ROYAL FINANCIAL CORP, 10SB12G, 1998-11-23

ROYAL FINANCIAL CORP
10SB12G, 1998-11-23

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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-SB

GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS

Under Section 12 (b) or (g) of the Securities Exchange Act of 1934

ROYAL FINANCIAL CORPORATION
(Exact name of Small Business Issuer in its charter)

NEVADA 13-3961109
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

1000 BALLPARK WAY, SUITE 210, ARLINGTON,
TX 76011 (Address of principal
executive office)

(817) 861-4000
(Issuer's telephone number)

Securities to be registered under Section 12 (b) of the Act: None

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

Common Stock, par value $.001
(Title of class)

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TABLE OF CONTENTS
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Page

PART I

<S> <C>
Item 1. Description of Business.................................................................................1

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...........................................................................6

Item 3. Description of Property.................................................................................9

Item 4. Security Ownership of Certain Beneficial Owners and Management ........................................10

Item 5. Directors, Executive Officers, Promoters and Control Persons ..........................................11

Item 6. Executive Compensation.................................................................................13

Item 7. Certain Relationships and Related Transactions.........................................................13

Item 8. Description of Securities..............................................................................13

PART II

Item 1. Market price of and Dividends of the Registrant's Common Equity
and Other Shareholder Matters......................................................................14

Item 2. Legal Proceedings......................................................................................14

Item 3. Changes in and Disagreements with Accountants..........................................................15

Item 4. Recent Sales of Unregistered Securities................................................................15

Item 5. Indemnification of Directors and Officers..............................................................16

PART F/S
Financial Statements

PART III

Index to Exhibits

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Explanatory Note:

Unless otherwise indicated or the context otherwise requires, all
references herein to the "Company" are to Royal Financial Corporation, a Nevada
corporation, and its wholly-owned subsidiaries, Royal Mortgage Corporation,
Royal Mortgage Brokerage, Inc., Walden Woods of Sugarmill, Inc. and Walden Woods
of Sugarmill Sales, Inc.

The Company is filing this Form 10-SB voluntarily. The Company's Common
Stock has traded on the OTC Bulletin Board since May 1998 and the Company
believes the market for its stock will be enhanced by being a reporting company.
In addition, the Company intends to seek listing on the NASDAQ SmallCap Market
in the near future, for which a registration under the 1934 Act will be
required.

PART I

Item 1. Description of Business

General

Royal Financial Corporation (the "Company") is a real estate financial
holding company which invests in the asset backed real estate and mortgage
markets. The Company was incorporated in August 1993 as Davenport Ventures, Inc.
("Davenport") and is duly organized and in good standing under the laws of the
State of Nevada. In late 1997, controlling interest in the Company was acquired
by a former officer and director of Davenport to initiate the business of
purchasing, developing and operating manufactured housing communities.

Davenport completed its first acquisition of a manufactured housing
community on June 1, 1998 for a purchase price of approximately $1,611,000
which included an $800,000 first mortgage secured through Royal Mortgage
Corporation. There are currently 87 pad sites with an annual revenue from
rents of approximately $180,000. The business objective is to increase the
size of the community by increasing the number of pad sites to approximately
215. In addition, the Company anticipates that the rents will be raised to
approximately $225 per month, per site, on January 1, 2000 from the current
rent of $175 per month. Once the community is fully rented, the Company
believes that the annual revenue from rents will be approximately $487,000
per year which the Company believes will substantially increase the value of
the community. This property acquisition was completed through the purchase
of 100% of the outstanding shares of common stock of Walden Woods of
Sugarmill, Inc., a Florida corporation ("Walden Woods"). Walden Woods and its
subsidiary, Walden Woods of Sugarmill Sales, Inc., a Florida corporation
("Walden Sales"), are now wholly-owned subsidiaries of the Company.

Effective August 18, 1998, the Company acquired Royal Mortgage
Corporation, a Texas corporation ("RMC"), through an exchange offer on the
basis of one share of its common stock for one share of RMC's common stock.
RMC was founded in December 1994 to invest in U.S. mortgage instruments (not
including origination of mortgages), and to obtain safe, high yields and
capital gains on these investments. The approval of the shareholders of both
companies was received on August 10, 1998.

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The terms of the exchange offer required that the name of Davenport be
changed to Royal Financial Corporation and that the existing officers and
directors of RMC become the officers and directors of the Company. The
exchange offer also resulted in the Company and RMC changing their fiscal
year ends to August 31.

Principal Business Activities

The Company believes that RMC has identified several unique, secure sectors
of the real estate market from which to focus. The following sectors represent
90% of the Company's revenues:

(1) Acquisition and resolution of sub and non-performing mortgage loans;
(2) Acquisition of distressed properties and foreclosure sales; and
(3) Purchase of tax lien certificates resulting from unpaid mortgages or
unpaid property taxes owed to municipal and county taxing authorities.

Mortgage Loans

According to the Mortgage Banker's Association of America (October 1997)
the great majority of homes purchased within the U.S. are financed through
banks, savings and loans associations, credit unions and other financing
companies, with the dollar amount of homes financed each year within the U.S.
consistently exceeding $600 billion over the past six years. On average, 4% of
these mortgages become sub and non-performing loans, which has created a $160
billion niche within the mortgage paper market.

Existing mortgage loans can be purchased at a discount in the secondary
market of the U.S. mortgage market. The level of discount achieved will vary
depending upon numerous factors, including but not limited to, (i) payment
history of subject mortgage loan, (ii) how motivated the seller is to sell
the loan, (iii) the terms of the loan, (iv) the condition of the property and
(v) the location of the property. RMC has purchased loans at discounts
ranging from approximately 15 to 60 percent of the face value of the loan.
The Company's discounted loan portfolio totaled approximately $2,808,902 or
26% of the Company's total assets, as of August 31, 1998.

Level of Discount

RMC has acquired performing loans at discounts of approximately 10 to 15
percent and has acquired non-performing loans at discounts of approximately 40
to 60 percent. Performing loans offer cash flow as well as an opportunity for a
moderate capital gain when RMC sells the loans. Non-performing loans offer no
cash flow, but the Company believes that they may offer tremendous capital gain
potential. RMC purchases discounted loans for the purpose of realizing a capital
gain within four to eighteen months of acquisition, although no assurances of a
capital gain can be given.

Source of Loans

RMC has acquired discounted mortgage loans from banks and other originators
of loans, large U.S. conglomerates that participate in the secondary mortgage
market and at public auctions. Performing loans are typically purchased from
originators and secondary market participants. Non-performing loans are
generally purchased from secondary market participants and at public auctions.

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Due Diligence

Whether purchasing performing or non-performing loans, RMC must carry out
several due diligence steps. First and foremost, RMC must locate sources of
these loans, then RMC evaluates and narrows its selections to pursue only those
mortgages that meet the RMC's investment criteria. Then the property is
inspected and the market value of the property is verified. Finally, all costs
associated with both purchasing and selling the property are calculated and, if
all the information gathered meets with the RMC's Investment Committee's
approval, the transaction takes place.

Distressed Properties and Foreclosure Sales

When a property owner fails to pay property tax, school tax or other
taxes or to make mortgage payments to his or her mortgage company for an
extended period of time, that person's home can be placed on the auction
block by the mortgage company or local governmental authorities. As evidenced
by county foreclosure listings, this occurs on a regular basis in the U.S.
and creates an opportunity to purchase homes out of mortgage foreclosure. RMC
has had the opportunity to purchase homes in mortgage foreclosure sales for
as little as 40 to 60 percent of their fair market value. At August 31, 1998,
the Company's real estate owned, net, totaled approximately $1,357,744 or 12%
of the Company's total assets.

RMC also contacts lenders and major secondary market participants to look
at portfolios of loans that are slated for foreclosure. RMC may purchase several
loans at once and then foreclose on each loan as the holder of the unpaid
mortgage and potentially realize a capital gain when the property is resold.
These portfolios of loans, purchased just prior to foreclosure, are available at
discounts ranging from approximately 40 to 80 percent of the face value of the
unpaid loan. The same due diligence is performed on distressed properties and
foreclosure sales as the Company would perform on other assets acquired.

Tax Lien Certificates

The Company believes that RMC has identified a specific market niche
that offers a low-risk and high-yield opportunity: Tax Lien Certificates.
When property taxes are not paid promptly by the property owner, certain
local taxing authorities auction tax lien certificates for that particular
property. The sale of the certificates provides immediate funds to the taxing
authority. In certain states and counties in the United States, purchasers of
tax lien certificates are able to realize a high rate of interest on these
certificates based on statutory rates set by the local taxing authorities.
Currently 31 states in the U.S. auction tax lien certificates at the local
government level.

According to Fitch Investor Service Inc. ("Fitch"), approximately 2 to 3
percent of all tax liens are not redeemed by the property owner and the
purchaser of the tax lien must wait until the property is sold at auction to
make a profit. However, in those instances when the taxes are not paid by the
property owner the property is sold at auction and the investor's lien is
ultimately satisfied.

To date, RMC has purchased tax lien certificates yielding approximately 17
to 24 percent annually. The redemption rate the Company has experienced is
consistent with the findings of the research conducted by Fitch. RMC purchased
$553,915 in tax lien certificates in June 1997. As of August 31, 1998, $127,520
of these certificates were still outstanding.

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In those states that do not participate in a tax lien certificate
program, the Company believes that RMC has identified an alternative approach
for achieving the same result as purchasing a tax lien certificate. In these
states, RMC lends money directly to property owners who are delinquent in
paying their property taxes. The funds go directly to the taxing authority to
pay the delinquent taxes. The Company receives a high rate of interest and
holds a first lien on the property owner's home. If the homeowner does not
repay the principal and interest to RMC, the Company forecloses on the
borrower's property. The Company believes that the amount loaned to the
delinquent taxpayer is small in relation to the fair market value of his or
her home, creating an over-collaterized, high-yield investment.

Royal Mortgage Brokerage, Inc.

Royal Mortgage Brokerage, Inc., a Texas corporation, which is also
authorized to do business in Florida, arranges for individuals, partnerships,
trusts or corporations to obtain mortgages from outside mortgage lenders on
properties owned by or outside of the Company. Customarily, Royal Mortgage
Brokerage, Inc. obtains a financing "broker's" commission for each mortgage it
arranges. These fees range from 1 to 4% depending upon the size of the mortgage
and the "broker's" fee paid by a particular lender. Royal Mortgage Brokerage,
Inc. is a wholly-owned subsidiary of RMC.

Manufactured Housing

Davenport completed its first acquisition of a manufactured housing
community on June 1, 1998 when it purchased Walden Woods Retirement Village (the
"Park"), a manufactured housing community in Homosassa, Florida. The Park is a
45 acre site. 18 of the 45 acres are developed with approximately 87 pad sites.
The Company is currently developing an additional 20 acres. It is anticipated
that the development will be completed by December 1998 at which time the
Company believes the Park will contain an aggregate of approximately 215 pad
sites. The Company believes, although no assurances can be given, that once the
community is fully rented, the annual revenue from rents will be approximately
$487,000 per year which the Company believes will significantly increase the
value of the community.

This property acquisition was completed through the purchase of 100% of
the capital stock of Walden Woods. Walden Woods is now a wholly-owned
subsidiary of the Company.

A manufactured home community is designed and improved with sites for the
placement of manufactured homes and related infrastructure and amenities.
Manufactured homes are detached, single-family homes that are built off-site by
manufacturers and installed on sites within each community. The owner of each
home in the community leases the site on which the home is located. Modern
manufactured home communities are similar to typical residential subdivisions
containing centralized entrances, paved streets, curbs, gutters and parkways. In
addition, these communities often provide a clubhouse for social activities,
recreation and other amenities, which may include swimming pools, shuffleboard
courts, tennis courts, laundry facilities and cable television services.

The Company believes that manufactured housing is the fastest growing
segment in the United Sates housing market. According to the Manufactured
Housing Institute, nearly one out of every three new homes sold in the U.S.
is a manufactured home and shipments of manufactured homes have increased 20%
annually since 1992.

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The Company generates revenue from its manufactured housing community from
three major sources:

(1) Land Leasing: The Company owns the manufactured home community,
including the land and any community developments thereon. The Company generates
revenue by leasing lots to home owners.

(2) Sale of manufactured homes: Through Walden Sales, the Company
intends to engage in the sale of manufactured homes, currently costing
approximately $50,000 to $125,000.

(3) Arranging third party mortgages: Through its wholly-owned subsidiary,
Royal Mortgage Brokerage, Inc., the Company arranges third party mortgage
financing for the homes which it sells. The earned commission results in a 2%
margin of profit for the Company.

The Company, through its wholly-owned subsidiaries, Walden Woods and
Walden Sales, anticipates acquiring and developing additional manufactured
housing communities. Although no assurances can be given, the Company
believes that the development of manufactured housing communities can be
accomplished in a relatively short time frame eliminating one of the largest
risks facing most real estate developments, the risk of tying up funds for an
extended time period and realizing no income off those funds. The Company
believes that an average of six months is required from the time a
manufactured housing community site is developed until revenues are realized
from sales of new manufactured homes to be placed in the new community. From
its manufactured housing communities, the Company will realize revenues from
the sale of new homes, from mortgage brokerage activities, from leasing lots
and from Company controlled utilities within the community. The Company
expects participation in the manufactured housing industry to comprise
approximately 10% of its overall portfolio.

Competition

The acquisition of discounted loans and tax lien certificates is highly
competitive because the acquisition of such loans is often based on competitive
bidding.

With regard to manufactured housing communities and manufactured homes,
local conditions such as oversupply of manufactured home sites or a reduction in
demand for manufactured home sites in the local area, the attractiveness of the
properties to tenants, zoning or other regulatory restrictions, changes in laws,
competition from available manufactured home communities and alternative forms
of housing (such as apartment buildings and site-built single-family homes) are
factors that affect the Company's business.

Environmental Impact

The Company believes that none of its activities utilize any hazardous
materials or result in the discharge of any pollutants into the environment. The
Company believes it complies fully with all state and federal environmental laws
and regulations. In addition, the properties owned by the Company or for which
the Company holds a mortgage or tax lien generally have been subjected to a
Phase I or similar environmental audit (which involves general inspections
without soil sampling or ground water analysis) completed by independent
environmental consultants whose audits have not revealed, nor is the Company
aware of, any material adverse affect on the Company's business, results of
operations, financial condition or liquidity.

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Employees

The Company employs a total of ten full-time persons, two commission-based
personnel and several contract personnel who perform due diligence procedures
on behalf of the Company. None of the Company's employees, commission-based
personnel or contract personnel are represented by a union and the Company
believes its relationship with its employees is very good.

Regulation

The Company is subject to the oversight of its various business activities
including the resale of real estate, mortgage brokerage activities and operation
of manufactured housing communities by various federal and state agencies and
related associations. Management of the Company believes it is in compliance
with all applicable federal and state statutes, rules and regulations.

Item 2. Management's Discussion and Analysis or Plan of Operation

General

The Company, through its wholly-owned subsidiaries:

(1) acquires sub and non-performing mortgage loans and real properties
that meet the Company's investment criteria;

(2) acquires tax lien certificates which result from property owners not
paying their property taxes. At a minimum, the Company receives statutory
interest yields which range from approximately 17 to 24%. Any tax lien
certificates which are not redeemed are converted into real estate assets;

(3) owns and operates a manufactured housing community in Florida.

SELECTED FINANCIAL DATA

The following table sets forth summary historical financial information of
the Company as of the dates and periods indicated in the following table. The
summary historical financial data for the eight months ended August 31, 1998
is derived from financial statements of the Company which have been audited
by Grant Thornton LLP, independent public accountants, appearing elsewhere
herein. The summary historical financial data as of and for the years ended
December 31, 1996 and 1997 is derived from the financial statements of RMC
which have been audited by William C. Spore & Company, P.C., independent
public accountants. The information below should be read in conjunction with
the Financial Statements and related notes thereto of the Company and RMC.

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Royal Mortgage Corporation Company
Year Ended Eight Months
December 31, Ended
1996 1997 August 31, 1998
-------------------------------------------------------------------
Statement of Operations Data(1):
<S> <C> <C> <C>
Revenues $ 34 $ 277,031 $ 220,776
Expenses (493,162) (1,790,821) (2,406,304)
Other income (expense) -- (4,723) --
----------- ------------ -------------

Net loss $ (493,128) $ (1,518,513) $ (2,185,528)
----------- ------------ -------------
----------- ------------ -------------

Net loss per share $ 0.24) $ (0.68) $ (0.40)
----------- ------------ -------------
----------- ------------ -------------

Weighted average shares outstanding 2,050,000 2,266,437 5,450,599
----------- ------------ -------------
----------- ------------ -------------

As of December 31, As of
1996 1997 August 31, 1998
---------------------------------------------------------------
Balance Sheet Data:
Working capital (deficit) $ (265,398) $ 3,511,816 $ 4,008,714
Investments -- 4,052,123 4,330,802
Property and equipment, net(2) 268,690 313,927 2,198,979
Total assets 329,358 9,058,000 10,755,724
Total long-term debt -- 50,000 1,290,000
Total liabilities 282,114 10,090,193 1,370,250
Stockholders' equity 47,244 (1,031,949) 9,385,474

</TABLE>

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(1) To give effect to the August 1998 merger, the Statement of Operations Data
includes the operating results of RMC and the Company as though the entities had
been combined as of January 1, 1996. In addition, the Park was acquired on June
1, 1998. The Statement of Operations Data includes the operating results of the
Park for the period from June 1, 1998 to August 31, 1998.

(2) Property and equipment, net as of August 31, 1998 includes the land and
improvements, buildings and equipment obtained in connection with the
acquisition of the Park. The net balance of these assets as of August 31, 1998
was $1,771,391.

Effective August 18, 1998, the Company acquired all of the outstanding
capital stock of RMC, in exchange for shares of the Company. See notes to the
"Consolidated Financial Statements."

The Company has a limited operating history and conducts its operations
through its wholly owned subsidiaries, Walden Woods, which owns a
manufactured housing community and Walden Sales, which sells manufactured and
modular homes, as well as its other subsidiaries, RMC, and its wholly-owned
subsidiary, Royal Mortgage Brokerage, Inc.

The Consolidated Financial Statements of the Company for the eight
months ended August 31, 1998, reflect the combined results of RMC and the
Company which includes manufactured housing operations and real estate
investment activities. Prior to the exchange offering, the Company and its
subsidiaries used December 31 as their fiscal year end. As a result of the
exchange agreement, the shareholders of both Davenport Ventures, Inc. and RMC
approved a change to an August 31 fiscal year end, as well as a name change
from Davenport Ventures, Inc. to Royal

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Financial Corporation. In addition, the existing officers resigned and the
officers and directors of RMC were approved by the shareholders of both
companies to become officers and directors of the Company.

RMC began its operations in May 1997 after the completion of a $9,850,000 8
1/2% convertible debentures offering. This gave RMC the ability to initiate its
operations in the market niches that the Company is currently exploiting today
in the acquisition and profitable disposition of mortgage and real estate
assets. As a whole, the Company has successfully used its market niches to
obtain investment returns that management believes were and are available.

Although no assurances can be given, the Company intends to acquire an
increasing number of properties at daily and monthly judicial and
non-judicial foreclosure auctions in all major counties in Florida and Texas
through RMC. In addition, the Company intends to acquire and develop
additional manufactured housing communities. Management believes that this
will provide solid predictable growth patterns in this segment of the
Company's business for its wholly-owned subsidiaries, Walden Woods and Walden
Sales. There can be no assurance that this will occur without the successful
completion of this current financing. The matters discussed herein contain
forward-looking statements that involve certain risks, uncertainties and
additional costs detailed herein. The actual results that are achieved may
differ materially from any forward-looking projections, due to such risks,
uncertainties and additional costs.

Year 2000 Compliance

The Year 2000 ("Y2K") issue is the result of computer programs using a
two-digit format, as opposed to four year digits, to indicate the year. Such
computer systems will be unable to interpret dates beyond the year 1999, which
could cause a system failure or other computer errors, leading to disruptions of
a company's operations.

The Company has developed a plan to ensure its computer programs are
compliant with system requirements to process transaction after the year 1999.
In June 1998, the Company installed a new Y2K compliant computer system and the
Company obtained a certificate of Y2K readiness from the software vendor. As a
result, although no assurances can be given, the Company does not expect that
any costs relating to the Y2K issue will be material to its financial condition
or result of operations.

The Company is working with its suppliers and processing banks to ensure
that their systems will be Y2K compliant. Such compliance costs will be borne by
those suppliers and processing banks. In the event that such suppliers or
processing banks are unable to convert their systems appropriately, the Company
anticipates, although no assurances can be given, that it will switch suppliers
and/or processing banks to new suppliers and/or processing banks which are fully
Y2K compliant.

Forward Looking Statements

Statements that are not historical facts included in this registration
statement are "forward-looking statements" (as that term is defined in the
Private Securities Litigation Reform Act of 1995) and involve risks and
uncertainties that could cause actual results to differ from projected results.
Such statements address activities, events or developments that the Company
expects, believes, projects, intends or anticipates will or may occur, including
such matters as future capital, business strategies, expansion and growth of the
Company's operations and future net cash flows. Factors that could cause actual
results to differ materially ("Cautionary Disclosures") are described throughout
this registration statement. Cautionary disclosures include, among others:
general economic conditions, the markets for and market price of the Company's
acquired properties, the Company's ability to find, acquire, market and sell
properties, the

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strength and financial resources of the Company's competitors, the Company's
ability to find and retain skilled personnel, the results of financing efforts,
and regulatory developments and compliance. All forward-looking statements
attributable to the Company are expressly qualified in their entirety by the
Cautionary Disclosures. The Company disclaims any obligation to update or revise
any forward-looking statement to reflect events or circumstances occurring
hereafter or to reflect the occurrence of anticipated or unanticipated events.

Item 3. Description of Property

The Company maintains its principal executive offices at 1000 Ballpark Way,
Suite 210, Arlington, Texas. The premises are leased from an unaffiliated party
at a current rate of approximately $7,600 per month. The lease expires in
February 2005 and contains rent escalation clauses, which are based on
pre-determined rent increases specified in the lease agreement.

The Company also maintains an office in Naples, Florida and subleases space
from an unaffiliated party for approximately $3,700 per month. This lease
expires in October, 2000 with an option to renew for two years.

The Company believes that these facilities are adequate for its current
needs and anticipated future needs.

The Company invests in various types of real estate, primarily residential,
but also including commercial and multi-family properties. The Company
establishes an exit strategy for each property at the time the investment is
made, with the ultimate goal of realizing targeted capital gain levels on all
properties, although no assurance can be given that the Company will be
successful in achieving this goal.

Certain of the Company's investments consist of non-performing loans. Most
of the mortgage loans purchased by the Company are first liens. The Company
believes, although no assurances can be given, that generally, the turnover of
mortgage loan investments is fairly quick at an average holding period of four
to nine months.

The Company also owns Walden Woods Retirement Village (the "Park"), a
manufactured housing community in Homosassa, Florida. The Park is a 45-acre
site. 18 of the 45 acres are developed with approximately 87 home sites. The
Company is currently developing an additional 20 acres. It is anticipated that
the development will be completed by December 1998 at which time the Company
believes the Park will contain an aggregate of approximately 215 home sites.
Upon completion of the development, new sites will rent for $225 per month. Rent
for existing cites is $175 per month. This increase will be made in January
2000. The current occupancy level at the Park is approximately 95%. The book
value of assets related to the Park at August 31, 1998 was approximately
$1,771,000, which was approximately 16% of consolidated assets at August 31,
1998.

Most of the Company's investment properties, as well as the Park discussed
above, are located in the state of Florida. The Company anticipates acquiring
properties in other states, which will diversify its portfolio.

All of the Company's properties are covered by property and casualty
insurance, which the Company believes is adequate.

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Item 4. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information as of August 31, 1998 with
respect to persons known to the Company to be the beneficial owners of more than
5% of its voting common stock and with respect to the beneficial ownership of
such common stock by each director of the Company and by all directors and
executive officers of the Company as a group.

Number of Shares Number of Shares
(Assuming No Exercise (Assuming Exercise
Name and Address of of Options of Options
Beneficial Owner by Holder (1) Percent by Holder (1) Percent
- ------------------------ ----------------------------- ------- ---------------------- -------

<S> <C> <C> <C> <C>
Bank of Liechtenstein 454,545 6% -- --
c/o Brown Brothers
Harriman & Co.
59 Wall Street
New York, NY 10005

Swiss Bank Corp. 977,955 13% -- --
2 Bahnhof Plotz
Zurich, Switzerland

Von Graffenried Private Bank 567,727 8% -- --
Marktgass Passage 3
Portfach 3000
Bern 3, Switzerland

Michael J. Pilgrim 231,667 3% 541,667 7%
1000 Ballpark Way, Suite 210
Arlington, Texas 76011

Mark J. Teinert 221,667 3% 521,667 7%
1000 Ballpark Way, Suite 210
Arlington, Texas 76011

David E. Wentsch -0- -- 120,000 1%
1000 Ballpark Way, Suite 210
Arlington, Texas 76011

Richard Bergner -0- -- 10,000 --
1000 Ballpark Way, Suite 210
Arlington, Texas 76011

Dr. Raymond Wicki -0- -- 10,000 --
1000 Ballpark Way, Suite 210
Arlington, Texas 76011

Susan M. Stein -0- -- 10,000 --
1000 Ballpark Way, Suite 210

</TABLE>

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<TABLE>

<S> <C> <C> <C> <C>
Arlington, Texas 76011

Directors and executive 453,334 6% 1,223,334 14%
officers as a group
( 6 persons)

</TABLE>

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(1) Messrs. Pilgrim, Teinert and all executive officers and directors as a
group beneficially own options exercisable at an average exercise price of $2.34
for 310,000, 300,000 and 770,000 shares of common stock, respectively.

