- -------------------------------------
Name and Address of Beneficial          Amount and Nature of Beneficial
Owner                                   Ownership                             Percent Of Class
<S>                                     <C>                                     <C>
--------------------------------------- ------------------------------------- -------------------------------------
Futuronics Corporation                  2,595,224 (1)                         12.05%
3652 Forest Gate Drive, N.E.
Iowa City, Iowa 52240
--------------------------------------- ------------------------------------- -------------------------------------
Peter D. Blanck                         3,431,390 (2)(3)                      15.78%
University of Iowa, College of Law
Iowa City, Iowa 52241
--------------------------------------- ------------------------------------- -------------------------------------
Richard Blanck                          3,211,391 (2)(4)                      14.87%
9 Hickory Road
Manhasset Hills, New York 11040
--------------------------------------- ------------------------------------- -------------------------------------
Robert W. D'Loren                       290,000(5)                            1.33%
72 Woodland Drive
Oyster Bay Cove, NY 11771
--------------------------------------- ------------------------------------- -------------------------------------
Jennifer M. Goldstein                   267,275(6)                            1.24%
50 West 72nd Street
New York, New York 10023
--------------------------------------- ------------------------------------- -------------------------------------
David I. Redlener                       11,940(7)                             *
155 Henry Street
Brooklyn, New York  11201
--------------------------------------- ------------------------------------- -------------------------------------
Irwin E. Redlener                       90,000(8)                             *
11 Alfred Lane
New Rochelle, New York 10804
--------------------------------------- ------------------------------------- -------------------------------------
Diane Rosenfeld                         1,112,484 (9)                         5.11%
RR #1 Box 427 D
County Road #86
Amenia, New York 12501
--------------------------------------- ------------------------------------- -------------------------------------
Kenneth S. Schwartz                     101,525(10)                           *
284 Guard Hill Road
Bedford, New York 10506
--------------------------------------- ------------------------------------- -------------------------------------
Carol Tannenhauser                      5,800,338 (2)(11)                     26.30%
210 East 68th Street
New York, New York 10021
--------------------------------------- ------------------------------------- -------------------------------------
Robert F. Tannenhauser                  5,800,338 (11)                        26.30%
210 East 68th Street
New York, New York 10021
--------------------------------------- ------------------------------------- -------------------------------------
Jerome B.  Alenick                      377,500 (12)                          1.75%
26 Columbia Turnpike
Florham Park, New Jersey 07932
--------------------------------------- ------------------------------------- -------------------------------------
Robert W. Wien                          159,500 (13)                          *
24 James Road
Mount Kisco, New York 10549
--------------------------------------- ------------------------------------- -------------------------------------


                                       34
<PAGE>


--------------------------------------- ------------------------------------- -------------------------------------
Name and Address of Beneficial          Amount and Nature of Beneficial
Owner                                   Ownership                             Percent Of Class
<S>                                     <C>                                     <C>
--------------------------------------- ------------------------------------- -------------------------------------
Leonard Rudolph                         60,925 (14)                           *
3 Pelham Place
East Brunswick, New Jersey 08816
--------------------------------------- ------------------------------------- -------------------------------------

All Directors and officers              7,783,339(15)                         33.83%
    as a group (nine persons)
--------------------------------------- ------------------------------------- -------------------------------------
</TABLE>

* Owns less than 1% of the outstanding shares of Common Stock

(1)      Includes  2,595,224  shares owned  directly by Futuronics  Corporation.
         Carol  Tannenhauser,  Richard Blanck,  and Peter D. Blanck are officers
         and directors of Futuronics Corporation.

(2)      Carol  Tannenhauser,  Richard Blanck, and Peter D. Blanck are siblings.
         Each disclaims beneficial ownership of the shares owned by the others.

(3)      Includes  (a) 160,737  shares owned  directly by Peter D.  Blanck,  (b)
         295,267  shares  deemed owned by Peter D. Blanck as  custodian  for his
         four children,  (c) 70,000 shares underlying  options owned by Peter D.
         Blanck,  (d) 176,830  shares owned by Trust  created  under the Will of
         Albert Blanck under which Peter D. Blanck is a Trustee and Beneficiary,
         (e) 2,595,224 shares owned by Futuronics  Corporation of which Peter D.
         Blanck is an officer  and  director,  (f)  100,000  shares  that may be
         acquired upon the  conversion  of Debentures  held directly by Peter D.
         Blanck and (g) 33,332 shares that may be acquired  upon the  conversion
         of  debentures  held by  Peter  D.  Blanck  as  custodian  for his four
         children.

(4)      Includes  (a) 273,834  shares  owned  directly by Richard  Blanck,  (b)
         107,169  shares deemed owned by Richard Blanck as custodian for his two
         children,  (c) 176,830  shares owned by Trust created under the Will of
         Albert Blanck under which Richard Blanck is a Trustee and  Beneficiary,
         (d) 2,595,224  shares owned by Futuronics  Corporation of which Richard
         Blanck is an officer  and  director  and (e) 25,000  shares that may be
         acquired upon the  conversion of Debentures  held by Richard Blanck and
         (f)  33,334  shares  that  may  be  acquired  upon  the  conversion  of
         Debentures held by Richard Blanck as custodian for his two children.

(5)      Includes (a) 200,000  shares that may be acquired  upon the exercise of
         Warrants  held by  D'Loren  Levien &  Company  L.L.C.  of which  Robert
         D'Loren is a member and (b) 90,000 shares that maybe  acquired upon the
         exercise of options held by Robert D'Loren.

(6)      Includes  (a) 197,275  shares owned by Jennifer M.  Goldstein,  and (b)
         70,000 shares underlying  options  exercisable as of September 11, 2000
         owned by Jennifer M. Goldstein.

(7)      Includes (a) 1,940 shares owned by David Redlener and (b) 10,000 shares
         that  may be  acquired  upon  the  exercise  of  options  held by David
         Redlener.

(8)      Includes  90,000  shares  that may be  acquired  upon the  exercise  of
         options held by Irwin Redlener.

(9)      Includes (a) 666,710  shares  directly  owned by Diane  Rosenfeld,  (b)
         218,274  shares  directly  owned by Eric Rosenfeld , (b) 202,500 shares
         underlying  options owned by Diane Rosenfeld and (d) 25,000 shares that
         may be acquired upon the exercise of Warrants owned by Diane Rosenfeld.

(10)     Includes  (a)  11,525  shares  directly  owned by Kenneth  Schwartz  or
         jointly with Jane Schwartz,  and (b) 90,000 shares that may be acquired
         upon the exercise of options held by Kenneth Schwartz.



                                       35
<PAGE>


(11)     Includes (a) 638,279 shares owned  directly by Robert F.  Tannenhauser,
         (b) 1,325,409 shares directly owned by Carol  Tannenhauser,  the spouse
         of  Robert  F.   Tannenhauser,   (c)  2,595,224   owned  by  Futuronics
         Corporation of which the spouse of Robert F. Tannenhauser is an officer
         and director,  (d) 176,830 shares owned by Trust created under the Will
         of Albert  Blanck under which the spouse of Robert F.  Tannenhauser  is
         Trustee and Beneficiary, (e)(f) 54,500 shares that may be acquired upon
         the conversion of Debentures  held by Carol  Tannenhauser,  (g) 249,500
         shares owned by David  Tannenhauser,  the son of Robert F. Tannenhauser
         and Carol Tannenhauser, (h) 164,600 shares owned by Emily Tannenhauser,
         the  daughter of Robert F.  Tannenhauser  and Carol  Tannenhauser,  (i)
         84,899  shares owned by Emily  Tannenhauser,  the daughter of Robert F.
         Tannenhauser  and  Carol  Tannenhauser,  (j) 4,500  shares  that may be
         acquired  upon  the   conversion  of  Debentures   held  by  Robert  F.
         Tannenhauser,   (k)  21,167  shares  that  may  be  acquired  upon  the
         conversion of Debentures held by David Tannenhauser,  the son of Robert
         F. Tannenhauser and Carol  Tannenhauser,  (l) 21,166 shares that may be
         acquired upon the conversion of Debentures held by Emily  Tannenhauser,
         the  daughter of Robert F.  Tannenhauser  and Carol  Tannenhauser,  (n)
         22,132 shares held in trust for David  Tannenhauser,  the son of Robert
         F. Tannenhauser and Carol Tannenhauser, (o) 22,132 shares held in trust
         for Emily  Tannenhauser,  the  daughter of Robert F.  Tannenhauser  and
         Carol   Tannenhauser   and  (p)  420,000  shares   underlying   options
         exercisable as of September 11, 2000 owned by Robert F. Tannenhauser.

(12)     Includes (a) 300,000  shares owned by the Defined  Benefit Plan for the
         Benefit of Jerome Alenick,  (b) 70,000 shares underlying  options owned
         by Jerome Alenick,  and (c) 7,500 shares owned by Jerome B. Alenick and
         Nicole A. Alenick as joint tenants and tenants in common.

(13)     Includes (a) 35,000 shares owned directly by Robert W. Wien, (b) 90,000
         shares that may be acquired upon the exercise of options held by Robert
         W. Wien,  and (c) 34,500  shares that may be acquired upon the exercise
         of certain Warrants held by Robert W. Wien.

(14)     Includes (a) 25,924  shares owned  directly by Leonard  Rudolph and (b)
         35,000 shares underlying  options  exercisable as of September 11, 2000
         owned by Leonard Rudolph.

