RESOURCE AMERICA INC, S-1/A, 1996-11-22

RESOURCE AMERICA INC
S-1/A, 1996-11-22
SHORT-TERM BUSINESS CREDIT INSTITUTIONS

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<PAGE> 1

REGISTRATION NO. 333-13905
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1

AMENDMENT NO. 2 TO

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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RESOURCE AMERICA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

Delaware
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
679
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)
72-0654145
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)

1521 Locust Street, Fourth Floor, Philadelphia, PA 19102 (215) 546-5005
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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MICHAEL L. STAINES, SENIOR VICE PRESIDENT
Resource America, Inc.
1521 Locust Street, Fourth Floor
Philadelphia, PA 19102
(215) 546-5005
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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WITH COPIES TO:

J. BAUR WHITTLESEY, ESQUIRE
Ledgewood Law Firm, P.C.
1521 Locust Street, Suite 800
Philadelphia, PA 19102
LEE MEYERSON, ESQUIRE
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017

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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECTION TO COMPLETION, DATED NOVEMBER 22, 1996

PROSPECTUS
LOGO

RESOURCE AMERICA, INC.

1,200,000 SHARES OF COMMON STOCK

Resource America, Inc., a Delaware corporation (the "Company"), is offering
hereby 1,200,000 shares of its Common Stock. The Common Stock is quoted on the
Nasdaq National Market ("Nasdaq") under the symbol "REXI." On November , 1996,
the last sale price of the Common Stock, as reported by Nasdaq, was $
per share. See "Price Range of Common Stock and Dividend Policy." It is
currently anticipated that the public offering price will be between $12.00 and
$14.00 per share. See "Underwriting" for a discussion of the factors to be
considered in determining the public offering price.

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 8 HEREOF FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED CAREFULLY BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK
OFFERED HEREBY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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<TABLE>
<S> <C> <C> <C>
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<CAPTION>
<S> <C> <C> <C>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
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Per Share................................ $ $ $
Total(3)................................. $ $ $
</TABLE>

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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."

(2) Before deducting expenses of the offering payable by the Company estimated
to be $ .

(3) The Company has granted the several Underwriters a 30-day option to purchase
up to 180,000 additional shares of Common Stock to cover over-allotments. If
all such shares of Common Stock are purchased, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."

The shares of Common Stock are offered by the Underwriters, subject to
receipt and acceptance by the Underwriters, approval of certain legal matters by
counsel for the Underwriters and certain other conditions. The Underwriters
reserve the right to withdraw, cancel or modify such offer and to reject any
order in whole or in part. It is expected that delivery of the shares of Common
Stock will be made in New York, New York on or about December , 1996.

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FRIEDMAN, BILLINGS, RAMSEY & CO., INC.

The date of this Prospectus is , 1996.
<PAGE> 3

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON NASDAQ, IN THE OVER-THE-COUNTER MARKET, OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed with the Commission are available for
inspection and copying at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, at the Commission's Regional Offices located at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and at Seven World
Trade Center, New York, New York 10048. Copies of such documents may also be
obtained from the Public Reference Section of the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In
addition, copies of such documents may be obtained through the Commission's
Internet address at http://www.sec.gov. The Company's Common Stock is authorized
for quotation on Nasdaq and, accordingly, such materials and other information
can also be inspected at the offices of the National Association of Securities
Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.

The Company has filed with the Commission under the Securities Act a
Registration Statement on Form S-1 (including all amendments and exhibits
thereto, the "Registration Statement") with respect to the shares of Common
Stock offered hereby. This Prospectus does not contain all of the information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. The Registration
Statement, including any amendments and exhibits thereto, is available for
inspection and copying as set forth above. Statements contained in this
Prospectus as to the contents of any contract or other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference.

The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the documents incorporated by reference (other than
exhibits to such documents which are not specifically incorporated by reference
in such documents). Written requests for such copies should be directed to
Secretary, Resource America, Inc., 1521 Locust Street, Fourth Floor,
Philadelphia, Pennsylvania 19102. Telephone requests may be directed to the
Secretary at (215) 546-5005.

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. Unless otherwise indicated, all information set forth herein
(i) assumes that the Underwriters' overallotment option is not exercised, and
(ii) gives effect to 6% stock dividends paid in January 1996 and April 1996 and
a five-for-two stock split (effected in the form of a 150% stock dividend) in
May 1996. References to the "Company" in this Prospectus include the Company and
its consolidated subsidiaries, unless the context otherwise requires.

THE COMPANY

GENERAL

The Company is a specialty finance company engaged in three lines of
business: the acquisition and resolution of commercial real estate loans, "small
ticket" commercial equipment leasing, and energy operations, including natural
gas and oil production. For approximately 25 years prior to 1991, the Company
was principally involved in the energy industry. Following the acquisition of a
significant ownership position in the Company by new stockholders in 1988 and
the appointment of new senior management (including the current Chairman, who
has been a senior officer of banking and other financial institutions for the
past 30 years), the Company evaluated alternative strategies to expand and
diversify its operations (particularly in light of the declining attractiveness
of the energy business to small investors following the 1986 changes to the
federal tax law).

Since 1991, the Company's business strategy has focused on locating and
developing niche finance businesses in which the Company can realize attractive
returns by targeting well-defined financial services markets and by developing
specialized skills to service those markets on a cost-effective basis. To date,
the Company has developed two business lines (asset acquisition and resolution,
and equipment leasing) that it believes meet these criteria.

The Company was organized in 1947. Its executive offices are located at
1521 Locust Street, Philadelphia, Pennsylvania 19102, and its telephone number
is (215) 546-5005.

ASSET ACQUISITION AND RESOLUTION

The Company's asset acquisition and resolution business involves the
purchase at a discount of relatively small (generally $1 million to $5 million
in purchase price) troubled commercial real estate loans from private market
sellers (primarily financial institutions), and the restructuring and
refinancing of those loans. These loans typically involve legal and other
disputes among the lender, the borrower and/or other parties in interest, and
generally are secured by properties which are unable to produce sufficient cash
flow to fully service the loans in accordance with the original lender's loan
terms. Since entering this business in 1991, the Company's loan portfolio has
increased to $100.5 million (before discounts) at September 30, 1996. During the
fiscal years ended September 30, 1994, 1995 and 1996, the Company's yield on its
net investment in loans acquired (including gains on refinancings and sales of
participations) equalled 30.8%, 34.6% and 36.2%, respectively, while its gross
profits from its loan activities (that is, revenues from loan activities minus
costs attributable thereto and less depreciation, depletion and amortization,
but without allocation of corporate overhead) for fiscal 1994, 1995 and 1996
were $2.3 million, $5.3 million and $6.7 million, respectively.

The Company seeks to reduce the amount of its own capital invested in loans
after their acquisition, and to enhance its returns, through prompt refinancing
of the properties underlying its loans, or through sale at a profit of senior
participations in its loans (typically on a recourse basis). At September 30,
1996, senior lenders held outstanding obligations of $38.7 million secured by
properties with an aggregate appraised value of $68.2 million, resulting in a
ratio of senior lien obligations-to-appraised value of property of 56.7%.
Currently, the operating cash flow coverage on the required debt service on
refinancings and participations (exclusive of proceeds from such refinancings or
participations) is 160.8%. The balance of operating cash flow is, pursuant

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to agreements with the borrowers, retained by the Company as debt service on the
outstanding balance of the Company's loans. See "Business -- Asset Acquisition
and Resolution: Loan Status."

EQUIPMENT LEASING

In September 1995, the Company entered the commercial leasing business
through its acquisition of the leasing subsidiary of a regional insurance
company. This acquisition provided the Company with a servicing portfolio of
approximately 520 individual leases held by six leasing partnerships which
provided the Company with a servicing revenue stream of $1.1 million during
fiscal 1996. More importantly, through this acquisition the Company acquired an
infrastructure of operating systems, computer hardware and proprietary software
(generally referred to as a "platform"), as well as personnel, which the Company
is utilizing to develop a commercial leasing business for its own account.

In order to develop this business, in early 1996 the Company hired a team
of four experienced leasing executives, including the former chief executive
officer of the U.S. leasing subsidiary of Tokai Bank, a major Japanese banking
institution. The Company's strategy in developing its leasing business is to
focus on leases with equipment costs of between $5,000 to $100,000 (with a
targeted average transaction of approximately $15,000 per lease) ("small ticket"
leasing) and to market its equipment leasing product through vendor programs
with equipment manufacturers likely to generate $10 million or less annually in
equipment leases, regional distributors and other vendors. The Company has
currently entered into vendor program relationships with five vendors: Minolta
Corporation (copiers), Celsis Incorporated (microbial testing systems), American
Marabacom Communications (Teleco) (telephone systems), CSi (test equipment) and
ATI Communications (telephone systems). The Company believes that this market is
under-served by equipment lessors, banks and other financial institutions,
affording the Company a niche market with significant growth potential. From the
inception of leasing activity for its own account in June 1996 through September
30, 1996, the Company has received 271 lease proposals involving equipment with
an aggregate cost of $6.5 million, approved 118 such proposals involving
equipment with an aggregate cost of $2.5 million, entered into 39 transactions
involving equipment with an aggregate cost of $711,000 and had 21 such proposals
pending involving equipment with an aggregate cost of $1.3 million.

According to the Equipment Leasing Association of America ("ELA"), a
leading industry trade association, approximately 80% of all United States
businesses lease some portion of their equipment. Leasing enables a company to
obtain the equipment it needs, while preserving cash flow and often receiving
favorable accounting and tax treatment. The Company believes that small
businesses are becoming more aware of the economic benefits offered by equipment
leasing, and that small business leasing will therefore become an increasingly
important segment of the leasing market.

ENERGY OPERATIONS

The Company produces natural gas and, to a lesser extent, oil from
locations principally in Ohio, Pennsylvania and New York. At September 30, 1996,
the Company had a net investment of $11.3 million in its energy operations,
including interests in 769 individual wells owned directly by the Company or
through 52 partnerships and joint ventures managed by the Company. While the
Company has focused its business development efforts on its specialty finance
operations over the past several years, its energy operations historically have
provided a steady source of revenues and tax benefits.

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THE OFFERING

Common Stock offered....... 1,200,000 shares(1)

Common Stock to be
outstanding after the
Offering................... 3,094,761 shares(1)(2)

Use of Proceeds............ For general corporate purposes, including the
acquisition of additional commercial real estate
loans for the Company's portfolio and expansion of
the Company's equipment leasing operations. See
"Use of Proceeds."

Nasdaq National Market
Symbol..................... REXI

Risk Factors............... An investment in the shares of Common Stock offered
hereby involves a high degree of risk. See "Risk
Factors" beginning on page 8 hereof for information
that should be considered by prospective purchasers
of the Common Stock offered hereby.
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(1) Assumes that the Underwriters' over-allotment option to purchase up to
180,000 shares of Common Stock is not exercised.

(2) Does not give effect to any future exercise of outstanding warrants to
purchase up to 983,150 shares of Common Stock or employee stock options to
purchase up to 348,316 shares of Common Stock. See "Description of Capital
Stock -- Warrants" and "Security Ownership of Certain Beneficial Owners and
Management."

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SUMMARY CONSOLIDATED FINANCIAL DATA

The financial data set forth below should be read in conjunction with, and
is qualified in its entirety by, the Consolidated Financial Statements of the
Company, including the notes thereto, and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere herein.

<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED SEPTEMBER 30,
-------------------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Asset acquisition and resolution:
Interest(1).................................................. $ 182 $ 606 $ 1,401 $ 3,422 $ 2,853
Fees......................................................... -- -- 25 963 675
Gains on refinancings and sales of participations(2)......... -- -- 1,096 1,729 3,643
------- ------- ------- ------- -------
Total...................................................... 182 606 2,522 6,114 7,171
Equipment leasing(3)........................................... -- -- -- -- 4,466
Energy production.............................................. 3,474 3,409 3,442 3,452 3,421
Energy services................................................ 2,676 2,445 2,080 1,880 1,736
Interest....................................................... 231 106 136 148 197
------- ------- ------- ------- -------
Total revenues............................................. 6,563 6,566 8,180 11,594 16,991
Costs:
Asset acquisition and resolution............................... 230 114 248 801 521
Equipment leasing(3)........................................... -- -- -- -- 2,339
Energy production and exploration.............................. 1,921 1,735 2,004 1,732 1,582
Energy services................................................ 1,247 1,106 1,131 1,027 869
General and administrative..................................... 1,890 1,841 1,901 2,265 2,087
Other.......................................................... 81 (342) 340 1,090 871
------- ------- ------- ------- -------
Total expenses............................................. 5,369 4,454 5,624 6,915 8,269
Income before income taxes, depreciation, depletion and
amortization................................................. 1,194 2,112 2,556 4,679 8,722
Depletion, depreciation and amortization....................... 1,700 1,478 1,347 1,335 1,369
Income (loss) before income taxes.............................. (506) 634 1,209 3,344 7,353
Net income..................................................... (406) 590 1,309 2,714 5,147
SEGMENT PROFITABILITY (LOSS):(4)
Asset acquisition and resolution................................. (82) 455 2,237 5,263 6,612
Equipment leasing(3)............................................. -- -- -- -- 1,923
Energy production................................................ 265 553 461 798 1,058
Energy services.................................................. 1,181 1,167 653 515 585
Corporate........................................................ (1,740) (1,393) (2,105) (3,207) (2,761)
BALANCE SHEET AND OTHER DATA:
Assets:
Current assets................................................. $ 6,679 $ 2,150 $ 3,985 $ 3,924 $ 6,106
Net investment in energy property and equipment................ 14,576 13,542 12,786 11,964 11,265
Net investment in real estate loans............................ 1,827 7,329 10,386 17,991 21,798
Net other assets............................................... 1,858 2,210 7,639 3,671 4,790
------- ------- ------- ------- -------
Total assets............................................... 24,940 25,231 34,796 37,550 43,959
Liabilities:
Current liabilities............................................ 989 723 1,355 1,329 1,664
Long term debt................................................. 972 813 8,627 8,523 8,966
Deferred income taxes.......................................... 416 834 674 1,147 2,206
------- ------- ------- ------- -------
Total liabilities.......................................... 2,377 2,370 10,656 10,999 12,836
Stockholders' equity............................................. 22,563 22,861 24,140 26,551 31,123
Stockholders' equity per common share(5)(6)...................... 11.43 11.59 12.52 14.21 16.43
Assets under management:
Real estate(7)................................................. 2,163 13,303 26,328 52,955 100,520
Leasing(8)..................................................... -- -- -- 25,994 24,212
Energy(9)...................................................... 37,500 38,500 36,067 33,688 32,147
SELECTED RATIOS:
Operating ratios:
Return on equity............................................... (1.8)% 2.6% 5.4% 10.2% 16.5%
Yield on net real estate investment(10)........................ 9.5% 12.1% 30.8% 34.6% 36.2%
Balance sheet ratio:
Real estate loan to value(11).................................. 94.4% 82.0% 79.1% 77.5% 85.7%
PER COMMON SHARE INFORMATION:
Net income (loss) - primary(12).................................. $ (.21) $ .30 $ .64 $ 1.23 $ 1.88
Net income (loss) - fully diluted(13)............................ $ (.21) $ .30 $ .62 $ 1.18 $ 1.87
Cash dividends................................................... .13 -- -- .09 .38
</TABLE>

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(1) Interest income includes accreted discounts of $0, $256,000, $602,000, $1.2
million and $954,000 for the fiscal years ended September 30, 1992, 1993,
1994, 1995 and 1996, respectively.