The Company is not aware of any arrangement which might result in a change
in control in the future.

Item 5. Directors, Executive Officers, Promoters and Control Persons

The following table sets forth certain information about the directors,
executive officers and significant employees of the Company.
<TABLE>
<CAPTION>

Name Age Position with Company

<S> <C> <C>
Michael J. Pilgrim 45 President and Chief Executive Officer, Chairman

Mark J. Teinert 44 Secretary and Treasurer

David E. Wentsch 46 Vice President and Director

Richard Bergner 68 Director

Raymond Wicki 55 Director

Susan M. Stein 39 Vice President - Finance

</TABLE>

Mr. Michael J. Pilgrim has been President and C.E.O. of the Company since
August 1998. Prior to such time and since 1994, Mr. Pilgrim as a co-founder of
RMC, where he serves as President and C.E.O. Mr. Pilgrim's duties include, but
are not limited to, supervising the Company's operations, serving on the
Company's mortgage evaluation and acquisition team and leading the Company's
manufactured housing activities. From 1992 to present, Mr. Pilgrim has been and
currently is a principal of Rockford Management Inc., which manages an
investment partnership, Gladiator Partners L.P. Mr. Pilgrim's employment history
also includes three years with the accounting firm of Arthur Young, five years
with Merrill Lynch, where he served as Senior Vice President and three years as
Vice President with Prudential Bache Securities. Mr. Pilgrim is a Licensed
Mortgage Broker in Florida and currently serves as the Principal Mortgage Broker
for Royal Mortgage Brokerage, Inc. Mr. Pilgrim received a Bachelor of Business
Administration degree from the University of Missouri in 1975.

Mr. Mark J. Teinert has been Secretary and Treasurer of the Company since
August 1998. Prior to such time and since 1994, Mr. Teinert was a co-founder of
RMC, where he served as Secretary and Treasurer. Mr. Teinert's duties include,
but are not limited to, serving on the Company's mortgage evaluation and
acquisition team, providing financial analysis, tax lien certificate acquisition
and

11
<PAGE>

coordinating auction activities. Mr. Teinert's employment history includes eight
years as a financial analyst for Dorchester Oil & Gas (a Fortune 500 Company),
three years with Merrill Lynch, where he served as Vice President of Retail
Equity sales, four years with California Federal Savings Bank where he oversaw
various home mortgage activities and four years as Vice President with
Professional Practice Insurance Brokers. Mr. Teinert received a Bachelor of
Business Administration degree from Texas Tech University.

Mr. David E. Wentsch has been Vice President of the Company since August
1998. Prior to such time and since April 1998, Mr. Wentsch served as Vice
President of RMC, where he served on the Company's mortgage evaluation and
acquisition team. From April 1997 to April 1998, Mr. Wentsch was engaged on a
contract basis to provide various legal services relating to the Company's
mortgage acquisition activities. Prior experience includes working as a trust
banker and practicing law in the areas of real estate, tax and bankruptcy
matters. Mr. Wentsch is a Florida Licensed Mortgage Broker. Mr. Wentsch received
a Bachelor of Business Administration from the University of Texas El Paso and
Jurist Doctor degree from the University of Texas School of Law.

Mr. Richard Bergner has been a director of the Company since August 1998.
Prior to such time and since April 1998, Mr. Bergner was a director of RMC. Mr.
Bergner has a general civil law practice in Houston, Texas which includes
business litigation in federal and state courts, corporation, general and
limited partnerships, including formation, stock issuance, acquisitions,
mergers, and liquidation and commercial and residential real estate
transactions. Mr. Bergner served in the United State Marine Corps from 1948
through 1952. Mr. Bergner received a B.A. and law degree from the University of
Texas.

Dr. Raymond Wicki has been a director of the Company since August 1998.
Prior to such time and since April 1998, Dr. Wicki was a director of RMC. From
1990 to present, Dr. Wicki has been and currently is the CEO of Bank Von
Graffenried, a family-owned private bank in Berne, Switzerland. From 1983 to
1990, Dr. Wicki focused on private and industrial portfolio management. This
included the assignment to build and manage the institutional asset management
business of a large Swiss bank. In the late 1970's, Dr. Wicki pioneered the
venture capital industry in Europe when, together with two partners, he
established one of the first venture capital funds that invested in the U.S. and
in Germany and Switzerland. Prior to such time and for eight years Dr. Wicki was
with the industrial organization of Aga Khar where he served as Head of Finance.
Dr. Wicki started his professional career in the investment department of
Hoffmann-La Roche, a Swiss pharmaceutical group. Dr. Wicki received a business
administration degree and a Ph. D. in finance and taxation from the University
of Berne, Switzerland. He also holds an MBA degree from Kent State University in
Ohio.

Mrs. Susan Stein has been Vice President of Finance of the Company since
August 1998. Prior to such time and since April 1998, Mrs. Stein was the
Controller of RMC. From 1994 to 1997, Mrs. Stein was with Arthur Andersen LLP in
Dallas, Texas where she served as engagement manager for a variety of public and
privately-owned client companies in the real estate and financial services
industries. Mrs. Stein's employment history includes five years with Coopers &
Lybrand, where she served as engagement manager for several clients including a
trust company, savings & loan, commercial banks and the FDIC. Mrs. Stein also
worked in the banking industry for three years. Mrs. Stein received a Bachelor
of Business Administration degree in Accounting from Baylor University.

Directors serve for a term of one year or until their successors are
elected and qualified.

Executive officers are appointed by and serve at the will of the Board of
Directors. There are no family relationships between or among any of the
directors or executive officers of the Company.

12
<PAGE>

Item 6. Executive Compensation

The following summary compensation table sets forth certain information
regarding compensation paid to the persons serving as the Company's chief
executive officer and each executive officer whose annual compensation exceeded
$100,000.

Name and Principal Annual Remuneration
Position Period Salary Other

<S> <C> <C> <C>
Michael J. Pilgrim,
Chairman 1998 132,000 5,000
1997 75,000 5,000

Mark J. Teinert,
Secretary/Treasurer 1998 126,000 5,000
1997 75,000 5,000

David Wentch,
Vice President and Director 1998 96,000 5,000
1997 Contract 5,000

</TABLE>

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

(1) Directors receive $5,000 and 10,000 options each year for serving as
members of the Company's Board of Directors.

There is no employment agreement with any executive officer.

Item 7. Certain Relationships and Related Transactions

The Company has entered into a long-term lease agreement for its Arlington,
Texas office. The lease expires in February, 2005 and has been personally
guaranteed by Michael Pilgrim and Mark Teinert.

Item 8. Description of Securities

The authorized capital stock of the Company consists of 50,000,000 shares
of common stock, par value $.001 per share (the "Common Stock"), of which
7,464,382 shares were outstanding as of August 31, 1998.

Voting Rights. Each holder of shares of Common Stock is entitled to one
vote for each share of Common Stock for the election of directors and on each
other matter submitted to a vote of the stockholders of the Company. The holders
of Common Stock have exclusive voting power on all matters at any time.

Liquidation Rights. Upon liquidation, dissolution or winding up of the
Company, holders of shares of Common Stock are entitled to share ratably in
distributions of any assets after payment in full or provision for all amounts
due creditors and provision for any liquidation preference of any other class or
series of stock of the Company then outstanding.

13
<PAGE>

Dividends. Dividends may be declared by the Board of Directors and paid
from time to time to the holders of Common Stock, on such record dates as may be
determined by the Board of Directors, out of the net profits or surplus of the
Company.

PART II

Item 1. Market Price of and Dividends on the Registrants Common Equity and Other
Shareholder Matters

Market Information

The Company's Common Stock began trading on the OTC Electronic Bulletin
Board (the "Bulletin Board") of the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") under the symbol "ROYF" in May 1998. The
following table sets forth, for the periods indicated, the high and low sales
prices for the Common Stock since it was initially quoted in May 1998 until
August 31, 1998. The quotations reflect inter-dealer prices without retail
mark-up, mark-down or commission and may not represent actual transactions.
<TABLE>
<CAPTION>

BID ASK
High Low High Low
---- --- ---- ---

<S> <C> <C> <C> <C>
Third Quarter 1998 (May) .85 .40 1.15 .65

Fourth Quarter 1998 2 15/16 1.20 3 1/16 1 1/2

Holders

</TABLE>

As of August 31, 1998, there were approximately 92 holders of record of the
Company's common stock.

Dividends

Holders of Common Stock are entitled to dividends when, as and if declared
by the Board of Directors out of funds legally available therefor. The Company
has never paid cash dividends on its Common Stock. The Board of Directors does
not anticipate paying cash dividends in the foreseeable future as it intends to
retain future earnings to finance the growth of the Company's businesses. The
payment of future cash dividends will depend on such factors as earnings levels,
anticipated capital requirements, the operating and financial condition of the
Company and its subsidiaries and such other factors that the Board of Directors
of the Company may deem relevant.

Item 2. Legal Proceedings

The Company is currently involved as plaintiff in various lawsuits of a
nature regularly incurred in the ordinary course of the Company's business.
Neither the Company nor any of its subsidiaries is involved in any litigation,
arbitration or other proceedings relating to claims which are material to the
Company's results of operations nor, so far as the Company is aware, are any
such litigation, arbitration or other proceedings pending or threatened.

14
<PAGE>

Item 3. Changes in and Disagreements with Accountants

None

Item 4. Recent Sales of Unregistered Securities

The following paragraphs set forth certain information for all securities
the Company sold during the past three years without registration under the
Securities Act of 1933 (the "Securities Act"). All transactions were effected in
reliance on the exemption from registration afforded by Rule 144 of the
Securities Act for transactions not involving a public offering.

Royal Mortgage Corporation

In March 1995, Royal Mortgage Corporation ("RMC") completed a Regulation D
offering of 800,000 shares at a price of $.75 per share, receiving gross
proceeds of $600,000.

In September 1995, RMC completed a Regulation S offering in the amount of
$120,000. The Regulation S offering was in the form of a one year $3.00
convertible debenture with the $120,000 raised accruing interest at an annual
rate of 8.00%. RMC elected to convert this debt instrument in September 1996 at
$3.00 per share plus the accrued interest to the holder of the Convertible
Debenture for a total of 43,210 shares.

In July 1996, RMC completed a $75,000 Regulation D offering of 37,500
shares at a price of $2.00 per share.

In August 1997, RMC completed a 250,000 share Regulation S offering at
$2.00 per share.

In September 1997, royal Mortgage Corporation completed a Regulation D
offering raising $9,850,000 through the sale of 8 1/2% Convertible Debentures
due March 2000. During the April-June 1998 time periods, $8,560,000 of the
$9,850,000 debenture holders voluntarily converted their debentures into shares
of RMC for a total of 1,556,363 shares at $5.50 per share at the option of the
Debenture Holders.

In August 1998, 73,485 shares were issued to warrant holders to replace
$970,000 in warrants which resulted from the $9,850,000 8 1/2% Senior
Convertible Debentures due March 2000, which would have resulted in
approximately 220,465 shares being issued. While RMC received no proceeds
from this issuance, it reduced the total number of shares to be issued by 67%
or 146,980 shares.

Davenport Ventures, Inc.

In May 1998, Davenport Ventures, Inc. issued 1,500,000 shares at $.05
per share for $75,000 pursuant to a Regulation D Section 504 Offering. In
early August 1998, Davenport Ventures, Inc. sold 440,000 shares at $2.00 per
share pursuant to a Regulation D 504 Offering.

Pursuant to the exchange offer by Davenport Ventures, Inc. to RMC's
shareholders a one-for-one share exchange was made and approved by both
company's shareholders on August 10,1998. Concurrent with the merger, Davenport
Ventures, Inc. charged its name to Royal Financial Corporation.

15
<PAGE>

Item 5. Indemnification of Directors and Officers

Article V of the Company's Bylaws provides for indemnification of officers
and directors against expenses incurred in connection with any legal action they
become a party to by reason of being or having been a director or officer of the
Company, unless such officer or director is adjudged to be liable for negligence
or misconduct in the performance of their duties.

Under Section NRS 78.7502 of the Nevada Law, a corporation may indemnify a
past or present director or officer against liability incurred in a proceeding
if (1) the director or officer conducted himself in good faith, (2) the director
or officer reasonably believed that his conduct was in, or not opposed to, the
corporation's best interest, and (3) in the case of any criminal action or
proceeding, the director or officer had no reasonable cause to believe his
conduct was unlawful; provided, however, that a corporation may not indemnify a
director or officer (1) in connection with a proceeding by or in the right of
the corporation in which the director or officer is adjudged liable to the
corporation, unless, and only to the extent that, the court in which the action
or suit was brought or other court of competent jurisdiction determines that the
director or officer is fairly and reasonably entitled to indemnification in view
of all the relevant circumstances.

In addition, pursuant to subsection 3 of Section NRS 78,7502 of the
Nevada Law, a corporation shall indemnify a director or officer who is wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he is a party because he is or was a director or officer against
reasonable expenses incurred by him in connection with the proceeding.

16
<PAGE>

PART F/S

The following financial statements are filed as part of this
registration statement on Form 10-SB. The financial statements as of August 31,
1998 and for the eight months then ended have been audited by Grant Thornton
LLP, as stated in their report appearing herein. The financial statements as of
December 31, 1997 and 1996 and for the years then ended have been audited by
William C. Spore & Company, P.C., independent auditors, as stated in their
reports appearing herein.

Index to Financial Statements

August 31, 1998

<S> <C>
Report of Independent Certified Public Accountants..............................................................F-2

Consolidated Balance Sheet as of August 31, 1998................................................................F-3

Consolidated Statement of Operations for the eight month period
ended August 31, 1998......................................................................................F-4

Consolidated Statement of Changes in Stockholder's Equity for
the eight month period ended August 31, 1998...............................................................F-5

Consolidated Statements of Cash Flow for the eight month period
ended August 31, 1998...........................................................................................F-6

Notes to Consolidated Financial Statements......................................................................F-7

December 31, 1997

Report of Independent Certified Public Accountants.............................................................F-19

Consolidated Balance Sheet as of December 31, 1997.............................................................F-20

Consolidated Statement of Operations for the year ended December 31, 1997......................................F-22

Consolidated Statement of Changes in Stockholder's Equity for the
year ended December 31, 1997...................................................................................F-23

Consolidated Statements of Cash Flow for the year ended December 31, 1997......................................F-24

Notes to Consolidated Financial Statements.....................................................................F-27

December 31, 1996

Report of Independent Certified Public Accountants.............................................................F-35

Consolidated Balance Sheet as of December 31, 1996.............................................................F-36

Consolidated Statement of Operations for the year ended December 31, 1996......................................F-37

Consolidated Statement of Changes in Stockholders Equity for the
year ended December 31, 1996...................................................................................F-38

Consolidated Statements of Cash Flow for the year ended December 31, 1996......................................F-41

Notes to Consolidated financial Statements.....................................................................F-42
</TABLE>

<PAGE>

<TABLE>

<S> <C>
Consolidated Statement of Changes in Stockholder's Equity for the
year ended December 31, 1997...................................................................................F-37

Consolidated Statements of Cash Flow for the year ended December 31, 1996......................................F-40

Notes to Consolidated Financial Statements.....................................................................F-41

</TABLE>

<PAGE>

FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

ROYAL FINANCIAL CORPORATION AND SUBSIDIARIES

AUGUST 31, 1998

F-1

<PAGE>

Report of Independent Certified Public Accountants

The Board of Directors
Royal Financial Corporation

We have audited the accompanying consolidated balance sheet of Royal Financial
Corporation and subsidiaries as of August 31, 1998, and the related consolidated
statements of operations, stockholders' equity and cash flows for the eight
months then ended. 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 audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Royal
Financial Corporation and subsidiaries as of August 31, 1998, and the
consolidated results of their operations and their consolidated cash flows for
the eight months then ended in conformity with generally accepted accounting
principles.

GRANT THORNTON LLP

Dallas, Texas
September 17, 1998

F-2

<PAGE>

Royal Financial Corporation and Subsidiaries

CONSOLIDATED BALANCE SHEET

August 31, 1998

ASSETS

<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,912,255
Prepaid expenses and other current assets 149,009
Manufactured home inventory 27,700
-------

Total current assets 4,088,964

INVESTMENTS
Mortgage loan portfolio, net $ 2,808,902
Real estate portfolio, net 1,357,744
Tax lien certificates 127,520
Other investments 36,636 4,330,802
-------

PROPERTY AND EQUIPMENT, NET 2,198,979

OTHER ASSETS
Deferred stock offering costs 35,000
Deferred debenture costs 79,340
Deposits and sundry assets 22,639 136,979
------- --------

Total assets $10,755,724
-----------
-----------

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 80,250

8-1/2% SENIOR CONVERTIBLE DEBENTURES DUE MARCH 2000 1,290,000
----------

Total liabilities 1,370,250

COMMITMENTS -

STOCKHOLDERS' EQUITY
Common stock, $.001 par value; authorized 50,000,000 shares;
issued and outstanding, 7,464,382 shares $ 7,464
Additional paid-in capital 14,062,657
Accumulated deficit (4,684,647) 9,385,474
---------- ----------

Total liabilities and stockholders' equity $10,755,724
-----------
-----------

</TABLE>

The accompanying notes are an integral part of this statement.

F-3

<PAGE>

Royal Financial Corporation and Subsidiaries

CONSOLIDATED STATEMENT OF OPERATIONS

Eight months ended August 31, 1998

<TABLE>

<S> <C> <C>
Revenues
Interest $ 114,772
Gains (losses) on sales of operating assets
Loans $ 82,073
Real estate (22,846) 59,227
--------
Lot rental income 46,777
---------

Total revenue 220,776

Expenses
Interest 1,053,750
Salaries and benefits 272,111
Contract labor 26,000
Directors fees 25,000
Professional fees 215,633
Promotional 103,283
Travel and lodging - operations 79,283
Travel and lodging - financing 43,372
General and administrative 129,788
Depreciation 61,290
Filing fees 4,498
Office rent 85,687
Insurance 64,801
Taxes - payroll and other 120,393
Real estate property maintenance 58,501
Due diligence expenses 62,914 2,406,304
------- ----------

Net loss $(2,185,528)
------------
------------

Loss per share - basic and diluted $(0.40)
------------
------------

Weighted average shares outstanding 5,450,599
------------
------------
</TABLE>

The accompanying notes are an integral part of this statement.

F-4

<PAGE>

Royal Financial Corporation and Subsidiaries

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

Eight months ended August 31, 1998

Common stock Additional
-------------------- paid-in Accumulated
Shares Amount capital deficit Total
--------- ------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1998,
as previously reported 520,000 $ 520 $ (520) $ - $ -

Merger with Royal Mortgage
Corporation (RMC) 2,380,700 2,381 1,464,789 (2,499,119) (1,031,949)
--------- ----- ---------- ---------- ----------

Balances at January 1, 1998,
restated 2,900,700 2,901 1,464,269 (2,499,119) (1,031,949)

RMC
Sale of common stock 892,500 893 3,168,818 - 3,169,711
Conversion of 8-1/2% senior
convertible debentures 1,556,364 1,556 8,558,444 - 8,560,000
Exercise of stock options 1,333 1 1,332 - 1,333
Conversion of warrants 73,485 73 (73) - -

Royal Financial Corporation
(formerly DVI)
Sale of common stock 1,940,000 1,940 864,967 - 866,907
Common stock issued for
services 100,000 100 4,900 - 5,000

Net loss - - - (2,185,528) (2,185,528)
--------- ------- ---------- ------------ -----------

Balance at August 31, 1998 7,464,382 $7,464 $14,062,657 $(4,684,647) $ 9,385,474
========= ===== ========== ========== ==========
</TABLE>

The accompanying notes are an integral part of this statement.

F-5

<PAGE>

Royal Financial Corporation and Subsidiaries

CONSOLIDATED STATEMENT OF CASH FLOWS

Eight months ended August 31, 1998

<TABLE>

<S> <C> <C>
Cash flows from operating activities
Net loss $(2,185,528)
Adjustments to reconcile net loss to net cash used in operating
activities
Depreciation $ 61,290
Amortization/write-off of debenture costs 781,559
Common stock issued for services 5,000 847,849
------
Changes in operating assets and liabilities
Prepaid expenses and other assets (43,445)
Accounts payable and accrued liabilities (159,937) (203,382)
--------- ---------

Net cash used in operating activities (1,541,061)

Cash provided by (used in) investing activities
Purchase of Walden Woods of Sugarmill, Inc. (1,611,625)
Purchase of additional land (18,000)
Principal collections on tax lien certificates 102,410
Purchases of property and equipment (177,921)
Purchases of loans (1,531,515)
Collections on loans 111,449
Disposition of loans 416,380
Sale of real estate and other assets 1,192,392
Purchases of real estate properties (572,327)
Investment in park development (138,798) (2,227,555)
---------

Cash provided by (used in) financing activities
Sale of common stock, net of offering costs 4,057,904
Exercise of stock options 1,333
Other (8,639) 4,050,598
---------- ----------

Net increase in cash and cash equivalents 281,982

Cash and cash equivalents, beginning of period 3,630,273
----------

Cash and cash equivalents, end of period $ 3,912,255
-----------
-----------
</TABLE>

The accompanying notes are an integral part of this statement.

F-6

<PAGE>

Royal Financial Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 1998

NOTE A - NATURE OF BUSINESS AND DESCRIPTION OF MERGER

Royal Financial Corporation ("Royal" or the "Company") is a financial
services company engaged primarily in the acquisition and resolution of
non-performing and under-performing mortgage loans and in various investment
activities including the acquisition of tax lien certificates and
single-family residential properties at foreclosure sales. In addition, the
Company owns and operates a manufactured housing community in Florida.

Effective August 18, 1998, the Company (formerly Davenport Ventures, Inc.),
merged with Royal Mortgage Corporation ("RMC"). Concurrent with the merger,
Davenport Ventures, Inc. ("DVI") changed its name to Royal Financial
Corporation. DVI acquired all of the outstanding common stock of RMC in
exchange for DVI common stock on the basis of one share of RMC stock for one
share of DVI stock. The controlling shareholder group of both DVI and RMC
was substantially the same prior to the merger. As a result, the merger has
been treated as a combination of entities under common control. Accordingly,
the results of operations of the combined entities is reflected in the
accompanying consolidated statement of operations as though the entities had
been combined as of January 1, 1998. Prior to the merger, RMC was engaged in
the real estate investment activities discussed above. DVI was a public
shell company until June 1998 when it acquired the capital stock of Walden
Woods of Sugarmill, Inc. ("Walden Woods"). The sole asset of Walden Woods is
Walden Woods Retirement Village (the "Park"), a manufactured housing
community in Homosassa, Florida. The Park is a 45-acre site, 18 acres of
which are developed with approximately 85 homesites. The Company is
currently developing an additional 20 acres. It is anticipated that the
development will be completed by December 1998 at which time the Park will
contain approximately 210 homesites. The accompanying consolidated financial
statements include the revenue and expenses of the Park from the date of
acquisition (June 1, 1998) through August 31, 1998.

Separate results of operations for the period prior to the merger are as
follows:

Eight months
ended
August 31, 1998
---------------
<S> <C>
Revenue
RMC $ 173,999
DVI 46,777
---------

Combined $ 220,776
---------
---------

Net (loss) earnings
RMC $(2,192,366)
DVI 6,838
-----------
Combined $(2,185,528)
------------
------------
</TABLE>

F-7

<PAGE>

Royal Financial Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

August 31, 1998

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries, Royal Mortgage Brokerage,
Inc. and Walden Woods of Sugarmill, Inc. All significant intercompany
accounts and transactions have been eliminated.

Risks and Uncertainties/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.

Most of the Company's investment properties, as well as the manufactured
housing community, are located in the state of Florida. The Company does
plan to acquire properties in other states which will diversify its
portfolio.

Cash and Cash Equivalents

Cash and cash equivalents consist primarily of cash in banks and highly
liquid investments purchased with an original maturity of three months or
less.

Mortgage Loan Investments

The Company purchases mortgage loans, for which the borrower is not current
as to principal and interest payments or which there is a reason to believe
the borrower will be unable to continue to make its scheduled principal and
interest payments, at a discount. All loans held at August 31, 1998 and for
the eight months then ended are deemed to be impaired. Income is recognized
only upon receipt of interest payments or the ultimate disposition of
collateral. The Company accounts for its initial investment in a pool of
loans based upon the pricing methodologies used to bid on the pool. The
acquisition cost is allocated to each loan within the pool when the bid
price was determined based upon an analysis of the expected future cash
flows of each individual loan Generally, loans in the Company's portfolio go
through foreclosure proceedings, the Company takes title to the property and
the property is sold on the open market. Loans are transferred to real
estate owned upon receipt of title to the property.

F-8

<PAGE>

Royal Financial Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

August 31, 1998

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Real Estate Investments

All real estate investments are held for sale. Properties acquired through
or in lieu of foreclosure are valued at the lower of the adjusted cost basis
of the loan or fair value less estimated costs of disposal of the property
at the date of foreclosure. Properties acquired directly at auction sales
are recorded at cost. Properties held are not depreciated and are
periodically re-evaluated to determine that they are being carried at the
lower of cost or fair value less estimated costs to dispose. Sales proceeds
and related costs are recognized with passage of title to the buyer. Holding
and maintenance costs are reported as period costs when incurred.