(15)     Represents  shares  beneficially  owned  pursuant  to Rule 13d-3 by Mr.
         Tannenhauser,  a Director and President of the Company,  Ms. Goldstein,
         Treasurer and Chief Financial Officer of the Company,  Leonard Rudolph,
         Executive Vice President of the Company,  David Redlener,  Secretary of
         the Company,  Messrs.  D'Loren,  Peter Blanck , Wien,  Alenick and Drs.
         Redlener and  Schwartz,  directors of the  Company.  The shares  deemed
         beneficially  owned by  Robert  F.  Tannenhauser  and  Peter D.  Blanck
         through  Futuronics  Corporation  and Trust  created  under the Will of
         Albert  Blanck have been added only once to the total  shares  owned by
         officers and directors as a group.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

                  Since June 30, 1992,  various members of the immediate  family
and  affiliates  of Robert F.  Tannenhauser  have  made  available  funds to the
Company for the purpose of  originating  loans.  In exchange for extending  such
loans,  the Company paid  interest to the person or entities  funding such loans
during Fiscal Years 2000,  1999,  1998,  1997 and 1996. For those  periods,  the
Company incurred  interest expense relating to such individuals in the aggregate
amounts of $20,000, $19,000, $17,000, $157,000, and $130,000,  respectively. The
maximum amounts  outstanding for these loans during the periods in question were
$300,000,  $1,077,000,  $2,594,000,  $2,594,000,  and $2,108,000,  respectively.
Additionally,  certain  members  and  affiliates  of Mr.  Tannenhauser's  family
participated in the debenture  offering placed by the Company during Fiscal Year
1998 and 1999.  During  Fiscal  Year 2000,  interest  expense  relating  to such
individuals  approximated  $95,000  based  upon  the  outstanding  debenture  of
$1,240,000.  Additionally, during Fiscal Year 1999, interest expense relating to
such individuals totaled approximately $88,000 based upon outstanding debentures
to said parties in the aggregate amount of $950,000.

                  On November 11, 1997,  the Company  entered into an investment
banking agreement with Josephthal & Co., Inc.  ("Josephthal")  pursuant to which
the  Company  paid  a  $25,000  retainer  to  Josephthal  and  agreed  to pay an
additional  $12,500  per month for three  months  commencing  in  January  1998.


                                       36
<PAGE>

Thereafter  the fee would be reduced to $5,000 per month.  For the fiscal  years
ended June 30, 1999 and 1998, the Company paid Josephthal approximately, $27,000
and  $85,000  in  fees,  respectively.   In  addition,  the  Company  issued  to
Josephthal,  pursuant to such Investment Banking Agreement, warrants to purchase
90,000 shares of the Common Stock of the Company. The initial exercise price for
the warrants is $1.10 per share. Robert W. Wien, a director of the Company, is a
Managing Director of Josephthal.

                  For information on Peter Blanck,  Kenneth  Schwartz and Robert
D'Loren see Item 11. Executive Compensation-Compensation Committee Interlock and
Insider Participation.



                                       37
<PAGE>


Part IV
Item 14.     Exhibits, Financial Statements, Financial Statement Schedules, and
             Reports on Form 8-K.

             (a)(1) and (2) Financial Statements and Financial Statement
             Schedules

REGISTRANT:

The following  consolidated  financial statements and schedules of BLC Financial
Services,  Inc.  and  subsidiaries,  the notes  thereto and the  related  report
thereon of the independent auditors are filed pursuant to Item 8 of this Report:

    Independent Auditors' Report............................................ F-2
    Consolidated Balance Sheets at June 30, 2000 and 1999................... F-3
    Consolidated Statements of Income --
     Years Ended June 30, 2000, 1999 and 1998................................F-4
    Consolidated Statements of Changes in
     Shareholders' Equity --Years ended
     June 30, 2000, 1999 and 1998......................................... . F-5
    Consolidated Statements of Cash Flows --
     Years ended June 30, 2000, 1999 and 1998................................F-6
                  Notes to Consolidated Financial Statements.................F-7

                  All  other  schedules  for  which  provision  is  made  in the
applicable  accounting  regulation of the Securities and Exchange Commission are
not  required  under  the  instructions  to  Item  8 or  are  inapplicable,  and
therefore, have been omitted.

                  (a)(3)   Exhibits Filed
                           See  Exhibit  Index  beginning  on  page  40 of  this
                  Report.

                  (b)      Reports on Form 8-K
                           The  Company  filed one Report on Form 8-K during the
                  fiscal  year  ending  on June  30,  2000.  In  December  1999,
                  Business Loan Center,  Inc., a wholly-owned  subsidiary of the
                  Company,  successfully  completed  the  closing of a revolving
                  securitization facility which allows for periodic loans sales
                  into a conduit facility.

                  (c)      Exhibits
                           See Item 14(a)(3) above.

                  (d)      Financial Statement Schedules
                           The  financial  statement  schedules  required  to be
                  filed pursuant to this Item 14(d) are listed above under Items
                  14(a)(1) and (2).



                                       38
<PAGE>
























                          BLC FINANCIAL SERVICES, INC.

                        CONSOLIDATED FINANCIAL STATEMENTS

                             JUNE 30, 2000 and 1999


<PAGE>


BLC FINANCIAL SERVICES, INC.

Contents                                                              Page


Consolidated Financial Statements

   Independent auditors' report                                        F-2

   Balance sheets                                                      F-3

   Statements of income                                                F-4

   Statements of changes in shareholders' equity                       F-5

   Statements of cash flows                                            F-6

   Notes to financial statements                                       F-7



<PAGE>

INDEPENDENT AUDITORS REPORT

Shareholders and Board of Directors
BLC Financial Services, Inc.


We have audited the  accompanying  consolidated  balance sheets of BLC Financial
Services,  Inc. and  subsidiaries  as of June 30, 2000 and 1999, and the related
consolidated  statements  of income,  changes in  shareholders'  equity and cash
flows for each of the years in the three year period ended June 30,  2000. These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion, the financial statements enumerated above present fairly, in all
material  respects,   the  consolidated  financial  position  of  BLC  Financial
Services,  Inc.  and  subsidiaries  as  of  June  30,  2000  and  1999  and  the
consolidated  results of their operations and their  consolidated cash flows for
each of the years in the three year period  ended June 30, 2000,  in  conformity
with generally accepted accounting principles.


Richard A. Eisner & Company, LLP


Florham Park, New Jersey
September 15, 2000



                                       F-2
<PAGE>





BLC FINANCIAL SERVICES, INC.

Consolidated Balance Sheets



<TABLE>
<CAPTION>
                                                                                                           June 30,
<S>                                                                                                <C>                <C>
                                                                                                   2000               1999

ASSETS
   Loans receivable - net                                                                      $22,291,000        $ 21,936,000
   Loans held for sale                                                                           7,494,000           8,922,000
   Cash                                                                                          9,609,000           4,229,000
   Restricted cash                                                                               1,860,000           1,728,000
   Accounts receivable - loans sold                                                             15,121,000           8,982,000
   Accounts and other receivables                                                                1,803,000           2,681,000
   Prepaid expenses and security deposits                                                          592,000             595,000
   Leasehold improvements, furniture and equipment, net of accumulated
      depreciation of $882,000 in 2000; $571,000 in 1999                                         1,288,000           1,207,000
   Servicing assets                                                                              7,189,000           4,761,000
   Residual interests                                                                           16,794,000          10,877,000
   Deferred tax asset                                                                                    0           1,000,000
   Deferred financing costs, net of accumulated amortization of $1,344,000 in
      2000; $774,000 in 1999                                                                     1,132,000             669,000
   Other assets                                                                                    723,000             450,000
                                                                                             --------------     --------------

                                                                                               $85,896,000        $ 68,037,000
                                                                                             ==============     ==============

LIABILITIES
   Advances under credit facilities                                                            $45,840,000        $ 39,488,000
   Accounts payable and accrued expenses                                                         2,073,000             643,000
   Due to participants                                                                           2,466,000           1,640,000
   Allowance for estimated future losses on loans sold                                              10,000              77,000
   Notes payable                                                                                         0             120,000
   Convertible debentures                                                                        6,486,000           4,725,000
   Customer deposits                                                                             2,443,000           2,197,000
   Deferred tax liability                                                                        1,487,000                   0
                                                                                             -------------      --------------

        Total liabilities                                                                       60,805,000          48,890,000
                                                                                             -------------      --------------

Commitments and contingencies (Note 8)

SHAREHOLDERS' EQUITY:
Preferred stock, $.10 par value:
   Authorized - 2,000,000  shares,  issued and  outstanding - none
Common stock, $.01 par value:
   Authorized - 35,000,000 shares, issued and outstanding
      20,467,875 in 2000 and 20,288,875 in 1999                                                   205,000              202,000
Additional paid-in capital                                                                     12,923,000           12,659,000
Retained earnings                                                                              11,147,000            5,865,000
Accumulated other comprehensive income - unrealized gain on residual interests
   (net of income taxes of $533,000 in 2000; $305,000 in 1999)                                    816,000              421,000
                                                                                             ------------          -----------

        Total shareholders' equity                                                             25,091,000           19,147,000
                                                                                             ------------         ------------

                                                                                              $85,896,000         $ 68,037,000
                                                                                             ============         ============
</TABLE>

See notes to financial statements



                                      F-3
<PAGE>

BLC FINANCIAL SERVICES, INC.