(2) Includes gains of $0, $1.729 million and $3.643 million during fiscal years
1994, 1995 and 1996, respectively, relating to sales of loan participations
on a recourse basis.

(3) Reflects primarily revenues from equipment leasing partnerships acquired by
the Company in September 1995 (see "Business -- General"). The Company did
not begin originating equipment leases for its own account until June 1996;
accordingly, future results may not be comparable to historical data.

(4) Represents revenues from the segment minus costs from the segment and less
depreciation, depletion and amortization attributable to the segment, but
without allocation of corporate overhead. For additional segment
information, including operating profit (loss) after allocation of
corporate overhead, see Note 11 to the Consolidated Financial Statements.

(5) Based on shares outstanding of 1.975 million, 1.973 million, 1.928 million,
1.869 million and 1.895 million at September 30, 1992, 1993, 1994, 1995 and
1996, respectively.

(6) Fully diluted stockholders' equity per common share at September 30, 1996,
which was calculated by assuming that all shares of Common Stock issuable
under warrants and options were issued and the proceeds received by the
Company upon exercise were added to shareholders' equity, was $11.45.

(7) Represents the stated, or face, amount of outstanding loans plus accrued
interest and penalties.

(8) Represents the net book value of assets held by the six equipment leasing
limited partnerships managed by the Company.

(9) Represents the original cost of assets held by the 52 energy partnerships
and joint ventures managed by the Company.

(10) Calculated as gross asset acquisition and resolution revenues (including
gains on refinancings and sales of participations) divided by the average
book cost of asset acquisition and resolution assets. See
"Business -- Asset Acquisition and Resolution: Accounting for Discounted
Loans."

(11) Calculated as the aggregate amount of loans outstanding with respect to any
property (including all loans with liens senior to or of the same seniority
as the loan interest held by the Company) divided by the appraised value of
the property.

(12) Based on weighted average common shares and common share equivalents of
1.975 million, 1.990 million, 2.076 million, 2.235 million and 2.757
million at September 30, 1992, 1993, 1994, 1995 and 1996, respectively.

(13) Based on weighted average common shares and common share equivalents of
1.975 million, 1.990 million, 2.117 million, 2.293 million and 2.763
million at September 30, 1992, 1993, 1994, 1995 and 1996, respectively.

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RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN INVESTMENT IN THE SHARES
OF COMMON STOCK OFFERED BY THIS PROSPECTUS. THE CAUTIONARY STATEMENTS SET FORTH
BELOW AND ELSEWHERE IN THIS PROSPECTUS SHOULD BE READ AS ACCOMPANYING
FORWARD-LOOKING STATEMENTS INCLUDED UNDER "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," "BUSINESS" AND ELSEWHERE
HEREIN. THE RISKS DESCRIBED IN THE STATEMENTS SET FORTH BELOW COULD CAUSE THE
COMPANY'S RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN OR INDICATED BY
SUCH FORWARD-LOOKING STATEMENTS.

GENERAL

Ability to Generate Funding for Growth. The Company's future growth will
be largely dependent upon the continued availability of funds to acquire and
resolve commercial real estate loans and to fund equipment lease transactions.
To date, funding for the Company's asset acquisition and resolution operations
has been derived from internally generated funds, the sale of a senior note to
Physicians Life Insurance Company of Ohio ("PICO"), sales by the Company of
participations in its portfolio loans and borrowers' refinancing of their
mortgage obligations. It is anticipated that funding for the Company's asset
acquisition and resolution operations (in addition to proceeds from this
offering) will continue to be derived from internally generated funds and
existing third-party sources, although the Company may seek additional
third-party sources in the future.

Funding for the Company's equipment leasing operations will be obtained
through third-party warehouse financing (full recourse, short-term borrowings
secured by the underlying equipment and repaid with the proceeds of permanent
funding) and third-party permanent funding (both bank term loans and
securitization of lease portfolios). Although the Company has an initial $20
million credit facility for the Company's leasing operations, the Company's
ability to draw down the full amount of this facility is limited until such time
as the Company's equity investment in its leasing subsidiary is increased
substantially over the current level. A portion of the net proceeds of this
offering is expected to be used to make substantially all of such equity
investment. See "Use of Proceeds" and "Business -- Sources of Funds."

The availability of third-party financing for each of the Company's
specialty finance businesses will be dependent upon a number of factors over
which the Company has limited or no control, including general conditions in the
credit markets, the size and liquidity of the market for the types of real
estate loans or equipment leases in the Company's portfolio and the respective
financial performance of the loans and equipment leases in the Company's
portfolio. Although the Company believes that the additional capital provided by
this offering will enhance both the number of funding sources available to it
and the total amount of funding obtainable, there can be no assurance that the
Company will be able to generate funding on satisfactory terms and in acceptable
amounts.

Ability to Generate Growth Opportunities. The Company's growth will also
depend on its continued ability to generate attractive opportunities for
acquiring commercial real estate loans at a discount and to originate equipment
leases. In each area, the Company will rely primarily upon the knowledge,
experience and industry contacts of its senior management to generate investment
opportunities. See "Management." There can be no assurance that the Company will
continue to generate opportunities satisfactory to it or sufficient to sustain
growth or that, in its asset acquisition and resolution activities, the Company
will be able to acquire loans in the same manner, on similar terms or at similar
levels of discount as its current portfolio loans. The availability of loans for
acquisition on terms acceptable to the Company will be dependent upon a number
of factors over which the Company has no control, including economic conditions,
interest rates, the market for and value of properties securing loans which the
Company may seek to acquire, and the willingness of financial institutions to
dispose of troubled or under-performing loans in their portfolios.

Credit Risks. Mortgage loans and equipment leases are subject to the risk
of default in payment by borrowers and lessees. Upon a default, the Company will
have the responsibility of seeking to recover outstanding loan or lease balances
through foreclosure, repossession of equipment or similar procedures. With

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<PAGE> 10

respect to any particular commercial real estate loan or equipment lease,
instituting any of these procedures could adversely impact the Company's yield
on such loan or lease. There can be no assurance that, in the event of default,
the amount realizable from the property securing a defaulted loan or the
equipment subject to a defaulted lease will be sufficient to recover amounts
invested by or owed to the Company (including the residual value assigned to
leased equipment). See "Risk Factors -- Asset Acquisition and Resolution
Considerations: Lien Priority" and "-- Equipment Leasing Considerations:
Residuals."

The Company's real estate mortgage loans are typically not the general
obligations of the borrower and, accordingly, in seeking to collect amounts owed
on a loan, the Company must rely solely on the value of the property underlying
the loan to satisfy the obligation. This value will be affected by numerous
factors beyond the Company's control, including general or local economic
conditions, neighborhood values, interest rates, operating expenses (such as
real estate taxes and insurance costs), occupancy rates and the presence of
competitive properties. In addition, most of the Company's loans require a
substantial lump sum payment at maturity. The ability of a borrower to pay a
lump sum, and thus the ability of the Company to collect promptly all amounts
due upon maturity, may be dependent on the borrower's ability to obtain suitable
refinancing or otherwise raise a substantial amount of cash which, in turn, will
depend upon factors (such as those referred to previously) over which the
Company has no control. To the extent that the Company has sold a participation
in a loan, or the loan has been refinanced, the Company will typically retain a
subordinated interest in the loan, which may be unsecured. See "Risk
Factors -- Asset Acquisition and Resolution Considerations: Lien Priority." Such
retained interests are subject to materially increased risks of collection upon
default. In addition, most of the loan participations that the Company has sold
to date have been sold on a recourse basis. See "Risk Factors -- Asset
Acquisition and Resolution Considerations: Sales of Participations to Insurance
Company."

The Company anticipates that many of the end-users of the equipment it
leases for its own account will be small businesses which may not be able to
supply the kinds of financial information available from larger firms, and which
may be more susceptible to changes in economic conditions or have lesser
financial resources with which to meet lease obligations than larger firms.
Although the Company will seek to mitigate this risk through the use of its
Small Business Credit Scoring System, its Fidelity Asset Tracking System and
loan servicing and collection procedures (see "Business -- Equipment Leasing:
Small Ticket Leasing"), there can be no assurance that the Company will not be
subject to higher risks of default than firms leasing to larger entities.

Competition. In each of its business operations, the Company is subject to
intense competition from numerous competitors, many of whom possess far greater
financial and other resources than the Company. See "Business -- Asset
Acquisition and Resolution: Competition," "-- Equipment Leasing: Competition"
and "-- Energy: Competition." The Company will also have to compete for the
capital necessary to fund both its asset acquisition and resolution and
equipment leasing operations based largely upon the performance of its portfolio
loans and equipment leases. See "Risk Factors -- General: Credit Risks."

ASSET ACQUISITION AND RESOLUTION CONSIDERATIONS

Troubled Status of Loans and Underlying Properties. The Company seeks to
acquire commercial real estate loans at a discount from both the unpaid
principal and interest amounts of the loans and the appraised value of the
underlying properties. As a consequence, the Company will often be involved with
loans which are the subject of contentious and often complex disputes among
various parties regarding application of cash flow from the underlying
properties, loan terms, lease terms or similar matters, or which are secured by
properties that, while income producing, are unable to generate sufficient
revenues to pay the full amount of debt service under the original loan terms.
Although prior to acquisition the Company will generally negotiate with the
borrower or other parties in interest and, where appropriate, make financial
accommodations to take into account the operating conditions of an underlying
property, resolve outstanding disputes and ensure the Company's control of the
cash flow from the underlying property, there can be no assurance that the
underlying property will not be subject to recurrence of the problems which
existed prior to the Company's acquisition of the loan, or other problems.

9
<PAGE> 11

Lien Priority. Although the Company normally acquires first mortgage
loans, it is not limited as to the lien priority of a loan which it may acquire.
Moreover, a lender refinancing a loan in the Company's portfolio will typically
require, as a condition to its refinancing (the proceeds of which generally are
paid to the Company, see "Business -- Asset Acquisition and Resolution: Sale of
Participations and Refinancings"), that the Company's remaining interest in the
loan be subordinated to such lender's interest and unsecured. The Company
currently holds twenty-three junior lien loans or subordinated participations,
six of which, aggregating $14.6 million (after loan amounts attributable to
senior lien interests), are not formally secured by recorded mortgages (although
they are protected by either judgment liens, unrecorded deeds in lieu of
foreclosure, borrowers' covenants not to further encumber the property without
the Company's consent, or similar devices). In addition, in certain
circumstances, mortgage loans, including first mortgage loans, may be subject to
mechanics', materialmen's or government liens which may be prior in right of
payment to liens held by the Company. To the extent that either the lien
securing a loan is junior to other liens encumbering an underlying property or
the loan is unsecured, the Company will be subject to greater risks of loss upon
a default. See "Risk Factors -- General: Credit Risks." In the event of a
default on a senior mortgage, the Company may make payments, if it has the right
to do so, in order to prevent foreclosure on the senior mortgage, increasing its
investment cost without necessarily improving its lien position.

In the event of a foreclosure, the Company will only be entitled to share
in the net proceeds after the payment of all senior lienors, including senior
mortgagees, and holders of mechanics', materialmens' and government liens. It is
therefore possible that the total amount which may be recovered by the Company
upon a foreclosure may be less than the outstanding balance of the loan or the
Company's investment in the loan, with resultant loss to the Company. It is also
possible that, in some cases, a "due on sale" clause included in a senior
mortgage, which accelerates the amount due under the senior mortgage in case of
the sale of the property, may apply to the sale of the property upon foreclosure
of a junior loan, and may accordingly increase the risks to the Company in the
event of a default by the borrower on the junior loan.

Environmental Liabilities. In the event of a default on a portfolio loan,
the Company may acquire the underlying property through foreclosure. There is a
risk that hazardous substances, wastes, contaminants or pollutants would be
discovered on the foreclosed property after acquisition by the Company. In such
event, the Company might be required to remove such substances from the property
at its sole cost and expense. There can be no assurance that the cost of such
removal would not substantially exceed the value of the affected property or the
loan secured by the property, that the Company would have adequate remedies
against the prior owner or other responsible parties or that the Company would
not find it difficult or impossible to sell the affected properties either prior
to or following any such removal.