Property and Equipment

Property and equipment are carried at cost and, except for land, are
depreciated over their estimated useful lives on the straight-line method.
The estimated useful lives used in computing depreciation are as follows:

Furniture, fixtures and equipment 3-10 years
Land improvements and buildings 15-20 years

Leasehold improvements are amortized over the term of the related leases.

Deferred Debenture Costs

The deferred debenture costs represent the unamortized balance of
professional fees, commissions and other expenses that have been incurred to
obtain debenture financing. These costs are amortized as interest expense
over the life of the debentures using the effective interest rate method.
The amortized amount for the eight months ended August 31, 1998 was
$116,530. See Note L regarding write off of deferred debenture costs during
1998.

Stock Options

The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees (APB 25) and related
interpretations in accounting for its employee stock options. Under APB 25,
because the exercise price of employee stock options equals or exceeds the
market price of the underlying stock on the date of grant, no compensation
expense is recorded. The Company has adopted only the disclosure provisions
of Statement of Financial Accounting Standards No. 123, "Accounting for
Stock Based Compensation" (SFAS 123), as well as the provisions of SFAS 123
as they relate to non-employee stock options.

F-9

<PAGE>

Royal Financial Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

August 31, 1998

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Loss Per Share

In 1998, the Company adopted the provisions of Statement of financial
Accounting Standards No. 128, "Earnings per Share" (SFAS 128). In accordance
with SFAS 128, the Company computes basic earnings (loss) per common share
based on the weighted average number of common shares outstanding. Diluted
earnings per share is computed based on the weighted average number of
common shares outstanding plus the number of additional common shares that
would have been outstanding if dilutive potential common shares had been
issued. No effect has been given to convertible debentures, stock options or
warrants because the effect of assumed conversion or exercise is
anti-dilutive.

Other Recent Accounting Standards

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income". Comprehensive income is defined as the change in equity of a
business enterprise during a period from transactions and other events and
circumstances, excluding those resulting from investments by and
distributions to owners. SFAS No. 130 requires that comprehensive income be
presented beginning with net income, adding the elements of comprehensive
income not included in the determination of net income, to arrive at
comprehensive income. SFAS No. 130 is effective for fiscal years and interim
periods beginning after December 15, 1997. There were no elements of
comprehensive income which were not included in the determination of net
income for the eight months ended August 31, 1998. Accordingly, the adoption
of SFAS 130 had no impact on the presentation of the Company's results of
operations or financial position.

NOTE C - WALDEN WOODS ACQUISITION

Effective June 1, 1998, the Company acquired Walden Woods from an
unaffiliated third party for approximately $1.6 million in cash. The
acquisition was accounted for using the purchase method of accounting and,
accordingly, the purchase price was allocated to the assets acquired based
on their estimated fair values on the date of acquisition. The allocation
was made as follows:

<TABLE>

<S> <C>
Assets acquired:
Land $1,351,425
Land improvements and buildings 255,000
Furniture, fixtures and equipment 5,200
------

$1,611,625
----------
----------
</TABLE>

F-10

<PAGE>

Royal Financial Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

August 31, 1998

NOTE D - CASH FLOW INFORMATION

Supplemental information on cash flows and noncash investing and financing
transactions is as follows:

<TABLE>

<S> <C>
Supplemental Cash Flow Information:
Interest paid $ 439,973

Supplemental Schedule of Non-cash Investing Activities:
Real estate acquired through foreclosure of loans 2,062,487
Other assets acquired in settlement of loan 40,000

Supplemental Schedule of Financing Activities:
8-1/2% senior convertible debentures converted into common
shares 8,560,000
Receivable for 2,500 common shares issued 9,000
Warrants converted to common shares 73
</TABLE>

NOTE E - PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
August 31,
1998
----------
<S> <C>
Land (Park) $1,369,425
Land improvements and buildings (Park) 255,000
Park development in progress 138,796
Furniture, fixtures and equipment 258,329
Leasehold improvements 335,063
--------
2,356,613
Less accumulated depreciation (157,634)
--------

Property and equipment, net $2,198,979
--------
--------

</TABLE>

F-11

<PAGE>

Royal Financial Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

August 31, 1998

NOTE F - OPERATING LEASES

The Company leases office space in Arlington, Texas, subleases space in
Naples, Florida and has various equipment operating leases. The Arlington
office lease expires in February, 2005. The Naples, Florida office lease
expires in October, 2000 with an option to renew for two years.

Future minimum payments following August 31, 1998 are as follows:

<TABLE>
<S> <C>
1999 $145,236
2000 157,794
2001 125,749
2002 117,717
2003 116,151
Thereafter 171,877
--------

$834,524
--------
--------

</TABLE>

Lease expense in 1998 was $95,931. The Arlington lease contains rent
escalation clauses which are based on pre-determined rent increases
specified in the agreement.

NOTE G - FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist of cash and cash equivalents,
mortgage loans, tax lien certificates, accounts payable and senior
convertible debentures payable. The methodologies used and key assumptions
make to estimate fair value, the estimated fair values determined and
recorded carrying values follow:

Cash and Cash Equivalents

The carrying amount approximates fair value because of the short maturity of
these instruments.

Mortgage Loans

The mortgage loan portfolio consists of non-performing loans. On the
majority of these loans, the Company expects to foreclose on the underlying
collateral and ultimately sell the properties. Accordingly, fair values have
been determined based on the status of pending settlements between the
Company and borrower or by utilizing the fair value of the underlying
collateral.

F-12

<PAGE>

Royal Financial Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

August 31, 1998

NOTE G - FAIR VALUE OF FINANCIAL INSTRUMENTS - Continued

Tax Lien Certificates

The fair value is estimated based upon the discounted value of the future
cash flows expected to be received based on statutory rates established by
the taxing jurisdictions assuming all remaining certificates are redeemed.
It is possible that not all certificates will be redeemed in which case the
Company may obtain title to the property upon expiration of the statutory
holding period.

Accounts Payable

The carrying amount approximates fair value because of the short-term nature
of accounts payable.

Senior Convertible Debentures Payable

The fair value is estimated based upon the discounted value of the future
cash flows expected to be paid on such borrowings, using the current rate
obtainable by the Company on similar borrowings.

Real Estate Portfolio

Real estate, although not a financial instrument, is an integral part of the
Company's business. The fair value of real estate is estimated based upon
appraisals, broker price opinions and other standard industry valuation
methods, less anticipated selling costs.

The carrying amounts and estimated fair values of the Company's financial
instruments and real estate are as follows:

August 31,
1998 Fair Value
----------- -----------

<S> <C> <C>
Financial assets:
Cash and cash equivalents $ 3,912,255 $ 3,912,255
Mortgage loan portfolio, net 2,808,902 3,600,000
Tax lien certificates 127,520 144,633
Real estate portfolio, net 1,357,744 1,813,644

Financial liabilities:
Accounts payable (10,047) (10,047)
Senior convertible debentures
payable (1,290,000) (1,284,739)

</TABLE>

F-13

<PAGE>

Royal Financial Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

August 31, 1998

NOTE H - CONVERTIBLE SENIOR DEBENTURES PAYABLE

In 1997, the Company issued $9,850,000 of convertible senior debentures. The
debentures accrue interest at 8.5% which is payable semi-annually on October
1 and April 1. During 1998, $8,560,000 of these debentures were converted
into common stock of the Company at a price of $5.50 per share. The
remaining $1,290,000 of debentures outstanding at August 31, 1998 are due
and payable at maturity on March 31, 2000, and are convertible at a price
equal to 80% of the market price of the common stock at such time as the
Company does an initial public offering.

NOTE I - INCOME TAXES

Following is a reconciliation of the Company's income tax provision with the
amount of tax computed at the federal statutory rate:

<TABLE>
<S> <C>
Tax benefit at the federal statutory rate $ 743,080
Nondeductible expenses (3,560)
Other (5,425)
Change in valuation allowance (734,095)
--------

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

Deferred tax assets consist of the following:

<TABLE>
<S> <C>
Net operating loss carryforward $ 1,496,931
Property and equipment 9,004
----------
1,505,935
Valuation allowance (1,505,935)
----------

Net deferred tax assets $ -
----------
----------
</TABLE>

The Company will file a consolidated federal income tax return with its
subsidiaries. For federal income tax purposes, the Company has cumulative
operating losses of approximately $4,400,000 which are being carried forward
to future years.

F-14

<PAGE>

Royal Financial Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

August 31, 1998

NOTE J - OPTIONS AND WARRANTS

The Company has issued stock options to directors, employees and others.
Options are granted at no less than fair value at date of grant, as
determined by the board of directors. Generally, the options vest at date
granted and expire in five years. Following is a summary of option
transactions for the eight months ended August 31, 1998:

<TABLE>
<CAPTION>
Weighted
average
exercise
Shares price
--------- ---------
<S> <C> <C>
Outstanding at January 1, 1998 - $ -
Options of RMC outstanding
at January 1, 1998 1,390,000 2.07
Granted
RMC 50,000 4.25
Royal (formerly DVI) 310,000 3.28
Exercised
RMC (1,333) 1.00
---------- ----

Outstanding at August 31, 1998 1,748,667 2.34
---------- ----
---------- ----

</TABLE>

The following table summarizes information about stock options at August 31,
1998:

<TABLE>
<CAPTION>
Outstanding and Exercisable
---------------------------
Weighted
average
remaining Weighted
contractual average
life exercise
Exercise price Shares (in years) price
-------------- ------ ----------- --------
<S> <C> <C> <C>
RMC
----
$1.00 198,667 1.50 $1.00
2.25 1,190,000 3.83 2.25
4.25 50,000 4.75 4.25

Royal
(formerly DVI)
--------------
$2.25 - 2.75 60,000 2.91 2.41
3.12 - 4.00 250,000 2.00 3.49
--------- ----
1,748,667 $2.34
--------- -----
--------- -----

</TABLE>

F-15

<PAGE>

Royal Financial Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

August 31, 1998

NOTE J - OPTIONS AND WARRANTS - Continued

The Company has adopted only the disclosure provisions SFAS 123. If the
Company had elected to recognize compensation expense based upon the fair
value at the option grant date consistent with the methodology prescribed by
SFAS 123, the Company's net loss would be increased to the pro forma amounts
indicated below:

<TABLE>
<S> <C> <C>
Net loss
As reported $2,185,528
Pro forma $2,246,628
Basic and diluted loss per share
As reported $.40
Pro forma $.41
</TABLE>

In connection with the issuance of debt in 1997 and common stock in 1998,
RMC has issued warrants expiring December 31, 2000, to purchase common
stock. The warrants issued in connection with the debt issuance were granted
to the placement agent and provide for the purchase of 223,864 shares of
common stock at $4.40 per share. Pursuant to an offer made by RMC in August
1998, 220,465 of these warrants were exchanged for 73,485 shares of common
stock. The following summarizes warrant transactions:

Exercise
Shares price
-------- ----------
<S> <C> <C>
Outstanding at January 1, 1998 - -
Warrants of RMC outstanding at January 1, 1998 223,864 $ 4.40
Issued in connection with sale of common stock 178,500 6.00
Conversion to common stock (220,465) 4.40
-------- ----------

Outstanding at August 31, 1998 181,899 $4.40-6.00
-------- ----------
-------- ----------

</TABLE>

NOTE K - COMMITMENTS

On August 24, 1998, the Company entered into an agreement with a financial
public relations firm whereby the Company agreed to pay $15,000 per month
for twelve months beginning August 4, 1998 and issue 70,000 free-trading
shares of common stock upon filing of a Form S-1 with the Securities and
Exchange Commission.

See Note F regarding lease commitments.

F-16

<PAGE>

Royal Financial Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

August 31, 1998

NOTE L - CHARGE TO OPERATIONS

Due to the conversion of $8,560,000 of the 8 1/2 % Senior Convertible
Debentures due March 2000 during the current period, $665,029 of costs that
had been deferred related to obtaining this financing were charged to
operations in 1998.

NOTE M - ADDITIONAL FINANCING

The Company plans a securities offering of up to $50,000,000 under
Regulation S of the Securities Act of 1933. The proposed offering would
include units consisting of 8 1/2% debentures with a three-year term and
warrants to purchase common stock at an exercise price of $4.00. However,
there is no assurance that this offering will be successful.

F-17

<PAGE>

ROYAL MORTGAGE CORPORATION

FINANCIAL STATEMENTS

December 31, 1997

F-18
<PAGE>

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Stockholders
Royal Mortgage Corporation

We have audited the accompanying balance sheet of Royal Mortgage Corporation (a
Texas corporation) as of December 31, 1997, and the related statements of loss,
changes in stockholders' equity and cash flows for the year ended December 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based upon our audit.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Royal Mortgage Corporation as
of December 31, 1997 and the results of its operations and its cash flows for
the year ended December 31, 1997 in conformity with generally accepted
accounting principles.

WILLIAM C. SPORE & COMPANY, PC
Certified Public Accountants

January 14, 1998

F-19
<PAGE>

ROYAL MORTGAGE CORPORATION
BALANCE SHEET

December 31, 1997

<TABLE>

<S> <C>
ASSETS

CURRENT ASSETS

Cash - Operating $ 1,258,354
Cash - Escrow & Custodial 2,371,919
Interest & Other Receivables 80,395
Prepaid Expenses 41,341
TOTAL CURRENT ASSETS 3,752,009

INVESTMENTS

Mortgage Investments 3,822,193
Tax Lien Certificates 229,930
TOTAL INVESTMENTS 4,052,123

PROPERTY & EQUIPMENT

Office & Transportation Equipment 198,098
Leasehold Improvements 212,173
410,271
Less - Accumulated Depreciation (96,344)
TOTAL PROPERTY & EQUIPMENT 313,927

OTHER ASSETS

Deposit - Stadium Bond 8,000
Security Deposit-Office Lease 6,000
Deferred Stock Offering Costs 65,286
Deferred Loan Costs-Net of Amortization 860,899
TOTAL OTHER ASSETS 940,185

TOTAL ASSETS $ 9,058,244

</TABLE>

F-20
<PAGE>

<TABLE>

<S> <C>
LIABILITIES & STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts Payable $ 25,699
Accrued Interest & Payroll Taxes 214,494
TOTAL LIABILITIES 240,193

LONG-TERM DEBT

8 1/2% Senior Convertible Debenture
Due March 2000 9,850,000

TOTAL LIABILITIES 10,090,193

STOCKHOLDERS' EQUITY

Capital Stock ($.001 par value per share,
10,000,000 shares authorized, 2,380,710
shares issued & outstanding) 2,381
Additional Paid In Capital 1,464,789
Retained Earnings (2,499,119)
TOTAL STOCKHOLDERS' EQUITY (1,031,949)

TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY $ 9,058,244

</TABLE>

F-21
<PAGE>

ROYAL MORTGAGE CORPORATION

STATEMENT OF LOSS

For the Year Ended December 31, 1997
<TABLE>

<S> <C>
REVENUES

Interest Income $ 257,318
Gain on Sale of Real Estate 19,713

TOTAL REVENUES 277,031

OPERATING EXPENSES

Computer Software, Services & Supplies 36,629
Contract Services 82,083
Custodial Fees 23,485
Depreciation 43,288
Director Fees 15,000
Dues & Subscription Services 7,742
Insurance 28,715
Interest 834,775
Management Salaries 166,710
Salaries & Wages 83,165
Offering Costs 40,352
Office Expense & Postage 28,906
Professional Fees 147,323
Rent 83,991
Security Filing Fees 256
Seminars 2,147
Taxes - Payroll & Other 23,701
Telephone 26,305
Travel & Promotion 107,357
Utilities 8,891
TOTAL OPERATING EXPENSES 1,790,821

NET LOSS FROM OPERATIONS (1,513,790)

OTHER INCOME (EXPENSE)

Loss on Sale of Assets (4,723)

NET LOSS $(1,518,513)

EARNING (LOSS) PER COMMON SHARE (0.67)

</TABLE>

F-22
<PAGE>

ROYAL MORTGAGE CORPORATION

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

For the Year Ended December 31, 1997

CAPITAL ADDITIONAL
STOCK PAID IN
AT PAR CAPITAL
----------- -----------
<S> <C> <C>

SHARES ISSUED BEGINNING 2,130,700

Shares issued July 1997 250,000

TOTAL SHARES ISSUED ENDING 2,380,700

CAPITAL RECEIVED BEGINNING $ 2,131 1,025,719

Shares issued July 1997 250 499,750

Less cost of issuance 0 (60,680)

TOTAL CAPITAL RECEIVED $ 2,381 $ 1,464,789

PRICE PER SHARE

Shares Issued July 1997 $ 2.00

RETAINED EARNINGS BEGINNING (980,606)

Loss January 1 to December 31, 1997 (1,518,513)

RETAINED EARNINGS ENDING (2,499,119)

</TABLE>

F-23
<PAGE>

ROYAL MORTGAGE CORPORATION

STATEMENT OF CASH FLOWS

For the Year Ended December 31, 1997

<TABLE>

<S> <C>
CASH FLOWS FROM OPERATIONS:

Interest Income Collected $ 193,834
Proceeds - Sale of Real Estate 40,067
Cash Paid for Operating Expenses (640,970)
Cash Paid for Wages and Benefits (304,449)
Cash Paid for Interest Expense (345,812)
Proceeds - Sale of Assets 8,747

TOTAL CASH USED IN OPERATIONS (1,048,583)

CASH FLOWS FROM FINANCING ACTIVITIES:

Cash Paid for Stock Offering Costs (65,286)
Cash Paid for Debenture Offering Costs (1,147,865)
Proceeds of Debentures Issued 9,850,000
Proceeds of Notes Payable 47,885
Payments of Note Payable (265,435)
Proceeds of Stock Issued 500,000
Cash paid for Stock Issuance Costs (60,680)

CASH PROVIDED BY FINANCING ACTIVITIES 8,858,619

CASH FLOWS FROM INVESTING ACTIVITIES:

Principal Collections on Tax Lien Certificates 243,849
Principal Collections on Investments 1,099
Investments Purchased (4,322,535)
Purchases of Property & Equipment (118,892)

CASH USED IN INVESTING ACTIVITIES (4,196,479)

NET INCREASE IN CASH 3,613,557

CASH - BEGINNING OF PERIOD 16,716

CASH - END OF PERIOD $ 3,630,273

</TABLE>

F-24
<PAGE>

RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:

For the Year Ended December 31, 1997

<TABLE>

<S> <C>
Net Loss $(1,518,513)

ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:

Depreciation 43,288
Amortization of Loan Costs 286,967
(Increase) in Interest & Other Receivables (80,395)
(Increase) in Prepaid Expenses (41,341)
Increase in Accounts Payable & Accruals 192,524
Stock Offering Costs Expensed 29,952
Cost of Real Estate Sold 65,465
Mortgage Receivable on Real Estate Sold (40,000)
Loss on Sale of Assets 13,470

CASH USED BY OPERATING ACTIVITIES $(1,048,583)

</TABLE>

NON-CASH ACTIVITIES:

In January 1997 the Company exchanged office equipment with a net cost of
$16,131 for an account payable of $16,896.

F-25

<PAGE>

ROYAL MORTGAGE CORPORATION
SCHEDULE OF MORTGAGE INVESTMENTS

December 31, 1997

MANAGEMENT
ESTIMATE
OF FMV OF
UNDERLYING
FACE COLLATERAL
INVESTMENT AMOUNT COST (UNAUDITED)

<S> <C> <C> <C>
90% Interest in a Pool of Notes $11,562,584 $ 1,614,870 $ 4,222,501

Three Mortgages - California 717,185 607,906 775,000

Twenty One Mortgages - Florida 1,874,020 1,559,466 2,396,240

Residential Mortgage - Florida 39,951 39,951 94,000

TOTAL $14,193,740 $ 3,822,193 $ 7,487,741

</TABLE>

F-26
<PAGE>

ROYAL MORTGAGE CORPORATION
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

December 31, 1997
Page - 1

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BUSINESS: The Company was incorporated under the laws of the state of
Texas on December 1, 1994. The Company was formed to purchase residential
mortgages, seller financed mortgages and tax lien certificates. The Company does
not originate loans but may broker mortgages it has acquired.

The Company's books and records will be maintained on a calendar year
basis.

PROPERTY & EQUIPMENT: Property and Equipment is recorded at cost and
depreciated using the straight-line method over the estimated useful lives of
the assets. Leasehold improvements are amortized over the term of the related
lease (ten years) and office equipment is depreciated over five to ten year
useful lives.

DEFERRED STOCK OFFERING COSTS: Costs directly related to 1997 stock
offerings have been capitalized and included in the December 31, 1997 balance
sheet as Deferred Stock Offering Costs. If the stock offerings are successful,
the proceeds of the offerings will be reduced by the deferred costs. If the
offerings are unsuccessful, the deferred costs will be expensed.

Costs directly related to the 1996 stock offering were capitalized and
included in the December 31, 1996 balance sheet as Deferred Stock Offering
Costs. The stock offering was unsuccessful and the deferred costs were expensed
in 1997.

DEFERRED LOAN COSTS: The deferred loan costs represents the unamortized
balance of professional fees, commissions and other expenses that were incurred
to obtain the debenture financing. These costs are amortized as interest expense
over the life of the debentures using the effective interest rate method. The
amortized amount for the period ended December 31, 1997 was $286,967.

ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.

INCOME TAXES: For federal income tax purposes the Company has net
operating losses of approximately $2,250,000 and capital losses of $33,265;
which is being carried forward to future years.

FAIR VALUE OF FINANCIAL INVESTMENTS: The carrying value of cash,
receivables and payables approximates fair value due to the short maturity of
these instruments. The carrying value of mortgage investments and tax lien
certificates approximates market value as the investments were purchased at
auctions within sixty days of the balance sheet date. The fair value of
long-term debt is estimated based upon interests rates for the same or similar
debt offerings having the same or similar maturities and collateral
requirements. None of the financial instruments are held for trading purposes.

F-27
<PAGE>

NOTE 2: CASH - ESCROW AND CUSTODIAL:

The debentures issued by the Company during 1997 require the
establishment of escrow and custodial funds for depositing the proceeds of the
debenture. The escrow and custodial funds are held in checking accounts or
highly liquid, short term investments. The Company can draw on the escrow and
custodial funds as working capital or investment needs warrant.

NOTE 3: DEPOSIT - STADIUM BOND:

The Company owns four Arlington Sports Development Authority, Inc.
stadium bonds. The bonds were purchased to give the Company seat and ticket
options for Texas Rangers (an Arlington, Texas based Major League Baseball
franchise) season tickets. The bonds are non interest bearing, mature in 2008
and are non-transferable.

NOTE 4: MORTGAGE INVESTMENTS:

The Companies mortgage investments are as follows:

(A) In May 1997 the Company purchased a 90% interest in a loan pool.
The pool of loans includes mortgage loans that are first, second or third lien
mortgages, unsecured mortgages and mortgages in bankruptcy. The loan pool was
purchased at a discount and the mortgage investments are recorded at cost, which
management of the Company believes is less than the fair market value of the
receivables.

The remaining 10% interest in the loan pool is owned by TransFirst
Asset Services, Inc. (TransFirst), a company unrelated to Royal Mortgage
Corporation. The Company has an agreement with TransFirst whereby TransFirst
shall act as sole managing agent and shall receive a service fee equal to 10% of
any monies collected from the pool. After deducting the 10% service fees, all
net proceeds shall go to Royal Mortgage Corporation until such time as the
Company recoups its investment along with $379,000 interest and fees. At this
point TransFirst shall receive all net proceeds until it has recouped its
investment along with $21,781 interest and fees. After all initial investments,
accrued interest and fees have been recouped all net proceeds shall be split 60%
to Royal Mortgage Corporation and 40% to TransFirst.

(B) In September 1997 the Company purchased three mortgage notes
related to two apartment building in California. One of the mortgages is a first
lien and the other two are second liens. The first lien and one of the second
lien notes matured in September 1997 and the other second lien note is payable
on demand. The mortgages are collateralized by the underlying apartment
buildings. One of the properties has a first lien in the amount of approximately
$284,000.

(C) During September and October 1997 the Company purchased twenty one
residential mortgages in Florida from Ford Consumer Finance Company, Inc.
Eighteen of the mortgages are first liens and three of the notes are second
liens. All of the mortgages are currently in default.

(D) In August 1997 the Company purchased a residential property at a
deed of trust auction in Florida which it resold in September 1997. The sale of
the property included a seller financed note receivable of $40,000. The note
requires twenty three monthly payments of $308 with a final payment of $39,676
due in September 1999.

F-28
<PAGE>

The components of the Mortgage Investments are as follows:

<TABLE>

<S> <C>
Face Amount of Mortgages $14,193,740

Less Unearned Discount 10,371,547

Cost of Investment $ 3,822,193

</TABLE>

The unearned discount will be recognized as income ratably as principal
collections are made on the mortgages.

NOTE 5: TAX LIEN CERTIFICATES:

The Company has purchased tax lien certificates from local taxing authorities in
Iowa and Louisiana. Tax lien certificates result when local municipal and county
governments are not paid property taxes due them from property owners. The local
taxing authorities record the tax obligation and impose an interest charge of
eight to twenty five percent on the owner. If the property tax and interest is
not paid within an allotted time frame, the owner must forfeit their property.
Some local tax authorities want or need the taxes and interest quickly so they
issue a tax lien certificate which is then sold at an auction.

