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, 1999           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 8, 1999, there were outstanding  20,288,875 shares of the
Registrant's  Common  Stock  ("Common  Stock"),  $.01 par value per  share.  The
aggregate  market  value  as  of  September  8,  1999,  of  the  shares  of  the
Registrant's   Common  Stock  held  by  non-affiliates  of  the  Registrant  was
approximately $29,173,773.

DOCUMENTS INCORPORATED BY REFERENCE:          NONE





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<PAGE>


                                     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 and "Item 7A.  Qualitative and
Quantitative Disclosure About Market Risk." "Item 7. Management's Discussion and
Analysis of Financial  Condition and Results of Operations,"  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.

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.





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<PAGE>


          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.

          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


                                       4
<PAGE>

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
the following 39 districts:  Birmingham, Alabama, Little Rock, Arkansas, Denver,
Colorado,  South and North Florida,  Atlanta,  Georgia, Chicago and Springfield,
Illinois, Indianapolis,  Indiana, Cedar Rapids and Des Moines, Iowa, Kansas City
and Wichita, Kansas, Louisville,  Kentucky, New Orleans,  Louisiana,  Baltimore,
Maryland,  Springfield  and St. Louis,  Missouri,  Omaha,  Nebraska,  Las Vegas,
Nevada,  Newark,  New  Jersey,  Albuquerque,   New  Mexico,  Rochester,  Elmira,
Melville,  New York  City and  Syracuse,  New  York,  Oklahoma  City,  Oklahoma,
Pittsburgh,   Pennsylvania,  Columbia,  South  Carolina,  Nashville,  Tennessee,
Richmond Virginia, Washington D.C., Clarksburg, West Virginia and five districts
in Texas including Houston, and Dallas.

          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


                                       5
<PAGE>

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, 1999  ("Fiscal
Year 1999"),  not more than 38% 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.  Therefore,  Business Loan Center typically
caps any premium  received on the sale of loans in the secondary  market at 10%,
which may result in  increased  servicing  fees that are earned over the life of
the loan.  During  Fiscal Year 1999,  Business  Loan Center  obtained an average
premium of approximately 9.4% 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 a portion of the annual servicing fee it receives equal to 1/2
of 1% of the outstanding  principal amount of the SBA-guaranteed  portion of any
loan closed  subsequent  to October 12, 1995.  Business Loan Center has obtained
net servicing  fees (after  deducting the fee paid to the SBA) ranging from 1.0%
to 4.06%,  with an average service fee for loans  originated  during Fiscal Year
1999 of 1.54%.

          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


                                       6
<PAGE>

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, 1999, Business Loan Center serviced a loan
portfolio consisting of 445 loans, in the approximate aggregate principal amount
of $230,749,000. Of this amount, approximately $167,312,000 (72.5%) consisted of
the SBA-guaranteed  portion of these loans, of which  approximately  $15,044,000
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
$63,437,000  (27.5%)  consisted of the  unguaranteed  portion of loans, of which
approximately  $20,221,000 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 $1,556,000 and the contractual  maturities range from 7 years to
25 years.  At June 30, 1999,  Business  Loan  Center's  portfolio had a weighted
average contractual  maturity of approximately 22.5 years and a weighted average
remaining  maturity of  approximately  20.6 years.  The interest  rates on these
loans are adjustable and substantially all are 2.75% over the prime rate.

          Of the  $230,749,000  of loans  serviced  by  Business  Loan  Center's
portfolio  at June  30,  1999,  delinquent  loans  accounted  for  approximately
$870,000  (.38%) of which,  approximately  $217,000  represented  Business  Loan
Center's proportionate share. These figures represent delinquencies greater than
90 days. See  Management's  Discussion and Analysis of Financial  Conditions and
Results of Operations - Results of Operations.

          Loans in liquidation  serviced by Business Loan Center's  portfolio at
June  30,  1999,  accounted  for  approximately   $9,088,000  (3.9%)  of  which,
approximately $1,673,000 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 15% were in the gas and convenience store industry and 14% were in
the restaurant industry. No other industry accounted for more than 10% of those
loans in liquidation.  At June 30, 1999, Business Loan Center had allowances for
credit loss and estimated future losses on loans in liquidation of approximately
$382,000 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, refinancing, cash
from the proceeds of the sale of the borrower's business or personal real estate


                                       7
<PAGE>

or the liquidation of other business assets.  During Fiscal Year 1999,  Business
Loan Center  collected  approximately  $29,080,000 of loan  prepayments of which
approximately $2,610,000 represented Business Loan Center's proportionate share.

          At June 30,  1999,  44  proposed  loans in the  approximate  aggregate
principal  amount of $22,070,000  had received both Business Loan Center and SBA
approval  and were  awaiting  closing.  In  addition,  87 proposed  loans in the
approximate  aggregate principal amount of $54,173,000 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 1999 is $10 billion under the Guaranteed
Loan Program in which  Business  Loan Center  participates.  The actual usage of
funds for  Federal  Fiscal Year 1998 was $9 billion as compared to $9.5 and $7.7
billion for  Federal  Fiscal  Years 1997 and 1996,  respectively.  Beginning  in
Federal  Fiscal Year 2000,  the  Administration  has  requested a $10.5  billion
program level for participants in the Guaranteed Loan Program.

          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, Charleston, South Carolina, Richmond
and Alexandria  (near  Washington  D.C.),  Virginia,  Tinton Falls,  New Jersey,
Memphis Tennessee,  Boston,  Massachusetts,  Wichita, Kansas, 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


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<PAGE>

(including certain  provisions  thereof commonly known as the  "Truth-in-Lending
Act"),  the Equal Credit  Opportunity  Act of 1974, as amended,  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. 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 , 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 ("BLC Network"), BLC Financial Network of Mid-America,
Inc.  ("BLC  Mid-America"),  and BLC Financial  Network of Florida,  Inc.  ("BLC
Florida").

          BLC  Network  is  headquartered  in  Richmond  Virginia  and has  four
satellite offices located in Alexandria, Virginia (near Washington D.C.), Tinton
Falls,  New  Jersey,  Boston,   Massachusetts,   and  Memphis,   Tennessee.  BLC
Mid-America  is  headquartered  in  Wichita,  Kansas with  satellite  offices in
Seattle,  Washington,  Phoenix,  Arizona,  Oklahoma City,  Oklahoma,  and Omaha,
Nebraska.  BLC  Florida  is  headquartered  in Panama  City,  Florida  and has a
satellite office in Charleston, South Carolina.

          During Fiscal Year 1999, Business Loan Center generated  approximately
85% 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 loan
sources accounted for more than 9% 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


                                       9
<PAGE>

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, 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").  The B&I Program was  designed to create jobs and
stimulate rural economies by providing financial backing for rural businesses.

          BLC  Commercial  has  offices in New York,  New York and in  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.

                                       10
<PAGE>

          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, 1999, BLC Commercial serviced
a  loan  portfolio  consisting  of  nine  loans,  in the  approximate  aggregate
principal  amount of  $17,795,000.  Of this  amount,  approximately  $14,366,000
consisted  of the  USDA  guaranteed  portion  of  the  loans  and  approximately
$3,429,000  consisted of the  unguaranteed  portion of the loans. BLC Commercial
retained  the entire  unguaranteed  portion for its own  account.  In  addition,
approximately  $2,261,000 of the  $14,366,000  in guaranteed  loans have not yet
been sold or were  pending  settlement  in the  secondary  market.  The original
principal  amounts of these loans ranged between  $1,200,000 and $5,000,000 with
maturities  between  15 and 30  years.  The  interest  rates on these  loans are
adjustable and ranged between 1% and 2.25% over prime.

          At  June  30,  1999,  none  of  these  loans  were  delinquent  or  in
liquidation. See Management's Discussion and Analysis - Results of Operations.

          At June 30, 1999,  five loans totaling  $12,495,000  had received both
BLC Commercial  and USDA approval and were awaiting  closing.  In addition,  ten
proposed loans in the approximate aggregate principal amount of $52,625,000 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 1999
is $1.0 billion.

          Seasonality - BLC Commercial Capital Corp.'s business is not seasonal.

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  has  been  originating  first
mortgage loans in conjunction  with its SBA loans.  These loans are being funded
by various  financial  institutions  from which BLC  Capital  receives a fee. In
addition,  the  Company  has  negotiated  an  agreement  with a major  financial


                                       11
<PAGE>

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 8% of the loan  amount and  totaled  $864,000  for the
fiscal year ended June 30,  1999.  See  Management's  Discussion  and Analysis -
Results of Operations.

          Loan Portfolio - At June 30, 1999,  BLC Capital  through its Companion
Loan Program serviced 30 loans, in the approximate aggregate principal amount of
$20,446,000.  During the fiscal year ended June 30, 1999, BLC Capital originated
23 loans  totaling  $17,209,000.  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.

Employees

          The Company, through its subsidiaries,  currently employs 68 full-time
and two part-time employees. Of these employees, eight are employed in executive
or  managerial  capacities,  16  are  employed  in  administrative  or  clerical
capacities,  eight are employed in loan servicing capacities and 38 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.