Disposition of Loan Interests. After the Company has acquired a loan, the
Company will typically sell a participation in the loan, or assist the borrower
in obtaining third-party refinancing, while retaining an interest in the loan.
Although the sale of a participation or a refinancing often results in the
return of the entire amount of (or, in some cases, more than) the Company's
investment in the loan (including amounts advanced to the borrower after loan
acquisition; see "Business -- Asset Acquisition and Resolution: Acquisition and
Administration"), in most such sales or refinancings a reduced portion of the
Company's investment in the loan remains unrecovered. Based upon the appraised
value of the properties underlying the loans, the Company believes that it will
recover amounts substantially in excess of the Company's remaining invested
capital; however, there can be no assurance that, upon termination of the loan,
the borrower will be able to repay the loan in an amount equal to or in excess
of the Company's remaining investment in such loan or that, if the borrower is
not able to do so, the Company will be able to dispose of its remaining loan
interest for an amount equal to or in excess of its remaining investment or that
the property underlying the loan can be disposed of for an amount equal to or in
excess of the interests of senior lienors and the Company's remaining
investment.

Sales of Participations to Insurance Company. Nine of the current
participations in the Company's portfolio of loans have been sold to PICO.
Pursuant to the terms of these sales (the "PICO Sales"), if the borrower under
any such loan defaults in the payment of debt service, the Company is required
to replace the defaulted obligation with a performing one. Since the Company has
sold participations in, or refinanced, most of its current portfolio of loans,
if the Company were required to replace a defaulted participation loan with a

10
<PAGE> 12

performing loan pursuant to the terms of the PICO Sales, it may not be able to
do so without acquiring additional commercial real estate loans. If the Company
could not fulfill its obligation to PICO pursuant to the terms of the PICO
Sales, PICO would have various legal remedies including foreclosure on and sale
of the underlying property (see "Risk Factors -- General: Credit Risks"),
requiring the Company to repay its participation, or declaring the Senior Note
immediately due and payable. There can be no assurance that borrowers on one or
more loans that are subject to the PICO Sales will not default on such loans or
that in such event, the Company would be able to acquire additional commercial
real estate loans to substitute in the PICO participations or, if a replacement
loan is not so acquired and substituted, that PICO would not seek to require the
Company to repay PICO's participation or declare the Senior Note immediately due
and payable.

Loss Reserves. Since the appraised value of each of the Company's
portfolio loans is currently substantially in excess of the outstanding balance
of senior liens (including participations) and the Company's outstanding
investment, the Company has not to date established any reserves with respect to
its portfolio loans. In accordance with generally accepted accounting
principles, the Company would establish reserves in its financial statements for
losses with respect to its portfolio loans (including losses which may occur if
a participation is reacquired by the Company) when it is determined to be
probable that a loss has been incurred (i.e. the realizable value of an
investment appears to be less than its carrying value on the Company's books).
If the Company were to be required to reacquire a participation, and if the
value of the underlying property were to decline as a result of the default
resulting in the reacquisition (and the Company has not theretofore established
reserves with respect thereto), the Company may be required to charge any
resulting loss against earnings. There can be no assurance that such a charge
would not be material.

Obligation of Company to Acquire Interest of Existing Senior Lienors. The
Company has agreed that a senior lienor with respect to one of the Company's
portfolio loans, whose interest existed at the time the Company acquired its
loan (and to which the Company's loan is subject), may require the Company to
purchase its interest on or after June 30, 2001 for an amount equal to the
outstanding balance of its interest. Such balance was $1.2 million at September
30, 1996. See "Business -- Asset Acquisition and Resolution: Loan Status."
Although the Company anticipates that this interest will be refinanced prior to
June 30, 2001, failure to do so will require the Company to seek financing for
such a purchase or acquire it with available corporate funds. In addition, the
Company is required to repurchase a participation from a senior lienor (in the
event that the participation is not repaid, in accordance with its terms, by
September 27, 2011) for a price equal to the unpaid principal balance of the
participation plus accrued interest. The Company currently anticipates that the
participation will be repaid in accordance with its terms. See
"Business -- Asset Acquisition and Resolution: Loan Status" and "-- Sources of
Funds: Participations."

Possible Fluctuations in Earnings from Asset Acquisition and Resolution
Business. A material portion of the Company's revenues from its asset
acquisition and resolution business is derived from the sale of participations
in, or refinancings of, its portfolio loans. These sales and refinancings are,
with respect to any one loan, non-recurring. Accordingly, the Company's ability
to recognize these gains in the future will depend upon its continuing ability
to acquire loans and the sale of participations in, or refinancings of, such
loans. See "Risk Factors -- General: Ability to Generate Growth Opportunities."
Moreover, depending upon the timing of portfolio acquisitions and sales of
participations or refinancings, the Company's revenues from its asset
acquisition and resolution business could be subject to significant fluctuations
from period to period. For a discussion of the Company's accounting treatment of
sales of participations or refinancings, see "Business -- Asset Acquisition and
Resolution: Accounting for Discounted Loans."

EQUIPMENT LEASING CONSIDERATIONS

Limited Equipment Leasing Operating History. The Company acquired the
equipment leasing operations of The Fidelity Mutual Life Insurance Company
("Fidelity") in September 1995 and, in 1996, the Company expanded these leasing
operations to include small ticket equipment leasing for its own account.
Although the leasing business acquired by the Company has been in operation
since 1986, and the executives primarily responsible for developing the
Company's proprietary leasing program have had lengthy experience in the
equipment leasing industry (see "Management -- Other Significant Employees"),
the Company has

11
<PAGE> 13

only a limited direct experience upon which an evaluation of its prospects in
the equipment leasing business can be based. Such prospects must be considered
in light of the expenses and difficulties frequently encountered by an acquiror
in integrating a newly-acquired business with its other operations, and in
expanding the scope of the newly-acquired business.

Demand for Company's Equipment Lease Financing. The demand for the
equipment lease financing provided by the Company is subject to numerous factors
beyond the control of the Company, including general economic conditions,
fluctuations in interest rate levels and fluctuations in demand for the types of
equipment as to which the Company provides equipment lease financing. In
addition, the demand for the Company's equipment lease financing will be
materially affected by the ability of the Company to market its services to
manufacturers, regional distributors and other vendors. See
"Business -- Equipment Leasing: Competition."

Financing for Equipment Leasing Operations. The Company anticipates that
it may be required to provide credit enhancement for debt obligations issued and
sold as a part of any warehouse or permanent financing utilized in its equipment
leasing operations. See "Risk Factors -- General: Ability to Generate Funding
for Growth." These credit enhancements may include cash deposits, funding of
subordinated tranches of securitizations, the pledge of additional equipment
loans which are funded by the Company's capital, and/or (as is the case with the
Company's existing credit facility) a guaranty by the Company and restrictive
covenants concerning maintenance by the Company of minimum capital levels or
debt to equity ratios. Any such requirements may reduce the Company's liquidity
and require it to obtain additional capital. See "Business -- Sources of Funds"
for a description of certain terms of the Company's existing equipment leasing
credit facility.

The Company anticipates that warehouse financing will bear interest at
variable rates while its permanent funding will typically be at fixed rates set
at the time the financing is provided. Accordingly, the Company will be subject
to interest rate risk to the extent interest rates increase between the time a
lease is funded by warehouse facilities and the time of permanent funding.
Increases in interest rates during this period could narrow or eliminate the
spread between the effective interest rates on the Company's equipment leases
and the rates on the Company's funding, or result in a negative spread.

Residuals. The Company anticipates that a significant portion of the
Company's revenues from leasing operations may result from the sale or
re-leasing of equipment upon lease termination or from the extension of lease
terms beyond their initial expiration dates ("residuals"). The Company's
realization of residuals is subject to numerous factors beyond the Company's
control, including equipment obsolescence, excessive supply of similar
equipment, reductions in manufacturer's prices for similar equipment, the
ability or willingness of a lessee to purchase or re-lease equipment and similar
matters, which could materially adversely affect the amount of residuals
obtainable by the Company and, accordingly, the operating results and financial
condition of the Company. See "Business -- Equipment Leasing: Small Ticket
Leasing."

ENERGY INDUSTRY CONSIDERATIONS

Market for Production. Historically, the availability of a ready market
for oil and natural gas, and the price obtained therefor, has depended upon
numerous factors including the extent of domestic production, import of foreign
natural gas and/or oil, political instability in oil and gas producing countries
and regions, market demand, the effect of federal regulation on the sale of
natural gas and/or oil in interstate commerce, and other governmental regulation
of the production and transportation of natural gas and/or oil. Certain other
factors outside the Company's control, such as operational and transportation
difficulties of pipeline or oil purchasing companies, may also limit sales. In
addition, the marketability of natural gas depends upon the needs of the
purchasers to which the producer has access. Depending upon the purchasers'
needs, the price obtainable for natural gas produced by the Company, or the
amount of natural gas which the Company is able to sell, the revenues of the
Company may be materially adversely affected.

Possible Decline in Production. Production of oil and gas from a
particular well generally declines over time until it is no longer economical to
produce from the well, at which time the well is plugged and

12
<PAGE> 14

abandoned. Wells which the Company owns or in which it has an interest have been
drilled at various times from 1966 to the present. The Company's wells generally
have productive lives of 15 to 20 years and have been subject to normal
production declines. To date, these declines have been offset largely by the
acquisition of additional well interests. However, from 1993 to the date hereof,
the Company has participated in the drilling of only a small number of wells.
See "Business -- Energy Operations: Exploration and Development." Although, in
general, the Company does not anticipate material growth in its energy
operations relative to its asset acquisition and resolution and equipment
leasing operations, the Company from time to time considers potential
acquisitions of energy assets. The Company cannot predict whether the Company
will acquire further energy assets or as to the timing or cost thereof.

Environmental Liabilities. Oil and gas operations are subject to numerous
hazards (such as seepage, spillage of well substances such as brine or oil, and
escape of oil or gas from wells, tanks or pipelines) which can cause substantial
pollution damage to the environment or severely damage the property of others.
While the Company maintains liability insurance coverage and has not had a
material environmental incident, there can be no assurance that incidents will
not occur in the future or that the liability resulting therefrom will not be
substantial.

IMPORTANCE OF KEY EMPLOYEES

The Company's future success will depend upon the continued services of the
Company's senior management and, with respect to its leasing operations, the
Chairman and Chief Executive Officer of its leasing subsidiary. The unexpected
loss of the services of any of these management personnel could have a material
adverse effect upon the Company. See "Management." The Company does not maintain
key man life insurance on, nor (except for Mr. Bernstein, the Chairman and Chief
Executive Officer of its leasing operations) does it have employment agreements
with, any of its senior management.

CONTROL BY PRINCIPAL SHAREHOLDER

Upon completion of the offering, Edward E. Cohen, the Company's Chairman,
President and Chief Executive Officer, will own beneficially 19.56% (23.98%
including shares subject to outstanding options held by Mr. Cohen) of the
Company's Common Stock. See "Security Ownership of Certain Beneficial Owners and
Management." As a result, Mr. Cohen will have a significant influence upon the
activities of the Company, as well as on all matters requiring approval of the
shareholders, including electing or removing members of the Company's Board of
Directors, causing the Company to engage in transactions with affiliated
entities, causing or restricting the sale or merger of the Company, and changing
the Company's dividend policy.

RESTRICTION ON PAYMENT OF DIVIDENDS

Under the terms of the Senior Note, dividend payments by the Company are
subject to certain restrictions. See "Price Range of Common Stock and Dividend
Policy" and "Business -- Sources of Funds."

SHARES ELIGIBLE FOR FUTURE SALE

Upon consummation of this offering, the Company will have 3,094,761 shares
(3,274,761 shares if the Underwriters' over-allotment option is exercised in
full) of Common Stock outstanding. All of such shares will be freely tradeable
without restriction or further registration under the Securities Act by persons
other than affiliates (as that term is defined in the Securities Act) of the
Company; 659,090 shares or 21.30% of the Company's Common Stock outstanding upon
consummation of the offering (20.13% if the Underwriters' over-allotment option
is exercised in full) will be owned by executive officers and directors of the
Company and their affiliates. Pursuant to Rule 144 under the Securities Act,
these persons may sell such shares subject to the volume and other restrictions
contained in such Rule. In addition to the foregoing, 1.331 million shares of
Common Stock have been reserved for issuance upon the exercise of outstanding
warrants held by PICO (an officer of which is a director of the Company) and
management stock options. See "Description of Capital Stock -- Warrants." PICO
has demand and piggy-back registration rights with respect to shares underlying
its warrants. See "Description of Capital Stock -- Warrants." The Company's
executive officers and directors,

13
<PAGE> 15

their affiliates, PICO and the Company have agreed not to sell any shares of
Common Stock (including shares issuable pursuant to exercise of options or
warrants) for certain specified periods from the date of this Prospectus without
the prior written consent of Friedman, Billings, Ramsey & Co., Inc., as
representative of the Underwriters. See "Underwriting." No prediction can be
made as to the effect, if any, that future sales of shares of Common Stock or
availability of such shares for future sale will have on the market price of the
Common Stock prevailing from time to time. Sales of substantial amounts of
Common Stock (including shares issued upon the exercise of outstanding options
and warrants), or the perception that such sales could occur, could adversely
affect prevailing market prices for the Common Stock.

DILUTION RESULTING FROM WARRANT AND OPTION EXERCISES

The Company has outstanding warrants for the purchase of 983,150 shares of
Common Stock at exercise prices of $3.38 per share (561,800 shares) and $4.18
per share (421,350 shares). See "Description of Capital Stock -- Warrants." The
Company also currently has outstanding management options to purchase 348,316
shares of Common Stock at prices ranging from $2.76 to $9.01 per share. Since
the exercise prices for these options and warrants are less than the current
book value per share of the Common Stock ($16.43 per share, exclusive of options
or warrants, at September 30, 1996) and substantially less than the public
offering price per share of the Common Stock being offered hereby, it is likely
(depending on the book value per share of the Common Stock at the time of
exercise) that the exercise of these options and warrants will have a
substantial dilutive effect on the book value of the Common Stock. If all of
such warrants and options had been exercised at September 30, 1996, the
Company's pro forma book value per share of Common Stock at that date would have
been $11.45.