F-29

<PAGE>

The Company has purchased two pools of tax lien certificates through
December 31, 1997. The Company assumes the same rights to collect the tax and
interest as the local government had, and if the certificates remain unpaid the
Company has a more secure lien position than any other lien holder on the
property.

The tax lien certificates are recorded at cost, which management of the Company
believes is less than the fair market value of the certificates. Interest is
accrued monthly based upon each taxing entities laws and regulations. The
Company intends to sell any properties it acquires due to non payment of the tax
lien certificates.

NOTE 6: 8 1/2% CONVERTIBLE SENIOR DEBENTURE DUE 2000:

Through December 31, 1997 the Company has issued $9,850,000 of
convertible senior debentures as part of a $15,000,000 offering. The debentures
accrue interest at 8.5% which is payable semi-annually on October 1 and April 1.
The debentures mature on March 31, 2000. The Company and/or the Debenture Holder
have the right, exercisable at any time, to convert the debenture into common
stock of the Company at a price equal to a twenty percent discount to the
initial public offering price, or, if the Company is unable to complete an
initial public offering of its shares prior to maturity the debenture holder may
redeem his debenture or convert it into common stock of the private Company at a
price per share equal to a twenty percent discount to the value of the shares of
the private Company as determined by an independent arms length evaluation.

Future debt requirements are as follows:

<TABLE>

<S> <C>
1997 $ 0
1998 0
1999 0
2000 9,850,000

</TABLE>

F-30
<PAGE>

NOTE 7: LEASE COMMITMENTS:

The Company has signed a ten year operating lease agreement for office
space in Arlington, Texas and a three year operating lease agreement for office
space in Naples, Florida. The Arlington lease agreement expires in March 2005
and the Naples lease agreement expires in December 2000.

Future minimum lease commitments are as follows:

<TABLE>

<S> <C>
1998 135,756
1999 135,756
2000 135,756
2001 135,756
2002 135,756
Future Years 206,307

</TABLE>

During 1997 the Company has subleased part of its office space to another entity
and has received $11,250 of rent which has been recorded as a reduction rent
expense.

NOTE 8: STOCK OPTIONS:

On March 21, 1995 stock options were issued to the Company's officers
as follows:

<TABLE>

<S> <C>
Total Shares 200,000
Option Price 1.00 per share
Expiration Date March 2000

</TABLE>

The market price of the Company's stock on March 21, 1995 was $0.75 per
share, therefore, the option price exceeded the market price on the date the
options were granted and no compensation expense was created by issuing the
options.

On April 30, 1997 stock options were issued to certain Officers and
Directors of the Company as follows:

<TABLE>

<S> <C>
Total Shares 790,000
Option Price $2.25 per share
Expiration Date April 2002

</TABLE>

F-31
<PAGE>

The market price of the Company's stock on April 30, 1997 was $2.00 per
share, therefore, the option price exceeded the market price on the date the
options were granted and no compensation expense was created by issuing the
options.

At December 31, 1997 none of the options had been exercised.

NOTE 9: RELATED PARTIES:

The Company has a month to month agreement with Mr. David Wentsch, a
director of the Company, to provide legal services to the Company. The agreement
calls for a monthly fee of $6,000 plus any related expenses. Through December
31, 1997 the Company has paid Mr. Wentsch a total of $49,333. These fees have
been recorded as contract services in the statement of income.

Prior to June 30, 1997 the Company had an ongoing agreement with Mr.
David Parker to provide services to the Company related to investor relations,
corporate publicity, and securing additional financing for the Company. The
agreement called for a monthly fee of $6,250. In July 1997 the agreement with
Mr. Parker was canceled. Through December 31, 1997 Mr. Parker has been paid at
total of $18,750. These fees have been recorded as contract services in the
statement of income.

The Company has a custodial agreement with Boyd R. Branch to act as a
custodial agent to effectuate the Companies obligations and physical security
and safeguarding of documents and other negotiable instruments acquired by the
Company pursuant to its convertible debt offering. The agreement calls for a fee
of twenty-five basis points (.25%) of assets held by the Custodian payable on a
prorated monthly basis. The agreement continues as long as any funds remain in
the custody of the custodial agent. Through December 31, 1997 custodial fees of
$13,486 have been paid under this agreement.

In April 1997 the shareholders of the Company agreed to compensate the
board of directors of the Company $5,000 annually. Through December 31, 1997
directors fees of $15,000 have been paid to the directors of the Company.

F-32
<PAGE>

NOTE 10: FAIR VALUE OF FINANCIAL INSTRUMENTS:

The estimated fair values of the Company's financial instruments are as follows:

Carrying Fair
Amount Value
<S> <C> <C>
Assets:
Cash $3,630,273 $3,630,273
Mortgage Investments 3,822,193 3,822,193
Tax Lien Certificates 229,930 229,930

Liabilities:
Debenture Payable $9,850,000 $9,850,000
</TABLE>

NOTE 11: ACCRUED MANAGEMENT SALARIES:

During 1995 and 1996 management of the Company was required by the
S.E.C.'s interpretation of G.A.A.P. to include management salaries for the
officers of the Company in these financial statements. No cash was expended nor
an accrual established for management salaries as management of the Company did
not intend to seek compensation for the period covered by those financial
statements.

The S.E.C. interpretation of G.A.A.P. requires the Company to record
reasonable salaries for its officers and to record the value of the salaries as
additional paid in capital in the stockholders' equity section of the balance
sheet. The salaries recorded are as follows:

<TABLE>

<S> <C>
Michael J. Pilgrim, President, $4,000 per month

Mark J. Teinert, Vice President, $3,000 per month

G. William Barnett, II, Vice President, $3,000 per month
(Employment terminated June 28, 1996)
</TABLE>

Total management salaries of $102,000 in 1996 and $120,000 in 1995 were
included in expenses and additional paid in capital.

The Company began compensating its management during 1997 and no further
accruals are required.

F-33
<PAGE>

ROYAL MORTGAGE CORPORATION

FINANCIAL STATEMENTS

December 31, 1996

F-34
<PAGE>

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Stockholders
Royal Mortgage Corporation

We have audited the accompanying balance sheet of Royal Mortgage Corporation (a
Texas corporation) as of December 31, 1996, and the related statements of loss,
changes in stockholders' equity and cash flows for the periods January 1, 1996
to December 31, 1996 and December 1, 1994 thru December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based upon
our audit.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Royal Mortgage Corporation as
of December 31, 1996 and the results of its operations and its cash flows for
the periods January 1, 1996 to December 31, 1996 and December 1, 1994 thru
December 31, 1996 in conformity with generally accepted accounting principles.

WILLIAM C. SPORE & COMPANY, PC
Certified Public Accountants

January 11, 1997

F-35
<PAGE>

ROYAL MORTGAGE CORPORATION
(A Development Stage Company)
BALANCE SHEET

December 31, 1996

<TABLE>

<S> <C>
ASSETS

CURRENT ASSETS
Cash in Bank $ 16,716

PROPERTY & EQUIPMENT
Office Equipment 132,156
Leasehold Improvements 198,174
330,330
Less - Accumulated Depreciation (61,640)
TOTAL PROPERTY & EQUIPMENT 268,690

OTHER ASSETS
Deposit - Stadium Bond 8,000
Security Deposit-Office Lease 6,000
Deferred Stock Offering Costs 29,952
TOTAL OTHER ASSETS 43,952

TOTAL ASSETS $ 329,358

LIABILITIES & STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Notes Payable $ 217,550
Accounts Payable 43,091
Accrued Expenses 21,473
TOTAL LIABILITIES 282,114

STOCKHOLDERS' EQUITY
Capital Stock ($.001 par value per share,
10,000,000 shares authorized, 2,130,700
shares issued & outstanding) 2,131
Additional Paid In Capital 1,025,719
Deficit Accumulated during the
Development Stage (980,606)
TOTAL STOCKHOLDERS' EQUITY 47,244

TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY $ 329,358

</TABLE>

F-36

<PAGE>

ROYAL MORTGAGE CORPORATION
(A Development Stage Company)

STATEMENT OF LOSS

For the Period January 1, 1996 to December 31, 1996 and the Period
December 1, 1994 (Date of Inception) to December 31, 1996

For the Period
For the Period December 1, 1994 1994 & 1995
January 1, 1996 (Inception)
OPERATING EXPENSES to December 31, 1996 to December 31, 1996

<S> <C> <C> <C>
Computer Software & Supplies $ 21,817 $ 39,506 17,689
Depreciation 37,366 61,820 24,454
Dues & Subscriptions 2,268 5,625 3,357
Escrow Fees 0 1,500 1,500
Insurance 28,228 53,205 24,977
Interest 16,386 20,881 4,495
Management Salaries 102,000 222,000 120,000
Office Expense & Postage 23,563 50,907 27,344
Outside Services - Paralegal 6,039 17,189 11,150
Taxes - Payroll & Other 6,900 10,769 3,869
Professional Fees 36,218 72,343 36,125
Rent 93,181 175,222 82,041
Security Filing Fees 2,479 15,088 12,609
Seminars 1,250 2,261 1,011
Telephone 23,643 47,139 23,496
Travel & Promotion 18,815 35,095 16,280
Utilities 8,891 15,419 6,528
Wages 63,798 103,326 39,528
Loss on Investments 320 33,585 33,265

TOTAL OPERATING EXPENSES 493,162 982,880 489,718

NET LOSS FROM OPERATIONS (493,162) (982,880) (489,718)

OTHER INCOME (EXPENSE)

Interest Income 34 2,274 2,240

NET LOSS $(493,128) $(980,606) (487,478)

EARNING (LOSS) PER COMMON SHARE (0.24) (0.51)

</TABLE>

F-37
<PAGE>

ROYAL MORTGAGE CORPORATION
(A Development Stage Company)

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

For the Period January 1, 1996 to December 31, 1996 and the Period
December 1, 1994 (Date of Inception) to December 31, 1996

CAPITAL ADDITIONAL
STOCK PAID IN
AT PAR CAPITAL
<S> <C> <C>

SHARES ISSUED
Issued December 1, 1994 1,250,000

Issued December 27, 1994 thru 800,000
September 30, 1995

Issued August 1996 - Debt Conversion 43,200

Issued August and September 1996 - Reg D 37,500

TOTAL SHARES ISSUED 2,130,700

CAPITAL RECEIVED
Issued December 1, 1994 $ 1,250 $ 0

Issued December 27, 1994 thru
September 30, 1995 800 599,200

Issued August 1996 - Debt Conversion 43 129557

Issued August and September 1996 - Reg D 38 74962

Value of Management Salaries 1995 0 120,000

Value of Management Salaries 1996 (Note 9) 0 102,000

TOTAL CAPITAL RECEIVED $ 2,131 $1,025,719

PRICE PER SHARE
Issued December 1, 1994 $ 0.001
Issued December 27, 1994 thru
December 31, 1995 $ 0.075

Issued August 1996 - Debt Conversion $ 3.00

Issued August and September 1996 - Reg D $ 2.00

</TABLE>

F-38
<PAGE>

DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE

<TABLE>

<S> <C>
Retained Earnings - December 1, 1994 $ 0

Loss for the period
December 1, 1994 thru December 31, 1994 (39,080)

Loss for the Period
January 1, 1995 thru December 31, 1995 (448,398)

Loss for the Period
January 1, 1995 thru December 31, 1996 (493,128)

ACCUMULATED LOSS DURING THE
DEVELOPMENT STAGE $(980,606)

</TABLE>

F-39
<PAGE>

RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:

For the Period
For the Period December 1, 1994
January 1, 1996 (Inception)
to December 31, 1996 to December 31, 1996

<S> <C> <C>
Net Loss $(493,128) $(980,606)

ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:

Depreciation 37,366 61,820
(Increase) Decrease in Prepaid Expenses (1,899) (1,899)
(Increase) in Deposits 0 (6,000)
Increase in Accounts Payable & Accruals 56,738 64,564
Increase in A.P.I.C. for Salaries 102,000 222,000
Capital Stock Issued for Interest Expense 9,600 9,600
Loss on Investments 2,520 35,785

CASH USED BY OPERATING ACTIVITIES $(286,803) $(594,736)

</TABLE>

NON-CASH ACTIVITIES:

In August 1996 the Company Issued $129,600 of Capital Stock In Payment of a
$120,000 Convertable Note Payable and $9,600 of Related Interest Expense.

F-40
<PAGE>

ROYAL MORTGAGE CORPORATION
(A Development Stage Company)

STATEMENT OF CASH FLOWS

For the Period January 1, 1996 to December 31, 1996 and the Period
December 1, 1994 (Date of Inception) to December 31, 1996

For the Period
For the Period December 1, 1994
January 1, 1996 (Inception)
to December 31, 1996 to December 31, 1996
<S> <C> <C> <C>
CASH FLOWS FROM OPERATIONS:

Cash Paid for Operating Expenses $(202,855) $(447,367) (244,512)
Cash Paid for Wages and Benefits (83,832) (148,198) (64,366)
Cash Paid for Interest Expense (2,670) (3,965) (1,295)
Proceeds - Sale of Investments 2,520 2,520 0
Cash Received from Interest Income 34 2,274 2,240

TOTAL CASH USED IN OPERATIONS (286,803) (594,736) (307,933)

CASH FLOWS FROM FINANCING ACTIVITIES:

Sale of Capital Stock 75,000 676,250 601,250
Cash Paid for Stock Offering Costs 0 (28,053) (28,053)
Proceeds of Note Payble/Capital Leases 217,550 371,201 153,651
Payments of Note Payble/Capital Leases 0 (33,651) (33,651)

CASH PROVIDED BY FINANCING ACTIVITIES 292,550 985,747 693,197

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of Property & Equipment 0 (333,030) (333,030)
Investments Purchased 0 (41,265) (41,265)

CASH USED IN INVESTING ACTIVITIES 0 (374,295) (374,295)

NET INCREASE IN CASH 5,747 16,716 10,969

CASH - BEGINNING OF PERIOD 10,969 0 0

CASH - END OF PERIOD $ 16,716 $ 16,716 10,969
</TABLE>

F-41
<PAGE>

ROYAL MORTGAGE CORPORATION
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

December 31, 1996
Page - 1

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BUSINESS: The Company was incorporated under the laws of the state of
Texas on December 1, 1994. The Company was formed to purchase primarily
owner-financed mortgages. The Company does not originate loans or loan monies on
real estate.

The Company's books and records will be maintained on a calendar year
basis.

DEFERRED STOCK OFFERING COSTS: Costs directly related to the 1997 stock
offering have been capitalized and included in the December 31, 1996 balance
sheet as Deferred Stock Offering Costs. If the stock offering is successful, the
proceeds of the offering will be reduced by the deferred costs. If the offering
is unsuccessful, the deferred costs will be expensed.

Costs directly related to the 1996 stock offering were capitalized and
included in the December 31, 1995 balance sheet as Deferred Stock Offering
Costs. The stock offering was unsuccessful and the deferred costs were expensed
in 1996.

INCOME TAXES: For federal income tax purposes the Company has net
operating losses of approximately $775,000 and capital losses of $33,265; which
is being carried forward to future years.

NOTE 2: DEPOSIT - STADIUM BOND:

NOTE 3: NOTE PAYABLE:

The Company has various demand notes payable as follows:

F-42

<PAGE>

<TABLE>

<S> <C>
Payable to Gladiator Partners, L.P., a Company
managed by certain stockholders of Royal
Mortgage Corporation; interest at 7%; $ 45,000

Payable to Four Star Partnership, a Company owned and managed by
certain stockholders of Royal Mortgage Corporation; interest at 7%;
10,150

Payable to certain stockholders of the
Corporation; interest at 7%; 137,400

Payable to an Individual; interest at 7%; 25,000

$217,550

</TABLE>

The notes are all non-secured demand notes.

At December 31, 1996 the Company has no senior debt.

In August 1995 the Company issued a convertible note payable to an
entity in Luxenbourg. The note beared interest at 8% and matured August 31,
1996. At that time the Company exercised it right, to convert this debenture
into common stock of the Company at the rate of one share of common stock for
each three dollars of principal of the debenture.

NOTE 4: DEVELOPMENT STAGE OPERATIONS:

The Company was formed December 1, 1994. Operations since December 1,
1994 have consisted primarily of raising capital, locating and acquiring office
lease space and negotiating contracts.

NOTE 5: LEASE COMMITMENTS:

The Company has signed a ten year operating lease agreement for office
space in Arlington, Texas. The lease agreement expires in March 2005.

The Company also has operating leases for a copy machine and a computer
service that expire in January 1998 and April 1997, respectively.

Future minimum lease commitments are as follows:

1997 86,792
1998 78,064
1999 77,848
2000 77,848
2001 77,848
Future Years 341,607

</TABLE>

F-43
<PAGE>

NOTE 6: STOCK OPTIONS:

On March 21, 1995 stock options were issued to the Company's officers
as follows:

Total Shares 200,000
Option Price $1.00 per share
Expiration Date March 2000
</TABLE>

At December 31, 1996 none of the options had been exercised.

NOTE 7: RELATED PARTIES:

One of the Company's officers and shareholders previously had a
retainer agreement with the Company to provide legal services to the Company.
The agreement provided that the Officer will provide legal services to the
Company related to (1) Acquisition and Closing of mortgage loans and (2) post
closing actions against parties to the mortgage loans.

The Company agreed to furnish the Officer office space, furniture and
equipment, and has agreed to reimburse the Officer for one half of the cost of
one full-time assistant.

This agreement was mutually canceled during August 1996.

During 1996 a total of $6,039 has been paid for the full time
assistant, $9,177 for office rent and $1,680 of other related office expenses.

At December 31, 1996 the Company had an account payable to this Officer
for reimbursement of office rent, the Company's share of the full-time assistant
and other related office expenses. In January 1997 the Company transferred the
office equipment and furniture it owns related to this office to the Officer in
complete settlement of this account payable.

NOTE 8: PROFESSIONAL FEES:

Since its inception the Company has paid professional fees as follows:

F-44
<PAGE>

Since
1996 Inception

<S> <C> <C>
Legal - Security Services $ 8,154 $53,843
Legal - Incorporation Services 225 1,480
Legal - General Services 0 886
Auditing 650 2,900
Financial Consulting 0 13,234
Acquisition of Capital 20,000 20,000
$29,029 $92,343
</TABLE>

Of the above fees, $20,000 of capital acquisition costs are related to
the 1997 stock offering and are included in the deferred stock offering costs on
the balance sheet at December 31, 1996 and $25,689 of legal-securities services
and $1,500 of auditing services were related to the 1996 stock offering and were
included in the deferred stock offering costs on the balance sheet at December
31, 1995 and are included in professional fees expense during 1996.

NOTE 9: ACCRUED MANAGEMENT SALARIES:

Management of the Company is being required by the S.E.C.'s
interpretation of G.A.A.P. to include management salaries for the officers of
the Company in these financial statements. No cash has been expended nor an
accrual established for management salaries as management of the Company does
not intend to seek compensation for the period covered by these financial
statements.

<TABLE>

<S> <C>
Michael J. Pilgrim, President, $4,000 per month

Mark J. Teinert, Vice President, $3,000 per month

G. William Barnett, II, Vice President, $3,000 per month
(Employment terminated June 28, 1996)

</TABLE>

Total management salaries of $102,000 in 1996 and $120,000 in 1995 have
been included in expenses and additional paid in capital.

F-45
<PAGE>

Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule of Mortgage Investments is
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such information, except for the column "Management
Estimate of FMV of Underlying Collateral" which is marked "unaudited", and on
which we express no opinion, has been subjected to the same auditing procedures
applied in the audit of the basic financial statements; and, in our opinion, the
information is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.

William C. Spore & Company, P. C.

January 14, 1998

F-46

<PAGE>

SIGNATURES

In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized this 16th day of November 1998.

ROYAL FINANCIAL CORPORATION

BY: /s/ Michael J. Pilgrim
---------------------------------
President, Chief Executive
Officer and Chairman

<PAGE>

INDEX TO EXHIBITS

Exhibit Number

<S> <C>
2.1 Articles of Incorporation, as amended of Davenport Ventures, Inc.
2.2 Bylaws of Davenport Ventures, Inc.
2.3 Articles of Merger of Royal Mortgage Corporation into Davenport
Ventures, Inc.
2.4 Articles of Incorporation of Royal Mortgage Corporation
2.5 By-Laws of Royal Mortgage Corporation*
2.6 Articles of Incorporation of Royal Mortgage Brokerage, Inc.
2.7 By-Laws of Royal Mortgage Brokerage, Inc.
2.8 Authorization to Transact Business in Florida of Royal Mortgage
Brokerage, Inc.
2.9 Articles of Incorporation of Walden Woods of Sugarmill, Inc.
2.10 By-Laws of Walden Woods of Sugarmill, Inc.
2.11 Articles of Incorporation of Walden Woods of Sugarmill Sales, Inc.
2.12 By-Laws of Walden Woods of Sugarmill Sales, Inc.
3.1 Specimen Common Stock Certificate*
12.1 Restated and Amended Agreement and Plan of Merger

</TABLE>

* To be filed by Amendment

<PAGE>

EXHIBIT 2.1

[LOGO]

CORPORATE CHARTER

I, CHERYL A. LAU, Secretary of State of the State of Nevada, do hereby
certify that DAVENPORT VENTURES, INC. did on the EIGHTEENTH day of AUGUST,
1993, file in this office the original Articles of Incorporation; that said
Articles are now on file and of record in the office of the Secretary of
State of the State of Nevada, and further, that said Articles contain all the
provisions required by the law of said State of Nevada.

IN WITNESS WHEREOF, I have hereunto set
my hand and affixed the Great Seal of
State, at my office, in Carson City,
Nevada, this 18TH day of AUGUST, 1993

/s/ Cheryl A. Lau
Secretary of State

By /s/ Kari Rhodes
Deputy

[LOGO]

<PAGE>

FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA

AUG 18, 1993
10087-93
CHERYL A LAU SECRETARY OF STATE
NO. /s/ Cheryl A. Lau
-----------------------------

ARTICLES OF INCORPORATION

DAVENPORT VENTURES, INC.

FIRST. The name of the corporation is:

DAVENPORT VENTURES, INC.

SECOND. Its registered office in the State of Nevada is located at
2533 North Carson Street, Carson City, Nevada 89706 that this Corporation may
maintain an office, or offices, in such other place within or without the
State of Nevada as may be from time to time designated by the Board of
Directors, or by the By-Laws of said Corporation, and that this Corporation
may conduct all Corporation business of every kind and nature, including the
holding of all meetings of Directors and Stockholders, outside the State of
Nevada as well as within the State of Nevada.

THIRD. The objects for which this Corporation is formed are: To
engage in any lawful activity, including, but not limited to the following:

(A) Shall have such rights, privileges and powers as may be conferred
upon corporations by any existing law.

(B) May at any time exercise such rights, privileges and powers, when
not inconsistent with the purposes and objects for which this corporation is
organized.

<PAGE>

(C) Shall have power to have succession by its corporate name for the
period limited in its certificate or articles of incorporation, and when no
period is limited, perpetually, or until dissolved and its affairs wound up
according to law.

(D) Shall have power to sue and be sued in any court of law or equity.

(E) Shall have power to make contracts.

(F) Shall have power to hold, purchase and convey real and personal
estate and to mortgage or lease any such real and personal estate with its
franchises. The power to hold real and personal estate shall include the
power to take the same by devise or bequest in the State of Nevada, or in any
other state, territory or country.

(G) Shall have power to appoint such officers and agents as the affairs
of the corporation shall require, and to allow them suitable compensation.

(H) Shall have power to make By-Laws not inconsistent with the
constitution or laws of the United States, or of the State of Nevada, for the
management, regulation and government of its affairs and property, the
transfer of its stock, the transaction of its business, and the calling and
holding of meetings of its stockholders.

(I) Shall have power to wind up and dissolve itself, or be wound up or
dissolved.

(J) Shall have power to adopt and use a common seal or stamp, and alter
the same at pleasure. The use of a seal or stamp by the corporation on any
corporate documents is not necessary. The corporation may use a seal or
stamp, if it desires, but such use or nonuse shall not in any way affect the
legality of the document.

(K) Shall have power to borrow money and contract debts when necessary
for the transaction of its business, or for the exercise of its corporate
rights, privileges or franchises,

2
<PAGE>

or for any other lawful purpose of its incorporation; to issue bonds,
promissory notes, bills of exchange, debentures, and other obligations and
evidences of indebtedness, payable at a specified time or times, or payable
upon the happening of a specified event or events, whether secured by
mortgage, pledge or otherwise, or unsecured, for money borrowed, or in
payment for property purchased, or acquired, or for any other lawful object.

(L) Shall have power to guarantee, purchase, hold, sell, assign,
transfer, mortgage, pledge or otherwise dispose of the shares of the capital
stock of, or any bonds, securities or evidences of the indebtedness created
by, any other corporation or corporations of the State of Nevada, or any
other state or government, and, while owners of such stock, bonds, securities
or evidences of indebtedness, to exercise all the rights, powers and
privileges of ownership, including the right to vote, if any.

(M) Shall have power to purchase, hold, sell and transfer shares of its
own capital stock, and use therefor its capital, capital surplus, surplus, or
other property or fund.