                                        12
<PAGE>



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.),   Tinton  Falls,  New  Jersey,
Indianapolis,  Indiana, Panama City Beach and Orlando, Florida, Wichita, Kansas,
Albuquerque,  New Mexico,  Mckinney,  Texas, Phoenix,  Arizona, Omaha, Nebraska,
Oklahoma City,  Oklahoma,  and  Charleston,  South Carolina . See  "Consolidated
Financial Statements - Note 8".
<TABLE>
<CAPTION>

------------------ --------------- --------------- ---------------- --------------- ---------------
                   New York,       Richmond,       Wichita       Panama City    Orlando
                   New York        Virginia        Kansas        Beach Florida  Florida
                 ------------------ --------------- --------------- ---------------- --------------- ---------------
<S>                 <C>            <C>            <C>            <C>            <C>
Approximate
Square Footage     11,800          7,100           3,000            2,400        300
------------------ --------------- --------------- ---------------- --------------- ---------------
                   Indianapolis,   Alexandria,           Albuquerque,    McKinney     Tinton Falls,
                   Indiana         Virginia (near        New Mexico      Texas,       New Jersey
                                   Washington, D.C.)
------------------ --------------- --------------------- --------------- --------------- -----------
<S>                 <C>            <C>                      <C>            <C>            <C>
Approximate
Square Footage     1,300           1,000                 800             600             650
------------------ --------------- --------------------- --------------- --------------- -----------


------------------ --------------- --------------------- --------------- ---------------
                   Phoenix,        Oklahoma City,        Omaha,          Charleston,
                   Arizona         Oklahoma              Nebraska        South Carolina
                ------------------ --------------- --------------------- --------------- ---------------
<S>                 <C>                 <C>                 <C>            <C>
Approximate
Square Footage     209             195                   128             400
------------------ --------------- --------------------- --------------- ---------------
</TABLE>


Item 3.  LEGAL PROCEEDINGS.

         None.





                                       13
<PAGE>

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


          On  April  27,  1999,   the  Company   held  its  Annual   Meeting  of
Stockholders.  The total number of shares voted at the meeting were  17,186,772,
including proxies. At the meeting,  stockholders voted on and approved:  (1) the
election of two directors of the Company (Irwin E. Redlener, M.D. and Kenneth S.
Schwartz, M.D.) and (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,
1999.Votes were cast in the following manner:

<TABLE>
<CAPTION>
----------------------------------------- ------------- ---------------- ------------ ------------
                                   Issue           For          Against      Abstain    Not Voted
----------------------------------------- ------------- ---------------- ------------ ------------
<S>                                 <C>           <C>            <C>           <C>      <C>

               1.  Election of Directors

               Kenneth S. Schwartz, M.D.    17,171,732           15,040
                 Irwin E. Redlener, M.D.    17,171,732           15,040
----------------------------------------- ------------- ---------------- ------------ ------------
            2.  Ratification of Auditors    17,172,952            9,808        4,012
----------------------------------------- ------------- ---------------- ------------ ------------
</TABLE>


The  following  directors  were not up for  re-election  at the meeting and they
continued in office after the meeting:  Robert F.  Tannenhauser,  Peter  Blanck,
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, 1999,  and prior to
that date, the range of high and low bid information as reported by the National
Quotation Bureau from January 1, 1997 through March 31, 1998.

                                 1999                    High Bid   Low Bid
                                 ----                    --------   -------
                           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)          3.9375     2.188
                           Second Quarter (AMEX)          5.25       3.0625
                           First Quarter                  3.0625     1.375

                                 1997
                               --------
                           Fourth Quarter                 1.625       .71875
                           Third Quarter                   .84375     .71875
                           Second Quarter                  .875       .5625
                           First Quarter                   .65625     .5

          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  8, 1999,  there were  approximately  861  holders of
record of the Common Stock of the Company.




                                       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,
                                1999         1998          1997(1)         1996(1)         1995
                                ----         ----          -----           -----           ----
<S>                        <C>              <C>             <C>            <C>              <C>
Summary of Operations:


Total revenues             $19,422,000   $15,729,000       $7,168,000     $4,997,000     $2,536,000

Income before
 extraordinary items         3,103,000     3,226,000        1,702,000        553,000        142,000

Extraordinary item                                            245,000         91,000

Net Income                 $3,103,000     $3,226,000       $1,947,000       $644,000       $142,000

Income per share (basic)
before extraordinary  item        .16            .18              .10            .04            .01

Income per share
from extraordinary item            -              -               .01            .01             -

Net income per
share (basic)                     .16            .18              .11            .05            .01

Net income per share              .14            .15              .11            .04            .01
(diluted)


As of June 30:

Total assets             $68,037,000     $53,281,000    $20,086,000      $10,983,000    $10,535,000
Total liabilities        $48,890,000     $39,012,000    $12,896,000       $5,657,000     $7,274,000

Shareholders' equity     $19,432,695     $14,269,000     $7,190,000       $4,601,000     $2,608,000
Shareholders' equity
per share                      $0.94           $0.72          $0.41            $0.27           0.23
</TABLE>

(1) Restated. See footnotes to "Consolidated Financial Statements."




                                       16
<PAGE>




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

<TABLE>
<CAPTION>
                                        September 30      December 31      March 31       June 30
                                        ------------      -----------      --------       -------
<S>                                     <C>                 <C>             <C>           <C>
Year ended June 30, 1999

Revenues                                $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 income                               $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

Year ended June 30, 1998

Revenue                                $2,381,000       $5,020,000    $3,436,000       $4,892,000

Expenses                                2,005,000        2,755,000     2,476,000        3,156,000

Provision for Income Taxes                151,000          820,000       358,000          782,000

Net Earnings before extraordinary items   225,000        1,445,000       602,000          954,000

Extraordinary items                        -                -             -                -

Net Earnings                             $225,000       $1,445,000      $602,000         $954,000

Earnings Per Share

Basic:

Net income                               .01              .08           .03                   .06

Diluted:

Net income                               .01              .07           .03                   .04

</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 portion of B&I loans. During the year ended June 30, 1999, interest
rates on the 7(a)  Program  facility  were  reduced on both the  guaranteed  and
unguaranteed  portion  of the loan.  Borrowings  under the  guaranteed  line are
repaid  immediately  upon the sale of the  guaranteed  portion on the  secondary
market.

          On December 30, 1998 the Company  successfully  completed  the sale of
its  SBA  Loan-Backed  Adjustable  Rate  Class  A  Certificates  1998-1  in  the
approximate aggregate principal amount of $24,317,000 which included a prefunded
amount of $4,600,000.  The Class A Certificates  received a Triple A rating from
Duff & Phelps Credit Rating Company.  At the same time,  Class B Certificates in
the amount of  $2,114,000,  which also  included a prefunded  amount of $400,000
were  acquired  by Business  Loan  Center  Financial  Corp.  II, a  wholly-owned
subsidiary of the Company. Proceeds from the sale were used to reduce the credit
lines.

          The Class A and B Certificates  pay annual interest rates of 6.75% and
6.95%, respectively,  during the initial accrual period. Thereafter, the Class A
Certificates will pay a per annum interest rate equal to the prime rate less 100
basis points.  The Class B Certificates will pay a per annum interest rate equal
to the prime rate less 80 basis points.  The applicable  interest rate earned on
the Class A and Class B Certificates  will be adjusted on the first business day
of every  January,  April,  July and October using the lowest Prime lending rate
published in the Eastern  edition of The Wall Street  Journal on the  applicable
adjustment date.  Principal  payments on the SBA loans are passed through to the
holders  of the  Certificates  on a  pro-rata  basis  with  the  holders  of the
guaranteed portion of the loans.

          In addition,  the Company,  through a private placement of convertible
debentures,  raised an initial  $1,422,000  during the year ended June 30, 1999.



                                       18
<PAGE>

The debentures  were initially  convertible  into common stock at the greater of
$3.50  per  share or 130% of the  average  market  price  per share for the five
business days immediately preceding the date the subscription is accepted by the
Company. However, subsequent to June 30, 1999, the conversion price was adjusted
to the greater of $2.75 per share of 130% of the average  market price per share
for the five business days  immediately  preceding the date the  subscription is
accepted by the Company.  The debentures  have a four-year term and pay interest
quarterly at the rate of 9% per annum.

          At June 30,  1999,  sales of the  guaranteed  portions of loans in the
aggregate amount of $8,982,000 were pending  settlement in the secondary market,
while $8,922,000 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,  1999,  the  Company  received  net  cash  proceeds  of
approximately $600,000 from those loans pending settlement at June 30, 1999.

          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  said loan or  (ii)substitute  interest  in
another  loan of equal  value.  During  Fiscal  Year  1999,  six  loans  with an
aggregate value of approximately $139,000 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 $140 million in new loans during  Fiscal Year 2000.
However,  there can be no  assurances  that the Company  will be able to achieve
this level.

Year 2000 Update

          Many currently  installed  computer systems and software  products are
coded to accept only two digit entries in the date code field.  Beginning in the
Year 2000,  these date code  fields  will need to accept  four digit  entries to
distinguish  the  twenty-first  century  dates.  The Company  uses  software and
related technologies that may be affected by the Year 2000 problem, and has been
pursuing a strategy to ensure that all of its critical  computer systems will be
operational beginning on January 1, 2000.



                                       19
<PAGE>

          The Company recently  completed  testing its technical  infrastructure
and hardware and has made the required  remediations  to computers  that did not
pass  preliminary  testing.  The Company  expects  these  computers  to be fully
operational in the Year 2000.

          While the analysis of the  Company's  information  technology  systems
continues,  management does not anticipate the costs  associated with making all
such systems Year 2000 compliant to exceed $50,000. To date, the Company's costs
associated with Year 2000 issues have not been material.

     The  Company  has  received  assurances  from the  vendor of its  servicing
system, that their system is Year 2000 compliant. A dummy system was established
and has shown satisfactory results in the Year 2000 environment. 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.

          The Company has discussed its non-technology  risks, (air conditioning
and heating,  lighting, safety and security systems), with its property manager,
who has assured the Company these systems will be Year 2000  compliant  prior to
December 31, 1999.

          There can be no assurance that other  companies'  computer systems and
applications on which the Company's operations rely will be timely converted, or
that any such  failure to convert by another  company  would not have a material
adverse effect on the Company's systems and operations.  Furthermore,  there can
be no  assurance  that  the  software  that  the  Company  uses  which  has been
represented by the supplier of such software to be Year 2000 compliant  contains
all necessary date code changes.

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  $112,142,000,  for Fiscal  Year 1999,  resulting  in a
serviced loan portfolio approximating $248,544,000. 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



                                       20
<PAGE>

geographic location,  is extremely diverse. At June 30, 1999, businesses in over
120 distinct industries in approximately 40 different states received loans from
Business  Loan Center.  The largest  industry  sectors in Business Loan Center's
portfolio include:  lodging,  approximating 35% of the aggregate loan portfolio,
gas  stations  and  convenience  stores,  approximating  14%;  and  restaurants,
approximating 13% of the aggregate loan portfolio.