Consolidated Statements of Income



<TABLE>
<CAPTION>

                                                                                           Year Ended June 30,
<S>                                                                                <C>              <C>              <C>
                                                                                  2000             1999             1998


Revenues:
   Gain on sale of loans                                                      $16,687,000       $ 11,868,000   $   10,583,000
   Interest income                                                              4,654,000          3,550,000        2,439,000
   Service fee income                                                           2,896,000          2,355,000        1,150,000
   Miscellaneous                                                                2,129,000          1,649,000        1,557,000
                                                                            -------------     --------------   --------------
                                                                               26,366,000         19,422,000       15,729,000
                                                                            -------------     --------------   --------------
Expenses:
   Operating costs                                                             11,237,000          8,636,000        6,481,000
   General and administrative                                                   3,126,000          2,746,000        1,753,000
   Interest                                                                     3,865,000          2,886,000        2,158,000
                                                                            -------------     --------------   --------------

                                                                               18,228,000         14,268,000       10,392,000
                                                                            -------------     --------------   --------------

Income before provision for income taxes                                        8,138,000          5,154,000        5,337,000
Provision for income taxes                                                      2,856,000          2,051,000        2,111,000
                                                                            -------------     --------------   --------------

Net income                                                                   $  5,282,000     $    3,103,000   $    3,226,000
                                                                            =============     ==============   ==============

Earnings per share
   Basic                                                                          $.26             $.16             $.18
   Diluted                                                                        $.22             $.14             $.15


</TABLE>











See notes to financial statements


                                      F-4
<PAGE>


BLC FINANCIAL SERVICES, INC.

Consolidated Statements of Changes in Shareholders' Equity


<TABLE>
<CAPTION>

                             Common Stock                        Retained      Accumulated
                         ----------------------     Additional   Earnings         Other
                         Number                      Paid-in   (Accumulated    Comprehensive Comprehensive
                        of Shares       Amount       Capital      Deficit)       Income       Income         Total
                        -----------    --------- ------------- ------------- -------------- ------------  -------------

<S>                       <C>            <C>            <C>            <C>       <C>            <C>            <C>
Balance,
June 30, 1997            17,341,243    $   173,000    $7,391,000  $ (464,000)     $  90,000                 $ 7,190,000
Exercise of warrants      2,437,206         24,000     1,264,000                                              1,288,000
Net income                                                         3,226,000                  $ 3,226,000     3,226,000
Pre-confirmation net
 operating loss
 utilization                                           1,996,000                                              1,996,000
Issuance of warrants
 in connection
 with professional
 services rendered                                       189,000                                                189,000
Change in unrealized
 gain on residual
 interests, net of
 income tax effect                                                                  380,000       380,000       380,000
                         ------------   -----------  ------------- ------------  -----------   -----------   -----------
                                                                                               $3,606,000
                                                                                               -----------

Balance
June 30, 1998            19,778,449        197,000    10,840,000   2,762,000        470,000                  14,269,000


Exercise of warrants
 and options                510,426          5,000       286,000                                                291,000
Net income                                                         3,103,000                   $3,103,000     3,103,000
Pre-confirmation net
 operating loss
 utilization                                           1,533,000                                              1,533,000
Change in unrealized
 gain on residual
 interests, net of
 income tax effect                                                                  (49,000)      (49,000)      (49,000)
                         -----------    -----------   ------------ ------------- -----------  ------------   -----------
                                                                                               $3,054,000
                                                                                              ------------
Balance,
June 30, 1999            20,288,875        202,000    12,659,000   5,865,000        421,000                  19,147,000
Exercise of warrants
 and options                179,000          3,000        89,000                                                 92,000
Net income                                                         5,282,000                    5,282,000     5,282,000
Pre-confirmation
 net operating loss
 utilization                                              92,000                                                 92,000
Issuance of warrants
 in connection
 with professional
 services rendered                                        83,000                                                 83,000
Change in unrealized
 gain on residual
 interests, net of
 income tax effect                                                                  395,000       395,000       395,000
                         -----------    -----------  ----------- ------------   -----------    ----------   -----------
                                                                                               $5,677,000
                                                                                               ----------
Balance,
June 30, 2000            20,467,875     $  205,000   $12,923,000 $11,147,000       $816,000                 $25,091,000
                         ===========    ===========  =========== ============   ===========                 ===========


</TABLE>







See notes to financial statements


                                      F-5
<PAGE>

BLC FINANCIAL SERVICES, INC.


Consolidated Statements of Cash Flows


<TABLE>
<CAPTION>

                                                                                                   Year Ended June 30,
<S>                                                                                       <C>              <C>            <C>
                                                                                          2000             1999           1998
Cash flows from operating activities:
   Net Income                                                                       $   5,282,000    $ 3,103,000      $ 3,226,000
   Adjustments to reconcile net income to net cash provided by (used in)
      Operating activities:
        Depreciation                                                                      310,000        233,000          131,000
        Amortization                                                                    1,809,000      1,047,000          782,000
        Provisions for credit losses                                                      702,000        398,000          190,000
        Deferred income tax expense                                                     2,351,000      1,560,000        1,711,000
        Issuance of warrants in connection with professional services
            rendered                                                                       83,000              0          189,000
        Loans held for sale originated                                                (32,345,000)   (14,700,000)     (20,202,000)
        Sales of loans held for sale                                                   33,773,000     15,237,000       15,863,000
        Changes in:
           Restricted cash                                                               (132,000)        40,000       (1,768,000)
           Accounts receivable - loans sold                                            (6,139,000)      (730,000)      (5,005,000)
           Accounts and other receivables                                                 878,000     (1,675,000)        (724,000)
           Prepaid expenses and security deposits                                           3,000       (162,000)        (212,000)
           Servicing assets                                                            (3,696,000)    (2,299,000)      (1,712,000)
           Accrued expenses                                                             1,430,000       (520,000)         741,000
           Due to participants                                                            826,000      1,376,000         (260,000)
           Customer deposits                                                              246,000        993,000          873,000
                                                                                    -------------    ---------------  ------------
              Net cash provided by (used in) operating activities                       5,381,000      3,901,000       (6,177,000)
                                                                                    -------------    ---------------  ------------
Cash flows from investing activities:
   Loans originated                                                                   (41,377,000)   (21,793,000)     (22,673,000)
   Principal collections and sales of loans receivable                                 39,980,000     18,480,000        8,937,000
   Origination of residual interest                                                    (7,085,000)    (6,965,000)      (3,823,000)
   Principal collections on residual interests                                          1,791,000      1,061,000          429,000
   Acquisition of equipment                                                              (391,000)      (698,000)        (529,000)
                                                                                      ------------   -------------    ------------
              Net cash used in investing activities                                    (7,082,000)    (9,915,000)     (17,659,000)
                                                                                      ------------   -------------    ------------
Cash flows from financing activities:
   Net borrowings under lines of credit                                                 6,352,000      6,947,000       23,921,000
   Net proceeds from notes payable                                                              0        620,000                0
   Proceeds from issuance of debentures                                                 1,621,000        922,000        2,978,000
   Proceeds from issuance of common stock and exercise of warrants
     and options                                                                           92,000        291,000        1,288,000
   Principal payments on debentures                                                             0        (25,000)               0
   Due to affiliates                                                                      140,000              0       (2,394,000)
   Deferred financing costs                                                            (1,004,000)      (196,000)        (920,000)
   Principal payments on notes payable                                                   (120,000)       (46,000)        (110,000)
                                                                                    --------------   ------------     ------------
              Net cash provided by financing activities                                 7,081,000      8,513,000       24,763,000
                                                                                    --------------   ------------     ------------
Net increase in cash                                                                    5,380,000      2,499,000          927,000
Cash at beginning of year                                                               4,229,000      1,730,000          803,000
                                                                                    --------------   ------------     ------------

Cash at end of year                                                                  $  9,609,000    $ 4,229,000      $ 1,730,000
                                                                                     =============   ============     ============

Supplemental disclosures of cash flow information:
  Cash paid for:
      Interest                                                                      $   3,696,000    $ 2,899,000      $ 1,950,000
      Income taxes                                                                  $     408,000    $ 1,011,000        $ 175,000

</TABLE>


See Notes to financial statements

                                      F-6
<PAGE>




BLC FINANCIAL SERVICES, INC.

Notes to Financial Statements
June 30, 2000 and 1999



NOTE 1. BUSINESS OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Business operations:

The Company is  primarily  engaged in the business of  originating,  selling and
servicing  loans to small  businesses  under the Section  7(a)  Guaranteed  Loan
Program  sponsored by the United States Small Business  Administration  ("SBA").
Additionally,  the Company  originates,  sells and services  loans to businesses
under the United States  Department of Agriculture  Rural Business - Cooperative
Business and Industry Guaranteed Loan Program ("B&I"). The Company sells the SBA
and  B&I  guaranteed  portion  of the  loan  in the  secondary  market,  without
recourse, at either a premium or at par, and sells the majority of the remaining
SBA unguaranteed  portions either as loan sales or securitizations.  These sales
may be with limited recourse, full recourse or no recourse.


Principles of consolidation and preparation:

The accompanying  consolidated  financial statements include the accounts of BLC
Financial  Services,  Inc. (the "Company") and its corporate  subsidiaries after
elimination of all significant intercompany accounts and transactions. The prior
years'  financial  statements  have been  reclassified to conform to the current
year presentation.


Accounting for loans and revenue recognition:

The guaranteed  portion of the loans receivable that have been  originated,  but
not yet sold, are carried at the lower of aggregate cost or market value. Market
value is determined by outside  commitments  from  investors or current yield on
similar loans.  Loans receivable held for investment are stated at the principal
amount outstanding less deferred income.

Upon the sale of loans, the Company  allocates the cost, based upon the relative
fair values, to the guaranteed portion of the loan, the unguaranteed  portion of
the loan, the servicing  asset and residual  interest,  if any. Gain on sales of
loans  receivable  principally  represents the present value of the differential
between the interest  rates charged by the Company and the interest rates passed
on to the  purchaser  of the  receivables,  after  considering  the  effects  of
estimated prepayments,  repurchases and normal servicing fees. Gains on the sale
of  loan  receivables  are  recorded  on  the  trade  date  using  the  specific
identification method.