(N) Shall have power to conduct business, have one or more offices, and
hold, purchase, mortgage and convey real and personal property in the State
of Nevada, and in any of the several states, territories, possessions and
dependencies of the United States, the District of Columbia, and any foreign
countries.

(O) Shall have power to do all and everything necessary and proper for
the accomplishment of the objects enumerated in its certificate or articles
of incorporation, or any amendment thereof, or necessary or incidental to the
protection and benefit of the corporation, and, in general, to carry on any
lawful business necessary or incidental to the attainment of the

3
<PAGE>

objects of the corporation, whether or not such business is similar in nature
to the objects set forth in the certificate or articles of incorporation of
the corporation, or any amendment thereof.

(P) Shall have power to make donations for the public welfare or for
charitable, scientific or educational purposes.

(Q) Shall have power to enter into partnerships, general or limited, or
joint ventures, in connection with any lawful activities.

FOURTH. That the total number of voting common stock authorized
that may be issued by the Corporation is TEN MILLION (10,000,000) shares of
stock with $.001 par value and no other class of stock shall be authorized.
Said shares may be issued by the corporation from time to time for such
considerations as may be fixed by the Board of Directors.

FIFTH. The governing board of this corporation shall be known as
directors, and the number of directors may from time to time be increased or
decreased in such manner as shall be provided by the By-Laws of this
Corporation, providing that the number of directors shall not be reduced to
fewer than one (1).

The name and post office address of the first Board of Directors shall be
one (1) in number and listed as follows:

<TABLE>
<CAPTION>
NAME POST OFFICE ADDRESS
---- -------------------
<S> <C>
Betty J. Elpern 2533 North Carson Street
Carson City, Nevada 89706
</TABLE>

SIXTH. The capital stock, after the amount of the subscription
price, or par value, has been paid in, shall not be subject to assessment to
pay the debts of the corporation.

SEVENTH. The name and post office address of the Incorporator
signing the

<PAGE>

Articles of Incorporation is as follows:

NAME POST OFFICE ADDRESS

Betty J. Elpern 2533 North Carson Street
Carson City, Nevada 89706

EIGHTH. The resident agent for this corporation shall be:

LAUGHLIN ASSOCIATES, INC.

The address of said agent, and, the registered or statutory address of this
corporation in the state of Nevada, shall be:

2533 North Carson Street
Carson City, Nevada 89706

NINTH. The corporation is to have perpetual existence.

TENTH. In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized:

Subject to the By-Laws, if any, adopted by the Stockholders,
to make, alter or amend the By-Laws of the Corporation.

To fix the amount to be reserved as working capital over and
above its capital stock paid in; to authorize and cause to be
executed, mortgages and liens upon the real and personal property of
this Corporation.

By resolution passed by a majority of the whole Board, to
designate one (1) or more committees, each committee to consist of one
or more of the Directors of the Corporation, which, to the extent
provided in the resolution, or in the By-Laws of the Corporation,
shall have and may exercise the powers of the Board of Directors in
the management of the business and affairs of the Corporation. Such
committee, or committees, shall have such name, or names,

<PAGE>

as may be stated in the By-Laws of the Corporation, or as may be determined
from time to time by resolution adopted by the Board of Directors.

When and as authorized by the affirmative vote of the Stockholders holding
stock entitling them to exercise at lease a majority of the voting power
given at a Stockholders meeting called for that purpose, or when authorized
by the written consent of the holders of at least a majority of the voting
stock issued and outstanding, the Board of Directors shall have power and
authority at any meeting to sell, lease or exchange all of the property and
assets of the Corporation, including its good will and its corporate
franchises, upon such terms and conditions as its board of Directors deems
expedient and for the best interests of the Corporation.

ELEVENTH. No shareholder shall be entitled as a matter of right to
subscribe for or receive additional shares of any class of stock of the
Corporation, whether now or hereafter authorized, or any bonds, debentures or
securities convertible into stock, but such additional shares of stock or
other securities convertible into stock may be issued or disposed of by the
Board of Directors to such persons and on such terms as in its discretion it
shall deem advisable.

TWELFTH. No director or officer of the Corporation shall be
personally liable to the Corporation or any of its stockholders for damages
for breach of fiduciary duty as a director or officer involving any act or
omission of any such director or officer; provided, however, that the
foregoing provision shall not eliminate or limit the liability of a director
or officer (i) for acts or omissions which involve intentional misconduct,
fraud or a knowing violation of law, or (ii) the payment of dividends in
violation of Section 78.300 of the Nevada Revised Statutes. Any repeal or
modification of this Article by the stockholders of the

<PAGE>

Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director or officer of the
Corporation for acts or omissions prior to such repeal or modification.

THIRTEENTH. This Corporation reserves the right to amend, alter,
change or repeal any provision contained in the Articles of Incorporation, in
the manner now or hereafter prescribed by statute, or by the Articles of
Incorporation, and all rights conferred upon Stockholders herein are granted
subject to this reservation.

<PAGE>

I, THE UNDERSIGNED, being the Incorporator hereinbefore named for the
purpose of forming a Corporation pursuant to the General Corporation Law of
the State of Nevada, do make and file these Articles of Incorporation, hereby
declaring and certifying that the facts herein stated are true, and
accordingly have hereunto set my and this 30th day of July, 1993.

/s/ Betty J. Elpern
---------------------
Betty J. Elpern

STATE OF NEVADA )
) SS:
CARSON CITY )

On this 30th day of July, 1993, in Carson City, Nevada, before me, the
undersigned, a Notary Public in and for Carson City, State of Nevada,
personally appeared:

Betty J. Elpern

Known to me to be the person whose name is subscribed to the foregoing
document and acknowledged to me that he executed the same.

/s/ Becky L. Butler
---------------------
Becky L. Butler

---------------------------------------
[SEAL] Becky L. Butler
NOTARY PUBLIC - NEVADA
DOUGLAS COUNTY
My Appt. Expires June 12, 1995
---------------------------------------

I, Laughlin Associates, Inc. hereby accept as Resident Agent for the
previously named Corporation.

7/30/93 /s/ Betty J. Elpern
- --------------------------------
Date Service Coordinator

<PAGE>

EXHIBIT 2.2

DAVENPORT VENTURES, INC.

BY-LAWS

ARTICLE I MEETINGS OF STOCKHOLDERS

1. Stockholders' Meetings shall be held in the office of the
corporation, at Carson City, NV, or at such other place or places as the
Directors shall from time to time determine.

2. The annual meeting of the stockholders of this corporation shall be
held at 11:00 a.m., on the 18th day of August of each year beginning in 1994,
at which time there shall be elected by the stockholders of the corporation a
Board of Directors for the ensuing year, and the stockholders shall transact
such other business as shall properly come before them.

3. A notice signed by any officer of the corporation or by any person
designated by the Board of Directors, which sets forth the place of the
annual meeting, shall be personally delivered to each of the stockholders of
record, or mailed postage prepaid, at the address as appears on the stock
book of the company, or if no such address appears in the stock book of the
company, to his last known address, at least ten (10) days prior to the
annual meeting.

Whenever any notice whatever is required to be given under any article
of these By-Laws, a waiver thereof in writing, signed by the person or
persons entitled to the notice, whether before or after the time of the
meeting of the stockholders, shall be deemed equivalent to proper notice.

<PAGE>

4. If a quorum is not present at the annual meeting, the stockholders
present, in person or by proxy, may adjourn to such future time as shall be
agreed upon by them, and notice of such adjournment shall be mailed, postage
prepaid, to each stockholder of record at least ten (10) days before such
date to which the meeting was adjourned; but if a quorum is present, they may
adjourn from day to day as they see fit, and no notice of such adjournment
need be given.

5. Special meetings of the stockholders may be called at anytime by the
President; by all of the directors provided there are no more than three, or
if more than three, by any three Directors; or by the holder of a majority
share of the capital stock of the corporation. The Secretary shall send a
notice of such called meeting to each stockholder of record at least ten (10)
days before such meeting, and such notice shall state the time and place of
the meeting, and the object thereof. No business shall be transacted at a
special meeting except as stated in the notice to the stockholders, unless by
unanimous consent of all stockholders present, either in person or by proxy,
all such stock being represented at the meeting.

6. A majority of the stock issued and outstanding, either in person or
by proxy, shall constitute a quorum for the transaction of business at any
meeting of the stockholders.

7. Each stockholder shall be entitled to one vote for each share of stock
in his own name on the books of the company, whether represented in person or
by proxy.

8. All proxies shall be in writing and signed.

9. The following order of business shall be observed at all meetings of
the stockholders so far as is practicable:

a. Call the roll;

b. Reading, correcting, and approving of
the minutes of the previous meeting;

<PAGE>

c. Reports of officers;

d. Reports of Committees;

e. Election of Directors;

f. Unfinished business; and

g. New business.

ARTICLE II STOCK

1. Certificates of stock shall be in a form adopted by the Board of
Directors and shall be signed by the President and Secretary of the
Corporation.

2. All certificates shall be consecutively numbered; the name of the
person owning the shares represented thereby, with the number of such shares
and the date of issue shall be entered on the company's books.

3. All certificates of stock transferred by endorsement thereon shall be
surrendered by cancellation and new certificates issued to the purchaser or
assignee.

ARTICLE III DIRECTORS

1. A Board of Directors, consisting of at least one (1) person shall be
chosen annually by the stockholders at their meeting to manage the affairs of
the company. The Directors' term of office shall be one (1) year, and
Directors may be re-elected for successive annual terms.

2. Vacancies on the board of Directors by reason of death, resignation or
other causes shall be filled by the remaining Director or Directors choosing
a Director or Directors to fill the unexpired term.

3. Regular meetings of the Board of Directors shall be held at 1:00
p.m., on the 18th day of August of each year beginning in 1994 at the office
of the company at Carson City, NV, or at such other time or place as the
Board of Directors shall by resolution appoint; special

<PAGE>

3. The VICE PRESIDENT shall exercise the functions of the President
during the absence or disability of the President and shall have such powers
and such duties as may be assigned to him from time to time by the Board of
Directors.

4. The SECRETARY shall issue notices for all meetings as required by
the By-Laws, shall keep a record of the minutes of the proceedings of the
meetings of the Stockholders and Directors, shall have charge of the
corporate books, and shall make such reports and perform such other duties as
are incident to his office, or properly required of him by the Board of
Directors. He shall be responsible that the corporation complies with Section
78.105 of the Nevada Corporation Laws and supplies to the Nevada Resident
Agent or Registered Office in Nevada, any and all amendments to the
Corporation's Articles of Incorporation and any and all amendments or changes
to the By-Laws of the Corporation. In compliance with Section 78.105, he will
also supply to the Nevada Resident Agent or Registered Office in Nevada, and
maintain, a current statement setting out the name of the custodian of the
stock ledger or duplicate stock ledger, and the present and complete Post
Office address, including street and number, if any, where such stock ledger
or duplicate stock ledger specified in the section is kept.

5. The TREASURER shall have the custody of all monies and securities of
the corporation and shall keep regular books of account. He shall disburse
the funds of the corporation in payment of the just demands against the
corporation, or as may be ordered by the Board of Directors, making proper
vouchers for such disbursements and shall render to the Board of Directors,
from time to time, as may be required of him, an account of all his
transactions as Treasurer and of the financial condition of the corporation.
He shall perform all duties incident to his office or which are properly
required of him by the Board of Directors.

<PAGE>

6. The RESIDENT AGENT shall be in charge of the corporation's
registered office in the State of Nevada, upon whom process against the
corporation may be served and shall perform all duties required of him by
statute.

7. The salaries of all officers shall be fixed by the Board of Directors
and may be changed from time to time by a majority vote of the Board.

8. Each of such officers shall serve for a term of one (1) year or until
their successors are chosen and qualified. Officers may be re-elected or
appointed for successive annual terms.

9. The Board of Directors may appoint such other officers and agents,
as it shall deem necessary or expedient, who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors.

ARTICLE V INDEMNIFICATION OF OFFICERS AND DIRECTORS

1. The corporation shall indemnify any and all of its Directors
and Officers, and its former Directors and Officers, or any person who
may have served at the Corporations request as a Director or Officer of
another corporation in which it owns shares of capital stock or of
which it is a creditor, against expenses actually and necessarily
incurred by them in connection with the defense of any action, suit or
proceeding in which they, or any of them, are made parties, or a party,
by reason of being or having been Director(s) or Officer(s) of the
corporation, or of such other corporation, except, in relation to
matters as to which any such Director or Officer or former Director of
Officer or person shall be adjudged in such action, suit or proceeding
to be liable for negligence or misconduct in the performance of duty.
Such

<PAGE>

indemnification shall not be deemed exclusive of any other rights to which
those indemnified may be entitled, under By-Law, agreement, vote of
stockholders or otherwise.

ARTICLE VI AMENDMENTS

1. Any of these By-Laws may be amended by a majority vote of the
stockholders at any annual meeting or at any special meeting called for that
purpose.

2. The Board of Directors may amend the By-Laws or adopt additional
By-Laws, but shall not alter or repeal any By-Laws adopted by the
stockholders of the company.

******************************************************************************

CERTIFIED TO BE THE BY-LAWS OF:

DAVENPORT VENTURES, INC

BY: /s/ Stephen B Foster
-------------------------------
Secretary

<PAGE>
Exhibit 2.3

ARTICLES OF MERGER

ROYAL MORTGAGE CORPORATION

INTO

DAVENPORT VENTURES, INC.

First: The name of the surviving entity is Davenport Ventures, Inc.,
and the place of its organization is the jurisdiction of Nevada. The name and
place of organization of the entity being merged into the surviving entity is
Royal Mortgage Corporation, organized in the jurisdiction of Texas, the laws
of which permit this merger.

Second: A plan of merger was adopted by each entity that is a party to
this merger.

Third: The plan of merger was submitted to the owners of Davenport
Ventures, Inc., by the entity of directors thereof pursuant to Chapter 78 of
the Nevada Revised Statutes.

Fourth: The designation, percentage of total vote or number of votes
entitled to be cast and the total number of undisputed votes or undisputed
total percentage of owner's interests cast for the plan, by each class of
owner's interests of Davenport Ventures, Inc. entitled to vote separately on
the plan is as follows:

<TABLE>
<CAPTION>
Votes Entitled Undisputed Votes or Percentage
Designation to be Cast of Owner's Interests for
- ----------- ------------ ------------------------------
<S> <C> <C>
Common Stock,
$.001 par value 2,560,000 1,512,960 or 59.1%
</TABLE>

Fifth: The number of votes or percentage of owner's interests cast for
the plan by the owners of each class of interests of Davenport Ventures, Inc.
was sufficient for approval by the owners of that class.

Sixth: The plan of merger was submitted to the owners of Royal Mortgage
Corporation, by the entity of directors thereof.

Seventh: The designation, percentage of total vote or number of votes
entitled to be cast and the total number of undisputed votes or undisputed
total percentage of owner's interests cast for the plan, by each class of
owner's interests of Royal Mortgage Corporation entitled to vote separately
on the plan is as follows:

<PAGE>

<TABLE>
<CAPTION>
Voted Entitled Undisputed Votes or Percentage
Designation to Be Cast of Owner's Interests for
- ----------- -------------- ------------------------------

<S> <C> <C>
Common Stock,
$.001 par value 4,528,845 2,010,674 or 44.4%

</TABLE>

Eighth: The number of votes or percentage of owner's interests cast for
the plan by the owners of each class of interests of Royal Mortgage
Corporation was sufficient for approval by the owners of that class.

Ninth: The articles of incorporation of Davenport Ventures, Inc. was
amended as provided by the plan of merger, so that the First and Fourth
Articles of said articles of incorporation are amended to read as follows:

"FIRST. The name of the corporation is:
ROYAL FINANCIAL CORPORATION,";

"FOURTH. The total number of voting common stock authorized
that may be issued by the Corporation is FIFTY MILLION (50,000,000)
shares of stock with $.001 par value and no other class of stock
shall be authorized. Said shares may be issued by the Corporation
from time to time for such considerations as may be fixed by the
Board of Directors."

Tenth: The complete executed plan of merger is on file at the place of
business of Davenport Ventures, Inc. located at 1000 Ballpark Way, Suite 210,
Arlington, Texas 76011 and a copy of the plan will be furnished by Davenport
Ventures, Inc., on request and without cost to any owner of any entity which
is a party to this merger.

Eleventh: All entities party to this merger have complied with laws of
their respective jurisdiction of organization concerning this merger.

DAVENPORT VENTURES, INC.

/s/ Michael J. Pilgrim
------------------------------
Michael J. Pilgrim, President

/s/ Mark J. Teinert
-----------------------------
Mark J. Teinert, Secretary

<PAGE>

STATE OF )
)ss.:
COUNTY OF )

On 8/14/98, personally appeared before me, a Notary Public Michael J.
Pilgrim and Mark J. Teinert who acknowledged that they executed that above
instrument.

Diane Posey
--------------------------
Signature of Notary Public

[NOTARY STAMP OR SEAL]

<PAGE>

EXHIBIT 2.4

ARTICLES OF INCORPORATION

ROYAL MORTGAGE CORPORATION

That I, the undersigned, have this day voluntarily acted for the
purpose of forming a corporation under the laws of the State of Nevada, and
to that end, I do hereby certify:

I. NAME

The name of the Corporation is ROYAL MORTGAGE CORPORATION.

II. AGENT FOR SERVICE OF PROCESS

The name and address of the initial Resident Agent and location of the
Registered Office in this state is Beckley, Singleton, Jemison, Cobeaga &
List, 1575 Delucchi Lane, Suite 224, Reno, Nevada 89502.

III. PURPOSE

The purpose of the corporation, and the nature of the business and
objects proposed to be transacted and carried on by it are:

To engage in any lawful act or activity for which
a corporation may be organized under the laws of
the State of Nevada other than the banking business,
the trust company business or the practice of a
profession permitted to be incorporated under the
laws of the State of Nevada.

IV. STOCK

The corporation is authorized to issue one class of shares, which shall
be designated "common shares," having a total number of 1,000 shares. Each
such share,

<PAGE>

when issued, shall have one (1) vote.

V. NUMBER OF DIRECTORS

The members of the governing board of the corporation shall be styled
"Directors," and the initial Board of Directors shall be five (5) in number.

The number of directors may, at any time or times, be increased or
decreased by a duly adopted amendment to these Articles of Incorporation, or
in such manner as shall be provided in the By-Laws of the corporation or by
an amendment to the By-Laws of the corporation duly adopted by either the
Board of Directors or the shareholders.

VI. INITIAL DIRECTORS

The name and address of the First Board of Directors is as follows:

Michael J. Pilgrim
1000 Ballpark Way, Ste. 210
Arlington, TX 76011

Mark J. Tainart
1000 Ballpark Way, Ste. 210
Arlington, TX 76011

David E. Wantach
1000 Ballpark Way, Ste. 210
Arlington, TX 76011

Richard F. Bergner
5718 Weisthaimer, Ste. 700
Houston, TX 77057

Dr. Raymond Weild
Marktgass Passage
3 Postfoch
3000 Bern 7 Switzerland

<PAGE>

VII. INCORPORATOR

The name and post office address of the Incorporator signing these
Articles of Incorporation is as follows:

Lance P. Maiss
Backley, Singleten, Jerrison, Cobeaga & List
1575 Delucchi Lane, Suite 224
Reno, Nevada 88502

VIII. ASSESSABILITY OF SHARES

The capital stock of this corporation after the amount of the
subscription price has been paid, shall not be subject to assessment to pay
the debts of the corporation, and no stock issued as fully paid shall be
assessable or assessed, nor shall the private property of the stockholders,
directors or officers of this corporation be subject to the payment of any
corporate debts to any extent whatsoever, and in this particular, the
Articles of Incorporation shall not be subject to amendment.

IX. INDEMNIFICATION AND LIMITATION ON LIABILITY

Every person who was or is a party, or is threatened to be made a party
to or is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or she or a
person of whom he or she is the legal representative, is or was a director or
officer of the corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprise,
shall be

<PAGE>

indemnified and held harmless to the fullest extent legally permissible under
the laws of the State of Nevada, as amended, against all expenses, liability
and loss (including attorneys' fees), judgments, fines and amounts paid in
connection therewith. Such right of indemnification shall be a contract right
which may be enforced in any manner desired by such person. Such right of
indemnification shall not be exclusive of any other right which such
directors, officers or representatives may have or hereafter acquire, and,
without limiting the generality of such statement, they shall be entitled to
their respective rights of indemnification under any By-Law, agreement, vote
of stockholders, provision of law, or otherwise, as well as their rights
under this Article.

The personal liability of a director or officer of the corporation or
its stockholders, shall be limited to the fullest extent provided by Nevada
law, as amended, for damages for breach of fiduciary duty as an officer or
director. This provision shall not eliminate the liability of a director or
officer for acts or omissions which involved intentional misconduct, fraud, a
knowing violation of the law or the payment of dividends in violation of NRS
78.300.

Expenses of directors and officers incurred in defending a civil or
criminal action, suit or proceeding, must be paid by the corporation as they
are incurred and in advance of the final disposition of the action, suit or
proceeding, upon receipt of and undertaking by or on behalf of the director
or officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he or she is not entitled to be indemnified by
the corporation. This does not affect the rights to advancement of expenses
which corporate

<PAGE>

personnel, other than directors or officers, may be entitled to under any
contract or otherwise by law.
Without limiting the application of the foregoing, the Board of
Directors may adopt By-Laws from time to time with respect to
indemnification, to provide at all times the fullest indemnification
permitted by the laws of the State of Nevada, and may cause the corporation
to purchase and maintain insurance on behalf of any person who is or was a
director or officer of the corporation, or is or was serving at the request
of the corporation as director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprise
against any liability asserted against such person and incurred in any such
capacity or arising out of such status, whether or not the corporation would
have the power to indemnify such peson.

X. RIGHTS, PREFERENCES, PRIVLEGES AND RESTRICTIONS

Unless otherwise determined by the Board of Directors, no holder of
stock of the corporation shall be entitled as such, as a matter of right, to
purchase or subscribe for any stock of any class which the corporation may
issue or sell, whether or not exchangeable for any stock of the corporation
of unissued shares authorized by the Articles of Incorporation of the
corporation as origninally filed or by any amendment thereof, or out of
shares of stock of the corporation acquired by it after the issue thereof,
and whether issued for cash, labor performed, personal property, real
property, or a lease thereof, nor shall he be entitled to any right of
subscription to any thereof; nor, unless otherwise determined by the Board of
Directors, shall any holder of any shares be entitled

<PAGE>

as such, as a matter of right, to purchase or subscribe for any obligation
which the corporation may issue or sell that shall be convertible into or
exchangeable for any shares of the stock of its capital stock of any class or
classes.

IN WITHNESS WHEREOF, I have hereunto set my hand this 17th day of
September, 1998, hereby declaring and certifying that the facts stated
hereinabove are true.

/s/ Lance P. Maiss
---------------------------------

LANCE P. MAISS

<PAGE>

State of Nevada )
)ss:
County of Washoe )

On September 17th, 1998, personally appeared before me, a Notary Public,
Lance P. Maiss, who acknowledged that he executed the above instrument.

/s/ Nancy D. Williams
--------------------------------
NOTARY

[SEAL]
Nancy D. Williams

[illegible]

<PAGE>

EXHIBIT 2.6

ARTICLES OF INCORPORATION

ROYAL MORTGAGE BROKERAGE, INC.
------------------------------

I, the undersigned natural person of the age of eighteen years or more,
acting as incorporator of a corporation under the Texas Business Corporation
Act, do hereby adopt the following Articles of Incorporation for such
corporation.

ARTICLE ONE

The name of the corporation shall be:

ROYAL MORTGAGE BROKERAGE, INC.

ARTICLE TWO

The period of its duration shall be perpetual.

ARTICLE THREE

The purposes for which the corporation is organized are the transaction
of any or all lawful business for which corporations may be incorporated
under the Texas Business Corporation Act.

ARTICLE FOUR

The aggregate number of shares which this corporation shall have the
authority to issue is:

One Thousand (1,000) Shares With No Par Value

ARTICLE FIVE

The corporation will not commence business until it has received for the
issuance of its shares consideration of the value of One Thousand Dollars
($1,000.00) consisting of money, labor done or property actually received.

ARTICLE SIX

The post office address of its initial registered office is: 1000 Ball
Park Way Ste 210, Arlington, TX 76011 and the name of the registered agent at
such address is: Michael J. Pilgram.

<PAGE>

ARTICLE SEVEN

The number of directors constituting the initial board of directors is
two (2), and the names and addresses of the persons who are to serve as
directors until the first annual meeting of shareholders or until their
successors are elected and qualify are:

NAME ADDRESS

Michael J. Pilgram Royal Mortgage Corporation
1000 Ball Park Way Ste 210
Arlington, TX 76011

David Wentsch Royal Mortgage Corporation
1000 Ball Park Way Ste 210
Arlington, TX 76011

ARTICLE EIGHT

The name and address of the incorporator is:

NAME ADDRESS

Anitra Contreras Corporation Service Company
800 Brazos
Austin, TX 78701-2507

IN WITNESS WHEREOF, I have hereunto set my hand and seal this 5th day of
February, A.D., 1998.

/s/ Anitra Contreras
--------------------
Anitra Contreras
Incorporator

<PAGE>

The State of Texas

Secretary of State

CERTIFICATE OF INCORPORATION

ROYAL MORTGAGE BROKERAGE, INC.
CHARTER NUMBER 01477627

THE UNDERSIGNED, AS SECRETARY OF STATE OF THE STATE OF TEXAS, HEREBY
CERTIFIES THAT THE ATTACHED ARTICLES OF INCORPORATION FOR THE ABOVE NAMED
CORPORATION HAVE BEEN RECEIVED IN THIS OFFICE AND ARE FOUND TO CONFORM TO LAW.