14
<PAGE> 16

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the Common
Stock offered hereby, based upon an initial offering price of $ per
share and after deducting the underwriting discount and estimated offering
expenses, are estimated to be $ ($ if the Underwriters'
over-allotment option is exercised in full).

The Company intends to use the net proceeds for general corporate purposes,
including the acquisition of additional discounted commercial real estate loans
for its portfolio and expansion of its equipment leasing operations. While the
Company has not specifically allocated the net proceeds among its operations, it
is currently anticipated that $ million will be allocated to its asset
acquisition and resolution operations and $ million to its equipment leasing
operations. There can, however, be no assurance that the allocation, as finally
made, will not differ from what is anticipated, or that such differences will
not be material. The final allocation will depend upon numerous factors,
including the availability of attractive opportunities to acquire commercial
real estate loans, the funding needs of the equipment leasing operations and the
availability of other funding sources for any of the Company's operations.

PRICE RANGE OF COMMON STOCK
AND DIVIDEND POLICY

The Company's Common Stock is quoted on Nasdaq under the symbol "REXI." The
following table sets forth the high and low sale prices, as reported by Nasdaq,
on a quarterly basis for the Company's last two full fiscal years and for the
first quarter of fiscal 1997 through October 31, 1996.

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1997 (fiscal)
-------------
First Quarter (through October 31, 1996)........................... $15.00 $12.25

1996 (fiscal)
-------------
Fourth Quarter..................................................... 17.50 12.00
Third Quarter...................................................... 21.19 12.83
Second Quarter..................................................... 16.23 7.83
First Quarter...................................................... 8.63 6.58

1995 (fiscal)
-------------
Fourth Quarter..................................................... 8.68 4.80
Third Quarter...................................................... 5.43 4.18
Second Quarter..................................................... 4.80 4.18
First Quarter...................................................... 4.90 4.18
</TABLE>

Prior to this offering, trading volume in the Company's Common Stock on
Nasdaq has been relatively low. The average monthly trading volume in the
Company's Common Stock for fiscal years 1995 and 1996, as reported by Nasdaq
(and as adjusted for the Company's stock dividends and stock split), was
approximately 29,800 shares and 98,000 shares, respectively. No prediction can
be made as to the effect, if any, that this offering will have on the market
price of the Company's Common Stock or the liquidity or trading volume of the
market for the Company's Common Stock after this offering.

As of October 31, 1996, there were 1,894,761 shares of Common Stock
outstanding held of record by 792 persons.

15
<PAGE> 17

The Company has paid regular quarterly cash dividends since August 31,
1995, as follows:

<TABLE>
<CAPTION>
DIVIDEND PAYMENT DATE PER SHARE DIVIDENDS
------------------------------------------------------------ -------------------
<S> <C>
August 30, 1996............................................. $.10
May 31, 1996................................................ $.10
February 29, 1996........................................... $.094
November 30, 1995........................................... $.089
August 31, 1995............................................. $.089
</TABLE>

The Company declared and paid a 6% stock dividend in January 1996, a 6%
stock dividend in April 1996, and effected a five-for-two stock split in the
form of a 150% stock dividend in May 1996. For a description of certain
restrictions on the Company's ability to pay cash dividends on its Common Stock
resulting from the Senior Note, see "Business -- Sources of Funds: The Senior
Note."

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company as of September 30, 1996, and as adjusted for the sale of the shares of
Common Stock offered hereby at an assumed public offering price of $13.00 per
share (the mid-point of the range set forth on the cover page of this
Prospectus) and after deduction of underwriting discounts and estimated offering
expenses, but assuming no exercise of the Underwriters' over-allotment option.

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
---------------------------
ACTUAL AS ADJUSTED
----------- -----------
<S> <C> <C>
Long-term debt.................................................... $ 8,966,524 $ 8,966,524
Stockholders' equity
Preferred Stock, $1.00 par value,
1,000,000 shares authorized,
none issued.................................................. 0 0
Common Stock, $.01 par value,
8,000,000 shares authorized,
1,894,761 shares issued and
outstanding; 3,094,761 shares,
as adjusted.................................................. 20,472 32,472
Additional paid-in capital................................... 21,760,695 35,788,695
Retained earnings............................................ 12,458,344 12,458,344
Less cost of treasury shares................................. (2,698,985) (2,698,985)
Less loan receivable from ESOP............................... (417,836) (417,836)
----------- -----------
Total stockholders' equity.............................. 31,122,690 45,162,690
----------- -----------
Total capitalization.............................................. $40,089,214 $54,129,214
=========== ===========
</TABLE>

16
<PAGE> 18

SELECTED CONSOLIDATED FINANCIAL DATA

The selected historical financial and operating data set forth below for
the Company for each of the five years in the period ended September 30, 1996
have been derived from the Company's financial statements which have been
audited by the Company's independent public accountants. The information set
forth below should be read in conjunction with the Consolidated Financial
Statements and notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operation" included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED SEPTEMBER 30,
-------------------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Asset acquisition and resolution:
Interest(1).................................................. $ 182 $ 606 $ 1,401 $ 3,422 $ 2,853
Fees......................................................... -- -- 25 963 675
Gains on refinancings and sales of participations(2)......... -- -- 1,096 1,729 3,643
------- ------- ------- ------- -------
Total........................................................ 182 606 2,522 6,114 7,171
Equipment leasing(3)........................................... -- -- -- -- 4,466
Energy production.............................................. 3,474 3,409 3,442 3,452 3,421
Energy services................................................ 2,676 2,445 2,080 1,880 1,736
Interest....................................................... 231 106 136 148 197
------- ------- ------- ------- -------
Total revenues............................................... 6,563 6,566 8,180 11,594 16,991
Costs:
Asset acquisition and resolution............................... 230 114 248 801 521
Equipment leasing(3)........................................... -- -- -- -- 2,339
Energy production and exploration.............................. 1,921 1,735 2,004 1,732 1,582
Energy services................................................ 1,247 1,106 1,131 1,027 869
General and administrative..................................... 1,890 1,841 1,901 2,265 2,087
Other.......................................................... 81 (342) 340 1,090 871
------- ------- ------- ------- -------
Total expenses............................................... 5,369 4,454 5,624 6,915 8,269
Income before income taxes, depreciation, depletion and
amortization................................................... 1,194 2,112 2,556 4,679 8,722
Depletion, depreciation and amortization......................... 1,700 1,478 1,347 1,335 1,369
Income (loss) before income taxes................................ (506) 634 1,209 3,344 7,353
Net income....................................................... (406) 590 1,309 2,714 5,147
SEGMENT PROFITABILITY (LOSS):(4)
Asset acquisition and resolution................................. (82) 455 2,237 5,263 6,612
Equipment leasing(3)............................................. -- -- -- -- 1,923
Energy production................................................ 265 553 461 798 1,058
Energy services.................................................. 1,181 1,167 653 515 585
Corporate........................................................ (1,740) (1,393) (2,105) (3,207) (2,761)
BALANCE SHEET AND OTHER DATA:
Assets:
Current assets................................................. $ 6,679 $ 2,150 $ 3,985 $ 3,924 $ 6,106
Net investment in energy property and equipment................ 14,576 13,542 12,786 11,964 11,265
Net investment in real estate loans............................ 1,827 7,329 10,386 17,991 21,798
Net other assets................................................. 1,858 2,210 7,639 3,671 4,790
------- ------- ------- ------- -------
Total assets................................................. 24,940 25,231 34,796 37,550 43,959
Liabilities:
Current liabilities............................................ 989 723 1,355 1,329 1,664
Long term debt................................................. 972 813 8,627 8,523 8,966
Deferred income taxes.......................................... 416 834 674 1,147 2,206
------- ------- ------- ------- -------
Total liabilities............................................ 2,377 2,370 10,656 10,999 12,836
Stockholders' equity............................................. 22,563 22,861 24,140 26,551 31,123
Stockholders' equity per common share(5)(6)...................... 11.43 11.59 12.52 14.21 16.43
Assets under management:
Real estate(7)................................................. 2,163 13,303 26,328 52,955 100,520
Leasing(8)..................................................... -- -- -- 25,994 24,212
Energy(9)...................................................... 37,500 38,500 36,067 33,688 32,147
</TABLE>

17
<PAGE> 19

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

<FN>
(1) Interest income includes accreted discounts of $0, $256,000, $602,000, $1.2 million and $954,000 for the fiscal
years ended September 30, 1992, 1993, 1994, 1995 and 1996, respectively.
(2) Includes gains of $0, $1.729 million and $3.643 million during fiscal years 1994, 1995 and 1996, respectively,
relating to sales of loan participations on a recourse basis.
(3) Reflects primarily revenues from equipment leasing partnerships acquired by the Company in September 1995 (see
"Business -- General"). The Company did not begin originating equipment leases for its own account until June
1996; accordingly, future results may not be comparable to historical data.
(4) Represents revenues from the segment minus costs from the segment and less depreciation, depletion and
amortization attributable to the segment, but without allocation of corporate overhead. For additional segment
information, including operating profit (loss) after allocation of corporate overhead, see Note 11 to the
Consolidated Financial Statements.
(5) Based on shares outstanding of 1.975 million, 1.973 million, 1.928 million, 1.869 million and 1.895 million at
September 30, 1992, 1993, 1994, 1995 and 1996, respectively.
(6) Fully diluted stockholders' equity per common share at September 30, 1996, which was calculated by assuming
that all shares of Common Stock issuable under warrants and options were issued and the proceeds received by
the Company upon exercise were added to shareholders' equity, was $11.45.
(7) Represents the stated, or face, amount of outstanding loans plus accrued interest and penalties.
(8) Represents the net book value of assets held by the six equipment leasing limited partnerships managed by the
Company.
(9) Represents the original cost of assets held by the 52 energy partnerships and joint ventures managed by the
Company.
(10) Calculated as gross asset acquisition and resolution revenues (including gains on refinancings and sales of
participations) divided by the average book cost of asset acquisition and resolution assets. See
"Business -- Asset Acquisition and Resolution: Accounting for Discounted Loans."
(11) Calculated as the aggregate amount of loans outstanding with respect to any property (including all loans with
liens senior to or of the same seniority with the loan interest held by the Company) divided by the appraised
value of the property.
(12) Based on weighted average common shares and common share equivalents of 1.975 million, 1.990 million, 2.076
million, 2.235 million and 2.757 million at September 30, 1992, 1993, 1994, 1995 and 1996, respectively.
(13) Based on weighted average common shares and common share equivalents of 1.975 million, 1.990 million, 2.117
million, 2.293 million and 2.763 million at September 30, 1992, 1993, 1994, 1995 and 1996, respectively.
</TABLE>

18
<PAGE> 20

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

GENERAL

The Company's operating results and financial condition over the past
several years reflects its shift in focus from its pre-existing energy
businesses to the development of specialty finance businesses. Between the
fiscal years 1994 and 1996, the Company's asset acquisition and resolution
operations grew from 31% of the Company's gross revenues and 30% of its total
assets to 42% of gross revenues and 50% of total assets. Equipment leasing
expanded in the year ended September 30, 1996 from 0% of gross revenues and 2%
of its total assets to 26% of gross revenues and 5% of its total assets. Oil and
gas revenues (including energy services) declined from 68% of the Company's
gross revenues in fiscal 1994 to 30% of gross revenues in fiscal 1996, while
related assets declined from 37% of total assets to 26% in the same period, as
the Company focused its efforts on expanding its asset acquisition and
resolution operations and on the development of its equipment leasing operation.
While the Company has generated only a small amount of revenue from its leasing
operations (as distinguished from its lease servicing and partnership management
revenues), it anticipates that both revenues from, and assets used in, its
leasing operations will grow significantly during fiscal 1997 (although there
can be no assurance that this will be the case; see "Risk Factors -- General:
Ability to Generate Funding for Growth", "-- General: Ability to Generate Growth
Opportunities" and "-- Equipment Leasing Considerations").

RESULTS OF OPERATIONS: ASSET ACQUISITION AND RESOLUTION

The following table sets forth certain information relating to the income
recognized on the Company's commercial real estate loan portfolio during the
periods indicated:

<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
------------------------------
1994 1995 1996
------ ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest............................................... $ 799 $ 2,246 $ 1,899
Accreted discount...................................... 602 1,176 954
Fees................................................... 25 963 675
Gains on refinancings and sale of participations....... 1,096 1,729 3,643
------ ------- -------
Total........................................ $2,522 $ 6,114 $ 7,171
====== ======= =======
Average balance of investment, net..................... $8,179 $17,683 $19,804
Yield on net average balance........................... 30.8% 34.6% 36.2%
</TABLE>

Revenues from asset acquisition and resolution operations increased to $7.2
million in fiscal 1996 from $6.1 million in fiscal 1995 and $2.5 million in
fiscal 1994. These increases were attributable to increases of 111% (1996) and
58% (1995) in gains recognized on the refinancing of loans and sale of
participations in loans held by the Company. Fees decreased 30% in 1996 as
compared to 1995 and increased significantly in 1995 as compared to 1994 due to
a reduction in the number of refinancings of, and sales of participations in,
certain of the Company's portfolio loans occurring during 1996 as compared to
1995, and an increase in the number of such refinancings and sales of
participations in 1995 as compared to 1994. The Company sold participation
interests in or refinanced eight and eleven loans during fiscal years 1996 and
1995 (representing an aggregate Company investment of $21.6 and $13.2 million),
respectively, as compared to $1.1 million on the refinancing of one loan
(representing an aggregate Company investment of $943,000) in fiscal 1994.