The Company generally ceases to accrue interest income on loan receivables which
become 90 days  delinquent.  Once the  Company  has  determined  that it will be
unable to collect all amounts due according to the contractual terms of the loan
agreement,  the loan is categorized as impaired and management  actively  begins
the  liquidation  process.  Typically  the  SBA or  USDA  is  contacted  and the
guaranteed  portions of the loan are then  repurchased from either the secondary
marketplace  or from the Company.  Contractual  interest  received on nonaccrual
loans is either  applied  against  principal  or reported  as  interest  income,
according to management's judgement as to the collectibility of principal.



                                      F-7
<PAGE>

BLC FINANCIAL SERVICES, INC.

Notes to Financial Statements
June 30, 2000 and 1999



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Credit losses:

The adequacy of the allowances  for credit losses on loans  receivable and loans
sold with  recourse are  determined  through a quarterly  review of  outstanding
loans,  commitments  to  extend  credit  and the  outstanding  loans  sold  with
recourse.  The impact of  economic  conditions  on the  creditworthiness  of the
borrowers is given consideration,  as well as credit loss experience, changes in
the composition and volume of the loan portfolio, and management's assessment of
the risk  inherent in the loan  portfolio.  These and other  factors are used in
assessing  the  overall  adequacy  of the  allowance  for credit  losses and the
resulting provision for credit losses.

Provisions  for credit  losses are  charged to income in amounts  sufficient  to
maintain the allowance for credit losses at a level considered adequate to cover
the losses of  principal in the existing  portfolio.  However,  the amount to be
realized from collateral  securing the impaired loans cannot be determined until
their  ultimate  disposition.  The  Company's  charge-off  policy is based on an
account-by-account review for all loans receivable.

Under certain limited circumstances, the Company may be liable, on loans that it
originated,   for  losses  incurred  by  the  SBA.  Management   considers  this
contingency in determining the adequacy of the allowance for credit losses.

Residual interests:

Upon the sale of loans,  the Company  may  recognize  a residual  interest.  The
residual  interest  represents  the  estimated   discounted  cash  flow  of  the
differential  between the total  interest to be earned on the loans sold and the
sum of the interest to be paid to the participants and the contractual servicing
fee.

The fair value of the residual  interest is determined based on various economic
factors  including  loan  size,  dates  of  origination,  terms  and  geographic
locations.  The Company also used other available information such as reports on
historical  average loan maturity as compared to the contractual  loan maturity.
The Company  periodically  reviews these factors and, if necessary,  adjusts the
remaining asset to the fair value of the residual interest. As of June 30, 2000,
the average loan  prepayment,  estimated  loan loss and cash flow  discount rate
assumptions are 18%, 1% and 9-3/4%, respectively.

The residual  interests are accounted for as  available-for-sale  securities and
are stated at  estimated  fair value.  Unrealized  gains and losses,  net of the
income tax effect,  have been included in total accumulated other  comprehensive
income.

Servicing assets:

Servicing assets arise from the sale of fractional interests of loans. Servicing
assets  represent the estimated  present value of the  differential  between the
contractual  servicing  fee and  the  Company's  normal  servicing  cost.  These
capitalized  amounts are amortized over the estimated  average life of the loans
in each pool sold.  The  Company  reviews the  carrying  amount of each pool for
possible  impairment.  If the estimated  present  value of the future  servicing
income is less than the carrying  amount,  the Company  recognizes an impairment
loss and reduces future amortization accordingly. Management has determined that
the primary risk  characteristics  for the servicing  pools are the type of loan
and the year of origination.




                                      F-8
<PAGE>


BLC FINANCIAL SERVICES, INC.

Notes to Financial Statements
June 30, 2000 and 1999


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




Leasehold improvements, furniture and equipment:

Furniture and equipment are recorded at cost. Depreciation is computed using the
straight-line  method over five to seven years, which approximates the estimated
useful lives of the assets. Leasehold improvements are amortized over the lesser
of the lease term or its economic life.

Comprehensive income:

Comprehensive income consists of net income plus all other changes in net assets
from nonownership sources.

Derivatives

In connection  with selling loans into a revolving  securitization,  the Company
enters into interest rate swaps in order to hedge  against  changes  between the
prime rate and LIBOR. These are accounted for as cash flow hedges. "Statement of
Financial Accounting Standards No. 133 Accounting for Derivative Instruments and
Hedging Activities"  requires that the impact of cash flow hedges be included in
other  comprehensive  income  until the related cash flow is  recognized  in the
statement of income.

Per share information:

Basic  earnings per share ("EPS") is determined  using net income divided by the
weighted average shares outstanding  during the period.  Diluted EPS is computed
by dividing net income, plus the after tax effect of the interest expense on the
convertible debentures, by the weighted average shares outstanding, assuming all
dilutive  potential common shares were issued using, with respect to the assumed
proceeds from the exercise of dilutive options and warrants,  the treasury stock
method calculated based upon average market price for the period.




                                      F-9
<PAGE>


BLC FINANCIAL SERVICES, INC.

Notes to Financial Statements
June 30, 2000 and 1999


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The following  table presents the basic and diluted EPS for the years ended
June 30, 2000, 1999 and 1998.


<TABLE>
<CAPTION>
                                      2000                                   1 9 9 9                               1 9 9 8
                     -------------------------------------   --------------------------------------  -------------------------------
                                   Weighted                                 Weighted                            Weighted
                                   Average                                  Average                             Average
                                   Number of     Per Share                  Number of     Per Share             Number of  Per share
                     Amount        Shares        Amount         Amount      Shares        Amount        Amount  Shares     Amount
<S>                     <C>       <C>           <C>             <C>         <C>             <C>           <C>      <C>       <C>

Net income         $5,282,000                                $3,103,000                              $3,226,000
                   ==========                                ==========                              ==========
Basic EPS
Income
 available
 to common
 Shareholders      $5,282,000   20,299,453       $.26        $3,103,000    20,017,158     $.16       $3,226,000  18,287,002     $.18
                                                 ====                                     ====                                  ====
Effect of
 diluted stock
 options and
 warrants                        2,011,820                                  2,613,168                             2,306,048
Effect of
 convertible
 debentures           316,000    2,806,893                      195,000     1,747,962                    91,000     831,025
                   ----------   ----------                   ----------    ----------                ----------  ----------

Diluted EPS
Income
   available
   to common
   shareholders    $5,598,000   25,118,166       $.22        $3,298,000    24,378,288     $.14       $3,317,000  21,424,075     $.15
                   ==========   ==========       ====        ==========    ==========     ====       ==========  ==========     ====

</TABLE>

Income taxes:

The Company and its subsidiaries file a consolidated  Federal income tax return.
Deferred income taxes relate to temporary differences and the net operating loss
carryforwards.

Use of 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 revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

Stock-based compensation:

Statement of Financial Accounting Standards No.  123,"Accounting for Stock-Based
Compensation"  ("FAS 123") allows companies to either expense the estimated fair
value of stock options or to continue to follow the  intrinsic  value method set
forth in  Accounting  Principles  Board  Opinion No. 25,  "Accounting  for Stock
Issued to Employees" ("APB 25") but disclose the pro forma effects on net income
had the fair value of the  options  been  expensed.  The  Company has elected to
continue to apply APB 25 in accounting for its employee  stock option  incentive
plans.




                                      F-10
<PAGE>
BLC FINANCIAL SERVICES, INC.

Notes to Financial Statements
June 30, 2000 and 1999


NOTE 2. LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES

The loans  receivable are principally  long-term  business  loans,  with initial
terms ranging from 7 to 25 years, made to qualifying small businesses. The loans
have variable interest rates which adjust based upon the prime rate.

As of June 30, 2000 and 1999, loans receivable - net consisted of:

                                                      2000             1999
                                                  -----------     --------------
              Loans receivable                    $23,966,000     $  23,860,000
              Less:
                 Deferred income                     (522,000)       (1,010,000)
                 Allowance for credit losses       (1,153,000)         (914,000)
                                                  ------------     -------------

              Net loans receivable                $22,291,000       $21,936,000
                                                  ============     =============

As of June 30, 2000,  contractual maturities of loans receivable for each of the
next five years are as follows:

           Year Ending
             June 30,
         ---------------
              2001                $  330,000
              2002                   370,000
              2003                   414,000
              2004                   463,000
              2005                   519,000


As of June 30, 2000 and 1999, the impaired loan portfolio totaled $1,879,000 and
$1,673,000,  respectively,  for which specific  allocations to the allowance for
credit losses aggregated $538,000 and $382,000 respectively. The average balance
of the  impaired  loan  portfolio  for the year  ended  June  30,  2000 and 1999
approximated  $1,776,000 and $1,741,000,  respectively.  The Company  recognized
approximately  $138,000 in interest income on its impaired loan portfolio during
the year ended June 30, 2000. The Company did not recognize any interest  income
on its impaired loan portfolio during the years ended June 30, 1999 and 1998.

Changes in the  allowance  for credit  losses for the three years ended June 30,
2000 were as follows:

           Balance as of June 30, 1998             $     641,000
           Provision for credit losses                   787,000
           Loans charged off                            (514,000)
                                                   --------------
           Balance as of June 30, 1999                   914,000
           Provision for credit losses                   769,000
           Loans charged off                            (530,000)
                                                   --------------

           Balance as of June 30, 2000             $   1,153,000
                                                   ==============






                                      F-11
<PAGE>

BLC FINANCIAL SERVICES, INC.