          Fiscal Year 1999 vs. Fiscal Year 1998. The Company recorded net income
of  $3,103,000  (or $.16 per basic  share)  for the year  ended  June 30,  1999
("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 the Fiscal
Year June 30, 1998 to  approximately  $3,550,000  for the Fiscal Year ended June
30,  1999,  or by 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, 1999 compared to $114,358,000 at June 30,
1998, representing a 72% increase. Servicing fees earned by the Company on those
guaranteed loans sold in the secondary market have ranged between .50% and 4.06%
per annum.  In  addition,  the Company  continues  to earn  additional  residual
interest income on unguaranteed loans securitized and guaranteed loans sold.

          Operating  expenses  increased from  approximately  $6,481,000 for the
Fiscal Year ended June 30, 1998 to approximately  $8,636,000 for the Fiscal Year
ended  June  30,  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 therefore,  revenues should result from these
production offices during the fiscal year ended June 30, 2000.


                                       21
<PAGE>



          General and  administrative  expenses of approximately  $2,746,000 for
the Fiscal Year ended June 30, 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 the Fiscal Year
ended June 30, 1999 as compared to the prior year's period. The increase was due
to  increased  borrowing  to  meet  the  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 averaging 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 the fiscal year 1999 resulted in
$11,868,000 of gains as compared to $10,583,000 for the 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:

<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



                                       22
<PAGE>



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 Business Loan Center.

          Fiscal Year 1998 vs. Fiscal Year 1997. The Company recorded net income
of  $3,226,000  (or $.18 per  basic  share)  for the year  ended  June 30,  1998
("Fiscal Year 1998") as compared to net income of $1,947,000  (or $.11 per basic
share) for the year ended June 30, 1997 ("Fiscal Year 1997").  Net income before
provision  for income  taxes and  extraordinary  item  ("Operating  Income") was
$5,337,000 for Fiscal Year 1998, as compared to $1,675,000 for Fiscal Year 1997.
Net income before  extraordinary  item was $3,226,000 (or $ .18 per basic share)
for Fiscal Year 1998,  as compared to  $1,702,000  (or $.10 per basic share) for
Fiscal Year 1997. There were no extraordinary  items during Fiscal Year 1998, as
compared  to an  extraordinary  gain of  $245,000  in  Fiscal  Year  1997.  This
extraordinary  gain  resulted  from  a  settlement  of  a  lawsuit  involving  a
promissory  note issued in  connection  with the  acquisition  of Business  Loan
Center from its predecessor in interest.

          Revenues  for  Fiscal  Year  1998,  which  approximated   $15,729,000,
increased  by 119% from Fiscal Year 1997  primarily  due to higher gains on loan
sales,  servicing fee income, and interest income. This is directly attributable
to (i) a 79 % increase in the loan portfolio, which approximated $175,889,000 at
June 30, 1998,  as compared to  approximately  $98,017,000  at June 30, 1997 and
(ii) the  recognition of gains on the sale of both  guaranteed and  unguaranteed
loans approximating $10,583,000 in Fiscal Year 1998.

          Interest  income  increased  from  $1,666,000  for Fiscal Year 1997 to
$2,439,000 for Fiscal Year 1998, or by  approximately  46%. This resulted from a
88% increase in the  unguaranteed  loan  portfolio  held by the  Company,  which
approximated  $22,281,000  at June 30, 1998, as compared to  $11,850,000 at June
30, 1997. At June 30, 1998,  the average  interest  rate on the Company's  total
portfolio  approximated  11.25%.  During  Fiscal  Year 1998 both  Business  Loan
Center's and BLC Commercial's, base lending  rate,  the prime rate,  remained
stable at 8.50%.

          Service fee income,  which  increased by 44% from Fiscal Year 1997, to
approximately  $1,150,000 in Fiscal Year 1998. This increase  directly  resulted
from the increased  guaranteed  loan portfolio  which yielded  servicing fees of
between 1% to 2.62% per annum,  as well as,  service  fees  ranging from .75% to
1.75% on the sale of participations  in the unguaranteed  portions of the loans.
In addition,  the Company earned  additional  residual  interest  income (net of
amortization) on those  unguaranteed  loans securitized during Fiscal Year 1998.
With respect to the  SBA-guaranteed  loans sold in the secondary  market,  loans
originated  during  Fiscal  Year 1998  yielded an average  service fee of 2.24%,
while the loans made pursuant to the B&I Program  yielded an average service fee
of 50 basis points.



                                       23
<PAGE>



          Operating expenses in Fiscal Year 1998 increased by approximately 100%
over  Fiscal Year 1997.  This  increase  can be  attributed  to the  increase in
payroll, commissions,  travel and consulting expenditures incurred in connection
with the Company's overall growth and expansion.

          General and  administrative  expenses in Fiscal Year 1998 approximated
$1,753,000,  an increase of 38% from Fiscal Year 1997,  as the Company  incurred
greater costs in connection with the opening of the new loan production offices.
The Company  also  incurred  additional  expenditures  for  corporate  and legal
services rendered.

          Interest  expense  rose  approximately  121% from  Fiscal Year 1997 to
$2,158,000 in Fiscal Year 1998.  This increase was directly  attributable to the
Company's increased  borrowings under its bank line resulting from the continued
growth in loan production activities during the fiscal year.

          Loans in the  approximate  aggregate  principal  amount of $93,854,000
were originated during Fiscal Year 1998, as compared to loans in the approximate
aggregate  principal amount of $42,335,000 for Fiscal Year 1997,  representing a
121% increase in  origination  activities  during the  referenced  periods.  The
guaranteed  principal  amount of the loans  originated  during  Fiscal Year 1998
approximated  $67,357,000 as compared to the aggregate  guaranteed  principal of
$31,140,000  for Fiscal Year 1997.  Of those loans  originated  and fully funded
during Fiscal Year 1998,  substantially all of the guaranteed portions were sold
in the secondary market  subsequent to the full funding of each loan, at premium
rates  approximating  10%. During Fiscal Year 1998, the Company  securitized and
sold  approximately  $18,000,000 in unguaranteed  loans. In connection with this
transaction,  the Company acquired  approximately  $5,800,000 of previously sold
participations in the unguaranteed loans from a purchaser.

                                       24
<PAGE>

          The  number  and  aggregate  principal  amount  of  the  loans  in the
Company's  portfolio  at the end of  Fiscal  Year  1998  may be  classified  and
compared  to the  loans  in its  portfolio  at the end of  Fiscal  Year  1997 as
follows:

<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   $164,037,000   $120,298,000   $43,739,000    321        $86,127,000 $65,265,000   $20,862,000     216

Delinquent Loans      2,630,000      2,060,000       570,000      3          4,379,000   3,534,000       845,000      13

Loans in Liquidation  9,222,000      7,413,000     1,809,000     35          7,511,000   6,127,000     1,384,000      30
                     -----------  --------------  ----------   ----         ----------  -----------  -----------    -------
Total Loans         $175,889,000  $129,771,000    $46,118,000   359        $98,017,000  $74,926,000  $23,091,000     259
                     ===========  ==============               ====         ==========  ===========                 =======

LESS:

Loans Sold                                       $ 22,289,000                                       $11,241,000

Allowance for Credit Losses                           641,000                                           901,000

Deferred Income & Other                             1,148,000                                         1,110,000
                                                   -----------                                        ----------
Loans Receivable Net                             $ 22,040,000                                        $ 9,839,000
                                                   ===========                                        ==========
</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.

Item 7(A) QUALITATIVE AND QUANTITATIVE DISCLOSURES ON MARKET RISK.

          In general, the Company manages its interest rate risk through the use
of  variable-based  interest  rate  indices for its  borrowing,  servicing,  and
lending activities.  Specifically, the Company's borrowing rates from its lender
are  based  upon a spread  above the Prime  Rate and the  LIBOR  Rate  while the
lending rate to its  borrowers is based upon a spread above the Prime Rate.  The
Company,  in its ordinary  course of business,  originates and sells portions of
its loans receivable  which adjusts with the Prime Rate. The residual  interests
and servicing assets which result from these sales are generally not impacted by
a change in interest  rates. As a result,  Management  believes that the Company
has substantially insulated itself from the impact of a change in interest rates
by having,  in  essence,  a locked in  interest  rate spread for the life of the
assets.  The use of these  variable  rates  obviates the need for the Company to
acquire  hedging  instruments,  and the like, to offset any interest rate change
differentials.

          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.

                                       25
<PAGE>

          In connection  with its interest rate risk management  practices,  the
Company has  performed  sensitivity  analysis  with respect to its servicing and
residual  interest assets.  The Company has estimated that if interest rates, in
general  and with all other  factors  remaining  constant,  were to  increase by
approximately  10%,  net  income  would  be  negatively  impacted  by less  than
$100,000.

          As a result,  Management  of the Company has deemed this  hypothetical
impact to be immaterial  to the  Company's  future  financial  condition.  These
sensitivity  analyses are limited in that they are  performed at a certain point
in time, they assume that an increase in interest rates would result in a direct
increase in the discount rate and estimated fair value interest rate, and do not
incorporate any other factors which may impact the Company's  financial  results
in such a situation.

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 DISCLOSURES.