During fiscal 1996, the Company purchased or originated nine real estate
loans, for a total cost of $15.1 million, as compared to seven loans for a total
of $13.6 million in fiscal 1995 and two loans for a total of $2.5 million in
fiscal 1994. In addition, the Company increased its investment in certain
existing loans by $1.7 million in fiscal 1996, $1.3 million in fiscal 1995 and
$717,000 in fiscal 1994 for purposes of paying for property improvement costs,
unpaid taxes and similar items relating to properties underlying portfolio
loans.

19
<PAGE> 21

All such items had been anticipated by the Company at the time of loan
acquisition and were included in its analysis of loan costs and yields. In
addition, in fiscal 1996 the Company increased its investment in loans by
$535,000 in connection with its repurchase of PICO loan participations to
facilitate borrower refinancings and received a note for $317,000 (thus
increasing its investment in loans) in connection with granting its consent to
the sale (subject to the Company's existing mortgage loan) of another property
by a borrower. Asset acquisition and resolution expenses decreased 35% in fiscal
1996 and rose significantly in fiscal 1995 compared to fiscal 1994. The decrease
from fiscal 1995 to fiscal 1996 was a result of lower legal costs, which were in
turn due to a lesser number of refinancings of, and participations sold in, the
Company's portfolio loans. The increase from fiscal 1994 to fiscal 1995 was
primarily a result of higher legal and personnel costs associated with the
expansion of these operations. As a consequence of the foregoing, the Company's
gross profit from asset acquisition and resolution operations increased from
$2.3 million for fiscal 1994 to $5.3 million for fiscal 1995 (134%) and to $6.7
million for fiscal 1996 (25%).

RESULTS OF OPERATIONS: EQUIPMENT LEASING

Equipment leasing revenues recognized to date represent fees (including
reimbursement of administrative costs) associated with managing portfolios of
equipment leases owned by limited partnerships in which a subsidiary of the
Company is a general partner, as well as the Company's pro rata share of income
from these partnerships and lease brokerage fees. The Company acquired this
business in September 1995 and, accordingly, did not recognize revenues from
this sector until after the completion of fiscal 1995. At September 30, 1996,
the Company acted as general partner for six limited partnerships which held a
total of $24.2 million (book value) in lease assets. For the year ended
September 30, 1996, the Company's servicing revenues from these equipment
leasing partnerships were $1.1 million and its reimbursement of administrative
costs was $1.4 million. The Company also received revenues in the period of $1.3
million from its equity interests in the equipment leasing partnerships and
$650,000 from its lease brokerage operations.

Equipment leasing expenses include costs incurred in the management of
equipment leasing partnerships in which the Company is a general partner. In
accordance with the terms of the related partnership agreements, the Company is
reimbursed by the partnerships for certain general and administrative expenses
incurred and allocable, directly or indirectly, to the partnerships. Such
reimbursements are included in equipment leasing revenue.

Expenses associated with the start-up of the Company's "small ticket"
equipment leasing operation amounted to $411,000 for the year ended September
30, 1996. This new business segment is expected to grow significantly during
fiscal 1997 although there can be no assurance that this will be the case. See
"Risk Factors -- General" and "-- Equipment Leasing Considerations."

RESULTS OF OPERATIONS: ENERGY

Oil and gas revenues from production sales remained essentially constant
for fiscal years 1994, 1995 and 1996.

20
<PAGE> 22

A comparison of oil and gas sales revenue, daily production volumes, and
average sales prices for the years indicated is as follows:

<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
----------------------------
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Sales (in thousands)
Gas(1)................................................. $2,851 $2,762 $2,722
Oil.................................................... 535 610 627
Production volumes
Gas (mcf/day)(1)....................................... 3,183 3,283 3,184
Oil (bbls/day)......................................... 93 100 93
Average sales prices
Gas (per mcf)(1)....................................... $ 2.45 $ 2.31 $ 2.34
Oil (per bbl).......................................... 15.74 16.74 18.53

<FN>
- ---------------

(1) Excludes sales of residue gas, which are typically at a substantial discount
to market price, and sales to landowners, which are typically at the retail
price to individual consumers (which is substantially in excess of the
commercial price received by the Company for its production).
</TABLE>

Natural gas revenues from production sales decreased 1% in fiscal 1996 from
fiscal 1995 due to a 3% decrease in production volumes partially offset by a 1%
increase in the average price per mcf of natural gas. In fiscal 1995, natural
gas revenues decreased 3% as a result of a 6% decrease in the average price per
mcf of natural gas partially offset by a 3% increase in production volumes. Oil
revenues increased by 3% in fiscal 1996 from fiscal 1995 due to an 11% increase
in the average price per barrel which was partially offset by a 7% decrease in
production volumes. In fiscal 1995, oil revenues increased by 14% over fiscal
1994 due to a 6% increase in the average price per barrel and a 7% increase in
production volumes. Primarily as a result of these price changes, the Company's
gross profit from energy production (energy production revenues less energy
production and exploration costs) increased from $1.4 million for fiscal 1994 to
$1.7 million for fiscal 1995 (20%) and to $1.8 million for fiscal 1996 (7%).

The Company continues to experience normally declining production from its
properties located in New York State. This decline has been almost totally
offset by the acquisition of additional well interests in Ohio. The Company
participated in the drilling of three successful exploratory wells and two
successful developmental wells during fiscal 1996. The impact on revenues from
these wells, however, will not be fully realized or reflected on the Company's
financial statements until fiscal 1997. In fiscal 1995, the Company participated
in the drilling of three successful exploratory wells and recompleted one
successful development well whose impact on revenues began to be realized in
fiscal 1996. See "Business -- Energy Operations: Exploration and Development."

Energy services revenues decreased 8% in fiscal 1996 over fiscal 1995 and
10% in fiscal 1995 over fiscal 1994. These decreases resulted from a decrease in
the number of wells operated for partnerships managed by the Company.

A comparison of the Company's production costs as a percentage of oil and
gas sales, and the production cost per equivalent unit for oil and gas for
fiscal years 1994, 1995 and 1996, is as follows:

<TABLE>
<CAPTION>
PRODUCTION COSTS 1994 1995 1996
------------------------------------------------------------ ----- ----- -----
<S> <C> <C> <C>
As a percent of sales....................................... 40% 44% 42%
Gas (mcf)................................................... $1.00 $1.06 $1.04
Oil (bbl)................................................... 6.01 6.36 6.23
</TABLE>

21
<PAGE> 23

Production costs decreased 5% ($81,000) from fiscal 1995 to fiscal 1996 as
a result of a decrease in the number of wells requiring cleanout and workover
operations. These operations are conducted on an as-needed basis and,
accordingly, costs incurred by the Company may vary from year to year.
Production costs increased 10% ($133,000) from fiscal 1994 to fiscal 1995, a
result of the acquisition of limited partnership interests in certain oil and
gas partnerships for which the Company serves as general partner and increased
workover costs in the Company's Ohio fields of operation.

Exploration costs decreased 30% ($69,000) in fiscal 1996 from fiscal 1995
and 64% ($405,000) in fiscal 1995 from fiscal 1994. The 1996 decrease resulted
from a decrease in delay rentals and impairment of lease costs which resulted
from a termination of certain leases in New York State in fiscal 1995 and
reduced costs relating to dry holes. The 1995 decrease was due to decreases in
impairment costs, costs relating to abandonment of non-producing properties and
dry hole costs. During fiscal 1996 the Company participated in one exploratory
dry hole and had lease impairments and delay rentals totalling $50,000. During
fiscal 1995, the Company's participation in two exploratory dry holes and lease
impairments, and delay rentals, totalled $145,000. During fiscal 1994, the
Company's participation in two exploratory dry holes and the determination that
an exploratory well drilled in a previous year was not capable of economic
production, along with lease impairments, totalled $547,000.

Energy service expenses decreased $157,000 (15%) in fiscal 1996 over fiscal
1995 and $105,000 (9%) in fiscal 1995 over fiscal 1994. These decreases resulted
from a decrease in the number of wells operated for third parties as a result of
normal production declines and well repurchases by the Company.

Depreciation, depletion and amortization consist primarily of amortization
of costs relating to oil and gas properties. Amortization of oil and gas
property costs as a percentage of oil and gas revenues was 23% in fiscal 1996,
27% in fiscal 1995 and 28% in fiscal 1994. The variance from year to year is
directly attributable to changes in the Company's oil and gas reserve
quantities, product prices and fluctuations in the depletable cost basis of oil
and gas properties. See Note 2 to the Consolidated Financial Statements.

As a result of the foregoing, gross profit from energy services decreased
from $653,000 for fiscal 1994 to $515,000 for fiscal 1995 and increased to
$585,000 for fiscal 1996.

RESULTS OF OPERATIONS: OTHER INCOME (EXPENSE)

General and administrative expense decreased 8% ($178,000) for the year
ended September 30, 1996 as compared to the same period in fiscal 1995 primarily
as a result of a decrease in executive compensation due to the death of a senior
officer in July 1995. General and administrative expense increased 19% from
fiscal 1994 to fiscal 1995. The increase in 1995 was a result of the payment of
incentive compensation to executive officers (see "Management -- Executive
Officer Compensation").

Interest expense decreased $219,000 from fiscal 1995 to fiscal 1996, and
increased $781,000 from fiscal 1994 to fiscal 1995, reflecting the changes in
borrowings to fund the growth of the Company's asset acquisition and resolution
operations. In May 1994, the Company privately placed its $8.0 million Senior
Note (see "Business -- Sources of Funds"). In December 1994, the Company
borrowed $2.5 million from Jefferson Bank and $2.0 million from PICO. The $2.5
million was repaid in June 1995 and the $2.0 million was repaid in September
1995. See "Management -- Certain Relationships and Related Transactions."

The effective tax rate increased from (8%) in fiscal 1994 to 19% in fiscal
1995 and 30% in fiscal 1996. Both the 1996 and 1995 increases were the result of
a continuing decrease in the generation of depletion (for tax purposes) and tax
credits in relation to net income. The increase for 1995 also resulted, in part,
from the one-time effect in 1994 of the reversal of a previously established
valuation allowance.

22
<PAGE> 24

LIQUIDITY AND CAPITAL RESOURCES

Sources and (uses) of cash for the three years ended September 30, 1996,
are as follows:

<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Provided by operations................................ $ 2,258 $ 1,578 $ 2,959
Used in investing activities.......................... (2,518) (6,113) (1,060)
Provided by (used in) financing activities............ 2,096 4,395 (202)
------- ------- -------
$ 1,836 $ (140) $ 1,697
======= ======= =======
</TABLE>

The Company had $4.2 million in cash and cash equivalents on hand at
September 30, 1996, as compared to $2.5 million at September 30, 1995 and $2.6
million at September 30, 1994. The Company's ratio of current assets to current
liabilities was 3.7:1 at September 30, 1996 and 2.9:1 on each of September 30,
1995 and 1994. Working capital at September 30, 1996 was $4.4 million as
compared to $2.6 million at both September 30, 1995 and September 30, 1994.

Cash provided by operating activities increased $1.4 million, or 88% during
fiscal 1996, as compared to fiscal 1995, and decreased $681,000, or 30%, during
fiscal 1995, as compared to fiscal 1994. The 1996 increase was primarily the
result of an increase in operating income in the asset acquisition and
resolution and equipment leasing businesses. The decrease in 1995 was primarily
the result of decreases in accounts payable and other accrued liabilities.

The Company's cash used in investing activities decreased $5.1 million or
88% during fiscal 1996, as compared to fiscal 1995, and increased $3.6 million,
or 143%, during fiscal 1995, as compared to fiscal 1994. The changes resulted
primarily from changes in the amount of cash used to fund asset acquisition and
resolution activities. The Company invested $15.1 million, $13.6 million and
$2.5 million in the acquisition of nine, seven and two loans in fiscal years
1996, 1995 and 1994, respectively. In addition, the Company advanced funds on
existing loans of $1.7 million, $1.3 million and $717,000 in fiscal years 1996,
1995 and 1994, respectively, and in fiscal 1996 increased its investment in
certain existing loans by $852,000. See "-- Results of Operations: Asset
Acquisition and Resolution," above.

Proceeds received upon refinancings or the sale of participations amounted
to $18.5 million, $10.2 million and $2.1 million in fiscal years 1996, 1995 and
1994, respectively. Cash used for capital expenditures increased $280,000, or
34%, and decreased $219,000, or 21%, during fiscal years 1996 and 1995 over the
previous periods. The 1996 increase includes $506,000 in capital expenditures
relating to start-up of small ticket leasing operations. The 1995 decrease was
due to a decrease in purchases of additional working interests in wells operated
by the Company. During fiscal 1995 the Company also invested $877,000 in the
acquisition of a leasing company (see Note 10 to the Consolidated Financial
Statements). Cost of equipment acquired for lease represents the equipment cost
and initial direct costs associated with the start up of small ticket leasing
operations. The Company commenced leasing operations for its own account in June
1996 and began to write leases in August 1996.

The Company's cash flow provided by financing activities decreased $4.6
million during fiscal 1996, as compared to fiscal 1995, and increased $2.3
million in fiscal 1995 as compared to fiscal 1994. During fiscal 1994, the
Company issued the Senior Note in the amount of $8.0 million (see
"Business -- Sources of Funds: Senior Note"), of which $5.2 million was pledged,
along with seven of the Company's portfolio loans, as collateral and restricted
as to its usage. The Company was, however, free to use such restricted cash for
the purpose of purchasing additional loans provided such purchased loans were
immediately pledged in place of the utilized cash. During fiscal 1995, the
Company (i) sold a $2.0 million loan participation, (ii) borrowed $2.5 million
and (iii) was able to release for corporate investment purposes $4.9 million of
the restricted cash as a result of the purchase of loans for the Company's
portfolio.

In fiscal years 1996 and 1995, $756,000 and $161,000 were paid in
dividends, respectively. The determination of the amount of future cash
dividends, if any, to be declared and paid is in the sole discretion of

23
<PAGE> 25

the Company's Board of Directors and will depend on the various factors
affecting the Company's financial condition and other matters the Board of
Directors deems relevant.