Notes to Financial Statements
June 30, 2000 and 1999


NOTE 3. SERVICING ASSETS AND RESIDUAL INTERESTS

Changes in  servicing  assets and residual  interests  for the three years ended
June 30, 2000 are as follows:


<TABLE>
<CAPTION>
                                                                                      Servicing        Residual
                                                                                        Assets         Interests
                <S>                                                                     <C>             <C>
                                                                                     -----------    -------------
              Balance, June 30, 1998                                                 $3,270,000     $   5,057,000
              Assets originating from loan sales                                      2,299,000         6,965,000
              Amortization                                                             (808,000)
              Principal payments                                                                       (1,061,000)
              Change in market value                                                                      (84,000)
                                                                                    -------------   --------------
              Balance, June 30, 1999                                                  4,761,000        10,877,000
              Assets originating from loan sales                                      3,696,000         7,085,000
              Amortization                                                           (1,268,000)
              Principal payments                                                                       (1,791,000)
              Change in market value                                                                      623,000
                                                                                    -------------    -------------

              Balance, June 30, 2000                                                $7,189,000        $16,794,000
                                                                                    ============     =============
</TABLE>


As of June 30, 2000, the net unrealized gains related to residual interests were
$1,349,000.


NOTE 4. FINANCING

As of June 30, 2000, the Company had $65,000,000 in revolving credit facilities.
The facilities are  collateralized by loans receivable,  loans held for sale and
accounts  receivable  - loans sold and the  interest  rates range from the LIBOR
rate plus 2% to the prime rate plus 1%. The facilities expire in August 2001 and
include  covenants  requiring  the company to,  among  other  matters,  maintain
minimum tangible net worth.

Debentures  aggregating  $3,303,000  as of June 30,  2000 and June 30, 1999 bear
interest at 9-1/4% per annum,  mature  November  2001 and are  convertible  into
1,649,549  shares  of  the  Company's  common  stock.   Debentures   aggregating
$3,183,000 as of June 30, 2000 and  $1,422,000 as of June 30, 1999 bear interest
at 9% per annum,  mature February 2003 and are convertible into 1,157,344 shares
of  the  Company's  common  stock.   Debentures  aggregating  $1,540,000  (total
outstanding at the  modification  date) were initially  convertible  into common
stock at $3.50 per share.  However,  during the year  ended June 30,  2000,  the
conversion price was reduced to $2.75 per share, which exceeded the market price
at the  modification  date.  This  modification  did not  result  in a charge to
operations. Additionally, these notes are subordinated to the revolving lines of
credit.

The principal payments on debentures of $3,303,000 and $3,183,000 are due during
the years ending June 30, 2002 and June 30, 2004, respectively.




                                      F-12
<PAGE>

BLC FINANCIAL SERVICES, INC.

Notes to Financial Statements
June 30, 2000 and 1999

NOTE 5. INCOME TAXES

The  significant  components  of the  Company's  deferred  income tax assets and
liabilities as of June 30, 2000 and 1999 are as follows:


<TABLE>
<CAPTION>
                                                                          2000              1999
                                                                      ------------     --------------
                <S>                                                       <C>                <C>
           Deferred income tax assets:
              Net operating losses                                    $   448,000      $   1,305,000
              Allowance for credit losses                                 442,000            382,000
              Loan discount                                               199,000            390,000
              Alternative minimum tax credit carryforward                 269,000            220,000
                                                                      -------------    --------------
                                                                        1,358,000          2,297,000
           Valuation allowance                                           (448,000)          (992,000)
                                                                      -------------    --------------
                                                                          910,000          1,305,000
                                                                      -------------    --------------
           Deferred income tax liability:
              Unrealized gain on residual Interest                       (533,000)          (305,000)
              Gain on securitization                                   (1,864,000)                 0
                                                                      -------------     -------------
                                                                       (2,397,000)          (305,000)
                                                                      -------------     -------------

           Net deferred income tax (liability)asset                   ($1,487,000)      $  1,000,000
                                                                      =============    ==============
</TABLE>

The valuation  allowance  represents the tax benefit of the pre confirmation net
operating losses not utilized.

The significant components of the provision for income taxes for the years ended
June 30, 2000, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>

                                                                          2000            1999            1998
                                                                     --------------   -------------- ---------------
<S>                                                                       <C>              <C>             <C>
         Current:
              Federal                                                   $   61,000       $   98,000     $  123,000
              State                                                        355,000          393,000        277,000
                                                                     -------------    -------------  --------------
                 Total current taxes                                       416,000          491,000        400,000
                                                                     -------------    -------------  --------------
           Deferred:
              Federal, including utilization of preconfirmation
                 net operating losses credited to additional
                 paid-in capital                                         2,650,000        2,248,000      3,572,000
              State                                                        334,000           10,000        (22,000)
              Change in valuation allowance                               (544,000)        (698,000)    (1,839,000)
                                                                     -------------    -------------  --------------
                 Total deferred taxes                                    2,440,000        1,560,000      1,711,000
                                                                     -------------    -------------  --------------
           Provision for income taxes                                  $ 2,856,000    $   2,051,000  $   2,111,000
                                                                     =============    =============  ==============

The  difference  between the statutory  federal income tax rate on the Company's
income before income taxes and the Company's  effective  income tax rate for the
years ended June 2000, 1999 and 1998 is summarized as follows:

                                                                      2000         1999        1998
                                                                   ---------     --------    ---------
             Statutory federal income tax rate                        34.0%        34.0%       34.0%
             State income tax, net of federal benefit                  5.6          5.2         4.8

             Miscellaneous                                            (4.5)         0.6         0.8
                                                                   --------       ------      ------
             Effective income tax rate                                35.1%        39.8%       39.6%
                                                                   ========        ======      ======


</TABLE>


                                      F-13
<PAGE>

BLC FINANCIAL SERVICES, INC.

Notes to Financial Statements
June 30, 2000 and 1999


Note 6. Stock Options and Warrants


The Company has stock option plans (the  "Plans")  for  directors,  officers and
employees  that  provide  for the  grant of  nonqualified  and  incentive  stock
options.  The Board of Directors  determines  the exercise price (not to be less
than fair market value for incentive  options) at the date of grant. The options
have a maximum term of 10 years and  outstanding  options  expire from  November
2000 through June 2005.

The Company applies APB 25 in accounting for its employee stock option incentive
plan  and,  accordingly,  recognizes  compensation  expense  for the  difference
between the fair value of the underlying  common stock and the exercise price of
the  option  at the  date of  grant.  The  effects  of  applying  FAS 123 on the
Company's pro forma results is not necessarily  representative of the effects on
reported  net income or loss for future years due to,  among other  things,  the
vesting  period of the stock  options  and the fair  value of  additional  stock
options in future years.  Had  compensation  cost for the Company's stock option
plans  been  determined  based  upon the fair value at the grant date for awards
under the plans  consistent with the methodology  prescribed  under FAS 123, the
Company's net income would have been as follows:

<TABLE>
<CAPTION>

                                                                Year Ended June 30,
                                                     ------------------------------------------
                                                         2000             1999          1998
                                                       --------         ---------     --------
<S>                                                      <C>            <C>             <C>

           Pro forma income                        $4,720,000        $2,938,000        $3,164,000
           Pro forma earnings per share:
              Basic                                   0.23              0.15              0.17
              Diluted                                 0.19              0.12              0.15

</TABLE>

The fair value of each option granted in 2000,  1999 and 1998 has been estimated
on the date of grant  using the  Black-Scholes  options  pricing  model with the
following  assumptions:  no dividend yield, expected volatility of 40% (1998 and
1999) and 89% (2000),  risk free interest  rates ranging from 4.58% to 6.26% and
expected lives of five years.  The average fair value of options  granted during
2000, 1999 and 1998 were $1.33, $1.07 and 1.00, respectively.



                                      F-14
<PAGE>
BLC FINANCIAL SERVICES, INC.

Notes to Financial Statements
June 30, 2000 and 1999



The following table summarizes stock option transactions under the Plans:

<TABLE>
<CAPTION>
                                                                     Year Ended June 30,
                                  ---------------------------------------------------------------------------------------
                                             2000                          1999                          1998
                                  -------------------------     ------------------------------     -------------------
                                                     Weighted                     Weighted                      Weighted
                                                     Average                      Average                       Average
                                                     Exercise                     Exercise                      Exercise
                                       Shares         Price         Shares         Price          Shares         Price
<S>                                     <C>             <C>             <C>         <C>             <C>           <C>
Outstanding options at the
  beginning of year                 3,491,017         $1.34         2,831,975      $1.04         1,922,475        $0.57
Options granted                       800,000          2.05         1,049,042       2.84         1,332,000         1.54
Options exercised                    (179,000)          .51           (35,000)       .59          (422,500)        0.50
Options expired or
  canceled                             (3,000)          .82          (355,000)      3.47
                                   -----------                     -----------                ------------
Outstanding options at the
  end of year                       4,109,017         $1.52         3,491,017      $1.34         2,831,975        $1.04
                                   ==========                      ============               ============


The following table summarizes  information about the Plans' outstanding options
as of June 30, 2000:

                                                     Options Outstanding                       Options Exercisable
                                        ------------------------------------------------    --------------------------------
                                                          Weighted
                                                           Average           Weighted                          Weighted
                                                          Remaining           Average                           Average
            Range of                    Number            Contractual        Exercise            Number        Exercise
         Exercise Price                 Outstanding      Life (in Years)       Price           Exercisable       Price
        ----------------               -------------    ----------------   -----------        -------------   ----------
          $0.50 - $0.90                   2,264,975         1.19               $ .71           1,711,475          $0.67
          $1.47 - $2.90                   1,498,542         3.93                2.33             527,117           2.26
          $3.25 - $3.63                     345,500         2.89                3.27             186,100           3.27


</TABLE>

As of June 30,  2000,  1999  and  1998,  respectively,  1,086,000,  673,500  and
1,075,500  shares were available for grant under the Employee Stock Option Plan.
During  the fiscal  year  ended June 30,  2000,  the  shareholders  approved  an
increase  in the  shares  available  under  this Plan from  2,500,000  shares to
3,500,000 shares.