ACCORDINGLY, THE UNDERSIGNED, AS SECRETARY OF STATE, AND BY VIRTUE OF
THE AUTHORITY VESTED IN THE SECRETARY BY LAW, HEREBY ISSUES THIS CERTIFICATE
OF INCORPORATION.

ISSUANCE OF THIS CERTIFICATE OF INCORPORATION DOES NOT AUTHORIZE THE USE
OF A CORPORATE NAME IN THIS STATE IN VIOLATION OF THE RIGHTS OF ANOTHER UNDER
THE FEDERAL TRADEMARK ACT OF 1946, THE TEXAS TRADEMARK LAW, THE ASSUMED
BUSINESS OR PROFESSIONAL NAME ACT OR THE COMMON LAW.

DATE FEB. 5, 1998
EFFECTIVE FEB. 5, 1998

[SEAL]

/s/ Alberto R. Gonzales
---------------------------------------
Alberto R. Gonzales, Secretary of State

<PAGE>

Exhibit 2.7

BY-LAWS

Royal Mortgage Brokerage, Inc.

ARTICLE I - OFFICES

The principal office of the corporation in the State of Texas shall be
located in the City of Arlington of County of Tarrant. The corporation may have
such other offices, either within or without the State of incorporation as the
board of directors may designate or as the business of the corporation may from
time to time require.

ARTICLE II - STOCKHOLDERS

1. ANNUAL MEETING.

The annual meeting of the stockholders shall be held on the last
business day of April in each year, beginning with the year 1998 at the hour
10:00 A.M., for the purpose of electing directors and for the transaction of
such other business as may come before the meeting. If the day fixed for the
annual meeting shall be legal holiday such meeting shall be held on the next
succeeding business day.

2. SPECIAL MEETINGS.

Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute, may be called by the president or by the
directors, and shall be called by the president at the request of the holders of
not less than fifty (50) percent of all the outstanding shares of the
corporation entitled to vote at the meeting.

3. PLACE OF MEETING.

The directors may designate any place, either within or without the
State unless otherwise prescribed by statute, as the place of meeting for any
annual meeting or for any special meeting called by the directors. A waiver of
notice signed by all stockholders entitled to vote at a meeting may designate
any place, either within or without the state unless otherwise prescribed by
statute, as the place for holding such meeting. If no designation is made, or if
a special meeting be otherwise called, the place of meeting shall be the
principal office of the corporation.

<PAGE>

4. NOTICE OF MEETING.

Written or printed notice stating the place, day and hour of the
meeting and, in case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered not less than one month nor more than 60
days before the date of the meeting, either personally or by mail, by or at the
direction of the president, or the secretary, or the officer or persons calling
the meeting, to each stockholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, addressed to the stockholder at his address as it appears on the
stock transfer books of the corporation, with postage thereon prepaid.

5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.

For the purpose of determining stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, or stockholders
entitled to receive payment of any dividend, or in order to make a determination
of stockholders for any other proper purpose, the directors of the corporation
may provide that the stock transfer books shall be closed for a stated period
but not to exceed, in any case, 60 days. If the stock transfer books shall be
closed for the purpose of determining stockholders entitled to notice of or to
vote at a meeting of stockholders, such books shall be closed for at least 60
days immediately preceding such meeting. In lieu of closing the stock transfer
books, the directors may fix in advance a date as the record date for any such
determination of stockholders, such date in any case to be not more than 60 days
and, in case of a meeting of stockholders, not less than 30 days prior to the
date on which the particular action requiring such determination of stockholders
is to be taken. If the stock transfer books are not closed and no record date is
fixed for the determination of stockholders entitled to notice of or to vote at
a meeting of stockholders, or stockholders entitled to receive payment of a
dividend, the date on which notice of the meeting is mailed or the date on which
the resolution of the directors declaring such dividend is adopted, as the case
may be, shall be the record date for such determination of stockholders. When a
determination of stockholders entitled to vote at any meeting of stockholders
has been made as provided in this section, such determination shall apply to any
adjournment thereof.

6. VOTING LISTS.

The officer or agent having charge of the stock transfer books for
shares of the corporation shall make, at least 30 days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting, or any adjournment thereof, arranged in alphabetical order, with the
address of and the number of shares held by each, which list, for a period of 30
days prior to such meeting, shall be kept on file at the principal office of the
corporation and shall be subject to inspection by any stockholder at any time
during usual business hours. Such list shall also be produced and kept open at
the time and place of the meeting and shall be subject to the inspection of any
stockholder during the whole time of the meeting. The original stock transfer
book shall be

<PAGE>

prima facie evidence as to who are the stockholders entitled to examine such
list or transfer books or to vote at the meeting of stockholders.

7. QUORUM.

At any meeting of stockholders forty (40) percent of the outstanding
shares of the corporation entitled to vote, represented in person or by proxy,
shall constitute a quorum at a meeting of stockholders. If less than said number
of the outstanding shares are represented at a meeting, a majority of the shares
so represented may adjourn the meeting from time to time without further notice.
At such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. The stockholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough stockholders to leave less than a quorum.

8. PROXIES.

At all meetings of stockholders, a stockholder may vote by proxy
executed in writing by the stockholder or by his duly authorized attorney in
fact. Such proxy shall be filed with the secretary of the corporation before or
at the time of the meeting.

9. VOTING.

Each stockholder entitled to vote in accordance with the terms and
provisions of the certificate of incorporation and these by-laws shall be
entitled to one vote, in person or by proxy, for each share of stock entitled to
vote held by such stockholders. Upon the demand of any stockholder, the vote for
directors and upon any question before the meeting shall be by ballot. All
elections for directors shall be decided by plurality vote; all other questions
shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation or the laws of this State.

10. ORDER OF BUSINESS.

The order of business at all meetings of the stockholders, shall be as
follows:

1. Roll Call.

2. Proof of notice of meeting or waiver of notice.

3. Reading of minutes of preceding meeting.

4. Reports of Officers.

5. Reports of Committees.

<PAGE>

6. Election of Directors.

7. Unfinished Business.

8. New Business.

11. INFORMAL ACTION BY STOCKHOLDERS.

Unless otherwise provided by law, any action required to be taken at a
meeting of the shareholders, or any other action which may be taken at a meeting
of the shareholders, may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by all of the shareholders
entitled to vote with respect to the subject matter thereof.

ARTICLE III - BOARD OF DIRECTORS

1. GENERAL POWERS.

The business and affairs of the corporation shall be managed by its
board of directors. The directors shall in all cases act as a board, and they
may adopt such rules and regulations for the conduct of their meetings and the
management of the corporation, as they may deem proper, not inconsistent with
these by-laws and the laws of this State.

2. NUMBER, TENURE AND QUALIFICATIONS.

The number of directors of the corporation shall be a minimum of
two/maximum of five. Each director shall hold office until the next annual
meeting of stockholders and until his or her successor shall have been elected
and qualified.

3. REGULAR MEETINGS.

A regular meeting of the directors, shall be held without other notice
than this by-law immediately after, and at the same place as, the annual meeting
of stockholders. The directors may provide, by resolution, the time and place
for the holding of additional regular meetings without other notice than such
resolution.

4. SPECIAL MEETINGS.

Special meetings of the directors may be called by or at the request of
the president or any two directors. The person or persons authorized to call
special meetings of the directors may fix the place for holding any special
meeting of the directors called by them.

<PAGE>

5. NOTICE.

Notice of any special meeting shall be given at least fourteen days
previously thereto by written notice delivered personally, or by telegram or
mailed to each director at his or her business address. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail so
addressed, with postage thereon prepaid. If notice is given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegraph company. The attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.

6. QUORUM.

At any meeting of the directors two directors shall constitute a quorum
for the transaction of business, but if less than said number is present at a
meeting, a majority of the directors present may adjourn the meeting from time
to time without further notice.

7. MANNER OF ACTING.

The act of the majority of the directors present at a meeting at which
a quorum is present shall be the act of the directors.

8. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.

Newly created directorships resulting from an increase in the number of
directors and vacancies occurring in the board for any reason except the removal
of directors without cause may be filled by a vote of a majority of the
directors then in office, although less than a quorum exists. Vacancies
occurring by reason of the removal of directors without cause shall be filled by
vote of the stockholders. A director elected to fill a vacancy caused by
resignation, death or removal shall be elected to hold office for the unexpired
term of his or her predecessor.

9. REMOVAL OF DIRECTORS.

Any or all of the directors may be removed for cause by vote of the
stockholders or by action of the board. Directors may be removed without cause
only by vote of the stockholders.

10. RESIGNATION.

A director may resign at any time by giving written notice to the
board, the president or the secretary of the corporation. Unless otherwise
specified in the notice, the resignation shall take effect upon receipt thereof
by the board or such officer, and the acceptance of the resignation shall not be
necessary to make it effective.

<PAGE>

11. COMPENSATION.

No compensation shall be paid to directors, as such, for their
services, but by resolution of the board a fixed sum and expenses for actual
attendance at each regular or special meeting of the board may be authorized.
Nothing herein contained shall be construed to preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor.

12. PRESUMPTION OF ASSENT.

A director of the corporation who is present at a meeting of the
directors at which action on any corporate matter is taken shall be presumed to
have assented to the action taken unless his dissent shall be entered in the
minutes of the meeting or unless he shall file his written dissent to such
action with the person acting as the secretary of the meeting before the
adjournment thereof or shall forward such dissent by registered mail to the
secretary of the corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to a director who voted in favor of such
action.

13. EXECUTIVE AND OTHER COMMITTEES.

The board, by resolution, may designate from among its members an
executive committee and other committees, each consisting of two or more
directors. Each such committee shall serve at the pleasure of the board.

ARTICLE IV - OFFICERS

1. NUMBER.

The officers of the corporation shall be a president, a secretary and a
treasurer, each of whom shall be elected by the directors. Such other officers
and assistant officers as may be deemed necessary may be elected or appointed by
the directors.

2. ELECTION AND TERM OF OFFICE.

The officers of the corporation to be elected by the directors shall be
elected annually at the first meeting of the directors held after each annual
meeting of the stockholders. Each officer shall hold office until his or her
successor shall have been duly elected and shall have qualified or until his or
her death or until he or she shall resign or shall have been removed in the
manner hereinafter provided.

3. REMOVAL.

<PAGE>

Any officer or agent elected or appointed by the directors may be
removed by the directors whenever in their judgment the best interests of the
corporation would be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed.

4. VACANCIES.

A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the directors for the unexpired
portion of the term.

5. PRESIDENT.

The president shall be the principal executive officer of the
corporation and, subject to the control of the directors, shall in general
supervise and control all of the business and affairs of the corporation. He
shall, when present, preside at all meetings of the stockholders and of the
directors. He may sign, with the secretary or any other proper officer of the
corporation thereunto authorized by the directors, certificates for shares of
the corporation, any deeds, mortgages, bonds, contracts, or other instruments
which the directors have authorized to be executed, except in cases where the
signing and execution thereof shall be expressly delegated by the directors or
by these by-laws to some other officer or agent of the corporation, or shall be
required by law to be otherwise signed or executed; and in general shall perform
all duties incident to the office of president and such other duties as may be
prescribed by the directors from time to time.

6. SECRETARY.

The secretary shall keep the minutes of the stockholders' and of the
directors' meetings in one or more books provided for that purpose, see that all
notices are duly given in accordance with the provisions of these by-laws or as
required, be custodian of the corporate records and of the seal of the
corporation and keep a register of the post office address of each stockholder
which shall be furnished to the secretary by such stockholder, have general
charge of the stock transfer books of the corporation and in general perform all
duties incident to the office of secretary and such other duties as from time to
time may be assigned to him by the president or by the directors.

7. TREASURER.

If required by the directors, the treasurer shall give a bond for the
faithful discharge of his duties in such sum and with such surety or sureties as
the directors shall determine. He shall have charge and custody of and be
responsible for all funds and securities of the corporation; receive and give
receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with these by-laws and in general perform all of the duties incident to the
office of treasurer and such other duties as from time to time may be assigned
to him by the president or by the directors.

<PAGE>

8. SALARIES.

The salaries of the officers shall be fixed from time to time by the
directors and no officer shall be prevented from receiving such salary by reason
of the fact that he is also a director of the corporation.

ARTICLE V - CONTRACTS, LOANS, CHECKS AND DEPOSITS

1. CONTRACTS.

The directors may authorize any officer or officers, agent or agents,
to enter into any contract or execute and deliver any instrument in the name of
and on behalf of the corporation, and such authority may be general or confined
to specific instances.

2. LOANS.

No loans shall be contracted on behalf of the corporation and no
evidences of indebtedness shall be issued in its name unless authorized by a
resolution of the directors. Such authority may be general or confined to
specific instances.

3. CHECKS, DRAFTS, ETC.

All checks, drafts or other orders for the payment of money, notes or
other evidences of indebtedness issued in the name of the corporation, shall be
signed by such officer or officers, agent or agents of the corporation and in
such manner as shall from time to time be determined by resolution of the
directors.

4. DEPOSITS.

All funds of the corporation not otherwise employed shall be deposited
from time to time to the credit of the corporation in such banks, trust
companies or other depositaries as the directors may select.

ARTICLE VI - CERTIFICATES FOR SHARES AND THEIR TRANSFER

1. CERTIFICATES FOR SHARES.

Certificates representing shares of the corporation shall be in such
form as shall be determined by the directors. Such certificates shall be signed
by the president and by the secretary

<PAGE>

or by such other officers authorized by law and by the directors. All
certificates for shares shall be consecutively numbered or otherwise identified.
The name and address of the stockholders, the number of shares and date of
issue, shall be entered on the stock transfer books of the corporation. All
certificates surrendered to the corporation for transfer shall be canceled and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and canceled, except that in case
of a lost, destroyed or mutilated certificate a new one may be issued therefor
upon such terms and indemnity to the corporation as the directors may prescribe.

2. TRANSFERS OF SHARES.

(a) Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, and cancel the old certificate; every such transfer shall be entered on
the transfer book of the corporation which shall be kept at its principal
office.

(b) The corporation shall be entitled to treat the holder of record of
any share as the holder in fact thereof, and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share on the part
of any other person whether or not it shall have express or other notice
thereof, except as expressly provided by the laws of this state.

ARTICLE VII - FISCAL YEAR

The fiscal year of the corporation shall begin on the 1st day of
September in each year.

ARTICLE VIII - DIVIDENDS

The directors may from time to time declare, and the corporation may
pay, dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law.

ARTICLE IX - SEAL

The directors shall provide a corporate seal which shall be circular in
form and shall have inscribed thereon the name of the corporation, the state of
incorporation, year of incorporation and the words, "Corporate Seal".

<PAGE>

ARTICLE X - WAIVER OF NOTICE

Unless otherwise provided by law, whenever any notice is required to be
given to any stockholder or director of the corporation under the provisions of
these by-laws or under the provisions of the articles of incorporation, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.

ARTICLE XI - AMENDMENTS

These by-laws may be altered, amended or repealed and new by-laws may
be adopted by a vote of the stockholders representing a majority of all the
shares issued and outstanding, at any annual stockholders' meeting or at any
special stockholders' meeting when the proposed amendment has been set out in
the notice of such meeting.

<PAGE>

Exhibit 2.8

APPLICATION BY FOREIGN CORPORATION FOR AUTHORIZATION TO
TRANSACT BUSINESS IN FLORIDA

IN COMPLIANCE WITH SECTION 607.1503, FLORIDA STATUTES, THE FOLLOWING IS
SUBMITTED TO REGISTER A FOREIGN CORPORATION TO TRANSACT BUSINESS IN THE STATE
OF FLORIDA:

1. Royal Mortgage Brokerage, Inc.
---------------------------------------------------------------------------
(Name of corporation must include the word "INCORPORATED", "COMPANY",
"CORPORATION" or words of abbreviation of the import in language or will
clearly indicate that it is a corporation instead of a natural person or
partnership if not so contained in the name or person.

2. Texas 3. 75-2745985
--------------------------------- ------------------------------------
(State or country under the law of (FEI Number, if applicable)
which it is incorporated)

4. February 5, 1995 5. Perpetual
------------------------- --------------------------------------------
(Date of Incorporation) (Duration: Year corp. will cease to exist or
"Perpetual")

6. Not yet transacted business
---------------------------------------------------------------------------
(Date first transacted business in Florida. (See sections 607.1601,
607.1502, and 817.168, F.S.)

7. 8889 Pelican Bay Blvd, Suite 400
---------------------------------------------------------------------------
Naples, Florida 34102
---------------------------------------------------------------------------
(Current mailing address)

8. Mortgage Brokerage Business
---------------------------------------------------------------------------
(Proposed at Corporation authorized in home state or country to be carried
out in this State or Country

9. Name and street address of Florida registered agent: (P.O. Box or Mail
Drop Box NOT acceptable)

Name: Corporation Service Company
------------------------------------

Office Address: 1201 Haye Street
--------------------------

Tallahassee , Florida, 32304
------------------------ ----------
(Zip Code)

10. Registered agent's acceptance:

Having been named as registered agent and to accept service of process for
the above stated corporation at the price designated in this application, I
hereby accept the appointment as registered agent and agree to act in this
capacity. I further agree to comply with the provisions of all statutes
relative to the proper and complete performance of my duties, and I am
familiar with and accept the obligations of my position as registered agent.

Corporation Service Company

By: /s/ Karen B. Tzar
----------------------------------
(Registered agent's signature)

11. Attached is a certificate of existence duly authenticated, not more than
90 days prior to delivery of this application to the Department of State, by
the Secretary of State or other Officer having custody of corporate records
in the jurisdiction under the law of which it is incorporated.

<PAGE>

12. Names and addresses of officers and/or directors: (Street address
ONLY - P.O. Box NOT acceptable)

A. DIRECTORS (Street address only - P.O. Box NOT acceptable)

Chairman: Michael J. Pilgrim
------------------------------------------------------------------
Address: 1000 Ballpark Way, Suite 210
------------------------------------------------------------------
Arlington, Texas 76011
------------------------------------------------------------------
Vice Chairman:
-------------------------------------------------------------
Address:
------------------------------------------------------------------

------------------------------------------------------------------
Director: David E. Wentsch
------------------------------------------------------------------
Address: 1000 Ballpark Way, Suite 210
------------------------------------------------------------------
Arlington, Texas 76011
------------------------------------------------------------------
Director:
------------------------------------------------------------------
Address:
------------------------------------------------------------------

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

B. OFFICERS (Street address only - P.O. Box NOT acceptable)

President: Michael J. Pilgrim
------------------------------------------------------------------
Address: 1000 Ballpark Way, Suite 210
------------------------------------------------------------------
Arlington, Texas 76011
------------------------------------------------------------------
Vice President:
-------------------------------------------------------------
Address:
------------------------------------------------------------------

------------------------------------------------------------------
Secretary: David E. Wentsch
------------------------------------------------------------------
Address: 1000 Ballpark Way, Suite 210
------------------------------------------------------------------
Arlington, Texas 76011
------------------------------------------------------------------
Treasurer: Michael J. Pilgrim
------------------------------------------------------------------
Address: 1000 Ballpark Way, Suite 210
------------------------------------------------------------------
Arlington, Texas 76011
------------------------------------------------------------------

NOTE: If necessary, you may attach an addendum to the application listing
additional officers and/or directors.

13. /s/ Michael J. Pilgrim
------------------------------------------------------------------
(Signature of Chairman, Vice Chairman, or any officer
listed in number 12 of the application.)

14. Michael J. Pilgrim
------------------------------------------------------------------
(Typed or printed name and capacity of person signing application)

<PAGE>

State of Florida
[GRAPHIC]
Department of State

I certify that the attached is a true and correct copy of the Articles of
Incorporation of WALDEN WOODS OF SUGARMILL, INC.

A CORPORATION ORGANIZED UNDER THE LAWS OF THE STATE OF FLORIDA, FILED ON
March 20, 1985.

THE CHARTER NUMBER FOR THIS CORPORATION IS H480Z3

Given under my hand and the
Great Seal of the State of Florida
at Tallahassee, the Capital, this the
20th day of March, 1985.

GREAT SEAL OF THE STATE OF FLORIDA
IN GOD WE TRUST

[SEAL]

/s/ George Firestone
------------------------------------
George Firestone
Secretary of State

WP-104 CER-101

<PAGE>

The undersigned subscriber to these Articles of Incorporation, a
natural person competent to contract, hereby forms a corporation under the
laws of the State of Florida.

ARTICLE I. NAME

The name of the corporation shall be:

WALDEN WOODS OF SUGARMILL, INC.

The principal place of business of this corporation shall be 1835 Jessica
Road, Clearwater, Florida 33575.

ARTICLE II. NATURE OF BUSINESS

This corporation may engage or transact in any or all lawful activities
or business permitted under the laws of the United States, the State of
Florida or any other state, country, territory or nation.

ARTICLE III. CAPITAL STOCK

The maximum number of shares of stock that this corporation is
authorized to have outstanding at any one time is 6,000 shares of common
stock having a par value of $1 per share.

ARTICLE IV. ADDRESS

The street address of the initial registered office of the corporation
shall be 502 East Park Avenue, Tallahassee, Florida 32301, and the name of
the initial registered agent of the corporation at that address is
Corporation Information Services, Inc. -- Gail Shelby.

<PAGE>

Internal Revenue code and that the corporation will file as a Subchapter S
corporation.

ARTICLE VII. DIRECTORS

This corporation shall have one director, initially. The names and
street addresses of the initial members of the Board of Directors are:

Robert Miller 1835 Jessica Road
Dir. Clearwater, Florida 33575

ARTICLE VIII. SUBSCRIBER

The name and street address of the subscriber to these Articles of
Incorporation is:

Gail Shelby 502 East Park Avenue
Tallahassee, Florida 32301

IN WITNESS WHEREOF, the undersigned has hereunto set her hand and seal
on this 20th day of March, 1985.

/s/ Gail Shelby (SEAL)
-----------------------
Gail Shelby

STATE OF FLORIDA

COUNTY OF LEON

The foregoing instrument was acknowledged before me this 20th day of
March, 1985, by Gail Shelby.

/s/ [illegible]
- ----------------------------------------
Notary Public, State of Florida at Large

My Commission Expires:
----------------

<PAGE>

BY-LAWS

WALDEN WOODS OF SUGARMILL, INC.

ARTICLE I
MEETINGS OF STOCKHOLDERS

SECTION 1. ANNUAL MEETING: The annual meeting of the stockholders of this
corporation shall be held at a time and place as called by the President or
Board of Directors. The annual meeting of the stockholders for any year shall be
held no later than thirteen months after the last preceding annual meeting of
the stockholders, unless otherwise designated. Business transacted at the annual
meeting shall include the election of directors of the corporation.

SECTION 2. SPECIAL MEETINGS: Special meetings of the stockholders shall
be held when directed by the President, the Board of Directors, or when
requested in writing by the holders of not less than ten percent of all the
shares entitled to vote at the meeting. A meeting requested by stockholders
shall be called for a date not less than ten or more than sixty days after
the request is made, unless the stockholders requesting the meeting designate
a later date. The call for the meeting shall be issued by the Secretary,
unless the President, Board of Directors, or stockholders requesting the
meeting shall designate another person to do so.

SECTION 3. PLACE: Meetings of stockholders shall be held within or without
the State of Florida. If no designation is made, the place of the meeting shall
be the registered office of the corporation.

SECTION 4. NOTICE: Written notice stating the place, day and hour of the
meeting and, in the case of a special meeting, the purpose or purposes for which
the meeting is called, shall be delivered not less than ten nor more than sixty
days before the meeting, either personally or by first class mail, by or at the
direction of the President, the Secretary, or the officer or persons calling the
meeting to each stockholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail addressed to the stockholder at his address as it appears on the
stock transfer books of the corporation, with postage thereon prepaid.

<PAGE>

SECTION 5. NOTICE OF ADJOURNED MEETINGS: When a meeting is adjourned to
another place or time, it shall not be necessary to give any notice of the
adjourned meeting if the place and time to which the meeting is adjourned are
announced at the meeting at which the adjournment is taken, and at the
adjourned meeting any business may be transacted that might have been
transacted on the original date of the meeting. If, however, after the
adjournment the Board of Directors fixes a new record date for the adjourned
meeting, a notice of the adjourned meeting shall be given as provided in this
section to each stockholder of record on the new record date entitled to vote
at such meeting.

SECTION 6. CLOSING OF TRANSFER BOOKS AND FIXING RECORD DATE: For the
purpose of determining stockholders entitled to notice of or to vote at any
meeting of stockholders or any adjournment thereof, or entitled to receive
payment of any dividend, or in order to make a determination of stockholders
for any other purposes, the Board of Directors may provide that the stock
transfer books shall be closed for a stated period but not to exceed, in any
case, sixty days. If the stock transfer books shall be closed for the purpose
of determining stockholders entitled to notice of or to vote at a meeting of
stockholders, such books shall be closed for at least ten days immediately
preceding such meeting.

In lieu of closing the stock transfer books, the Board of Directors may
fix in advance a date as the record date for any determination of
stockholders, such date in any case to be not more than sixty days and, in
case of a meeting of stockholders, not less than ten days prior to the date
on which the particular action requiring such determination of stockholders
is to be taken.