                None.
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                 9/8/99)          Positions        Director Since    Officer Since   Will Expire
----------------------------- -------------- -------------------- ----------------- ---------------- ------------
<S>                           <C>            <C>                  <C>               <C>             <C>
Robert F. Tannenhauser (1)    54             President &          September 1986    September 1986   2000
                                             Chairman of the
                                             Board
----------------------------- -------------- -------------------- ----------------- ----------------
Peter D. Blanck (1)(3)        42             Director             June 1993         N/A              2000
----------------------------- -------------- -------------------- ----------------- ---------------- ------------
Jerome B. Alenick (2)         70             Director             May 1998          N/A              2001
----------------------------- -------------- -------------------- ----------------- ---------------- ------------
Robert W. D'Loren (3)         41             Director             June 1997         N/A              2001
----------------------------- -------------- -------------------- ----------------- ---------------- ------------
Irwin E. Redlener, M.D. (2)   55             Director             June 1997         N/A              2002
----------------------------- -------------- -------------------- ----------------- ---------------- ------------
Kenneth S. Schwartz, M.D.     54             Director             June 1997         N/A              2002
(3)
----------------------------- -------------- -------------------- ----------------- ---------------- ------------
Robert W. Wien (2)            48             Director             June 1997         N/A              2001
----------------------------- -------------- -------------------- ----------------- ---------------- ------------
Leonard Rudolph               52             Executive Vice       N/A               May 1998         N/A
                                             President
----------------------------- -------------- -------------------- ----------------- ---------------- ------------
Jennifer M. Goldstein         27             Chief Financial      N/A               June 1996        N/A
                                             Officer & Treasurer
----------------------------- -------------- -------------------- ----------------- ---------------- ------------
David I. Redlener             31             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
------------------------------------

                                       26
<PAGE>

          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, and April 1999. 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 Preventive  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.

          Robert  W.  D'Loren  has  been  President  of  CAK  Universal   Credit
Corporation since February 1, 1998. Prior to that he had been  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 1997. 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 had been chief Medical Officer of American Imaging
Management Inc. in Northbrook,  Illinois since December 1998. At present,  he is
senior radiology consultant to American Imaging Management, Inc. and a principal
of S&D  Medical  LLP,  New York.  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,


                                       27
<PAGE>

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.

          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 to 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 Masters
degree in Finance.  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,  1999,  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 Exchange Act of
1934.

                                       28
<PAGE>

Item 11.        EXECUTIVE  COMPENSATION.

Compensation Committee Interlocks and Insider Participation.

          At June 30, 1999,  Peter Blanck,  Robert D'Loren and Kenneth  Schwartz
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  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 Kenneth Schwartz are
also warrant holders and/or  shareholders of the Company.  (See Item 12 Security
Ownership of Certain Beneficial Owners and Management).

          The  Company,  during  Fiscal Year 1998  obtained a line of credit for
Business Loan Center and entered into a loan origination and servicing agreement
with a certain  financial  institution  introduced  to the  Company by Robert W.
D'Loren,  a Director of the Company.  In connection with such  arrangements  and
pursuant  to a written  agreement,  D'Loren  Levien & Company,  LLC  ("DLC"),  a
limited liability company of which Mr. D'Loren is a member,  received total fees
of $125,000.  In July 1997,  BLC Capital,  a subsidiary of the Company,  entered
into a loan origination and servicing  agreement with the financial  institution
introduced by Mr. D'Loren  pursuant to which BLC Capital was to receive fees for
originating and servicing  non-SBA first mortgage  commercial real estate backed
loans for the financial institution.  DLC is entitled to receive fees based upon
each  transaction  closed.  In the fiscal year ended June 30, 1999, DLC received
$21,800 in fees for these  services.  In January 1999,  DLC received a placement
fee of $60,000 in connection with sale of the Company's  unguaranteed SBA loans,
which  occurred on December  30,  1998.  In December  1997,  DLC  received a fee
advance  of  $72,500  in  connection  with  arranging  a line of credit  for BLC
Commercial,  to be utilized to fund loans under the  Department  of  Agriculture
Program.  In  December  1997,  the  Company  and DLC  agreed,  and the  Board of
Directors  approved,  an amendment to the agreement with respect to fees due and
to be received in the future by DLC whereby DLC agreed to reduce the cash amount
of its fees in exchange for 200,000 warrants to purchase the Common Stock of the
Company  at a  purchase  price  of  $1.83  per  share  and the  right to earn an
additional 600,000 shares.


                                       29
<PAGE>

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,  1999.  The
following  salaries and/or benefits are presently payable pursuant to employment
agreements.


                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>

------------------------------ -------------- ---------------------------- -----------------------------
Name and Principal Position    Fiscal Year                 Annual Compensation     Securities Underlying
                                                                                          Options
--------------------------------------------------------------------------------------------------------
                                               Salary       Bonus     Other
<S>                            <C>            <C>           <C>         <C>          <C>
                               1999           $224,285(1)   $50,000    $0           375,000

Robert F. Tannenhauser
President and Director         1998           $208,085(1)        $0     $0           500,000

                               1997           $207,411(1)        $0     $0           0
-------------------------------------------------------------------------------------------------------
Leonard Rudolph                1999           $170,000       $10,000    $0           25,000
Executive Vice President

                               1998            $36,154(2)        $0     $0           70,000(3)

                               1997              N/A                                   N/A
-------------------------------------------------------------------------------------------------------
Jennifer Goldstein             1999            $124,038       $35,000   $0            75,000
Treasurer
                               1998            $ 91,923       $15,000     $0         100,000

                               1997             $64,769        $7,000     $0          75,000

-------------------------------------------------------------------------------------------------------
</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 the fiscal year ended June 30, 1999,
and pursuant to Non-Qualified Stock Option Agreements, each Director was granted
(i) 10,000 options to purchase  Common Stock at an exercise price of $3.31,  all
of which are  exercisable  immediately or at any time prior to July 17, 2003 and
(ii) 25,000  options to purchase  Common Stock at an exercise price of $2.00 per
share,  all of which are  exercisable  immediately or at any time prior to April
27, 2004. As  additional  compensation,  each Director is to receive  $1,000 per
meeting of the Board of Directors.

          Executive Employment  Agreements.  The Company 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.

                                       30
<PAGE>

          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.

          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 the four years.  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.  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 on (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.






                                       32
<PAGE>
                 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  the  fiscal  year  ended  June  30,  1999  by the  named
individual,  along with the year-end  value of unexercised  options/warrants  at
June 30, 1999.

<TABLE>
<CAPTION>

----------------------------- ---------------- ---------------- ----------------------- ----------------------------
                                                                Number of Securities    Value of Unexercised
Name                          Shares                            Underlying Unexercised  In-The-Money
                              Acquired on      Value Realized   Options at 6/30/99      Options/Warrants at
                              Exercise                                                  6/30/99 (4)
----------------------------- ---------------- ---------------- ----------------------- ----------------------------
<S>                           <C>                 <C>            <C>                      <C>
Robert F. Tannenhauser
President and Director        0                0                1,302,500 (1)           $1,188,500 (5)
----------------------------- ---------------- ---------------- ----------------------- ----------------------------
Leonard Rudolph
Executive Vice President      0                0                   95,000 (2)              $     0 (6)
----------------------------- ---------------- ---------------- ----------------------- ----------------------------
Jennifer Goldstein
Treasurer                     0                0                  250,000 (3)            $ 230,500 (8)
----------------------------- ---------------- ---------------- ----------------------- ----------------------------

</TABLE>

(1)Includes  375,000 options at an exercise price of $2.90,  500,000 options
   at  an  exercise  price  of  $.82  of  which  100,000  shares  are  currently
   exercisable,  and 427,500 at an exercise  price of $.60 of which  427,500 are
   currently exercisable.

(2)Includes  70,000 options at an exercise price of $3.25 of which 17,500 are
   currently exercisable, and 25,000 options at an exercise price of $2.90.

(3)Includes  75,000 at an  exercise  price of $2.90,  100,000  options  at an
   exercise price of $.82 of which 20,000 are currently exercisable,  and 75,000
   at an  exercise  price  of $.50  per  share  of  which  56,250  is  currently
   exercisable.

(4)The value realized equals the market value of the common stock at June 30,
   1999  (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, 1999 was $2.00.

(5)500,000  shares  ($2.00 - $.82) = $590,000  and 427,500  ($2.00 - $.60) =
   $598,500.

(6)These options are out of the money.

(7)100,000  shares  ($2.00 - $.82) =  $118,000  and  75,000  ($2.00 - $.50) =
   $112,500.


                     OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
                                Individual Grants
<TABLE>
<CAPTION>
----------------------- -------------- -------------- ---------- ----------- ------------------- -------------------
                                                                                      Potential           Potential
                            Number of        % Total                           realizable value    realizable value
                           securities   Options/SARs  Exercise                at assumed annual   at assumed annual
                           underlying     Granted to      Price                  rates of stock      rates of stock
                         options/SARs   Employees in  ($/share)  Expiration               price               price
Name                          Granted    Fiscal Year                   Date    appreciation for    appreciation for
                                                                                    option term         option term
                                                                                         5% ($)             10% ($)
----------------------- -------------- -------------- ---------- ----------- ------------------- -------------------
<S>                            <C>           <C>       <C>       <C>            <C>                 <C>
Robert F. Tannenhauser
President and Director        375,000            73%      $2.90   12/7/2003             $0                $84,100
----------------------- -------------- -------------- ---------- ----------- ------------------- -------------------
Leonard Rudolph
Executive Vice                 25,000             5%       2.90   12/7/2003             $0                 $5,600
President                      70,000            12%       3.25    5/4/2002             $0                     $0
----------------------- -------------- -------------- ---------- ----------- ------------------- -------------------
Jennifer Goldstein
Treasurer                      75,000            15%      $2.90   12/7/2003             $0                $16,800
----------------------- -------------- -------------- ---------- ----------- ------------------- -------------------
</TABLE>
                                       33
<PAGE>

          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.

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



                                       34
<PAGE>


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

          The following table sets forth certain information as of June 30, 1999
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 below,  the shareholders  listed possess sole voting and investment
power with respect to their shares.