As of June 30, 2000,  warrants  outstanding to purchase  1,161,957 shares of the
Company's  common  stock  ranged from $0.50 to $2.10 per share.  These  warrants
expire from November 2000 through June 2004.

As of June 30,  2000,  9,163,867  shares have been  reserved for the exercise of
warrants, stock options and conversion of debentures.

During the years  ended June 30,  1998 and June 30,  2000,  the  Company  issued
warrants,  which were  immediately  exercisable,  to purchase  415,000 shares of
common stock  (exercisable  between $1.10 and $1.85 per share) and 60,000 shares
of common stock  (exercisable at $2.10 per share),  respectively,  in connection
with professional services rendered.  The fair value of each warrant granted has
been estimated on the date of grant using the  Black-Scholes  pricing model with
the following assumptions: no dividend yield, expected volatility of 40% (1998 )
and 89% (2000), risk free interest rates ranging from 5.5% to 6.66% and expected
lives ranging from 3 to 5 years.




                                      F-15
<PAGE>
BLC FINANCIAL SERVICES, INC.

Notes to Financial Statements
June 30, 2000 and 1999



Note 7 - Commitments

Revolving securitization

During the year ended June 30,  2000,  the  Company  entered  into a $75 million
revolving  securitization.  Under the terms of this  facility,  the  Company may
periodically   sell  the   unguaranteed   portion   of  the  SBA  loans  to  the
securitization conduit. Additionally,  since the interest rates on the loans are
based upon the prime  rate and the  securitization  interest  rate is based upon
LIBOR, the Company  concurrently  with selling loans,  enters into interest rate
swaps  with an  affiliate  of the  entity  which  purchases  the  securitization
instruments.  During the year ended June 30,  2000,  as a result of the interest
rate swap transactions,  the charge to operations aggregated $12,000. As of June
30,  2000,  the  current  balance  of loans sold into this  facility  aggregated
$35,995,000.


Lease commitments:

The Company has entered into operating  leases for office space expiring through
May 2009. Minimum future rental payments under these leases are as follows:

          Year Ending
           June 30,

             2001              $   752,000
             2002                  574,000
             2003                  575,000
             2004                  559,000
             2005                  538,000
             Thereafter          2,016,000
                              ------------

                                $5,014,000


Rent  expense  for the  years  ended  June 30,  2000,  1999 and 1998  aggregated
$786,000, $481,000 and $294,000, respectively.


NOTE 8. FINANCIAL INSTRUMENTS, CREDIT RISK CONCENTRATION AND OTHER MATTERS:

Fair value of financial instruments:

Statement of Financial  Accounting  Standards No. 107,  "Disclosures  about Fair
Values of Financial  Instruments" ("FAS 107") requires  disclosure of fair value
information  about  financial  instruments,  whether  or not  recognized  on the
balance sheet,  for which it is  practicable to estimate that value.  Because no
market exists for certain of the Company's  assets and  liabilities,  fair value
estimates are based upon judgments regarding credit risk,  investor  expectation
of  economic   conditions,   normal  cost  of  administration   and  other  risk
characteristics,  including  interest rate and prepayment  risk. These estimates
are  subjective  in nature and involve  uncertainties  and matters of  judgment,
which significantly affect the estimates.



                                      F-16
<PAGE>
BLC FINANCIAL SERVICES, INC.

Notes to Financial Statements
June 30, 2000 and 1999


Note 8. FINANCIAL INSTRUMENTS, CREDIT RISK CONCENTRATION AND OTHER MATTERS
        (CONTINUED)



The following  summarizes the information  about the fair value of the financial
instruments  recorded on the Company's  financial  statements in accordance with
FAS 107:
<TABLE>
<CAPTION>

                                                              June 30, 2000                         June 30, 1999
                                                        ----------------------------         -----------------------------
                                                        Carrying Value    Fair Value         Carrying Value      Fair Value

<S>                                                     <C>                 <C>                 <C>                 <C>
     Cash                                           $   9,609,000       $  9,609,000        $ 4,229,000         $ 4,229,000
     Loans held for sale                                7,494,000          8,131,000          8,922,000           9,725,000
     Servicing assets and residual interest            22,634,000         24,611,000         15,638,000          15,979,000
     Loans receivable                                  23,966,000         25,297,000         23,860,000          24,573,000
     Accounts receivable                               15,121,000         15,121,000          8,982,000           8,982,000
     Notes payable                                     45,840,000         45,840,000         39,608,000          39,608,000
     Debentures                                         6,486,000          6,486,000          4,725,000           4,725,000

</TABLE>


The  methodology  and  assumptions  utilized to  estimate  the fair value of the
Company's financial instruments are as follows:

Cash:

The carrying amount of cash approximates fair value.

Loans held for sale:

The Company has estimated the fair values reported based on recent sales.

Loans receivable, servicing assets and residual interests:

The Company has estimated the fair value  reported based on the present value of
expected future cash flows.

Accounts receivable:

The carrying amount of accounts receivable approximates fair value.

Notes payable:

Since these are primarily  variable rate and  short-term,  the carrying  amounts
approximate fair value.

Debentures:

The fair value of the  debentures  is based upon the greater of market  value of
the underlying  common stock into which the  debentures  are  convertible or the
effect of the difference  between a market rate of interest and the stated fixed
rate of interest.

Loan commitments:

Typically,  the Company does not charge fees for commitments to originate loans,
except  with  respect  to  loans   originated   under  the  B&I  Loan   Program,
additionally,  since the loans are variable  rate,  changes in interest rates do
not affect their fair value. Accordingly, the off-balance sheet instruments have
no estimated fair value.


                                      F-17
<PAGE>

BLC FINANCIAL SERVICES, INC.

Notes to Financial Statements
June 30, 2000 and 1999

NOTE 8. FINANCIAL INSTRUMENTS, CREDIT RISK CONCENTRATION AND OTHER MATTERS
        (CONTINUED)

Off-balance sheet financial instruments and concentrations of credit risk:

Financial instruments which potentially subject the Company to concentrations of
credit risk are primarily cash and loans  receivable.  The Company maintains its
cash in highly rated  financial  institutions.  As of June 30, 2000, the Company
had  bank  deposits   exceeding   federally   insured  limits  by  approximately
$11,759,000.  The Company  originates  loans to a large  number of  customers in
diverse  commercial  entities and states. In the normal course of business,  the
Company  enters into  commitments  to extend  credit.  The Company uses the same
credit policies in making commitments as it does for loans receivable  reflected
on the balance sheet.  As of June 30, 2000, the Company's  commitments to extend
credit  aggregated  $72,250,000.   However,  approximately  $55,188,000  of  the
commitments  are SBA and B&I guaranteed  loans which the Company intends to sell
in the secondary market.

As of June 30,  2000,  the  outstanding  balance of loans  sold with  limited or
unlimited recourse aggregated $70,309,000.  The Company's maximum exposure under
the recourse  provisions is $9,568,000.  The Company lends to diverse industries
across the United States,  however,  at June 30, 2000,  loans  originated in the
states of New York and  Virginia  represented  approximately  11%  and  10%,
respectively, of the Company's loans receivable. No other state represented more
than 10% of the Company's loans receivable. As of June 30, 2000, the lodging and
restaurant industries represented approximately 12% and 12% of the Company's
loans receivable,  respectively.  No other industry represented more than 10% of
the Company's loans receivable.

Concentrations:

During the year ended June 30, 2000, no loan  production  company  accounted for
more than 8% of loan  originations.  During the years  ended  June 30,  2000 and
1999, two loan production  companies  accounted for 15% and 24% of the Company's
loan originations,  respectively. During the years ended June 30, 2000, 1999 and
1998, 83% of the guaranteed loans were sold to five securities dealers, 75% were
sold to three securities  dealers and 83% were sold to four securities  dealers,
respectively.


Note 9. Related Parties Transactions

During the years  ended June 30,  2000,  1999 and 1998,  the  maximum  amount of
outstanding short-term loans payable to family members of an officer/shareholder
aggregated  $300,000,  $1,077,000 and $2,594,000,  respectively.  As of June 30,
2000 and 1999 no loans to the family members were outstanding.  Interest expense
on these loans aggregated  $20,000,  $19,000 and $17,000 in the years ended June
30, 2000, 1999 and 1998, respectively.

Family members of an  officer/shareholder  purchased  $950,000 of the debentures
issued in 1998 and $290,000 of the debentures issued in 1999. For the year ended
June 30, 2000 and 1999, interest expense on these debentures  aggregated $95,000
and  $88,000,  respectively.  During the fiscal  year  ended June 30,  2000,  an
officer/shareholder  exchanged  $140,000 of advances  due to him to an unrelated
third party that was then subsequently exchanged for a debenture.


Note 10. Employee Benefit Plan

The Company maintains a contributory employee savings plan for substantially all
its  employees,  in  accordance  with the  provisions  of Section  401(k) of the
Internal Revenue Code. Pursuant to the terms of the plan, participants can defer
a portion of their income through contributions to the plan.