If the stock transfer books are not closed and no record date is fixed
for determination of stockholders entitled to notice or to vote at a meeting
of stockholders, or stockholders entitled to receive payment of a dividend,
the date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as
the case may be, shall be the record date for such determination of
stockholders.

When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this section, such determination
shall apply to an adjournment thereof, unless the Board of Directors fixes a
new record date for the adjourned meeting.

SECTION 7. VOTING RECORD: The officers or agent having charge of the
stock transfer books for shares of the corporation shall make, at least ten
days before each meeting

2
<PAGE>

of the stockholders, a complete list of the stockholders entitled to vote at
such meeting or any adjournment thereof, with the address of and the number and
class and series, if any, of shares held by each. The list, for a period of
ten days prior to such meeting, shall be kept on file at the registered office
of the corporation, at the principal place of business of the corporation or
at the office of the transfer agent or registrar of the corporation and any
stockholder shall be entitled to inspect the list at any time during usual
business hours. The list shall also be produced and kept open at the time
and place of the meeting and shall be subject to the inspection of any
stockholder at any time during the meeting.

If the requirements of this section have not been substantially complied
with, the meeting on demand of any stockholder in person or by proxy, shall
be adjourned until the requirements are complied with. If no such demand is
made, failure to comply with the requirements of this section shall not
affect the validity of any action taken at such meeting.

SECTION 8. STOCKHOLDER QUORUM AND VOTING: A majority of the shares
entitled to vote, represented in person or by proxy, shall constitute a
quorum at a meeting of stockholders. When a specified item of business is
required to be voted on by a class or series, a majority of the shares of
that class or series shall constitute a quorum for the transaction of such
item of business by that class or series.

If a quorum is present, the affirmative vote of the majority of the
shares represented at the meeting and entitled to vote on the subject matter
shall be the act of the stockholders unless otherwise provided by law.

After a quorum has been established at at stockholders' meeting, the
subsequent withdrawal of stockholders, so as to reduce the number of
stockholders entitled to vote at the meeting below the number required for a
quorum, shall not affect the validity of any action taken at the meeting or
any adjournment thereof.

SECTION 9. VOTING SHARES: Each stockholder entitled to vote in
accordance with the terms and provisions of the Articles of Incorporation and
these By-Laws, shall be entitled to one vote for each share of stock owned by
such stockholder. Upon the demand of any stockholder, the vote for directors
shall be by ballot. All other requirements as to voting, voting trusts and
stockholders' agreements shall be in accordance with the laws of the State of
Florida.

<PAGE>

SECTION 10. ACTION BY STOCKHOLDERS WITHOUT A MEETING: Any action
required by law, these By-Laws, or the Articles of Incorporation of this
corporation to be taken at any annual or special meeting of stockholders of
the corporation, or any action which may be taken at any or special meeting
of such stockholders, may be taken without a meeting, without prior notice
and without a vote, if consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. If any class of shares is entitled to vote thereon as a class,
such written consent shall be required of the holders of a majority of the
shares of each class of shares entitled to vote as a class thereon and of the
total shares entitled to vote thereon.

Within ten days after obtaining such authorization by written consent,
notice shall be given to those stockholders who have not consented in
writing. The notice shall fairly summarize the materials features of the
authorized action and, if the action be a merger, consolidation or sale or
exchange of assets for which dissenters rights are provided under this act,
the notice shall contain a clear statement of the right of stockholders
dissenting therefrom to be paid the fair value of their shares upon
compliance with further provisions of this act regarding the rights of
dissenting stockholders.

SECTION 11. PROXIES: Every stockholder entitled to vote at a meeting
of stockholders or to express consent or dissent without a meeting or a
stockholders' duly authorized attorney-in-fact, may authorize another person
or persons to act for him by proxy.

Every proxy must be signed by the stockholder or his attorney-in-fact.
No proxy shall be valid after the expiration of eleven months from the date
thereof unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the stockholder executing it, except as
otherwise provided by law.

The authority of the holder of a proxy to act shall not be revoked by
the incompetence or death of the stockholder who executed the proxy unless,
before the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the corporate officer
responsible for maintaining the list of stockholders.

-4-

<PAGE>

If a proxy for the same shares confers authority upon two or more
persons and does not otherwise provide, a majority of them present at the
meeting, or if only one is present then that one, may exercise all the powers
conferred by the proxy; but if the proxy holders present at the meeting are
equally divided as to the right and manner of voting in any particular
case, the voting of such shares shall be prorated.

If a proxy expressly provides, any proxy holder may appoint in writing
a substitute to act in his place.

ARTICLE II
DIRECTORS

SECTION 1. FUNCTION: All corporate powers shall be exercised by or
under the authority of, and the business and affairs of this corporation
shall be managed under the direction of the Board of Directors.

SECTION 2. QUALIFICATION: Directors need not be residents of this
state or stockholders of this corporation.

SECTION 3. COMPENSATION: The Board of Directors shall have authority
to fix the compensation of directors.

SECTION 4. DUTIES OF DIRECTORS: A Director shall perform his duties
as a director, including his duties as a member of any committee of the board
upon which he may serve, in good faith, in a manner he reasonably believes
to be in the best interests of the corporation, and with such care as any
ordinarily prudent person in a like position would use under similar
circumstances.

In performing his duties, a director shall be entitled to rely on
information, opinions, reports or statements, including financial statements
and other financial data, in each case prepared or presented by:

(a) one or more officers or employees of the corporation whom the
director reasonably believes to be reliable and competent in the matters
presented.

(b) counsel, Public Accountants or other persons as to matters which
the director reasonably believes to be within such person's professional or
expert competence, or

(c) a committee of the board upon which he does not serve, duly
designated in accordance with a provision of the Articles of Incorporation or
the By-Laws, as to matters within its designated authority, which committee
the director reasonably believes to merit confidence.

-5-

<PAGE>

A director shall not be considered to be acting in good faith if he has
knowledge concerning the matter in question that would cause such reliance
described above to be unwarranted.

A person who performs his duties in compliance with this section shall
have no liability by reason of being or having been a director of the
corporation.

SECTION 5. PRESUMPTION OF ASSENT: A director of the corporation who
is present at a meeting of its directors at which action on any corporation
matter is taken shall be presumed to have assented to the action taken unless
he votes against such action or abstains from voting in respect thereto
because of an asserted conflict of interest.

SECTION 6. NUMBER: This corporation shall be managed by a board of at
least (1) director(s). The number of directors may be increased or decreased
from time to time by amendment to these By-Laws, but no decrease shall have
the effect of shortening the terms of any incumbent director.

SECTION 7. ELECTION & TERM: At the first annual meeting of
shareholders and at each annual meeting thereafter the shareholders shall
elect directors to hold office until the next succeeding annual meeting, or
until a successor shall have been elected and qualified or until the earlier
resignation, removal from office or death.

SECTION 8. VACANCIES: Any vacancy occurring in the Board of
Directors, including any vacancy created by reason of an increase in the
number of directors, may be filled by the affirmative vote of a majority of
the remaining directors though less than a quorum. A director elected to fill
a vacancy shall hold office only until the next election of directors by the
stockholders.

SECTION 9. REMOVAL OF DIRECTORS: At a meeting of stockholders called
expressly for that purpose, any director or the entire Board of Directors may
be removed, with or without cause, by a vote of the holders of a majority of
the shares then entitled to vote at an election of directors.

SECTION 10. QUORUM & VOTING: A majority of the number of directors
fixed by these By-Laws shall constitute a quorum for the transaction of
business. The act of the majority of the directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors.

-6-

<PAGE>

SECTION 11. EXECUTIVE & OTHER COMMITTEES: The Directors, by
resolution adopted by a majority of the full Board of Directors, may
designate from among its members, an executive committee and other
committees, and each such committee shall serve at the pleasure of the Board
with the authority contained in the Florida Statutes. The Board, by
resolution, may designate one or more directors as alternate members of any
such committee, who may act in the place and stead of any absent member or
members at any meeting of such committee.

SECTION 12. REGULAR MEETINGS: A regular meeting of the Directors
shall be held without other notice than this By-Law, immediately after and at
the same place as the annual meeting of the stockholders.

SECTION 13. SPECIAL MEETINGS: Special Meetings of the Directors may
be called by the President or by any two directors. The person or persons
authorized to call special meetings of the directors may fix the place for
holding any special meeting of the directors called by them. Members of the
Board of Directors may participate in a meeting of such board by means of a
conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other at the same
time. Participation by such means shall constitute presence in person at a
meeting.

SECTION 14. NOTICE: Written notice of the time and place of Special
Meetings of Directors shall be given to each director either by personal
delivery or by mail, telegram or cablegram at least two days before the
meeting. Notice need not be given to any director who signs a waiver of
notice either before or after the meeting. Attendance of a director at a
meeting shall constitute a waiver of notice of such meeting and waiver of any
and all objections to the place of the meeting, any objection to the
transaction of business because the meeting is not lawfully called or
convened. The business to be transacted at or the purpose of any special
meeting of the directors shall be specified in the written waiver of notice.

-7-

<PAGE>

SECTION 15. ACTION WITH A MEETING: Any action required to be taken at a
meeting of the directors of a corporation, or any action which may be taken
at a meeting of the directors or a committee thereof, may be taken without a
meeting if a consent in writing, setting forth the action so to be taken;
signed by all of the directors, or all the members of the committee, as the
case may be, is filed in the minutes of the proceedings of the board or of
the committee. Such consent shall have the same effect as a unanimous vote.

ARTICLE III
OFFICERS

SECTION 1. OFFICERS: The officers of this corporation shall consist of a
president, secretary and treasurer, each of whom shall be elected by the
Board of Directors. Such other officers and assistant officers and agents as
may be deemed necessary may be elected or appointed by the Board of Directors
from time to time. Any two or more offices may be held by the same person.
The directors shall elect officers of the corporation annually at the meeting
of the directors held after each annual meeting of the stockholders. Each
officer shall hold office until his successors shall have been duly elected
and shall have qualified or until his death, resignation, or until he shall
have been removed in the manner provided herein.

SECTION 2. DUTIES OF OFFICERS: The officers of this corporation shall
have the following duties:

THE PRESIDENT shall be the chief executive officer of the corporation,
shall have general and active management of the business and affairs of the
corporation subject to the directions of the Board of Directors, and shall
preside at all meetings of the stockholders and Board of Directors.

THE SECRETARY shall have custody of, and maintain, all of the corporate
records except the financial records; shall record the minutes of all
meetings of the stockholders and Board of Directors, send all notices of
meetings out, and perform such other duties as may be prescribed by the Board
of Directors or the President.

THE TREASURER shall have custody of the corporate funds and financial
records, shall keep full and accurate accounts of receipts and disbursements
and render accounts

<PAGE>

SECTION 3. REMOVAL: Any officer or agent elected or appointed by the
Directors may be removed by them, with or without cause, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.

ARTICLE IV
CERTIFICATES FOR SHARES

SECTION 1. ISSUANCE: Every holder of shares in this corporation shall be
entitled to have a certificate, representing all shares to which he is
entitled. No certificate shall be issued for any share until such share is
fully paid.

SECTION 2. FORM: Certificates representing shares of the corporation
shall be issued by the President and Secretary or by such other officers
authorized by the Directors under the laws of the State of Florida, and may
be sealed with the seal of the corporation or a facsimile thereof. All
certificates shall be consecutively numbered or otherwise identified. All
certificates representing shares shall state upon the face thereof: The name
of the corporation; that the corporation is organized under the laws of this
State; the name of the person or persons to whom issued; the number and class
of shares and designation of series, if any, which such certificate
represents; the par value of each share represented by such certificate or a
statement that the shares are without par value.

SECTION 3. LOST, STOLEN OR DESTROYED CERTIFICATES: The corporation shall
issue a new stock certificate in place of any certificate previously issued
if the holder of record of the certificate (a) makes proof in affidavit form
that it has been lost, destroyed or wrongfully taken; (b) requests the issue
of a new certificate before the corporation has notice that the certificate
has been acquired by a purchaser for value in good faith and without notice
of any adverse claim; (c) gives bond in such form as the corporation may
direct, to indemnify the corporation, the transfer agent, and registrar
against any claim that may be made on account of the alleged loss,
destruction, or theft of a certificate; and (d) satisfies any other
reasonable requirements imposed by the corporation.

SECTION 4. TRANSFER OF SHARES: Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares duly endorsed
or accompanied by proper

<PAGE>

this State.

ARTICLE V
BOOKS AND RECORDS

This corporation shall keep correct and complete books and records of
account and shall keep minutes of the proceedings of its stockholders,
directors and committees of directors upon the terms and conditions provided
by law.

ARTICLE VI
DIVIDENDS

The directors may from time to time declare, and the corporation may
pay, dividends on its outstanding shares upon the terms and conditions
provided by law.

ARTICLE VII
FISCAL YEAR

The decision to operate on a fiscal year and the dates thereof, if
applicable, shall be determined by a majority of the Board of Directors.

ARTICLE VIII
CORPORATE SEAL

The directors shall provide a corporate seal which shall be circular in
form and shall have inscribed thereon the name of the corporation, state of
incorporation, year of incorporation and the words, "corporate seal."

ARTICLE IX
AMENDMENT

These By-Laws may be repealed or amended, and new By-Laws adopted by
either the Directors or the stockholders, but the Directors may not amend or
repeal any By-Law adopted by stockholders if the stockholders specifically
provide such By-Law not subject to amendment or repeal by the directors.

<PAGE>

State of Florida

[LOGO]

Department of State

I certify that the attached is a true and correct copy of the
Articles of Incorporation of WALDEN WOODS OF SUGARMILL SALES,
INC., a corporation organized under the Laws of the State of
Florida, filed on May 28, 1985, as shown by the records of
this office.

The charter number of this corporation is H58875.

Given under my hand and the
Great Seal of the State of Florida,
at Tallahassee, the Capital, this the
28th day of May, 1985.

/s/ George Firestone
[SEAL] George Firestone
Secretary of State

<PAGE>

ARTICLES OF INCORPORATION
OF
WALDEN WOODS OF SUGARMILL SALES, INC.

The undersigned incorporator to these Articles of Incorporation, a
natural person competent to contract, hereby forms a corporation for profit
under the laws of the State of Florida.

ARTICLE I - NAME

WALDEN WOODS OF SUGARMILL SALES, INC. shall be the name of this
corporation.

ARTICLE II - NATURE OF BUSINESS

The general character of nature of the business to be transacted by this
corporation is: The corporation may engage in any activity or business
permitted under the laws of the United States and of the State of Florida.

ARTICLE III - CAPITAL STOCK

The maximum number of shares of stock that this corporation is
authorized to have on hand at any time is 6,000 shares of common stock having
a par value of $1.00. The authorized capital stock may be paid for in cash,
services or other property at a just value to be fixed by the board of
directors of the corporation at any regular or special meeting of the same.

ARTICLE IV - ADDRESS AND RESIDENT AGENT

The street address of the initial registered office of the corporation
is: 4 BELLEVIEW BLVD., BELLEAIR, FLORIDA 33516, and the name of the initial
registered agent of the corporation at that address is: ROBERT MILLER.
ROBERT MILLER having been so named to accept said service of process, said
registered agent hereby accepts said designation to act in said capacity and
agrees to comply with the provisions of the Florida Statutes relating to
keeping open said office and so accepts by signing the Articles of
Incorporation hereunder.

ARTICLE V - DIRECTORS

The corporation shall have no less than one director nor more than
nine(9). The number may be increased or decreased as may be authorized by the
By-Laws of this corporation. The number of directors constituting the
initial Board of Directors shall be one.

<PAGE>

ARTICLE VI - INITIAL DIRECTORS AND INCORPORATORS

DIRECTORS ADDRESS
------------- -------
ROBERT MILLER 4 BELLEVIEW BLVD.
BELLEAIR, FLORIDA 33516

INCORPORATORS ADDRESS
------------- -------
ROBERT MILLER 4 BELLEVIEW BLVD.
BELLEAIR, FLORIDA 33516

IN WITNESS WHEREOF, I, the undersigned, have set my hand and seal to the
foregoing Articles of Incorporation for WALDEN WOODS OF SUGARMILL SALES, INC.
and acknowledged the same under the laws of the State of Florida, this
21st day of May, 1985.
- ---- ---

/s/ Robert Miller
-------------------------------------
ROBERT MILLER, Incorporator
and Registered Agent

STATE OF FLORIDA
COUNTY OF PINELLAS

Before me, the undersigned authority, personally appeared ROBERT MILLER,
as Incorporator and Registered Agent, to me well known and known to me to be
the person described in and who executed the foregoing Articles Articles of
Incorporation an who acknowledged before me that he signed the same for the
purposes therein expressed.

SWORN TO AND SUBSCRIBED this 21st day of May, 1985, at Clearwater,
---- --- ----------
Pinellas County, State of Florida.
- --------

My Commission Expires: /s/ [ILLEGIBLE]
NOTARY PUBLIC STATE OF FLORIDA -------------------------------------
MY COMMISSION EXP. NOV. 27, 1988 NOTARY PUBLIC, State of Florida
BONDED THRU GENERAL INS. UND.

<PAGE>

BY-LAWS

WALDEN WOODS OF SUGARMILL SALES, INC.

ARTICLE I
MEETINGS OF STOCKHOLDERS

SECTION 1. ANNUAL MEETING: The annual meeting of the stockholders of
this corporation shall be held at a time and place as called by the President
or Board of Directors. The annual meeting of the stockholders for any year
shall be held no later than thirteen months after the last preceding annual
meeting of the stockholders, unless otherwise designated. Business transacted
at the annual meeting shall include the election of directors of the
corporation.

SECTION 2. SPECIAL MEETINGS: Special meetings of the stockholders
shall be held when directed by the President, the Board of Directors, or when
requested in writing by the holders of not less than ten percent of all the
shares entitled to vote at the meeting. A meeting requested by stockholders
shall be called for a date not less than ten nor more than sixty days after
the request is made, unless the stockholders requesting the meeting designate
a later date. The call for the meeting shall be issued by the Secretary,
unless the President, Board of Directors, or stockholders requesting the
meeting shall designate another person to do so.

SECTION 3. PLACE: Meetings of stockholders shall be held within or
without the State of Florida. If no designation is made, the place of the
meeting shall be the registered office of the corporation.

SECTION 4. NOTICE: Written notice stating the place, day and hour of
the meeting and, in the case of a special meeting, the purpose of purposes
for which the meeting is called, shall be delivered not less than ten nor
more than sixty days before the meeting, either personally or by first class
mail, by or at the direction of the President, the Secretary, or the officer
or persons calling the meeting to each stockholder of record entitled to vote
at such meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail addressed to the stockholder at his
address as it appears on the stock transfer books of the corporation with
postage thereon prepaid.

<PAGE>

SECTION 5. NOTICE OF ADJOURNED MEETINGS: When a meeting is adjourned to
another place or time, it shall not be necessary to give any notice of the
adjourned meeting if the place and time to which the meeting is adjourned are
announced at the meeting at which the adjournment is taken, and at the
adjourned meeting any business may be transacted that might have been
transacted on the original date of the meeting. If, however, after the
adjournment the Board of Directors fixes a new record date for the
adjournment meeting, a notice of the adjourned meeting shall be given as
provided in this section to each stockholder of record on the new record date
entitled to vote at such meeting.

SECTION 7. VOTING RECORD: The officers or agent having charge of the
stock transfer books for shares of the corporation shall make, at least ten
days before each meeting

<PAGE>

of the stockholders, a complete list of the stockholders entitled to vote at
such meeting or any adjournment thereof, with the address of and the number
and class and series, if any, of shares held by each. The list, for a period
of ten days prior to such meeting, shall be kept on file at the registered
office of the corporation, at the principal place of business of the
corporation or at the office of the transfer agent or registrar of the
corporation and any stockholder shall be entitled to inspect the list at any
time during usual business hours. The list shall also be produced and kept
open at the time and place of the meeting and shall be subject to the
inspection of any stockholder at any time during the meeting.

After a quorum has been established at a stockholders' meeting, the
subsequent withdrawal of stockholders, so as to reduce the number of
stockholders entitled to vote at the meeting below the number required for a
quorum, shall not affect the validity of any action taken at the meeting or
any adjournment thereof.

SECTION 9. VOTING OF SHARES: Each stockholder entitled to vote in
accordance with the terms and provisions of the Articles of Incorporation and
these By-Laws, shall be entitled to one vote for each share of stock owned by
such stockholder. Upon the demand of any stockholder, the vote for directors
shall be by ballot. All other requirements as to voting, voting trusts and
stockholders' agreements shall be in accordance with the laws of the State of
Florida.

<PAGE>

SECTION 11. PROXIES: Every stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent without a meeting or a
stockholders' duly authorized attorney-in-fact, may authorize another person
or persons to act for him by proxy.

<PAGE>

If a proxy for the same shares confers authority upon two or more
persons and does not otherwise provide, a majority of them present at the
meeting, or if only one is present then that one, may exercise all the powers
conferred by the proxy; but if the proxy holders present at the meeting are
equally divided as to the right and manner of voting in any particular case,
the voting of such shares shall be prorated.

If a proxy expressly provides, any proxy holder may appoint in writing a
substitute to act in his place.

ARTICLE II
DIRECTORS

SECTION 2. QUALIFICATION: Directors need not be residents of this state
or stockholders of this corporation.

SECTION 3. COMPENSATION: The Board of Directors shall have authority to
fix the compensation of directors.

SECTION 4. DUTIES OF DIRECTORS: A Director shall perform his duties as
a director, including his duties as a member of any committee of the board
upon which he may serve, in good faith, in a manner he reasonably believes to
be in the best interests of the corporation, and with such care as any
ordinarily prudent person in a like position would use under similar
circumstances.

(a) one or more officers or employees of the corporation whom the
director reasonably believes to be reliable and competent in the matters
presented.

(b) counsel, Public Accountants or other persons as to matters which the
director reasonably believes to be within such person's professional or
expert competence, or

(c) a committee of the board upon which he does not serve, duly
designated in accordance with a provision of the Articles of Incorporation or
by the By-Laws, as to matters within its designated authority, which
committee the director reasonably believes to merit confidence.

<PAGE>

A director shall not be considered to be acting in good faith if he has
knowledge concerning the matter in question that would cause such reliance
described above to be unwarranted.

A person who performs his duties in compliance with this section shall
have no liability by reason of being or having been a director of the
corporation.

SECTION 5. PRESUMPTION OF ASSENT: A director of the corporation who is
present at a meeting of its directors at which action on any corporation
matter is taken shall be presumed to have assented to the action taken unless
he votes against such action or abstains from voting in respect thereto
because of an asserted conflict of interest.

SECTION 7. ELECTION & TERM: At the first annual meeting of shareholders
and at each annual meeting thereafter the shareholders shall elect directors
to hold office until the next succeeding annual meeting, or until a successor
shall have been elected and qualified or until the earlier resignation,
removal from office or death.

SECTION 8. VACANCIES: Any vacancy occurring in the Board of Directors,
including any vacancy created by reason of an increase in the number of
directors, may be filled by the affirmative vote of a majority of the
remaining directors though less than a quorum. A director elected to fill a
vacancy shall hold office only until the next election of directors by the
stockholders.

SECTION 10. QUORUM & VOTING: A majority of the number of directors fixed
by these By-Laws shall constitute a quorum for the transaction of business.
The act of the majority of the directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors.

<PAGE>

SECTION 11. EXECUTIVE & OTHER COMMITTEES: The Directors, by resolution
adopted by a majority of the full Board of Directors, may designate from
among its members, an executive committee and other committees, and each such
committee shall serve at the pleasure of the Board with the authority
contained in the Florida Statutes. The Board, by resolution, may designate
one or more directors as alternate members of any such committee, who may act
in the place and stead of any absent member or members at any meeting of such
committee.

SECTION 12. REGULAR MEETINGS: A regular meeting of the Directors shall
be held without other notice than this By-Law, immediately after and at the
same place as the annual meeting of the stockholders.

SECTION 13. SPECIAL MEETINGS: Special Meetings of the Directors may be
called by the President or by any two directors. The person or persons
authorized to call special meetings of the directors may fix the place for
holding any special meeting of the directors called by them. Members of the
Board of Directors may participate in a meeting of such board by means of a
conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other at the same
time. Participation by such means shall constitute presence in person at a
meeting.

<PAGE>

the directors or a committee thereof, may be taken without a meeting if a
consent in writing, setting forth the action so to be taken, signed by all of
the directors, or all the members of the committee, as the case may be, is
filed in the minutes of the proceedings of the board or of the committee.
Such consent shall have the same effect as a unanimous vote.

ARTICLE III
OFFICERS

SECTION 1. OFFICERS: The officers of this corporation shall consist of
a president, secretary and treasurer, each of whom shall be elected by the
Board of Directors. Such other officers and assistant officers and agents as
may be deemed necessary may be elected or appointed by the Board of Directors
from time to time. Any two or more offices may be held by the same person.
The directors shall elect officers of the corporation annually at the meeting
of the directors held after each annual meeting of the stockholders. Each
officer shall hold office until his successors shall have been duly elected
and shall have qualified or until his death, resignation, or until he shall
have been removed in the manner provided herein.

SECTION 2. DUTIES OF OFFICERS: The officers of this corporation shall
have the following duties:

THE TREASURER shall have custody of the corporate funds and financial
records, shall keep full and accurate accounts of receipts and disbursements
and render accounts

<PAGE>

[ILLEGIBLE] Every holder of shares in this corporation shall be entitled to
have a certificate, representing all shares to which he is entitled. No
certificate shall be issued for any share until such share is fully paid.