<TABLE>
<CAPTION>

--------------------------------------- ------------------------------------- -------------------------------------
                                        Amount and Nature of Beneficial
Name and Address of Beneficial          Ownership                             Percent Of Class
Owner
--------------------------------------- ------------------------------------- -------------------------------------
<S>                                     <C>                                     <C>
Futuronics Corporation                  2,595,224 (1)                         12.79%
3652 Forest Gate Drive, N.E.
Iowa City, Iowa 52240
--------------------------------------- ------------------------------------- -------------------------------------
Peter D. Blanck                         3,396,390 (2)(3)                      16.54%
University of Iowa, College of Law
Iowa City, Iowa 52241
--------------------------------------- ------------------------------------- -------------------------------------
Richard Blanck                          3,211,391 (2)(4)                      15.78%
9 Hickory Road
Manhasset Hills, New York 11040
--------------------------------------- ------------------------------------- -------------------------------------
Robert W. D'Loren                       255,000(5)                            1.24%
72 Woodland Drive
Oyster Bay Cove, NY 11771
--------------------------------------- ------------------------------------- -------------------------------------
Robert C. McGee                         1,085,296 (6)                         5.30%
204 Oxford Circle East
Richmond, Virginia 23221
--------------------------------------- ------------------------------------- -------------------------------------
Jennifer M. Goldstein                   195,785(7)                            *
50 West 72nd Street
New York, New York 10023
--------------------------------------- ------------------------------------- -------------------------------------
David I. Redlener                       4,157(8)                              *
155 Henry Street
Brooklyn, New York  11201
--------------------------------------- ------------------------------------- -------------------------------------
Irwin E. Redlener                       55,000(9)                             *
11 Alfred Lane
New Rochelle, New York 10804
--------------------------------------- ------------------------------------- -------------------------------------
Diane Rosenfeld                         1,119,984 (10)                        5.46%
RR #1 Box 427 D
County Road #86
Amenia, New York 12501
--------------------------------------- ------------------------------------- -------------------------------------
Kenneth S. Schwartz                     66,525(11)                            *
284 Guard Hill Road
Bedford, New York 10506
--------------------------------------- ------------------------------------- -------------------------------------
Carol Tannenhauser                      5,509,523 (2)(12)                     26.30%
210 East 68th Street
New York, New York 10021
--------------------------------------- ------------------------------------- -------------------------------------
Robert F. Tannenhauser                  5,509,523 (12)                        26.30%
210 East 68th Street
New York, New York 10021
--------------------------------------- ------------------------------------- -------------------------------------
Jerome B.  Alenick                      454,375 (13)                           2.24%
26 Columbia Turnpike
Florham Park, New Jersey 07932
--------------------------------------- ------------------------------------- -------------------------------------

                                       35
<PAGE>

--------------------------------------- ------------------------------------- -------------------------------------
                                        Amount and Nature of Beneficial
Name and Address of Beneficial          Ownership                             Percent Of Class
Owner
--------------------------------------- ------------------------------------- -------------------------------------
Robert W. Wien                          124,500 (14)                          *
24 James Road
Mount Kisco, New York 10549
--------------------------------------- ------------------------------------- -------------------------------------
Leonard Rudolph                         30,087                                *
3 Pelham Place
East Brunswick, New Jersey 08816
--------------------------------------- ------------------------------------- -------------------------------------
All Directors and officers              7,309,788(15)                         33.59%
    as a group (nine persons)
--------------------------------------- ------------------------------------- -------------------------------------
* Owns less than 1% of the outstanding shares of Common Stock
</TABLE>

(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) 85,737  shares owned  directly by Peter D. Blanck,  (b) 295,267
shares deemed owned by Peter D. Blanck as custodian for his four  children,  (c)
110,000 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) 55,000  shares that maybe  acquired  upon the exercise of options
held by Robert D'Loren.

(6)  Includes  (a)  897,821  shares  owned  directly  by Robert C. McGee and (b)
187,475 shares that may be acquired upon the exercise of certain  warrants owned
by Robert C.  McGee.

(7) Includes (a) 119,535  shares owned by Jennifer  M.Goldstein,  and (b) 76,250
shares that may be  acquired  upon the  exercise of options  held by Jennifer M.
Goldstein.

(8) Includes (a) 1,157 shares owned by David  Redlener and (b) 3,000 shares that
may be acquired upon the exercise of options held by David Redlener.


                                       36
<PAGE>

(9)  Includes  55,000  shares that may be acquired  upon the exercise of options
held by Irwin Redlener.

(10) Includes (a) 666,710 shares directly owned by Diane Rosenfeld,  (b) 225,774
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.

(11) Includes (a) 11,525 shares  directly  owned by Kenneth  Schwartz or jointly
with Jane Schwartz, and (b) 55,000 shares that may be acquired upon the exercise
of options held by Kenneth Schwartz.

(12) Includes (a) 204,964 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) 427,500 shares underlying
options owned by Carol Tannenhauser,(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 held in a custodial account for the benefit of
Emily  Tannenhauser,  the  daughter  of  Robert  F.  Tannenhauser  each of Carol
Tannenhauser and Robert F.  Tannenhauser  share voting and dispositive  power of
such  shares,  (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)  135,000  shares  underlying  options  owned by  Robert F.
Tannenhauser.

(13)  Includes  (a) 311,875  shares  owned by the Defined  Benefit  Plan for the
Benefit of Jerome Alenick,  (b) 35,000 shares underlying options owned by Jerome
Alenick, and (c) 107,500 shares owned by Jerome B. Alenick and Nicole A. Alenick
as joint tenants and tenants in common.

(14)  Includes (a) 35,000  shares owned  directly by Robert W. Wien,  (b) 55,000
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.

(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.

                                       37
<PAGE>

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  1999,  1998,  1997 and 1996.  For those  periods,  the  Company  incurred
interest  expense  relating  to such  individuals  in the  aggregate  amounts of
$19,000,  $17,000,  $157,000,  and $130,000,  respectively.  The maximum amounts
outstanding  for these loans  during the periods in  question  were  $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. During fiscal
year 1999,  interest  expense and interest  accrual relating to such individuals
approximated  $88,000  and  $22,000,  respectively,  based upon the  outstanding
debenture of $950,000.  Additionally,  during Fiscal Year 1998, interest expense
and interest accrual relating to such individuals totaled  approximately $48,000
and $25,000, respectively,  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.  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.

          The Company and Robert C. McGee, a former director and  Vice-President
of the Company and a current  beneficial  owner of greater  than five percent of
the  Company's  Common Stock are parties to an amended and  restated  employment
agreement.  Robert McGee's original Employment Agreement provided that he was to
be employed as Vice  President  of the Company,  a Managing  Partner of Business
Loan Center and President  and Chief  Executive  Officer of BLC Network  through
January 15,  2001 at an annual  gross  salary of  $200,000.  Mr.  McGee was also
issued warrants to purchase  187,475 shares of Common Stock at an exercise price
of $.60,  all of  which  are  exercisable  immediately  or at any time  prior to
November 5, 2000.

          Mr. McGee's Amended and Restated Employment Agreement provides that he
shall be employed as BLC Network's,  Senior Credit Advisor  through  January 15,
2001 at a gross annual salary of $175,000.  The agreement  further provides that
should BLC-Network terminate Mary McGee's, his spouse, employment for other than
cause or death or disability,  then Mr. McGee's  compensation shall be increased
to  $256,000  per  year.  In  the  event  BLC-Network  terminates  Mary  McGee's
employment  for cause or as a result of death or  disability,  then Mr.  McGee's
compensation shall be increased to $200,000 per annum. Furthermore, in the event
BLC-Network reduces Mary McGee's salary below $81,000 per year, then Mr. McGee's
salary  will be  increased  by a like  amount.  Mr.  McGee is also  entitled  to
participate in all benefit plans  established  from time to time by the Company,
BLC-Network,  and  Business  Loan  Center,  Inc.  on the same basis as all other
executive  employees.  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.

          On April 1, 1997,  the Company  entered into an  employment  agreement
with R.  Matthew  McGee,  the son of Robert  McGee,  whereby Mr.  McGee shall be
employed as a  consultant  for BLC Capital  Corp.  through  March 31, 2002 at an
annual gross salary of $136,000, which has been increased to $195,000. Mr. McGee
is entitled to participate in all plans  established  from  time-to-time  on the
same basis as all other  employees.

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




                                       38
<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, 1999 and 1998...F-3
                  Consolidated Statements of Income --
                    Years Ended June 30, 1999, 1998 and
                    1997..................................................F-4
                  Consolidated Statements of Changes in
                    Shareholders' Equity --Years ended
                    June 30, 1999, 1998 and 1997..........................F-5
                  Consolidated Statements of Cash Flows --
                    Years ended June 30, 1999, 1998 and
                    1997..................................................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 43
                          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,  1999.  On December  30,  1998,
                  Business  Loan  Center,  a  wholly-owned   subsidiary  of  the
                  Company, successfully completed the securitization and sale of
                  a portion of its unguaranteed SBA loan portfolio.

                  (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).




                                       39
<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 27, 1999                    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.

Signatures                                Title                        Date
---------------                    ---------------------           -------------
/s/ Robert F. Tannenhauser
Robert F. Tannenhauser                  Director            September 27, 1999

/s/ Peter D. Blanck
Peter D. Blanck                         Director            September 27, 1999

/s/ Robert D'Loren
Robert W.  D'Loren                      Director            September 27, 1999

/s/ Irwin E. Redlener
Irwin E. Redlener                       Director            September 27, 1999

/s/ Kenneth S. Schwartz
Kenneth S. Schwartz                     Director            September 27, 1999

/s/ Robert W. Wien
Robert W. Wien                          Director            September 27, 1999

/s/ Jerome Alenick
Jerome Alenick                          Director            September 27, 1999



                                       40
<PAGE>


EXHIBIT INDEX


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

*                   3.5  By-Laws of BLC Financial Corp. II

*                   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 issue 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

*                   4.7  Form of Debenture Note 9% Convertible Subordinated
                         Note Due 2001

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

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




                                       41
<PAGE>



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

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)



                                       42
<PAGE>

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

Exhibit 10.4[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 FinancialServices 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 24, 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



                                       43
<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


                                       44
<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



                                       45
<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





                                       46
<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"

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

*                 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

*                 10.63  9% Convertible subordinated Note Due 2003 Conversion
                         Price $3.50 per Share Series 1

*                 10.64  Addendum to Confidential Private Placement Memorandum
                         BLC Financial Services, Inc. 9% Convertible
                         Subordinated Note Due 2003




                                       47
<PAGE>



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

*                 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

*                 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

*                 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

*                 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.