                                      F-18
<PAGE>


                                   SIGNATURES

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

Date: September 28, 2000                        BLC FINANCIAL SERVICES, INC.
                                                      (Registrant)

                                                By: /s/ Robert F. Tannenhauser
                                                    Robert F. Tannenhauser,
                                                    President


                                                By: /s/ Jennifer M. Goldstein
                                                    Jennifer M. Goldstein,
                                                    Treasurer and Chief
                                                    Financial Officer

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

<TABLE>
<CAPTION>


Signatures                                  Title                           Date
<S>                                           <C>                           <C>
/s/ Robert F. Tannenhauser                  Director                   September 28, 2000
Robert F. Tannenhauser

/s/ Peter D. Blanck                         Director                   September 28, 2000
Peter D. Blanck

/s/ Robert W.  D'Loren                      Director                   September 28, 2000
Robert W.  D'Loren

/s/ Irwin E. Redlener                       Director                   September 28, 2000
Irwin E. Redlener

/s/ Kenneth S. Schwartz                     Director                   September 28, 2000
Kenneth S. Schwartz

/s/ Robert W. Wien                          Director                   September 28, 2000
Robert W. Wien

/s/ Jerome Alenick                          Director                   September 28, 2000
Jerome Alenick

</TABLE>


                                       39
<PAGE>


EXHIBIT INDEX

<TABLE>
<CAPTION>

Incorporated by            Exhibit
Reference to               Number                       Description
------------               ------           -------------------------------------------------------
<S>                            <C>              <C>

Exhibit 1.3[15]            3.1              Amended and Restated Certificate of Incorporation of Registrant

Exhibit 1.4[15]            3.2              Amended and Restated By-Laws of Registrant

Exhibit 1.5 [17]           3.3              By-Laws of BLC Financial Corporation

Exhibit 1.6 [17]           3.4              By-Laws of BLC Commercial Capital Corporation

Exhibit 1.7 [19]           3.5              By-Laws of BLC Financial Corp II

Exhibit 1.8 [19]           3.6              By-Laws of BLC Real Estate Corp.

Exhibit 2.1[6]             4.1              Form of Common Stock Certificate of  Registrant

Exhibit 2.3[1]             4.2              Form of Warrant Agreement issued by Registrant

Exhibit 2.6[8]             4.3              Form of 7% three-year Unsecured Convertible Debenture issued
                                            by Registrant in connection with its 1994 Debenture-Unit Private Placement

Exhibit 2.8[8]             4.4              Form of Class B Warrant issued by Registrant in
                                            connection with its 1994 Debenture-Unit Private Placement

Exhibit 2.13 [17]          4.5              Form of Warrant 1997-1

Exhibit 2.14 [17]          4.6              Form of Debenture 9-1/4 Convertible Subordinated Note Due 2001

Exhibit 2.15 [19]          4.7              Form of Debenture Note 9% Convertible Subordinated Note Due 2003

Exhibit 2.5[6]            10.1              Form of Stock Option Agreement issued to certain
                                            directors in August 1992

Exhibit 2.9[8]            10.2              Form of Warrant issued by Registrant to Financial Advisor

                                       40
<PAGE>

Incorporated by           Exhibit
Reference to              Number                        Description
------------               ------           -------------------------------------------------------

Exhibit 2.10[8]           10.3              Form of Warrant issued by Registrant in connection with its 1994 Common Stock-Unit
                                            Private Placement

Exhibit 2.12[15]          10.4              1995 Employee Stock Purchase Plan

Exhibit 2.15 [17]         10.5              Form of Incentive Stock Option Agreement

Exhibit 2.16 [17]         10.6              Employment Agreement between Business Loan Center and Leonard Rudolph dated May 4, 1998

Exhibit 3.2 [17]          10.7              Employment Agreement between Business Loan Center and
                                            Jennifer Goldstein dated October 8, 1997

Exhibit 4.1[15]           10.8              Small Business Administration Loan Guaranty Agreement (Deferred Participation) dated
                                            March 27, 1997 between BLC-New York and the United States Small Business Administration
                                            (SBA Form 750)

Exhibit 8.1b[15]          10.9              Lease Agreement dated July 31, 1997 by and between The Equitable-Nissei Madison Co., as
                                            landlord, and Business Loan Center, Inc., as tenant.

Exhibit 9.1 [17]          10.10             Guarantee Agreement dated May 7, 1998 between BLC Financial Services, Inc. and
                                            Transamerica Business Credit Corporation.

Exhibit 9.2 [17]          10.11             Guarantee Agreement dated March 25, 1998 between BLC Financial Services, Inc. and
                                            Transamerica Business Credit Corporation.

Exhibit 10.1[9]           10.12             Revolving Credit Agreement dated as of 1994 between BLC-Delaware,
                                            Registrant, Business Loan Center and Sterling National Bank &
                                            Trust Company of New York

Exhibit 10.3[15]          10.13             Amended and Restated Revolving Credit agreement dated August 27, 1997 between BLC
                                            Financial  Services, Inc., Business Loan Center, Inc.  and Sterling National Bank
                                            (f/k/a/ Sterling National  Bank & Trust Company of New York)



                                       41
<PAGE>



Incorporated by            Exhibit
Reference to               Number                       Description
------------               ------           -------------------------------------------------------

Exhibit10.4[15]            10.14            Revolving  Credit  Agreement dated August 27, 1997 between BLC Financial
                                            Services, Inc. and Sterling National Bank (f/k/a/ Sterling National Bank & Trust Company
                                            of New York)

Exhibit 10.5[15]           10.15            Confirmation Agreement by and among Robert F. Tannenhauser in favor of Sterling National
                                            Bank dated August 27, 1997

Exhibit 10.6[15]           10.16            Partial Assignment Agreement between Sterling National Bank and Transamerica Business
                                            Credit Corporation dated August 27, 1997

Exhibit 10.7 [17]          10.17            Loan Agreement between BLC Commercial Capital Corporation as Borrower, BLC Financial
                                            Services as parent and Transamerica Business Credit Corporation as lender dated May 7,
                                            1998

Exhibit 10.8 [17]          10.18            Loan Agreement between Business Loan Center as Borrower, BLC Financial Services as
                                            parent and Transamerica Business Credit Corporation as lender dated March 25, 1998

Exhibit 10.9 [17]          10.19            First Amendment to Loan Agreement between Business Loan Center as Borrower, BLC
                                            Financial Services as parent and Transamerica Business Credit Corporation as lender
                                            dated June 23, 1998

Exhibit 10.10 [17]         10.20            Pooling and Servicing Agreement between Marine Midland Bank (Trustee) and Business Loan
                                            Center (Seller and Servicer) dated as of December 1,1997

Exhibit 10.11 [17]         10.21            Security Agreement between Business Loan Center and Transamerica Business Credit
                                            Corporation as lender dated March 25, 1998

Exhibit 10.12 [17]         10.22            Security Agreement between BLC Commercial Capital Corporation and Transamerica Business
                                            Credit Corporation as lender dated May 7, 1998




                                       42
<PAGE>



Incorporated by            Exhibit
Reference to               Number                       Description
------------               ------           -------------------------------------------------------

Exhibit 10.13 [17]         10.23            Revolving Credit Note between BLC Commercial Capital Corporation and Transamerica
                                            Business Credit Corporation dated May 7, 1998

Exhibit 10.14 [17]         10.24            Revolving Credit Note between Business Loan Center and Transamerica Business Credit
                                            Corporation dated March 25, 1998

Exhibit 10.15 [17]         10.25            Amendment and Restated Revolving Credit Note between Business Loan Center and
                                            Transamerica Business Credit Corporation (June 1998)

Exhibit 10.16 [17]         10.26            Multi-Party Agreement between Business Loan Center, Inc., BLC Financial Services, Inc.,
                                            Transamerica Business Credit Corporation, Colson Services Corp., and the United States
                                            Small Business Administration dated March 25, 1998

Exhibit 10.17 [17]         10.27            Multi-Party Agreement Among Business Loan Center, Inc., Marine Midland Bank, Colson
                                            Services Corp., and the SBA dated December 1, 1997

Exhibit 10.18 [17]         10.28            Business Loan Center SBA Loan-Backed Adjustable Rate Certificates (Class A)

Exhibit 10.19 [17]         10.29            Business Loan Center SBA Loan-Backed Adjustable Rate Certificates (Class B)

Exhibit 10.20 [17]         10.30            Business Loan Center SBA Loan Trust 1997-1 between Business Loan Center, Inc. (Seller)
                                            and Marine Midland Bank (Borrower) dated December 1, 1997

Exhibit 11.1[9]            10.31            Security Agreement dated as of December 1994 between BLC-Delaware, Registrant, Business
                                            Loan Center and Sterling National Bank & Trust Company of New York




                                       43
<PAGE>



Incorporated by            Exhibit
Reference to               Number                    Description
------------               ------           -------------------------------------------------------

Exhibit 11.2[15]            10.32           Amendment NO.1 to Security Agreement between BLC-Delaware, Registrant,
                                            Business Loan Center and Sterling National Bank (f/k/a Sterling National Bank &
                                            Trust Company of New York) dated August 27, 1997.

Exhibit 11.3[15]            10.33           Release among Sydney Yoskowitz and Sterling National Bank dated August 27, 1997

Exhibit 12.1[9]             10.34           Multi-Party Agreement dated as of December 1994 (relating to SBA Loan Documentation and
                                            Administration)

Exhibit 13.1[10]            10.35           Exchange Agreement between BLC Financial Network, Inc., BLC Financial Services, Inc.,
                                            and Southeastern 1st Financial Network, Inc.