SECTION 3. LOST, STOLEN OR DESTROYED CERTIFICATES: The corporation
shall issue a new stock certificate in place of any certificate previously
issued if the holder of record of the certificate (a) makes proof in
affidavit form that it has been lost, destroyed or wrongfully taken; (b)
requests the issue of a new certificate before the corporation has notice
that the certificate has been acquired by a purchaser for value in good faith
and without notice of any adverse claim; (c) gives bond in such form as the
corporation may direct, to indemnify the corporation, the transfer agent, and
registrar against any claim that may be made on account of the alleged loss,
destruction, or theft of a certificate; and (d) satisfies any other
reasonable requirements imposed by the corporation.

SECTION 4. TRANSFER OF SHARES: Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares duly endorsed
or accompanied by proper

<PAGE>

Exhibit 12.1

RESTATED AND AMENDED AGREEMENT AND PLAN OF MERGER

AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of June 30,
1998, by and between ROYAL MORTGAGE CORPORATION, a Texas corporation
("ROYAL"), the stockholders of ROYAL ("STOCKHOLDERS"), and DAVENPORT
VENTURES, INC., a Nevada corporation ("DAVENPORT").

WHEREAS:

A. The Board of Directors of ROYAL and DAVENPORT and STOCKHOLDERS
previously entered into an Exchange Agreement for DAVENPORT to acquire all of
the outstanding stock of ROYAL from STOCKHOLDERS in exchange for DAVENPORT
common stock on a basis of one share of ROYAL common stock for one share of
DAVENPORT common stock, whereby ROYAL would become a wholly-owned subsidiary
of DAVENPORT.

B. The Boards of Directors of ROYAL and DAVENPORT and STOCKHOLDERS had
intended to and desired that ROYAL merge with and into DAVENPORT, whereby
DAVENPORT would remain as the surviving corporation.

C. Articles of Merger have been filed with the Secretary of State for
the States of Nevada and Texas, indicating that ROYAL was to merge with and
into DAVENPORT as the surviving corporation.

D. The Boards of Directors of ROYAL and DAVENPORT and STOCKHOLDERS deem
it desirable and in their best interests, to amend, restate, and fully
supersede the Exchange Agreement.

NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE ONE
(Merger)

1.1 THE MERGER. At the Effective Time of the Merger (as defined in
Section 1.2). ROYAL shall be merged with and into DAVENPORT. The Merger shall
be consummated in accordance with the Nevada Revised Statutes. DAVENPORT
shall be the surviving corporation and shall continue its corporate existence
under the laws of the State of Nevada.

1.2 CLOSING AND EFFECTIVE TIME OF THE MERGER. The Closing of the
Merger shall take place within three (3) business days of both ROYAL's and
DAVENPORT'S respective shareholder's approval, or at such other time as may
be mutually agreed upon between the parties in writing ("Closing"). After the
Closing, DAVENPORT shall file Articles of Merger, executed, certified, and
verified in accordance with the Nevada Revised Statutes, with the Secretary
of State for the State of

1
<PAGE>

Nevada. When these Articles are so filed and accepted by the Secretary of
State for the State of Nevada, the Merger will become effective. ("Effective
Time of the Merger").

ARTICLE TWO
(Articles and Bylaws)

2.1. Articles of Incorporation. From and after the Effective Time of the
Merger, the Articles of Incorporation of DAVENPORT shall be the Articles of
Incorporation for the surviving corporation, subject to the right of the
surviving corporation to amend its Articles of Incorporation after the
Merger, in accordance with the Nevada Revised Statutes, except that the First
and Fourth Articles will be amended to read as follows:

FIRST. The name of the corporation is ROYAL
FINANCIAL CORPORATION.

FOURTH. The total number of voting common stock
authorized that may be issued by the Corporation
is FIFTY MILLION (50,000,000) shares of stock
with $.001 par value and no other class of stock
shall be authorized. Said shares may be issued
by the Corporation from time to time for such
consideration as may be filed by the Board of
Directors.

2.2. Bylaws. The bylaws of DAVENPORT shall be the bylaws of the surviving
corporation as in effect at the Effective Time of the Merger, until changed
or amended as provided therein.

ARTICLE THREE
(Directors and Officers)

3.1. Directors. From and after the Effective Time of the Merger, the
directors of the surviving corporation shall be the directors of ROYAL. Said
directors shall hold office subject to the provisions of the Nevada Revised
Statutes and the bylaws of the surviving corporation.

3.2. Officers. From and after the EFfective Time of the Merger, the
officers of the surviving corporation shall be the officers of ROYAL. The
officers of the surviving corporation shall hold office subject to the
provisions of the Nevada Revised Statutes, the bylaws of the surviving
corporation, and the terms and conditions contained in any applicable
employment agreements.

2
<PAGE>

ARTICLE FOUR
(Conversion of Shares)

4.1 CONVERSION. In connection with the Merger, DAVENPORT will exchange
one of its shares of common stock for one share of common stock held by
STOCKHOLDERS.

4.2 SURRENDER AND PAYMENT. After the Effective Time of the Merger, each
holder of a certificate which represented shares of ROYAL common stock
outstanding at the Effective Time of the Merger shall be entitled, upon
surrender of the certificate to the surviving company's transfer agent, to
receive a certificate representing shares of the surviving corporation common
stock as set forth in 4.1 above. In the event share certificates representing
shares of the surviving corporation after the above-referenced exchange are
issued, such certificates will bear a legend as the surviving corporation
deems appropriate in the circumstances.

4.3 TREASURY SHARES. Any shares of ROYAL, common or preferred, held in
its treasury on the Effective Time of the Merger, shall be surrendered to the
surviving corporation for cancellation.

4.4 NO FURTHER TRANSFERS. Upon and after the Effective Time of the
Merger, no transfer of shares of ROYAL common stock outstanding prior to the
Effective Time of the Merger shall be made on the stock transfer books of the
surviving corporation.

ARTICLE FIVE
(Certain Effects of Merger)

5.1 EFFECTS OF MERGER. At the Effective Time of the Merger, the separate
existence of ROYAL shall cease, and the surviving corporation shall succeed,
without other transfer, to all the rights and property of ROYAL and shall be
subject to all of the debts and liabilities of ROYAL in the same manner as if
the surviving corporation had itself incurred them. Upon the Merger, all
rights of creditors and all liens upon the property of ROYAL and DAVENPORT
shall be preserved unimpaired; provided, however, that such liens upon the
property of ROYAL shall be limited to the property affected thereby
immediately prior to the Effective Time of the Merger.

5.2 FURTHER ASSURANCES. If at any time after the Effective Time of the
Merger, the surviving corporation shall determine or be advised that any
deeds, assignments, assurances, or any other acts or things are necessary or
desirable to vest, perfect, or confirm in the surviving corporation its
right, title, or interest in, to or under any of the rights, properties, or
assets of ROYAL and DAVENPORT acquired or to be acquired by virtue of the
Merger or to otherwise carry out this Agreement, the officers and directors
of the surviving corporation shall be authorized to execute and deliver, in
the name and on behalf of ROYAL and DAVENPORT or otherwise, all such deeds,
assignments, and assurances and to take or do all such acts or things as may
be necessary or desirable to vest, perfect, or confirm such right, title, and
interest in the surviving corporation and otherwise to carry out this
Agreement.

<PAGE>

ARTICLE SIX
(Representations and Warranties of Royal and Stockholders)

6.1 ORGANIZATION AND AUTHORITY. ROYAL and STOCKHOLDERS hereby represent
and warrant that:

(a) ROYAL is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Texas and is duly qualified to
transact business and is in good standing under the laws of each jurisdiction
in which the character or location of the assets owned by it or the nature of
the business transacted by it requires qualification.

(b) To the best of its knowledge, ROYAL has corporate power and all
necessary federal, state, and local authorization to own, lease, and operate
all of its properties and assets and to carry on its business as now being
conducted.

(c) ROYAL has corporate power and it duly authorized by all
necessary corporate action to merge with and into DAVENPORT pursuant to this
Agreement.

(d) The execution and delivery of this Agreement do not, and the
consummation of the Merger will not, violate any provision of ROYAL'S
Articles of Incorporation or bylaws, nor constitute a default or accelerate
the performance required under any mortgage, deed of trust, or other contract
or agreement to which ROYAL is bound or by which it or any of its assets is
bound, nor subject to all required regulatory approvals, violate any order,
writ, injunction, or decree of any court, administrative agency, or
governmental body.

(e) The Board of Directors of ROYAL has taken all action required
by law, its Articles of Incorporation, its bylaws, or otherwise to authorize
the execution and delivery of this Agreement, and this Agreement is a valid
and binding agreement of ROYAL in accordance with its terms.

6.2 CAPITALIZATION. ROYAL and STOCKHOLDERS further represent and warrant
that:

(a) The authorized capital stock of ROYAL consists of Fifty Million
(50,000,000) shares of common stock, $.001 par value, of which approximately
4,829,564 shares are issued and outstanding at June 30, 1998. No other
classes of stock are authorized or issued.

(b) All the issued and outstanding shares of ROYAL common stock are
validly issued, fully paid, and nonassessable and not issued in violation of
the preemptive rights of any shareholder.

(c) There are no outstanding convertible securities, subscriptions,
options, preemptive rights, or other agreements or commitments obligating
ROYAL to issue shares of its common stock, with the exception of:

4
<PAGE>

(1) $1,290,000 of Convertible Debentures, which are set to
mature on March 31, 2000. These Convertible Debentures
carry a conversion feature allowing the holders to convert
to equity in ROYAL at a 20% discount to the Initial Public
Offering Price of ROYAL.

(2) 198,667 (200,000 less 1,333 which have been exercised)
options issued at $1.00 per share to the founders of Royal
Mortgage Corporation. Five year options issued March, 1995.

(3) 40,000 options issued at $2.25 per share to board members
of Royal Mortgage Corporation as compensation for elected
term. Five year options issued April, 1997.

(4) 750,000 options issued at $2.25 per share to founders of
Royal Mortgage Corporation. Five year options issued
April, 1997.

(5) 200,000 options issued at $2.25 per share to Royal
Mortgage Corporation's Placement Agent. Five year options
issued October, 1997.

(6) 200,000 options issued at $2.25 per share to Royal
Mortgage Corporation to be utilized in rewarding key
employees. Five year options issued in October, 1997.

(7) 50,000 options issued at $4.25 per share to board members
of Royal Mortgage Corporation as compensation for elected
term. Five year options issued in April, 1998.

(8) 178,500 Warrants issued to purchase shares in the Company
at a price of $6.00 per share; issued as part of a "unit"
in a Regulation S Equity Offering. Issued on January 1,
1998 and expiring on December 31, 2000.

6.3. FINANCIAL STATEMENTS. The financial position of ROYAL is
represented and warranted as follows:

(a) ROYAL and STOCKHOLDERS have furnished to DAVENPORT copies of
the audited financial statements of ROYAL, which are attached hereto and
marked as Exhibit 1. These financial statements accurately set forth the
financial condition of ROYAL as of the dates specified, and of the results of
operations for the period involved, and were prepared in conformity with
generally accepted accounting principles consistently applied.

5
<PAGE>

(b) ROYAL has no obligations, liabilities, or commitments, contingent
or otherwise, of a material nature, except as set forth in Exhibit 1.

6.4. ABSENCE OF CHANGES. Since the date of the financial statements up to
the date of this Agreement, ROYAL and STOCKHOLDERS represent and warrant that
there has not been:

(a) Any material adverse change in the consolidated financial
condition, business, properties, or assets of ROYAL.

(b) Any loss or damage to any of the properties or assets of ROYAL
(whether or not covered by insurance) which has materially and adversely
affected the business of ROYAL.

(d) Any direct or indirect redemption, purchase, or other acquisitions
by ROYAL of any shares of stock of ROYAL or any declaration, setting aside,
or payment of any dividend or other distribution in respect to such shares.

(e) Any change in the authorized capital or outstanding securities of
ROYAL.

(f) Any indebtedness incurred by ROYAL for borrowed money or any
agreement to borrow money entered into by ROYAL.

(g) Any general wage increase or any increase in the rate of
compensation payable to any officer or director of ROYAL, or any adoption of
or increase in any employee benefit plan except those increases made
effective January, 1998.

6.5. TAX MATTERS. To the best of the knowledge of ROYAL and STOCKHOLDERS:

(a) All foreign, federal, state, county, local, and other taxes,
including without limitation, income taxes, corporate franchise taxes,
property and ad valorem taxes, sales and use taxes, fuel and highway use
taxes, and payroll taxes, due and payable to ROYAL on or before the date of
this Agreement have been paid.

(b) The liabilities for foreign, federal, state, county, local, and
other taxes have been computed in accordance with generally accepted
accounting principles.

(c) No unpaid assessments or deficiencies have been made against
ROYAL and no examination is pending by the Internal Revenue Service or any
other taxing authority with respect to any of the tax returns or reports
mentioned above.

(d) No state of facts exists or has existed which would constitute
grounds for the assessment of any material tax liability with respect to any
taxable period which has not been audited

6
<PAGE>

by the Internal Revenue Service, except to the extent that any such
assessment may be based on or arise out of any action required or
contemplated to be taken by ROYAL pursuant to this Agreement.

(c) There are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any federal or state income tax
return of ROYAL for any period.

6.6. Title to Properties. ROYAL has good and marketable title to all its
property and assets (except property and assets disposed of since the ending
date of the financial statements in the usual and ordinary course of
business), subject to no mortgage, pledge, lien, or other encumbrance, except
as disclosed in Exhibit 1.

6.7. Litigation. ROYAL is not a defendant or plaintiff against whom a
counterclaim has been asserted, in any litigation, pending or threatened, nor
has any material claim been made or asserted against ROYAL, nor are there any
proceedings threatened or pending before any foreign, federal, state, or
municipal government, or any department, board, body, or agency thereof,
involving ROYAL, except as disclosed in Exhibit 1.

6.8. Default. There has been no default (after the expiration of any
applicable grace period) in any material obligation to be performed by ROYAL
under any contract, lease, agreement, commitment, or undertaking to which it
is a party or by which it is or its assets or properties are bound. ROYAL is
not in default with respect to any order of any court, regulatory agency, or
other governmental agency.

ARTICLE SEVEN
(Representations and Warranties of Davenport)

7.1. Organization and Authority. DAVENPORT hereby represents and warrants
that:

(a) DAVENPORT is a corporation duly organize, validly existing, and
in good standing under the laws of the State of Nevada and is duly qualified
to transact business and is in good standing under the laws of each
jurisdiction in which the character or location of the assets owned by it or
the nature of the business transacted by it requires qualification.

(b) To the best of its knowledge, DAVENPORT has corporate power and
all necessary federal, state, and local authorizations to own, lease, and
operate all of its properties and assets and to carry on its business as now
being conducted.

(c) DAVENPORT has corporate power and it duly authorized by all
necessary corporate action to merge with ROYAL pursuant to this Agreement.

(d) The execution and delivery of this Agreement do not, and the
consummation of the Merger will not, violate any provision of DAVENPORT'S
Articles of Incorporation or bylaws, nor constitute a default or accelerate
the performance required under any mortgage, deed of

7
<PAGE>

trust, or other contract or agreement to which DAVENPORT is bound or by
which it or any of its assets is bound, nor subject to all required
regulatory approvals, violate any order, writ, injunction, or decree of any
court, administrative agency, or governmental body.

(e) The board of directors of DAVENPORT has taken all action
required by law, its Articles of Incorporation, its bylaws, or otherwise to
authorize execution and delivery of this Agreement, and this Agreement is a
valid and binding agreement of DAVENPORT in accordance with its terms.

7.2 Capitalization. DAVENPORT further represents and warrants that:

(a) The authorized capital stock of DAVENPORT consists of Ten
Million (10,000,000) shares of common stock, $.001 par value, of which
approximately 2,032,000 shares are issued and outstanding at June 30, 1998.
No other classes of stock are authorized or issued.

(b) All the issued and outstanding shares of DAVENPORT common
stock are validly issued, fully paid, and nonassessable and not issued in
violation of the preemptive rights of any shareholder.

(c) There are no outstanding convertible securities,
subscriptions, options, preemptive rights, or other agreements or
commitments obligating DAVENPORT to issue shares of its common stock.

7.3 Financial Statements. The financial position of DAVENPORT is
represented and warranted as follows:

(a) DAVENPORT has furnished to ROYAL copies of the audited
financial statements of DAVENPORT, which are attached hereto and marked as
Exhibit 2. These financial statements accurately set for the financial
condition of DAVENPORT as of the dates specified, and of the results of
operations for the period involved, and were prepared in conformity with
generally accepted accounting principles consistently applied.

(b) DAVENPORT has no obligations, liabilities, or commitments,
contingent or otherwise, of a material nature, except as set forth in
Exhibit 2.

7.4. Absence of Changes. Since the date of the financial statements up
to the date of this Agreement, DAVENPORT represent and warrant that there has
not been:

(a) Any material adverse change in the consolidated financial
condition, business, properties, or assets of DAVENPORT.

(b) Any loss or damage to any of the properties or assets of
DAVENPORT (whether or not covered by insurance) which has materially and
adversely affected the business of DAVENPORT.

8
<PAGE>

(d) Any direct or indirect redemption, purchase, or other
acquisition by DAVENPORT of any shares of stock of DAVENPORT or any
declaration, setting aside, or payment of any dividend or other distribution
in respect to such shares.

(e) Any change in the authorized capital or outstanding securities
of DAVENPORT.

(f) Any indebtedness incurred by DAVENPORT for borrowed money or
any agreement to borrow money entered into by DAVENPORT.

(g) Any general wage increase or any increase in the rate of
compensation payable to any officer or director of DAVENPORT, or any adoption
of or increase in any employee benefit plan.

7.5. TAX MATTERS. To the best of the knowledge of DAVENPORT:

(a) All foreign, federal, state, county, local, and other taxes,
including without limitation, income taxes, corporate franchise taxes,
property and ad valorem taxes, sales and use taxes, fuel and highway use
taxes, and payroll taxes, due and payable by DAVENPORT on or before the date
of this Agreement have been paid.

(b) The liabilities for foreign, federal, state, county, local, and
other taxes have been computed in accordance with generally accepted
accounting principles.

(c) No unpaid assessments or deficiencies have been made against
DAVENPORT and no examination is pending by the Internal Revenue Service or
any other taxing authority with respect to any of the tax returns or reports
mentioned above.

(d) No state of facts exists or has existed which would constitute
grounds for the assessment of any material tax liability with respect to any
taxable period which has not been audited by the Internal Revenue Service,
except to the extent that any such assessment may be based on or arise out of
any action required or contemplated to be taken by DAVENPORT pursuant to this
Agreement.

(e) There are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any federal or state income tax
return of DAVENPORT for any period.

7.6. TITLE TO PROPERTIES. DAVENPORT has good and marketable title to all
its property and assets (except property and assets disposed of since the
ending date of the financial statements in the usual and ordinary course of
business), subject to no mortgage, pledge, lien, or other encumbrance, except
as disclosed in Exhibit 2.

7.7. LITIGATION. DAVENPORT is not a defendant or plaintiff against whom a
counterclaim has been asserted, on any litigation, pending or threatened, nor
has any material claim been made or asserted against DAVENPORT, nor are there
any proceedings threatened or pending before any foreign, federal, state, or
municipal government, or any department, board, body, or

9
<PAGE>

agency thereof, involving DAVENPORT, except as disclosed in Exhibit 2.

7.8. Default. There has been no default (after the expiration of any
applicable grace period) in any material obligation to be performed by
DAVENPORT under any contract, lease, agreement, commitment, or undertaking to
which it is a party or by which it is or its assets or properties are bound.
DAVENPORT is not in default with respect to any order of any court,
regulatory agency, or other governmental agency.

ARTICLE EIGHT
(Conditions of Royal and Stockholders)

The obligation of ROYAL and STOCKHOLDERS to consummate the transaction
contemplated by this Agreement is subject to the satisfaction at or prior to
the Closing Date of the following conditions, unless waived by DAVENPORT.

8.1. Representations and Warranties. Each of the representations and
warranties of ROYAL contained herein or in any certificate, instrument, or
other document delivered by or on behalf of ROYAL in connection herewith
shall be true and correct in all material respects on and as of the Closing
Date with the same force and effect as if such representation and warranty
had then been made, except to the extent affected by the transaction
contemplated herein and by the operations of ROYAL as permitted in this
Agreement.

8.2. Covenants Performed. ROYAL shall have performed and complied with
all covenants, obligations, agreements, and conditions required by this
Agreement to be performed and complied with by ROYAL on or before the Closing
Date.

8.3. Stockholder Approval. The STOCKHOLDERS shall have approved the
Merger in the manner required by Texas law.

8.4. Government Approvals. All governmental consents and approvals, if
any, necessary to consummate the Merger and to permit the continuance of
operations of ROYAL thereafter shall have been obtained.

ARTICLE NINE
(Conditions of Davenport)

9.1. Representations and Warranties. Each of the representations and
warranties of DAVENPORT contained herein or in any certificate, instrument,
or other document delivered by or on behalf of DAVENPORT in connection
herewith shall be true and correct in all material respects on and as of the
Closing Date with the same force and effect as if such representation and
warranty had then been made, except to the extent affected by the transaction
contemplated herein and by the operations of DAVENPORT as permitted in this
Agreement.

9.2. Covenants Performed. DAVENPORT shall have performed and complied
with all covenants, obligations, agreements, and conditions required by this
Agreement to be performed and complied with by DAVENPORT on or before the
Closing Date.

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<PAGE>

9.3 Stockholder Approval. The shareholders of DAVENPORT shall have
approved the Merger in the manner required by Nevada law.

9.4 Government Approvals. All governmental consents and approvals, if
any, necessary to consummate the Merger and to permit the continuance of
operations of DAVENPORT thereafter shall have been obtained.

ARTICLE TEN
(Termination)

10.1 Termination. This Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time of the Merger.

(a) By mutual consent of ROYAL, STOCKHOLDERS, and DAVENPORT.

(b) By ROYAL for any material breach of this Agreement by DAVENPORT.

(d) By either ROYAL or DAVENPORT should shareholder approval not be
obtained from DAVENPORT.

10.2 Effect of Termination. If this Agreement is terminated, all further
obligations by ROYAL, STOCKHOLDERS, or DAVENPORT under this Agreement shall
terminate without further liability of any of the parties hereto to any of
the other parties hereto.

ARTICLE ELEVEN
(Miscellaneous)

11.1 Representations and Warranties. All statements contained in any
certificate, instrument, or other document delivered by either ROYAL or
DAVENPORT pursuant to the provisions hereof shall be deemed representations
and warranties by each such corporation. Except as otherwise stated herein,
all warranties and covenants contained herein or in any certificate or other
instrument delivered by or on behalf of ROYAL or DAVENPORT shall be
continuous and shall survive for one year following the Closing.

11.2 Brokers. ROYAL and DAVENPORT represent that they have not employed
any investment banker, broker, finder, or intermediary in connection with the
transaction contemplated hereby who might be entitled to a fee from ROYAL or
DAVENPORT or any commission upon the consummation of the Merger.

11.3 Expenses. All legal and other expenses incurred in connection with
this Agreement and the transaction contemplated hereby shall be paid by the
corporation incurring such expenses.

11.4 Notices. All notices, requests, consents, and other communications
hereunder shall be in writing and shall be deemed to have been given if sent
by prepaid certified mail return receipt, addressed as follows:

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<PAGE>

Royal/Stockholders ROYAL MORTGAGE CORP.
1000 Ballpark Way, Ste. 210
Arlington, TX 76011

Davenport DAVENPORT VENTURES, INC.
711 Ketch Drive
Naples, FL 34108

11.5. BINDING EFFECT, ASSIGNMENT. This Agreement shall be binding upon
and shall inure to the benefit of ROYAL and DAVENPORT and their respective
successors and assigns; provided, however, that this Agreement may not be
assigned by either ROYAL or DAVENPORT without the consent of the other.

11.6. AMENDMENT. This Agreement may be amended with the mutual approval
of the Board of Directors of each party at any time prior to the Effective
Time of the Merger, and thereafter by such Board's approval together with the
approval of the shareholders of both parties.

11.7. ENTIRE AGREEMENT. This Agreement, together with its exhibits,
represents the entire agreement among the parties and supersedes all prior
agreements between the parties.

11.8. GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the law of the State of Nevada.

DAVENPORT VENTURES, INC. ROYAL MORTGAGE CORPORATION

/s/ Michael Farwater /s/ Michael J. Pilgrim
- -------------------------------- -----------------------------
By: Michael Farwater By: Michael J. Pilgrim
Title: President & Chairman Title: President & Chairman

/s/ Stephen Foster /s/ David E. Wentsch
- -------------------------------- -----------------------------
By: Stephen Foster By: David E. Wentsch
Title: Vice President & Director Title: Vice President & Director

/s/ Joseph Matcheal /s/ Mark J. Teinert
- -------------------------------- -------------------------------
By: Joseph Matcheal By: Mark J. Teinert
Title: Director Title: Secretary/Treasurer &
Director

<PAGE>

/s/ Raymond Wicki
----------------------------
By: Raymond Wicki
Title: Director

/s/ Richard Bergner
-------------------------------
By: Richard Bergner
Title: Director