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

*                 10.70  Form of Subscription Agreement

Exhibit 21[15]    21     Amended List of Subsidiaries

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

Exhibit 27 [17]   27.2   Financial Data Schedule

*                 27.3   EDGAR filing: Article 5 Financial Data Schedule

-----------------------
* Filed Herewith



                                       48
<PAGE>


Previous SEC Filings:

[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

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

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



                                       49
<PAGE>




                          BLC FINANCIAL SERVICES, INC.

                        CONSOLIDATED FINANCIAL STATEMENTS

                             JUNE 30, 1999 and 1998




<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>

                [LETTERHEAD OF RICHARD A EISNER & COMPANY, LLP]


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, 1999 and 1998, 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, 1999.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  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,  1999  and  1998  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, 1999,  in  conformity
with generally accepted accounting principles.




/s/Richard A. Eisner & Company, LLP

Richard A. Eisner & Company, LLP

Florham Park, New Jersey
August 27, 1999






                                      F-2
<PAGE>

BLC FINANCIAL SERVICES, INC.

Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                  June 30,
<S>                                                      <C>                 <C>
                                                        1999                1998
ASSETS
-------

Loans receivable - net                           $21,936,000         $22,040,000
Loans held for sale                                8,922,000           7,160,000
Cash                                               4,229,000           1,730,000
Restricted cash                                    1,728,000           1,768,000
Accounts receivable - loans sold                   8,982,000           8,252,000
Accounts and other receivables                     2,681,000           1,006,000
Prepaid expenses                                     464,000             302,000
Leasehold improvements, furniture and equipment,
net of accumulated depreciation of $571,000
in 1999; $342,000 in 1998                          1,207,000             742,000
Servicing assets                                   4,761,000           3,270,000
Residual interests                                10,877,000           5,057,000
Deferred income taxes                              1,000,000             991,000
Security deposits                                    131,000             131,000
Deferred financing costs, net of accumulated
amortization of $774,000 in
1999; $415,000 in 1998                               669,000             832,000
Other assets                                         450,000
                                                   ----------       ------------
                                                 $ 68,037,000       $ 53,281,000
                                                 ============       ============
LIABILITIES
------------

Advances under credit facilities                   $39,488,000      $32,541,000
Accounts payable and accrued expenses                  643,000        1,163,000
Due to participants                                  1,640,000          264,000
Allowance for estimated future
   losses on loans sold                                 77,000          466,000
Notes payable                                          120,000           46,000
Debentures                                           4,725,000        3,328,000
Customer deposits                                    2,197,000        1,204,000
                                                    ----------       -----------
 Total liabilities                                  48,890,000       39,012,000
                                                   ===========       ===========

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 - 20,288,875 shares, issued and
outstanding in 1999 and 19,778,449 in 1998            202,000           197,000
Additional paid-in capital                         12,659,000        10,840,000
Retained earnings                                   5,865,000         2,762,000
Accumulated other comprehensive income -
unrealized gain on residual interests
(net of income taxes of $305,000 in 1999;
$341,000 in  1998)                                    421,000           470,000
                                                  ------------       -----------
Total shareholders' equity                         19,147,000        14,269,000
                                                  ------------       -----------
                                                  $68,037,000       $53,281,000
                                                  ============      ===========


</TABLE>

See notes to financial statements

                                      F-3
<PAGE>

<TABLE>
<CAPTION>


Consolidated Statements of Income
Year Ended June 30,

<S>                                                        <C>           <C>          <C>
                                                          1999          1998         1997


Revenues:

Interest income                                    $ 3,550,000   $ 2,439,000   $1,666,000

Gain on sale of loans                               11,868,000    10,583,000    4,333,000

Service fee income                                   2,355,000     1,150,000      800,000

Miscellaneous                                        1,649,000     1,557,000      369,000
                                                   -----------   -----------   ----------
                                                    19,422,000    15,729,000    7,168,000
                                                   -----------   -----------   ----------

Expenses:

Operating costs                                      8,636,000     6,481,000    3,249,000

General and administrative                           2,746,000     1,753,000    1,267,000

Interest                                             2,886,000     2,158,000      975,000

Equity of minority interest in income of
subsidiary                                                                          2,000
                                                     -----------   -----------  ----------
                                                      14,268,000    10,392,000  5,493,000
                                                     -----------   -----------  ----------

Income before provision (benefit)
for income taxes
and extraordinary item                                 5,154,000     5,337,000   1,675,000

Provision (benefit) for income taxes                   2,051,000     2,111,000     (27,000)
                                                     -----------   -----------   -----------
Income before extraordinary item                       3,103,000     3,226,000    1,702,000
                                                                                 -----------
Extraordinary gain - forgiveness of debt
  (net of income taxes of $27,000)                                                  245,000
                                                     -----------   -----------   -----------
Net income                                         $   3,103,000     3,226,000   $1,947,000
-----------                                         ============   ============  ===========
</TABLE>


<TABLE>
<CAPTION>
<S>                                                    <C>             <C>             <C>

Basic:

Income before extraordinary item                       $.16            $.18               $.10

Extraordinary item                                                                        $.01

Net income                                             $.16            $.18               $.11

Diluted:

Income before extraordinary item                       $.14            $.15               $.10

Extraordinary item                                                                        $.01

Net income                                             $.14            $.15               $.11

</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,
     1996                 16,882,052    $169,000   $6,843,000   $(2,411,000)                              $4,601,000
Exercise of
 warrants                    459,191       4,000      174,000                                                178,000
Net income                                                        1,947,000                 $1,947,000     1,947,000
Pre-confirmation net
 operating loss
 utilization                                          374,000                                                374,000
Change in unrealized
 gain on residual
 interests, net
 of income
 tax effect                                                                      $90,000        90,000        90,000
                         -----------   ----------   -----------   ----------   ----------- ------------   ------------

Balance, June 30, 1997    17,341,243     173,000    7,391,000     (464,000)       90,000    $2,037,000     7,190,000
                                                                                          ============

Exercise of warrants
and options                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
                         ------------ ------------ ------------ -------------    ---------  -----------   -----------

Balance, June 30, 1998    19,778,449    197,000    10,840,000    2,762,000        470,000  $3,606,000     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)
                         -------------  ---------   ------------ -----------    ----------   ----------- ------------

Balance, June 30,1999     20,288,875    $202,000   $ 12,659,000  $ 5,865,000   $ 421,000     $3,054,000  $19,147,000
                         =============  =========   ============  ===========   ==========   =========== ============
</TABLE>

See notes to financial statements



                                      F-5
<PAGE>

BLC FINANCIAL SERVICES, INC.

Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>                                                                                        Year Ended June 30,
                                                                           -----------------------------------------
                                                                              1999          1998          1997
                                                                             --------    -----------     -----------
<S>                                                                      <C>              <C>             <C>
Cash flows from operating activities:

Income before extraordinary item                                        $  3,103,000    $  3,226,000    $ 1,702,000
Adjustments to reconcile net income to net cash provided by (used in)
 operating activities:
 Depreciation                                                                233,000         131,000         69,000
 Minority interest in income of subsidiary                                                                    2,000
  Amortization                                                             1,047,000         782,000        217,000
  Provisions for credit losses                                               398,000         190,000         74,000
 Deferred income tax expense (benefit)                                     1,560,000       1,711,000       (333,000)
 Issuance of warrants in connection with professional services
  rendered                                                                                   189,000
 Loans held for sale originated                                          (16,999,000)    (21,914,000)    (1,079,000)
  Sales of loans held for sale                                            15,237,000      15,863,000      2,294,000
  Changes in:
  Restricted cash                                                             40,000      (1,768,000)
  Accounts receivable - loans sold                                          (730,000)     (5,005,000)    (3,247,000)
  Accounts and other receivables                                          (1,675,000)       (724,000)       (23,000)
 Prepaid expenses                                                           (162,000)        (84,000)      (218,000)
 Deferred financing costs                                                   (196,000)       (920,000)      (250,000)
 Accrued expenses                                                           (520,000)        741,000         34,000
 Due to participants                                                       1,376,000        (260,000)       524,000
 Security deposits                                                                          (128,000)        19,000
  Customer deposits                                                          993,000         873,000         65,000
                                                                        ------------    ------------    -----------
  Net cash provided by (used in) operating activities                      3,705,000      (7,097,000)      (150,000)

Cash flows from investing activities:
 Loans originated                                                        (28,758,000)    (26,496,000)    (10,996,000)
  Principal collections and sales of
  loans receivable                                                        18,480,000       8,937,000       5,037,000
 Payments on residual interests                                            1,061,000         429,000          15,000
 Acquisition of equipment                                                  (698,000)       (529,000)       (254,000)
  Purchase of minority interest in
  subsidiary                                                                                               (380,000)
                                                                         ------------    ------------    ------------
Net cash used in investing
 activities                                                               (9,915,000)    (17,659,000)     (6,578,000)
                                                                         ------------    ------------    ------------
Cash flows from financing activities:
Net borrowings under lines of credit                                       6,947,000      23,921,000       5,066,000
Net proceeds from notes payable                                              620,000
Proceeds from issuance of debentures                                         922,000       2,978,000
Proceeds from exercise of
 warrants and options                                                        286,000       1,288,000         178,000
Proceeds from issuance of common stock                                         5,000
Principal payments on debentures                                             (25,000)
 Due to affiliates                                                                        (2,394,000)      1,966,000
Principal payments on notes payable                                          (46,000)       (110,000)       (172,000)
                                                                         ------------    ------------    ------------
          Net cash provided by
          financing activities                                              8,709,000      25,683,000       7,038,000
                                                                          ------------    ------------    ------------

Net increase in cash                                                        2,499,000         927,000         310,000
Cash at beginning of year                                                   1,730,000         803,000         493,000
                                                                          ------------    ------------    ------------
Cash at end of year                                                      $  4,229,000    $  1,730,000    $    803,000
                                                                          ============    ============    ============
Supplemental disclosures of
cash flow information:

Cash paid for:

Interest                                                                 $  2,899,000    $  1,950,000    $    961,000
Income taxes                                                             $  1,011,000    $    175,000    $    438,000


See notes to financial statements

</TABLE>

                                      F-6

<PAGE>


BLC FINANCIAL SERVICES, INC.