INFLATION AND CHANGES IN PRICES

Inflation affects the Company's operating expenses and increases in those
expenses may not be recoverable by increases in finance rates chargeable by the
Company. Inflation also affects interests rates and movements in rates may
adversely affect the Company's profitability.

The Company's revenues and the value of its oil and gas properties have
been and will continue to be affected by changes in oil and gas prices. Oil and
gas prices are subject to fluctuations which the Company is unable to control or
accurately predict.

ENVIRONMENTAL REGULATION

A continued trend to greater environmental and safety awareness and
increasing environmental regulation has resulted in higher operating costs for
the oil and gas industry and the Company. The Company believes environmental and
safety costs will continue to increase in the future. To date, compliance with
environmental laws and regulations has not had a material impact on the
Company's capital expenditures, earnings or competitive position. The Company
monitors environmental laws and believes it is in compliance with applicable
environmental regulations. The Company is unable to predict the impact of future
laws and regulations on the Company's operations.

24
<PAGE> 26

BUSINESS

GENERAL

The Company is a specialty finance company engaged in three lines of
business: the acquisition and resolution of commercial real estate loans,
commercial equipment leasing, and energy operations, including natural gas and
oil production. For approximately 25 years prior to 1991, the Company was
principally involved in the energy industry. Following the acquisition of a
significant ownership position in the Company by new stockholders in 1988 and
the appointment of new senior management (including the current Chairman, who
has been a senior officer of banking and other financial institutions for the
past 30 years), the Company evaluated alternative strategies to expand and
diversify its operations (particularly in light of the declining attractiveness
of the energy business to small investors following the 1986 changes to the
federal tax law).

The Company's asset acquisition and resolution business involves the
purchase at a discount of relatively small (generally $1 million to $5 million
in purchase price) troubled commercial real estate loans from private market
sellers (primarily financial institutions), and the restructuring and
refinancing of those loans. These loans typically involve legal and other
disputes among the lender, the borrower and/or other parties in interest, and
generally are secured by properties which are unable to produce sufficient cash
flow to fully service the loans in accordance with the original lender's loan
terms. Since entering this business in 1991, the Company's loan portfolio has
grown to $100.5 million (before discounts) at September 30, 1996. During the
fiscal years ended September 30, 1994, 1995 and 1996, the Company's yield on its
net investment in loans acquired (including gains on refinancings and sales of
participations) equalled 30.8%, 34.6% and 36.2%, respectively, while its gross
profits from its loan activities for fiscal years 1994, 1995 and 1996 were $2.3
million, $5.3 million and $6.7 million, respectively.

The Company seeks to reduce the amount of its own capital invested in loans
after their acquisition, and to enhance its returns, through prompt refinancing
of the properties underlying its loans, or through sale at a profit of senior
participations in its loans (typically on a recourse basis). See "-- Asset
Acquisition and Resolution: Accounting for Discounted Loans," below. At
September 30, 1996, senior lenders held outstanding obligations of $38.7
million, secured by properties with an aggregate appraised value of $68.2
million, resulting in a ratio of senior lien obligations-to-appraised value of
property of 56.7%. Currently, the operating cash flow coverage on the required
debt service on refinancings and participations (exclusive of proceeds from such
refinancings and participations) is 160.8%. The balance of operating cash flow
is, pursuant to agreements with the borrowers, retained by the Company as debt
service on the outstanding balance of the Company's loans. See "-- Asset
Acquisition and Resolution: Loan Status," below.

In September 1995, the Company entered the commercial leasing business
through its acquisition of the leasing subsidiary of Fidelity. This acquisition
provided the Company with a servicing portfolio of approximately 520 individual
leases held by six leasing partnerships which provided the Company with a
servicing revenue stream of $1.1 million during fiscal 1996. More importantly,
through this acquisition the Company acquired an infrastructure of operating
systems, computer hardware and proprietary software (generally referred to as a
"platform"), as well as personnel, which the Company is utilizing to develop its
commercial leasing business for its own account.

In order to develop this business, in early 1996 the Company hired a team
of four experienced leasing executives, including the former chief executive
officer of the U.S. leasing subsidiary of Tokai Bank, a major Japanese banking
institution. See "Management -- Other Significant Employees." The Company's
strategy in developing its leasing business is to focus on leases with equipment
costs of between $5,000 to $100,000 (with a targeted average transaction of
approximately $15,000 per lease) ("small ticket" leasing) and to market its
equipment leasing product through vendor programs with equipment manufacturers
likely to generate

25
<PAGE> 27

$10 million or less annually in equipment leases, regional distributors and
other vendors. The Company believes that this market is under-served by
equipment lessors, banks and other financial institutions, affording the Company
a niche market with significant growth potential. From the inception of leasing
activity for its own account in June 1996 through September 30, 1996, the
Company has received 271 lease proposals involving equipment with an aggregate
cost of $6.5 million, approved 118 such proposals involving equipment with an
aggregate cost of $2.5 million, entered into 39 transactions involving equipment
with an aggregate cost of $711,000 and, had 21 such proposals pending involving
equipment with an aggregate cost of $1.3 million.

ASSET ACQUISITION AND RESOLUTION

Strategy

Identification and Acquisition of Troubled Commercial Real Estate
Loans. The Company believes that the success to date of its asset acquisition
and resolution business has been due in large part to its ability to identify
and acquire troubled commercial real estate loans which, due to legal or factual
disputes, operational difficulties or other problems, can be acquired at a
discount from the unpaid principal and interest amounts of the loan and the
estimated value of the underlying property. A principal part of this strategy is
the Company's focus on relatively small commercial loans (generally $1 million
to $5 million in purchase price) held by large private sector financial
institutions. Due to the small size of these loans relative to a large
institution's total portfolio, the lender is often not able, or willing, to
devote the managerial and other resources necessary to resolve the problems to
which the loans are subject, and thus is sometimes willing to dispose of these
loans at prices favorable to the Company. The Company, which offers to acquire a
loan quickly and for immediate cash, provides a convenient way for an
institution to dispose of these loans and to eliminate future work-out costs.
The Company believes that the trend of consolidation in the banking industry may
cause an increase in the amount of smaller loans available for sale and provide
the Company significant opportunities for growth.

Efficient Resolution of Loans. The Company believes that a further aspect
of its success to date has been its ability to resolve problems surrounding
loans it has identified for acquisition. The principal element of this strategy
is the cost-effective use of management and third-party resources to negotiate
and resolve disputes concerning a troubled loan or the property securing it, and
to identify and resolve any existing operational or other problems at the
property. To implement this strategy, the Company has taken advantage of the
background and expertise of its management (see "Management") and has identified
third-party subcontractors (such as property managers and legal counsel; see
"Management -- Certain Relationships and Related Transactions") familiar with
the types of problems to which smaller commercial properties may be subject and
who have, in the past, provided effective services to the Company.

Refinancing or Sale of Participations in Portfolio Loans. The Company seeks
to reduce its invested capital and enhance its returns through prompt
refinancing of the properties underlying its loans or through sales, at a
profit, of senior participations in its loans. In so doing, the Company has in
the past obtained a return of a substantial portion (and in some cases all) of
its invested capital, which it will typically seek to reinvest in further loans,
while maintaining a significant continuing position in the original loan. See
"-- Asset Acquisition and Resolution: Sale of Participations and Refinancings,"
below. The Company's strategic plan contemplates continued growth in its loan
portfolio, in part through the liquidity provided by such sales or refinancings.

Disposition of Loans. In the event a borrower does not repay a loan when
due (whether upon expiration of the Forbearance Agreement or otherwise), the
Company will seek to sell the property underlying the loan or otherwise
liquidate the loan. In appropriate cases and for appropriate consideration, the
Company may agree to further forbearance. See "-- Asset Acquisition and
Resolution: Forbearance Agreements" and "-- Loan Status," below.

26
<PAGE> 28

Market for Asset Acquisition and Resolution Services

The discounted loans acquired by the Company to date are secured by
commercial properties (multi-family housing, small office buildings or
single-user retail properties) which, while income producing, are unable to
fully meet debt service requirements set forth in their initial underwriting.
All of the loans have been acquired from private sector entities (banks and
other financial institutions or institutional sellers) except for one loan
purchased from the United States Department of Housing and Urban Development.
Typically, the loans identified by the Company for acquisition (and the
properties securing them) have been the subjects of complex and/or contentious
legal and other disputes, operational difficulties or other problems demanding
commitments of managerial and other resources that are perceived by the selling
institutions to be inordinate relative to the comparatively small asset value of
these loans.

The market for asset acquisition and resolution services of the type
provided by the Company is, the Company believes, relatively new. A major
impetus to this market has been the sales of packages of under-performing and
non-performing loans by government agencies, in particular the Resolution Trust
Corporation ("RTC") and Federal Deposit Insurance Corporation ("FDIC"). While
the need for asset acquisition and resolution services by governmental agencies
has declined in recent years (the RTC terminated its loan pool packaging and
sales operations on December 31, 1995, and any RTC assets remaining to be sold
at that time were transferred to the FDIC for sale), the Company believes (based
upon its operations to date) that a permanent market for these services is
emerging in the private sector as financial institutions realize that outside
specialists may be able to resolve troubled loan assets more cost-efficiently
than the institution's internal staff. Moreover, the sale of loan assets
provides the institutions with a means of disposing of under-performing loans,
thereby obtaining liquidity and improving their balance sheets. The trend has
been reinforced, management believes, by consolidation within the banking
industry and, within the insurance industry, by the implementation of risk-based
capital rules.

Acquisition and Administration

Prior to acquiring any loan, the Company conducts an acquisition review.
This review includes an evaluation of the adequacy of the loan documentation
(for example, the existence and adequacy of notes, mortgages, collateral
assignments of rents and leases, and title policies ensuring first or other lien
positions) and other available information (such as credit and collateral
files). The value of the property securing the loan is estimated by the Company
based upon a recent independent appraisal obtained by the borrower, an
independent appraisal obtained by the Company, or upon valuation information
obtained by the Company and thereafter confirmed by an independent appraisal.
One or more members of the Company's management makes an on-site inspection of
the property and, where appropriate, the Company will require further
inspections by engineers, architects or property management consultants. The
Company may also retain environmental consultants to review potential
environmental issues. The Company obtains and reviews available rental, expense,
maintenance and other operational information regarding the property, prepares
cash flow and debt service analyses and reviews all pertinent information
relating to any legal or other disputes to which the property is subject. The
amount of the Company's offer to purchase is based upon the foregoing
evaluations and analyses. The Company generally will not acquire a loan unless
(i) current net cash flow from the property securing the loan is sufficient to
yield an immediate cash return on the Company's investment of not less than 10%
per annum, (ii) the ratio of the Company's initial investment to the appraised
value of the property underlying the loan is less than 80%, (iii) there is the
possibility of either prompt refinancing of the loan by the borrower after
acquisition, or sale by the Company of a participation, that will result in an
enhanced yield to the Company on its (reduced) funds still outstanding (see
" -- Sale of Participations and Refinancings," below), and (iv) there is the
possibility of substantial increase in the value of the property underlying the
loan over its appraised value, increasing the potential amount of the loan
discount recoverable by the Company at loan termination. On occasion, the
Company will acquire a loan that does not meet one or more of the criteria
specified above if in the Company's judgment other factors make the loan an
appropriate investment opportunity. The Company currently has in its portfolio
six loans in which the initial investment-to-appraised value of underlying
property exceeded 80%. Also, the Company has acquired loans outside of its
targeted range of $1 million to $5 million (5 loans were acquired at a lesser
cost, while one loan was acquired at a greater cost), and as opportunities
arise, may do so in the future. The Company is not limited by

27
<PAGE> 29

regulation or contractual obligation as to the types of properties securing the
loans it may seek to acquire, the nature or priority of any lien or other
encumbrance it may accept with respect to a property, whether, after sale of a
participation or a refinancing, its interest in a loan must continue to be
secured, the amount it may invest in any one loan or the ratio of initial
investment-to-appraised value of the underlying property.

As part of the acquisition process, the Company typically resolves disputes
relating to the loans or the underlying properties. Through negotiations with
the borrower and, as appropriate or necessary, with other creditors or parties
in interest, the Company seeks to arrive at arrangements that reflect more
closely the current operating conditions of the property and the present
strategic position of the various interested parties. Where appropriate, the
Company will offer concessions to assure the Company's future control of the
property's cash flow free from dispute. These arrangements are normally
reflected in a Forbearance Agreement, pursuant to which the Company agrees to
defer foreclosure or other action so long as the arrangements reflected in the
Forbearance Agreement are met. The Company also seeks to resolve operational
problems of the properties by appointment of a property manager acceptable to it
(see "-- Asset Acquisition and Resolution: Forbearance Agreements," below, and
"Management -- Certain Relationships and Related Transactions") and may advance
funds for purposes of paying property improvement costs, unpaid taxes and
similar items. Prior to loan acquisition, the Company includes in its
pre-acquisition analysis of loan costs and yields an estimate of such advances.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations: Results of Operations: Asset Acquisition and Resolution".

After acquiring a loan, the Company follows specified procedures to monitor
loan performance and compliance. In particular, the Company requires that all
revenues from the property underlying the loan be paid into an operating account
on which the Company is the sole signatory. All expenditures with respect to a
property (including debt service, taxes, operational expenses and maintenance
costs) are paid from that account and are reviewed and approved by a senior
officer of the Company prior to payment. The Company further requires that its
approval be obtained before any material contract or commercial lease with
respect to the property is executed. To assist it in monitoring the loan, the
Company requires that the borrower prepare a budget for the property not less
than sixty days prior to the beginning of a year, which must be reviewed and
approved by the Company, and submit both a monthly cash flow statement and a
monthly occupancy report. The Company analyzes these reports in comparison with
each other and with account activity in the operating account referred to above.