Exhibit 14.1[10]            10.36           Employment Agreement between BLC Financial Network, Inc., BLC Financial Services, Inc.,
                                            and Robert C. McGee

Exhibit 14.3[15]            10.37           Employment Agreement between BLC Financial Network, Inc., BLC Financial Services, Inc.,
                                            and R. Matthew McGee dated April 1, 1997

Exhibit 14.4[10]            10.38           Employment Agreement between BLC Financial Network, Inc., BLC Financial Services, Inc.,
                                            and Mary D. McGee

Exhibit 14.5[10]            10.39           Employment Agreement between BLC Financial Services, Inc., Business Loan Center, and
                                            Robert F. Tannenhauser

Exhibit 14.6[10]            10.40           Employment Agreement between Business Loan Center, and Eric D. Rosenfeld

Exhibit 15.1[10]            10.41           Warrant Certificate for Purchase of Common Stock

Exhibit 15.2[10]            10.42           Class A Warrant to Purchase Shares of Common Stock

Exhibit 15.3[10]            10.43           Class B Warrant to Purchase Shares of Common Stock

Exhibit 16.1[10]            10.44           Stock Purchase Agreement between BLC Financial Services, Inc. and Robert C. McGee




                                       44
<PAGE>



Incorporated by            Exhibit
Reference to               Number                    Description
------------               ------           -------------------------------------------------------

Exhibit 16.2[10]            10.45           Stock Purchase Agreement between R. Matthew McGee for 306,818 shares of Common Stock

Exhibit 16.3[10]            10.46           Stock Purchase Agreement between R. Matthew McGee for 380,139 shares of Common Stock

Exhibit 17.1[10]            10.47           Participation Agreement between Business Loan Center and GE Capital Small
                                            Business Finance Corporation

Exhibit 17.2[15]            10.48           Participation Agreement between Business Loan Center and GE Capital Small
                                            Business Finance Corporation - March 20, 1997

Exhibit 18.1[15]            10.49           Agreement between BLC Management Consulting Services, Inc., Business Loan
                                            Center, Inc., and Business Loan Center dated February 3, 1997 (relating to the cessation
                                            of Business Loan Center, a New York general partnership as a small business lending
                                            company)

Exhibit 18.2[15]            10.50           Assignment and Assumption Agreement between Business Loan Center, Inc. and
                                            Business Loan Center, a New York general partnership.

Exhibit 18.3[15]            10.51           Schedule of Assets and Liabilities (relating to Assignment and Assumption
                                            Agreement between Business Loan Center, Inc. and Business Loan Center, a
                                            New York general partnership.

Exhibit 20.1[13]            10.52           Participation Agreement between Business Loan Center, Inc., BLC Financial Services, Inc.
                                            and Transamerica Business Credit Corporation dated May 1, 1997.

Exhibit 20.2[13]            10.53           Security agreement between Business Loan Center, Inc. and Transamerica Business
                                            Credit Corporation dated August 27, 1997



                                       45
<PAGE>

Incorporated by            Exhibit
Reference to               Number                    Description
------------               ------           -------------------------------------------------------

Exhibit 20.3[15]            10.54           Guaranty Agreement between Business Loan Center, Inc. and Transamerica Business Credit
                                            Corporation dated August 27, 1997

Exhibit 20.4[15]            10.55           Restated and Amended Loan Agreement between Business Loan Center, Inc., BLC
                                            Financial Services, Inc. and Transamerica Business Credit Corporation dated August 27,
                                            1997

Exhibit 20.5[15]            10.56           Trademark Security Agreement between  Business Loan Center, Inc. and
                                            Transamerica Business Credit Corporation dated August 27, 1997

Exhibit 20.6[15]            10.57           Revolving Credit Note between  Business Loan Center, Inc. and Transamerica
                                            Business Credit Corporation dated August 27, 1997

Exhibit 20.7[15]            10.58           Intercreditor Agreement between Transamerica Business Credit Corporation and
                                            Sterling National Bank dated August 27, 1997

Exhibit 2.4[6]              10.59           Form of Letter to Unit Holders regarding Conversion of Debentures

Exhibit 23.1[6]             10.60           Service Mark Registration for "BUSINESS LOAN CENTER"

Exhibit 23.2 [19]           10.61           Amendment to lease agreement dated January,  1999
                                            between The Equitable-Nissei Madison Co., as landlord, and Business Loan Center, Inc.,
                                            as tenant.

Exhibit 23.3 [19]           10.62           Lease Agreement dated August 28,  1998 by and between International Mission Board of the
                                            Southern Baptist Convention and BLC Financial Network., Inc as tenant

Exhibit 23.4 {19]           10.63           9% Convertible subordinated Note Due 2003 Conversion Price $3.50 per Share Series 1

Exhibit 23.5 [19]           10.64           Addendum to Confidential Private Placement Memorandum BLC Financial Services, Inc.  9%
                                            Convertible Subordinated Note Due 2003

                                       46
<PAGE>

Incorporated by            Exhibit
Reference to               Number                    Description
------------               ------           -------------------------------------------------------

Exhibit 23.6 [19]          10.65            Business Loan Center SBA Loan-Backed Adjustable Rate Certificates, Series 1998-1
                                            $24,316,729.85 Class A Certificate Confidential Placement Memorandum dated December 28,
                                            1998

Exhibit 23.7 [19]          10.66            Second Amendment to Loan Agreement between Business Loan Center as Borrower, BLC
                                            Financial Services as parent and Transamerica Business Credit Corporation as lender
                                            dated September, 1998

Exhibit 23.8 [19]          10.67            Third Amendment to Loan Agreement between Business Loan Center as Borrower, BLC
                                            Financial Services as parent and Transamerica Business Credit Corporation as lender
                                            dated October, 1998

Exhibit 23.9 [19]          10.68            Fourth Amendment to Loan Agreement between Business Loan Center as Borrower, BLC
                                            Financial Services as parent and Transamerica Business Credit Corporation as lender
                                            dated December, 1998

Exhibit 23.10 [19]         10.69            Pooling and Servicing Agreement between Marine Midland Bank (Trustee) and Business Loan
                                            Center (Seller and Servicer) dated as of December 23, 1998

Exhibit 23.11 [19]         10.70            Form of Subscription Agreement

Exhibit 23.12 [20]         10.71            Sale and Servicing Agreement dated November 1, 1999 between BLC Funding Trust
                                            and Business Loan Center

*                          10.72            Second Amendment to Loan Agreement between BLC Commercial Capital Corp. as Borrower,
                                            BLC Financial Services, Inc., as parent, and Transamerica Business Credit Corporation
                                            as lender dated April 26, 2000.

*                          21               Amended List of Subsidiaries

Exhibit 22 [15]            27.1             EDGAR filing: Article 5 Financial Data Schedule

Exhibit 27.2 [17]          27.2             Financial Data Schedule

Exhibit 27.3 [19]          27.3             EDGAR filing: Article 5 Financial Data Schedule

*                          27.4             EDGAR filing: Article 5 Financial Data Schedule

-----------------------
* Filed Herewith
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<TABLE>
<CAPTION>

Previous SEC Filings:

<S>                                             <C>
[1]          Registrant's Annual Report on Form 10-K for the year ended June 30, 1993.
[2]          Registrant's Annual Report on Form 8-K dated August 8, 1986.
[3]          Registrant's Annual Report on Form 10-K for the year ended June 30, 1990.
[4]          Registrant's Annual Report on Form 8-K dated May 4, 1990.
[5]          Registrant's Annual Report on Form 10-K for the year ended June 30, 1991.
[6]          Registrant's Registration Statement on Form S-1 filed with the Securities & Exchange Commission on September 27, 1993.
[7]          Pre-effective Amendment No. 2 to Registrant's Registration Statement on Form S-1 filed with the Securities and Exchange
             Commission on December 30, 1993.
[8]          Pre-effective Amendment No. 5 to Registrant's Registration Statement on Form S-1 filed with the Securities and Exchange
             Commission on August 4, 1994.
[9]          Registrant's Annual Report on Form 10-K for the year ended June 30, 1996.
[10]         Registrant's Current Report on Form 8-K dated February 5, 1996.
[11]         Registrant's Current Report on Form 8-K dated June 4, 1996.
[12]         Registrant's Current Report on Form 8-K dated September 17, 1996.
[13]         Registrant's Current Report on Form 8-K dated May 12, 1997.
[14]         Registrant's Notice of Special Meeting (in Lieu of Annual Meeting) of  Stockholders
             dated June 6, 1997.
[15]         Registrant's Annual Report on Form 10-K for the year ended June 30, 1997.
[16]         Registrant's Current Report on Form 8-K dated December 30, 1997.
[17]         Registrant's Annual Report on Form 10-K for the year ended June 30, 1998.
[18]         Registrant's Current Report on Form 8-K dated February 12, 1999.
[19]         Registrant's Annual Report on Form 10-K for the year ended June 30, 1999.
[20]         Registrant's Current Report on Form 8-K dated December 23, 1999.


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<PAGE>


EXHIBIT 21

         The following is a list of the  registrant's  subsidiaries,  other than
subsidiaries  that, if considered in the aggregate as a single  subsidiary would
not  constitute a  significant  subsidiary  as of the end of the year covered by
this report:

                                                                 Jurisdiction
                                                                     of
              Name of Subsidiary                                 Incorporation
              ------------------                                  -------------
              Business Loan Center, Inc.                              Delaware
              BLC Commercial Capital Corporation                      Florida
              BLC Capital Corporation                                 Delaware
              BLC Financial Network, Inc.                             Delaware
              BLC Financial Network of Florida, Inc.                  Delaware
              BLC Financial Network of Mid-America, Inc.              Kansas
              Business Loan Center Financial Corporation              Delaware
              Business Loan Center Financial Corporation II           Delaware
              Business Loan Center Real Estate Corporation            Delaware
              BLC Funding Corp                                        Delaware
---------------------


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