Notes to Financial Statements
June 30, 1999 and 1998


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation and preparation:

The accompanying  consolidated  financial statements include the accounts of BLC
Financial Services,  Inc. (the "Company");  its corporate subsidiaries and prior
to February 1997, a general partnership (the "Partnership") after elimination of
all significant intercompany accounts and transactions. On September 16, 1996, a
wholly-owned  subsidiary of the Company  purchased the minority  interest of the
Partnership for $380,000.  Prior to September 16, 1996, the Company owned 88% of
the Partnership. In February 1997, the assets and liabilities of the Partnership
were transferred into a wholly-owned subsidiary of the Company.

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 a premium, 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.

Accounting for loans and revenue recognition:

The Company's  policy is to sell the SBA or B&I guaranteed  portion of all loans
that it  originates,  at a premium,  in the  secondary  market on a  nonrecourse
basis. 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.

Effective  January 1, 1997,  as required by Statement  of  Financial  Accounting
Standards No. 125  "Accounting  for Transfers and Servicing of Financial  Assets
and  Extinguishment  of  Liabilities  ("FAS 125"),  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. The impact of the adoption of FAS
125 on net income in 1997 was immaterial.

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.


                                      F-7
<PAGE>
BLC FINANCIAL SERVICES, INC.

Notes to Financial Statements
June 30, 1999 and 1998


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Accounting for loans and revenue recognition: (continued)

The Company generally ceases to accrue interest income on loan receivables which
become 90 days delinquent,  categorizes these loans as being in liquidation, and
takes  appropriate  steps to attempt to  collect  the loan in full.  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.

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 ultimate amount
realized  from  collateral  securing the impaired  loans  cannot  reasonably  be
determined until their 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:

In accordance with FAS 125, effective January 1, 1997, the Company, upon sale of
loans  recognizes 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 reviews these factors and, if necessary, adjusts the remaining asset
to the fair value of the residual  interest.  As of June 30,  1999,  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.


                                      F-8
<PAGE>
BLC FINANCIAL SERVICES, INC.

Notes to Financial Statements
June 30, 1999 and 1998



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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.

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:

During the year ended June 30,  1999,  the  Company  retroactively  adopted  the
provisions of Statement of Financial  Accounting  Standards  No. 130  "Reporting
Comprehensive  Income" which establishes  standards for reporting  comprehensive
income  (net  income  plus all other  changes  in net assets  from  nonownership
sources) and its components in the financial statements.

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, 1999 and 1998


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The following  table presents the basic and diluted EPS for the years ended June
30, 1999, 1998 and 1997.
<TABLE>
<CAPTION>

                                1 9 9 9                         1 9 9 8                            1 9 9 7
                       ---------------------------     ------------------------------   -----------------------------
                    Income                             Income                           Income
                    before                             Before                           Before
                    Extra-     Weighted                Extra-     Weighted              Extra-    Weighted
                    ordinary   Average    Per Share    ordinary   Average   Per Share   ordinary   Average   Per Share
                    Item       Shares     Amount       Item       Shares    Amount      Item       Shares    Amount
<S>                 <C>        <C>         <C>        <C>        <C>         <C>        <C>         <C>       <C>

Income before
extraordinary
 item            $ 3,103,000                           $3,226,000                      $1,702,000
                 ===========                           ==========                      ==========
Basic EPS
 Income before
 extraordinary
 item available
 to common
 stockholders     $ 3,103,000   20,017,158   $.16     $ 3,226,000  18,287,002   $.18   $1,702,000  17,317,428   $.10
                                             ====                               ====                            ====
Effect of
 dilutive
 stock
 options and
 warrants                        2,613,168                          2,306,048                         915,429

Effect of
convertible
debentures            195,000     1,747,962                91,000     831,025
                     ---------  -----------              ---------  -----------       ----------- -----------

Diluted EPS
Income before
 extraordinary
 item available
 to common
 stockholders     $ 3,298,000    24,378,288   $.14      $3,317,000 21,424,075   $.15   $ 1,702,000   18,232,857  $.10
                 ============   ===========   ========= =========== =========== =====   ===========   ==========  ====

</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 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, 1999 and 1998


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, 1999 and 1998, loans receivable - net consisted of:

<TABLE>
<CAPTION>
BLC FINANCIAL SERVICES, INC.

Notes to Financial Statements
June 30, 1999 and 1998
                                                   1999                1998
                                             ----------------    ---------------
<S>                                           <C>                  <C>
Loans receivable                               $ 23,860,000        $ 23,829,000
Less:
Deferred income                                  (1,010,000)         (1,148,000)
Allowance for credit losses                        (914,000)           (641,000)
                                               ------------        ------------
Net loans receivable                           $ 21,936,000        $ 22,040,000
                                               ============        ============

</TABLE>

As of June 30, 1999,  contractual maturities of loans receivable for each of the
next five years were as follows:

           Year Ending
             June 30,
-------------------------------
              2000                                $     617,000
              2001                                      684,000
              2002                                      759,000
              2003                                      843,000
              2004                                      935,000


As of June 30, 1999 and 1998, the impaired loan portfolio totaled $1,673,000 and
$1,809,000,  respectively,  for which specific  allocations to the allowance for
credit losses aggregated $382,000 and $309,000 respectively. The average balance
of the  impaired  loan  portfolio  for the year  ended  June  30,  1999 and 1998
approximated  $1,741,000  and  $1,589,000,  respectively.  The  Company  did not
recognize any interest  income on its impaired loan  portfolio  during the years
ended June 30, 1999, 1998 and 1997.

Changes in the  allowance  for credit  losses for the three years ended June 30,
1999 were as follows:

           Balance as of June 30, 1996             $   1,230,000
           Provision for credit losses                    83,000
           Loans charged off                            (412,000)
                                                   -------------
           Balance as of June 30, 1997                   901,000
           Benefit for credit losses                    (177,000)
           Loans charged off                             (83,000)
                                                   -------------
           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
                                                   =============





                                      F-11
<PAGE>
BLC FINANCIAL SERVICES, INC.

Notes to Financial Statements
June 30, 1999 and 1998

NOTE 3. SERVICING ASSETS AND RESIDUAL INTERESTS

Changes in  servicing  assets and residual  interests  for the three years ended
June 30, 1999 are as follows:
<TABLE>
<CAPTION>

                                                  Servicing            Residual
                                                  Assets               Interests
                                                  -----------         ----------
<S>                                               <C>                   <C>

Balance June 30,1996                               $ 1,479,000
Assets originating from loan sales                     684,000       $   867,000
Amortization                                          (191,000)
Principal payments                                                      (15,000)
Change in market value                                                   100,000
                                                   -----------       -----------
Balance, June 30, 1997                               1,972,000           952,000
Assets originating from loan sales                   1,712,000         3,823,000
Amortization                                          (414,000)
Principal payments                                                      (429,000)
Change in market value                                                   711,000
                                                   -----------       -----------
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
                                                   ===========       ===========
</TABLE>

As of June 30, 1999, the net unrealized gains related to residual  interests was
$726,000.


NOTE 4. FINANCING

As of June 30, 1999, 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 plus 1%. The  facilities  expire  between May 2000 and
August 2001 and include covenants requiring the company to, among other matters,
maintain minimum tangible net worth.

As of June 30, 1999, the Company had a note payable of $120,000.  The note bears
interest at the prime rate and had an original maturity date of August 1999. The
maturity date has been extended to August 2000.

Debentures  aggregating $3,303,000 as of June 30, 1999 and $3,328,000 as of June
30,  1998 bear  interest  at 9-1/4%  per  annum,  mature  November  2001 and are
convertible  respectively  into 1,649,549 and 1,662,049  shares of the Company's
common  stock.  Debentures  aggregating  $1,422,000  as of June  30,  1999  bear
interest at 9% per annum,  mature February 2003 and are convertible into 406,286
shares of the Company's common stock. Additionally, they are subordinated to the
revolving lines of credit.  During 1999, a note holder exchanged a $500,000 note
payable  for  a  $500,000  debenture  payable.  During  1998,  $150,000  of  the
subordinated  advances and $200,000 of amounts due to affiliates  were converted
into $350,000 of debentures.

As of June 30,1998, the Company had a note payable of $46,000, which was paid in
full during 1999.

The principal  payments on the  debentures of $3,303,000  and $1,422,000 are due
during the years ending June 30, 2002 and June 30, 2003, respectively.


NOTE 5. INCOME TAXES

The  significant  components  of the  Company's  deferred  income tax assets and
liabilities as of June 30, 1999 and 1998 are as follows:

                                      F-12
<PAGE>
BLC FINANCIAL SERVICES, INC.

Notes to Financial Statements
June 30, 1999 and 1998


                                                       1999            1998
                                                  -------------- ---------------
Deferred income tax assets:

Net operating losses                                 $ 1,305,000    $ 2,056,000
Allowance for credit losses                              382,000        428,000
Loan discount                                            390,000        398,000
Alternative minimum tax credit carryforward              220,000        140,000
                                                    ------------    ------------
                                                       2,297,000      3,022,000
Deferred income tax liability; unrealized gain
on residual interest                                    (305,000)      (341,000)
Valuation allowance                                     (992,000)    (1,690,000)
                                                     -----------    -----------
Net deferred income tax asset                        $ 1,000,000    $   991,000
                                                     ===========    ===========


The  valuation  allowance  represents  the  unutilized  tax  benefit  of the pre
confirmation net operating losses.