Sale of Participations and Refinancings

In evaluating a potential loan, the Company places significant emphasis on
the likelihood of its being able to sell a participation on favorable terms
after the acquisition and/or the borrower's likely ability, with or without the
Company's assistance, to secure favorable refinancing. When a loan is
refinanced, or a participation sold, the Company will obtain net refinance or
participation proceeds in an amount representing a major portion of (and
sometimes exceeding) the amount of its investment in the loan. After such
refinancing or sale of a participation, the Company will typically retain an
interest in the loan, which is usually subordinated to the interest of the
refinance lender or loan participant.

Where a participation interest is sold, the balance of the Company's loan
outstanding at the time of sale remains outstanding, including as a part of that
balance the amount of the participation. Thus, the Company's remaining interest
effectively "wraps around" the participation interest. Typically, the interest
rate on the participation interest is less than the stated rate on the Company's
loan. From debt service payments received by the Company, the Company remits to
the participant the debt service applicable to its interest, retaining the
balance. See "-- Asset Acquisition and Resolution: Loan Status," below.
Participations sold during fiscal years 1994 and 1995 to PICO also obligated the
Company, in the event of a default on the related loan, to replace it with a
performing loan. See "Risk Factors -- Sales of Participations to Insurance
Company" and "Business -- Sources of Funds: Participations."

Where a refinancing is effectuated, the Company reduces the amount
outstanding on its loan by the amount of net refinancing proceeds received by it
and either converts the outstanding balance of the original note (both principal
and accrued interest, as well as accrued penalties) into the stated principal
amount of an amended note on the same terms as the original note or retains the
original loan obligation as paid down by the

28
<PAGE> 30

amount of refinance proceeds received by the Company. As with participations,
the interest rate on the refinancing is less than the interest rate on the
Company's retained interest.

After sale of a participation or a refinancing, the Company's retained
interest may not be formally secured by a mortgage (because of conditions
imposed by the refinance lender), although it may be protected by a judgment
lien, an unrecorded deed-in-lieu of foreclosure, the borrower's covenant not to
further encumber the property without the Company's consent, or a similar
device. See "Risk Factors -- Asset Acquisition and Resolution Considerations:
Lien Priority" and "-- General: Credit Risks."

Forbearance Agreements

On substantially all of its portfolio loans, the Company has entered into
Forbearance Agreements with borrowers pursuant to which (i) the Company agrees,
subject to receipt of minimum monthly payments, to defer the exercise of
existing rights to proceed on the defaulted loan (including the right to
foreclose), (ii) the Company directly receives the rents from the underlying
property and (iii) the borrower agrees to retain a property management firm
acceptable to the Company. As a result of provision (iii), an affiliated
company, Brandywine Construction and Management, Inc. ("BCMI") (see
"Management -- Certain Relationships and Related Transactions") has assumed
responsibility for supervisory and, in many cases, day to day management of the
underlying properties with respect to substantially all of the loans the Company
currently owns. In five instances, the President of BCMI has also acted as the
general partner of the borrower. The minimum payments required under a
Forbearance Agreement (generally related to anticipated cash flow from the
property after operating expenses) are normally materially less than the debt
service payments called for by the original terms of the loan. The difference
between the minimum required payments under the Forbearance Agreement and the
payments called for by the original loan terms continues to accrue, but (except
for amounts recognized as an accretion of discount; see "-- Asset Acquisition
and Resolution: Accounting for Discounted Loans," below) are not recognized as
revenue to the Company until actually paid.

At the end of the term of a Forbearance Agreement, the borrower is required
to pay the loan in full. The borrower's ability to do so, however, will be
dependent upon a number of factors, including prevailing conditions at the
underlying property, the state of real estate and financial markets (generally
and as regards the particular property), and general economic conditions. In the
event the borrower does not or cannot do so, the Company anticipates that it
will seek to sell the property underlying the loan or otherwise liquidate the
loan. Alternatively the Company anticipates that it might, in appropriate cases,
and for appropriate additional consideration, agree to further forbearance.

An existing Forbearance Agreement remains in effect with no modifications
when the Company sells a participation in a loan. In such instance, the
participant's interest is in the loan as modified by the terms of the
Forbearance Agreement. However, when a borrower refinances a loan, the
Forbearance Agreement is thereby amended to (i) reflect the pay down of the loan
balance, (ii) acknowledge the existence of the refinancings and (iii) provide
for the continued effectiveness of all provisions of the Forbearance Agreement
for the term specified therein, except that where specific provisions of the
Forbearance Agreements are inconsistent with the terms of the refinancing, the
terms of the refinancing have priority. In some refinancings, the refinance
lender may require that the borrower issue an amended note (a "retained interest
note") to reflect the reduction of the borrower's indebtedness to the Company
and, where applicable, any other revised terms (such as extension of the
forbearance period).

Loan Status

Of the twenty-four loans in the Company's portfolio, eighteen were acquired
as first mortgage loans and six were acquired as junior lien obligations. In
accordance with the Company's emphasis on acquiring loans in anticipation of
refinancing, borrowers on six of the Company's loans have obtained refinancing,
and the Company has sold participations in twelve loans. After such refinancings
and sales of participation interests, the Company holds subordinated interests
in twenty-three loans, of which six interests are not collateralized by recorded
mortgages. See "Risk Factors -- General: Credit Risks" and Note 12 to the
Consolidated Financial Statements. The following table sets forth the Company's
acquisition and refinancing activity from 1991 (the year the Company commenced
its asset acquisition and resolution operations) through September 30, 1996:

29
<PAGE> 31

<TABLE>
<CAPTION>
OUTSTANDING APPRAISED VALUE
PROPERTY TYPE OF LOAN LOAN OF PROPERTY COST OF
NUMBER PROPERTY LOCATION SELLER ACQUIRED RECEIVABLE(1) SECURING LOAN(2) INVESTMENT(3)
- -------- ------------- --------------- ------------------------- -------- ------------- ---------------- -------------
<C> <S> <C> <C> <C> <C> <C> <C>
001 Multifamily Pennsylvania Alpha Petroleum Pension
Fund 1991 $ 8,276,838 $ 5,300,000 $ 4,597,849
002 Multifamily Pennsylvania CoreStates Bank(9) 1992 1,465,714 800,000 548,995
003 Multifamily New Jersey RAM Enterprises/Glenn
Industries Pension Plan 1993 2,512,965 1,350,000 1,307,962
004 Multifamily Pennsylvania St. Paul Federal Bank for
Savings(12) 1993 1,431,763 1,125,000 842,445
005 Office Pennsylvania Shawmut Bank(9) 1993 5,665,620 1,600,000 1,207,197
006 Office/Retail Virginia Nationsbank(9) 1993 5,426,783 2,425,000 2,294,988
007 Single User Minnesota Prudential Insurance,
(Retail) Alpha Petroleum Pension
Fund 1993 4,294,167 2,515,000 1,362,421
008 Multifamily Pennsylvania Nomura/Cargill/Eastdil
Realty(13) 1994 5,261,804 1,950,000 1,612,674
009 Multifamily Pennsylvania Mellon Bank(9) 1995 1,558,308 1,730,000 1,358,884
010 Multifamily Pennsylvania RIVA Financial 1994 1,491,446 800,000 454,856
011 Office Washington, First Union Bank(9) 1995 1,060,532 2,000,000 927,986
D.C.
012 Multifamily Pennsylvania CoreStates Bank(9)(12) 1995 2,999,874 1,825,000 1,272,809
013 Single User California California Federal Bank,
(Commercial) FSB 1995 2,997,375 2,400,000 1,671,695
014 Office Washington, Nomura/Cargill/Eastdil
D.C. Realty(13) 1995 14,702,547 11,000,000 8,546,218
015 Condo/ North Carolina First Bank, South Trust
Multifamily Bank(14) 1995 3,794,708 3,501,000 2,721,661
016 Single User California Mass Mutual, Alpha
(Retail) Petroleum Pension Fund 1995 6,695,368 3,000,000 2,073,470
017 Single User West Virginia Triester Investments(9) 1996 1,655,757 1,900,000 929,280
(Retail)
018 Single User California Emigrant Savings Bank,
(Retail) Walter R. Samuels and
Jay Furman(16) 1996 2,887,362 4,555,000 2,148,205
019 Multifamily Pennsylvania Summit Bancorp(9) 1996 4,851,557 4,600,000 3,756,201
020 Office New Jersey Cargill/Eastdil
Realty(13) 1996 5,977,762 4,100,000 2,799,392
021 Multifamily Pennsylvania Bruin Holdings/Berkeley
Federal Savings Bank 1996 8,158,461 2,700,000 1,518,193
022 Multifamily Pennsylvania FirsTrust FSB 1996 3,269,049 3,250,000 2,284,775
023 Multifamily Pennsylvania Jefferson Bank(8) 1996 606,225 510,000 412,206
024 Multifamily Pennsylvania U.S. Dept. of Housing &
Urban Development 1996 3,477,631 3,300,000 2,528,976
------------- ---------------- -------------
Totals $100,519,616 $ 68,236,000 $49,179,338
============ ================ ============
</TABLE>

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

(1) Consists of the stated, or face value of the obligations plus accrued
interest and penalties and the amount of senior secured interests at
September 30, 1996.

(2) The Company generally obtains appraisals on each of its properties at least
once every three years. Accordingly (with the exception of one appraisal
for property 5, which was completed in July 1993), appraisal dates range
from 1994 to 1996.

(3) Consists of the original cost of the investment to the Company (including
acquisition costs and the amount of any senior lien obligation to which the
property remained subject) plus subsequent advances, but excludes the
proceeds to the Company of the sale of participations or borrower
refinancings.

30
<PAGE> 32

<TABLE>
<CAPTION>
COMPANY'S MATURITY OF LOAN/
PROCEEDS FROM NET INTEREST IN EXPIRATION OF
REFINANCING OR NET CARRIED COST OUTSTANDING LOAN FORBEARANCE
PARTICIPATIONS SOLD INVESTMENT(4) OF INVESTMENT(5) RECEIVABLES(6) AGREEMENT(7)
- ------------------- ------------- ---------------- ---------------- ------------------
<S> <C> <C> <C> <C>
$ 2,570,000(8) $ 2,027,849 $ 2,410,665 $ 5,711,836 12/31/02
575,000(10) 26,005 179,980 865,714 10/31/98
627,000 482,963 694,850 1,882,965 1/1/03
871,000(10) 28,555 226,968 535,763 10/31/98
940,000(10) 267,197 1,086,709 4,825,620 02/07/01
840,000 1,454,988 1,537,546 4,537,883 7/31/98
2,099,000 (736,579) 527,846 2,095,167 12/31/14
934,300 678,374 721,212 4,148,809 07/31/98
654,600 704,284 510,608 664,761 11/1/99
575,000(10) (120,144) 112,467 891,446 9/2/99
660,000(10) 267,986 414,360 375,532 09/30/99
954,000 153,460 747,640 1,731,874 12/2/99
1,975,000(10) (303,305) 302,354 997,375 5/1/01
6,487,000 2,059,218 3,170,843 7,825,020 11/30/98
2,475,000(8) 246,660 356,147 1,365,705 08/25/00
2,375,000(10) (301,550) 428,703 4,295,368 12/31/19
524,000(8) 930,481 961,756 1,122,557 12/31/18(15)
(10)
1,969,000 179,783 782,973 918,362 11/1/98
3,020,000 736,177 900,017 1,644,145 12/29/00
2,562,000(11) 237,392 1,536,729 3,377,762 2/7/01
(10)
2,010,000 (491,807) 516,036 6,148,461(17) 7/1/16(17)
1,250,000(8) 1,034,775 1,060,176 2,019,049 10/31/98(18)
303,000(8) 109,206 110,559 303,225 03/28/01(19)
-- 2,528,976 2,500,624 3,477,631 11/1/22(20)
- ------------------- ------------- ---------------- ----------------
$37,249,900 $12,200,944 $ 21,797,768 $ 61,762,030
================= ============ =============== ================

<FN>
(4) Represents the unrecovered costs of the Company's investment (calculated as
the cash investment made in acquiring the loan plus subsequent advances
less cash received from sale of a participation in or borrower refinancing
of the loan). Negative amounts represent the receipt by the Company of
proceeds from the sale of participations or borrower refinancings in excess
of the Company's investment.

(5) Represents the cost of the investment carried on the books of the Company
after accretion of discount and allocation of gains from the sale of a
participation in or borrower refinancing of the loan. For a discussion of
accretion of discount and allocation of gains, see "Business -- Asset
Acquisition and Resolution: Accounting for Discounted Loans."

(6) Consists of the amount set forth in the column "Outstanding Loan
Receivable" less senior secured interests.

(7) With respect to properties 6, 7, 8, 9, 14 and 19, the date given is for the
maturity of the subordinated note for the residual loan balance received by
the Company in connection with the refinancing. For the remaining
properties, the date given is the expiration date of the related
Forbearance Agreement.

(8) Represents the amount of the senior lien in place on date of acquisition.
</TABLE>

31
<PAGE> 33

(9) Successor by merger to the Seller.

(10) Participation sold to PICO. See "Risk Factors -- Asset Acquisition and
Resolution Considerations: Sales of Participations to Insurance Company"
for a discussion of PICO's right, upon a default, to require the Company to
substitute a performing loan.

(11) Participation sold to Commerce Bank, N.A. The Company has the obligation to
repurchase this participation on or after September 27, 2011 if it is not
repaid in accordance with its terms. See "Business -- Sources of Funds:
Participations."

(12) Seller was a wholly-owned subsidiary of this institution.

(13) Seller was a partnership of these entities.

(14) The positions of these institutions are currently held by Gene M. and Anne
S. Holbrooks, the guarantors thereof, who acquired these positions as part
of the transaction in which the Company made its loan.

(15) The loan acquired consists of a series of notes becoming due yearly through
October 31, 2018. The notes are being paid in accordance with their terms
and, accordingly, a Forbearance Agreement was not required.