The significant  components of the provision  (benefit) for income taxes for the
years ended June 30, 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>

                                                        1999          1998         1997
                                                  -------------- -------------- --------------

<S>                                                    <C>            <C>            <C>
Current:

Federal                                             $    98,000    $   123,000    $  20,000
State                                                   393,000        277,000      286,000
                                                     ----------       --------     --------
Total current taxes                                     491,000        400,000      306,000
Deferred:                                            ----------       --------     --------
Federal, including utilization of preconfirmation
net operating losses credited to additional
paid-in capital                                       2,248,000      3,572,000      336,000
State                                                    10,000        (22,000)    (101,000)
Change in valuation allowance                          (698,000)    (1,839,000)    (568,000)
                                                      ---------     ----------- ------------
Total deferred taxes                                  1,560,000      1,711,000     (333,000)
                                                      ---------     ----------- ------------
Provision (benefit) for income taxes                $ 2,051,000    $ 2,111,000    $ (27,000)
                                                     ==========    ===========    ==========
</TABLE>

The  difference  between the statutory  federal income tax rate on the Company's
income before income taxes and  extraordinary  item and the Company's  effective
income tax rate for the years ended June 1999,  1998 and 1997 is  summarized  as
follows:
<TABLE>
<CAPTION>

                                                  1999       1998    1997
                                             ----------   --------  -------
<S>                                            <C>        <C>       <C>
Statutory federal income tax rate              34.0%      34.0%     34.0%
State income tax, net of federal benefit        5.2        4.8%      5.2
Reduction in valuation allowance                                   (33.9)
Miscellaneous                                   0.6        0.8      (6.9)
                                              ------     ------    ------
Effective income tax rate                      39.8%      39.6%     (1.6)%
                                              ======     ======    ======
</TABLE>


                                      F-13
<PAGE>

BLC FINANCIAL SERVICES, INC.

Notes to Financial Statements
June 30, 1999 and 1998

NOTE 5. INCOME TAXES (CONTINUED)

As of June 30, 1999,  the Company has net operating loss  carryforwards  ("NOL")
for income tax purposes expiring as follows:

                Year Ending
                  June 30,
               -------------
                   2000                            $  1,568,000
                   2001                                 225,000
                   2002                               1,127,000
                   2003                                 124,000
                   2004                                 124,000
                   2005                                 546,000
                   2006                                 125,000
                                                  -------------
                                                  $   3,839,000
                                                  -------------

NOL's amounting to $2,920,000 relate to losses incurred prior to confirmation of
the Company's  plan of  reorganization  in 1987.  The tax benefit  realized upon
utilization  of  such  carryforwards  will be  credited  to  additional  paid-in
capital.

Note 6. Stock Options and Warrants

The Company has stock option plans (the  "Plans")  for  directors,  officers and
employees  which  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 October 1999
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. 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 income before extraordinary items would have been as follows:

                                                  Year Ended June 30,
                                         1999            1998            1997
                                        ---------------------------------------
Pro forma income before
extraordinary item              $   2,938,000   $   3,164,000   $   1,661,000
Pro forma earnings per share:
Basic                                0.15             0.17            0.10
Diluted                              0.12             0.15            0.09

The fair value of each option granted in 1999,  1998 and 1997 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%, risk free
interest  rates  ranging from 4.58% to 6.37% and expected  lives  ranging from 3
years to 10 years.  The average fair value of options  granted during 1999, 1998
and 1997 were $1.07, $1.00 and $.27, respectively.


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

Notes to Financial Statements
June 30, 1999 and 1998

NOTE 6. STOCK OPTIONS AND WARRANTS (CONTINUED)

The following table summarizes stock option transactions under the Plans:

<TABLE>
<CAPTION>

                                                       Year Ended June 30,
                    ----------------------------------------------------------------------------------------
                                1999                          1998                     1997
                    ----------------------------------------------------------------------------------------
                                             Weighted                Weighted                  Weighted
                                             Average                  Average                   Average
                               Shares        Exercise                Exercise    Shares        Exercise
                                             Price        Shares       Price                    Price
                    -----------------   -------------- -------------- -----------------   ------------------
<S>                            <C>          <C>        <C>          <C>         <C>          <C>
Outstanding options at the
 beginning of year            2,831,975     $1.04      1,922,475    $ 0.57      1,947,475    $ 0.56
Options granted (a)           1,049,042      2.84      1,332,000      1.54        150,000      0.62
Options exercised              (35,000)       .59       (422,500)     0.50       (140,000)     0.50
Options expired or
 canceled (a)                  355,000)      3.47                                 (35,000)     0.50
Outstanding options at the     ---------               ----------               -----------
 end of year                  3,491,017     $1.34      2,831,975    $ 1.04      1,922,475    $ 0.57
                              =========               ===========               ===========  --------
----------------------------------
</TABLE>

(a) Includes  options on 270,000  shares  repriced in January 1999. The original
exercise prices ranged from $4.18 to $4.81 and were repriced at $3.25.

The following table summarizes  information about the Plans' outstanding options
as of June 30, 1999:
<TABLE>
<CAPTION>

                         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
 ----------------  ----------- ------------------ ----------        -------------            -----------
<S>                 <C>             <C>          <C>                 <C>                      <C>
$0.50 - $0.90        2,446,975       2.10         $ .69               1,652,375                $ 0.64
$1.47 - $3.63        1,044,042       4.10          2.85                 239,000                  2.33

</TABLE>

As of June 30, 1999, 1998 and 1997, respectively, 673,500, 1,075,500 and 625,000
shares were available for grant under the Plans.

As of June 30, 1999, the Company had outstanding  warrants to purchase 1,101,957
shares of common  stock at prices  ranging from $0.65 to $1.85.  These  warrants
expire from November 2000 through December 2002.

As of June 30,  1999,  6,624,718  shares have been  reserved for the exercise of
warrants, stock options and conversion of debentures.

During the year ended June 30,  1998,  the Company  issued  warrants to purchase
415,000  shares  of  common  stock  in  connection  with  professional  services
rendered.  The fair value of each warrant  granted in 1998 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%, risk free interest
rate of 5.5% and expected lives ranging from 3 to 5 years.



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

Notes to Financial Statements
June 30, 1999 and 1998

NOTE 7. COMMITMENTS

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,
      ------------------
             2000                                      $   681,000
             2001                                          713,000
             2002                                          558,000
             2003                                          575,000
             2004                                          559,000
             Thereafter                                  2,553,000
                                                       ------------
                                                        $5,639,000
                                                       ============

Rent  expense  for the  years  ended  June 30,  1999,  1998 and 1997  aggregated
$481,000, $294,000 and $109,000, 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.

Fair value estimates are based on existing  balance sheet financial  instruments
without  attempting to estimate the value of anticipated future business and the
value of assets and liabilities that are not considered  financial  instruments.
The tax  ramifications  related to the  realization of the unrealized  gains and
losses can have a  significant  effect on the fair value  estimates and have not
been considered in the estimates.

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, 1999                June 30, 1998
                                   Carrying Value  Fair Value   Carrying Value Fair Value
                                 -----------------------------  --------------------------
 <S>                                      <C>           <C>           <C>           <C>
Cash                                     $ 4,229,000   $ 4,229,000   $ 1,730,000   $ 1,730,000
Loans held for sale                        8,922,000     9,725,000     7,160,000     7,876,000
Servicing assets and residual interest    15,638,000    15,979,000     8,327,000     8,952,000
Loans receivable                          23,860,000    24,573,000    23,829,000    24,491,000
Accounts receivable                        8,982,000     8,982,000     8,252,000     8,252,000
Notes payable                             39,608,000    39,608,000    32,587,000    32,587,000
Debentures                                 4,725,000     4,725,000     3,328,000     5,402,000
</TABLE>

Note 8.  Financial  Instruments,  Credit Risk  Concentration  and Other  Matters
(continued)

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

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

Notes to Financial Statements
June 30, 1999 and 1998


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,
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.

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, 1999, the Company
had  bank  deposits   exceeding   Federally   insured  limits  by  approximately
$5,654,000.  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, 1999,
the Company's  commitments to extend credit  aggregated  $148,363,000.  However,
$112,781,000  of the  commitments  are SBA and B&I  guaranteed  loans  which the
Company intends to sell in the secondary market.




                                      F-17
<PAGE>

BLC FINANCIAL SERVICES, INC.

Notes to Financial Statements
June 30, 1999 and 1998

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

As of June 30,  1999,  the  outstanding  balance of loans  sold with  limited or
unlimited recourse aggregated $39,975,000.  The Company's maximum exposure under
the recourse  provisions is $9,846,000.  The Company lends to diverse industries
primarily in the eastern  United  States.  As of June 30, 1999,  the lodging and
restaurant  industries  represented  approximately  27% and 11% of the Company's
loans receivable, respectively.

Concentrations:

During the year ended June 30, 1999, no loan  production  company  accounted for
more than 8% of loan  originations.  During the years  ended  June 30,  1998 and
1997, two loan production  companies  accounted for 24% and 29% of the Company's
loan originations,  respectively.  During the years ended June 30,1999, 1998 and
1997, 75% of the guaranteed  loans were sold to three  securities  dealers,  83%
were sold to four securities dealers and 78% were sold to one securities dealer,
respectively.


Note 9. Related Parties Transactions

During the years  ended June 30,  1999,  1998 and 1997,  the  maximum  amount of
outstanding short-term loans payable to family members of an officer/shareholder
aggregated $1,077,000,  $2,594,000 and $2,594,000,  respectively. As of June 30,
1999 and 1998, no loans to the family members were outstanding. Interest expense
on these loans aggregated $19,000,  $17,000 and $157,000 in the years ended June
30, 1999, 1998 and 1997, respectively.

Family members of an  officer/shareholder  purchased  $950,000 of the debentures
issued in 1998. For the year ended June 30, 1999 and 1998,  interest  expense on
these debentures aggregated $88,000 and $48,000, respectively.


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>