(16) Amounts advanced by the Company were used in part to directly repay the
loan of Emigrant Savings Bank; the balance was applied to purchase a note
held by Messrs. Samuels and Furman.

(17) The loan acquired consists of twenty-eight separate mortgage loans on
thirty-two individual condominium units in a single building. Nine of such
loans are due on July 1, 2016, eighteen are due January 1, 2015 and one is
due March 1, 2001.

(18) The senior lienor has the right to sell its interest to the Company on or
after June 30, 2001 for an amount equal to the outstanding balance of such
interest.

(19) Includes a note for $14,948 which is payable to the Company on demand.

(20) Loan maturity date pursuant to a Provisional Workout Arrangement entered
into between borrower and the U.S. Department of Housing and Urban
Development. Borrower is current under these arrangements as of the date of
this Prospectus.

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<PAGE> 34

The following table sets forth the current monthly cash flow from each of
the properties underlying the Company's portfolio loans, the monthly debt
service payable to participants and refinance lenders and the current monthly
payment with respect to the Company's retained interest:

<TABLE>
<CAPTION>
MONTHLY DEBT
SERVICE ON MONTHLY
MONTHLY CASH REFINANCING PAYMENT TO
PROPERTY FLOW FROM OR THE COMPANY'S
NUMBER PROPERTY(1)(2) PARTICIPATIONS(3) INTEREST(2)
- -------- ------------ ------------------ -------------
<S> <C> <C> <C>
001 $ 30,533 $ 17,626 $ 12,907
002 5,964 4,875 1,089
003 7,000 6,058 942
004 8,107 7,280 827
005 12,158 6,825 5,333
006 21,176 8,021 13,155
007 20,400 20,400 --
008 23,971 10,670 13,301
009 19,829 7,359 12,470
010 6,750 4,875 1,875
011 8,000 5,566 2,434
012 15,833 10,317 5,516
013 19,000 15,833 3,167
014 107,218 58,551 48,667
015 29,278 27,330 1,948
016 20,557 19,500 1,057
017 9,068 5,415 3,653
018 24,827(4) 15,998 8,829
019 36,000 25,300 10,700
020 22,667 20,884 1,783
021 16,577 16,331 246
022 25,408 8,075 17,333
023 6,206 2,273 3,933
024 26,777 -- 26,777
------------ ------------------ -------------
$523,304 $325,362 $ 197,942
========== ============= ===========
<FN>
- ---------------

(1) "Cash Flow" as used herein is that amount equal to the operating revenues
from property operations less operating expenses, including real estate and
other taxes pertaining to the property and its operations, and before
depreciation, amortization and capital expenditures.
(2) Except as set forth in note (4), monthly cash flow from each of the
properties has been calculated as the average monthly amount during the
three months ended September 30, 1996.
(3) Monthly debt service consists of required payments of principal, interest
and other regularly recurring charges payable to the holder of the
refinancing loan or participation.
(4) Includes one-fourth of an annual payment of $110,000 received in December of
each year.
</TABLE>

All of the Company's portfolio loans are currently performing in accordance
with the terms set forth in their respective Forbearance Agreements or remainder
interest notes.

33
<PAGE> 35

Accounting for Discounted Loans

The difference between the Company's cost basis in a loan and the sum of
projected cash flows from, and the appraised value of, the underlying property
is accreted into interest income over the estimated life of the loan using a
method which approximates the level interest method. The projected cash flows
from the property are reviewed on a regular basis and changes to the projected
amounts reduce or increase the amounts accreted into interest income over the
remaining life of the loan on a method approximating the level interest method.

The Company records the investments in its loan portfolio at cost, which is
significantly discounted from the face value of, and accrued interest and
penalties on, the notes. This discount totaled $9.8 million, $16.1 million and
$40.0 million at September 30, 1994, 1995 and 1996, respectively. The cost basis
in the various loans is periodically reviewed to determine that it is not
greater than the sum of the projected cash flows and the appraised value of the
underlying properties. If the cost basis were found to be greater, the Company
would provide, through a charge to operations, an appropriate allowance. For the
years ended September 30, 1994, 1995 and 1996, no such provision was required.
See "Risk Factors -- Asset Acquisition and Resolution Considerations: Loss
Reserves."

Gains on the sale of a participation in or refinancing of a portfolio loan
are allocated between the portion of the loan sold or refinanced and the portion
retained based upon the fair value of those respective portions on the date of
such sale or refinancing. The fair value of the loan is the current appraised
value of the property underlying the loan. Any gain recognized on a sale of a
participation or a refinancing is brought into income on the date of such sale
or refinancing.

Competition

Although the asset acquisition and resolution business is intensely
competitive in virtually all of its aspects, the Company's focus on the
acquisition of relatively small troubled commercial real estate loans subject to
complex and/or contentious situations is a niche in which the Company believes
there are relatively few, specialized investors. In the overall market for the
acquisition of real estate obligations, however, there are a substantial number
of competitors (including investment partnerships, financial institutions,
investment companies, public and private mortgage funds and other entities),
many of which possess far greater financial resources than the Company. The
Company's ability to add to its loan portfolio will depend on its success in
obtaining funding for the acquisition of additional mortgages. See "Risk
Factors -- Ability to Generate Funding for Growth." In raising such funds in the
financial capital markets, the Company will have to compete for capital based
largely on the Company's overall financial performance and, more specifically,
the performance of the Company's loan portfolio.

EQUIPMENT LEASING

General

The Company conducts its leasing operations through three separate
corporate divisions: Fidelity Leasing, Inc. ("FLI"), which conducts the
Company's small ticket leasing operations; F.L. Partnership Management, Inc.
("FLPM"), which manages six public leasing partnerships formerly managed by
Fidelity; and FL Financial Services, Inc. ("FLFS"), which provides lease finance
placement and advisory services. The Company's primary focus is on the
development of FLI and its small ticket leasing operation, which has only
recently commenced operations. FLPM's operations will be reduced over the next
several years as partnership assets are sold and cash is distributed back to the
investors. FLPM does not anticipate forming new limited partnerships in the
future. FLFS will continue to operate its lease finance placement and advisory
business which, while profitable, is not expected to constitute a material
source of revenues for the Company.

Strategy

Focus on Small Ticket Leasing. The Company focuses on leasing equipment
costing between $5,000 and $100,000. By so doing, the Company takes advantage
not only of the background and expertise of its leasing management team (which
previously had managed the United States small ticket leasing operations of
Tokai

34
<PAGE> 36

Bank; see "Management -- Other Significant Employees"), but also of the
servicing platform the Company has acquired and developed, which has the
capacity to monitor the large amounts of equipment and related assets involved
in a small-ticket leasing operation. In addition, small ticket items represent a
substantial portion of the equipment sought by small business, a segment of the
end-user market the Company believes is under-served by equipment lessors, banks
and other financial institutions, which affords the Company a niche market with
significant growth potential (see "-- Focus on Leasing to Small Businesses,"
below). Moreover, the small size of a typical transaction relative to the
Company's total lease portfolio reduces the Company's credit risk exposure from
any particular transaction. See "Risk Factors -- General: Credit Risks."

Focus on Vendor Programs, Particularly with Smaller Manufacturers. The
significant majority of equipment leased to end-user customers by the Company
will be purchased from manufacturers or regional distributors with whom the
Company is establishing vendor programs. In so doing, the Company utilizes the
manufacturer's or distributor's sales organization to gain access to the
manufacturer's end-user base without incurring the costs of establishing
independent customer relationships. The vendor relationship will typically
provide for the upgrade, refurbishment and remarketing of equipment purchased
and leased by the Company. Through these relationships, and particularly with
respect to the vendor's involvement in remarketing the equipment, the Company's
profit opportunity from residual sales or re-leasing of equipment is enhanced.
The Company is actively pursuing the establishment of multiple vendor programs
in an effort to reduce its reliance on any one vendor and, thus, to reduce the
risk of tying the success of the Company's leasing operations to the
continuation of a relationship with one (or a small group) of vendors. The
Company has currently established programs with five manufacturers or
distributors. See "-- Small Ticket Leasing," below. The Company emphasizes the
establishment of vendor programs with smaller manufacturers (those likely to
generate $10 million or less annually in equipment leases) and regional
distributors. Historically, the Company's primary competitors, most of whom are
far larger than the Company, target vendors with substantially larger leasing
volumes. As a result, the Company's targeted group of vendors often do not have
a relationship with an equipment finance provider, again offering the Company a
market niche with significant growth potential.

Focus on Leasing to Small Businesses. The Company focuses its marketing
programs and resources on lease programs for small business end-users (generally
those with 500 or fewer employees). Because small business end-users frequently
are unable to provide standardized financial information for credit analysis
(for example, audited financial statements), the Company believes that these
end-users may be perceived by the Company's larger competitors as less desirable
credit risks thereby reducing competition for their business and creating a
niche market the Company believes it can profitably serve. The Company has
acquired and developed credit evaluation and scoring systems (based upon credit
evaluation services provided by Dun & Bradstreet) which it believes
significantly reduce the perceived credit risk (see "Business -- Equipment
Leasing: Small Ticket Leasing"). The Company also believes that small business
end-users, while sensitive to the size of a monthly lease payment, are less
sensitive than large end-users to the interest rate structure of a lease,
allowing the Company to increase its yield by lengthening lease terms to lower
monthly rent. The Company currently offers lease terms from two to five years to
meet the needs of its end-users.

Focus on Full-Payout Leases. The Company seeks to reduce the financial
risk associated with the lease transactions it originates through the use of
full payout leases. The principal benefit from this lease format is the
repayment to the Company during the lease term of its invested capital plus an
amount sufficient to cover its transaction costs and, typically, a return on its
invested capital. The Company seeks to substantially increase this return
through amounts received upon remarketing the equipment or through continued
leasing of the equipment after expiration of the initial lease term. See "Risk
Factors -- Equipment Leasing Considerations: Residuals."

Focus on Providing Service. The Company provides service and support to
its small business customers and vendors by seeking to minimize the time
required to respond to customer applications for lease financing and by
providing sales training programs to its vendors and their sales staff (which it
customizes to their particular needs) regarding the use of lease financing for
marketing purposes to increase a vendor's equipment sales and market share. The
Company has acquired and developed proprietary management systems to assist it
in providing lease quotes and application decisions to its customers, generally
within 24 hours after receipt of a request.

35
<PAGE> 37

Industry Overview

Equipment leasing is a significant factor in the financing of productive
assets by United States businesses. According to the ELA, a leading industry
trade association, of the estimated $571.1 billion of such capital expenditures
in 1995 (up from $296.2 billion in 1986), $160.7 billion (up from $85.0 billion
in 1986) represented lease financing. The ELA further estimates that total
capital expenditures will increase to $582.1 billion in 1996, of which $169.1
billion (or 29%) will be acquired through leasing, a leasing growth rate of
5.6%, slightly less than the average annual rate of 6.5%.

The Company's targeted market is businesses with less than 500 employees
and leases involving equipment with a cost of under $100,000. According to
studies conducted by the U.S. Small Business Administration, in 1991 there were
5.7 million such businesses and an additional 8.9 million sole proprietorships.
A 1995 survey conducted by the Federal Reserve Board found that, in 1993, 9.2%
of all small businesses used equipment leasing services (not including vehicle
leases), 14.0% used credit lines or loans to acquire equipment and 7.5% obtained
one or more leases from a leasing company. Moreover, in a 1995 survey of its
membership, the ELA found that 30% of all new leasing volume (by dollar amount)
was for equipment costing under $100,000, while 47.8% of all new leasing volume
(by number of transactions) was for equipment costing under $100,000.

According to the ELA, approximately 80% of all United States businesses
lease some portion of their equipment. Leasing enables a company to obtain
equipment it needs, while preserving cash flow and often receiving favorable
accounting and tax treatment. Leasing, particularly with shorter term leases,
also provides a lessee with greater flexibility than ownership in the event it
outgrows its equipment or requires equipment upgrades. The Company believes that
small businesses are becoming more aware of the economic benefits offered by
equipment leasing, and that small business leasing will therefore become an
increasingly important segment of the leasing market.

Small Ticket Leasing

The Company offers full pay-out leases with options, exercisable by the
lessee at the end of the lease term, either to purchase the equipment at fair
market value, to purchase the equipment for a fixed price negotiated at the time
the lease is signed, or to continue as a lessee on a month-to-month basis. A
"full pay-out lease" is a lease under which the non-cancelable rental payments
due during the initial lease term are at least sufficient to recover the
purchase price of the equipment under the lease and related acquisition fees.
The Company's leases have a provision which requires the lessee to make all
lease payments under all circumstances. The leases are also net leases,
requiring the lessee to pay (in addition to rent) any other expenses associated
with the use of equipment, such as maintenance, casualty and liability
insurance, sales or use taxes and personal property taxes. The Company also
offers lease terms from two to five years and will consider other lease terms in
appropriate circumstances.

Equipment types initially being financed include telecommunication systems,
medical diagnostic and treatment equipment, document processing and storage
equipment, small manufacturing machines and office furniture. The Company will
vary the equipment categories in which it is willing to lease based upon the
demands of its small business customers.

The Company has developed credit evaluation and lease administration
systems based upon systems the Company acquired from Fidelity. The credit
evaluation system, known as the "Small Business Credit Scoring System," is
intended to respond to the inability of small businesses to supply standardized
financial information for credit analysis (for example, audited financial
statements). The system operates by assigning point amounts, or "scores," to
various factors (such as business longevity, type of business, payment history,
bank account balances and credit ratings) deemed relevant by the Company in
determining whether an end-user is a creditworthy lessee. The scoring system
declines approval of end-users with low scores, approves end-users with high
scores and refers mid-range scores to credit analysts for further consideration
and decision. Information is obtained from the end-user, from reports by
standard credit reporting firms and from reports provided by consumer credit
bureaus. The credit scoring system is also based upon industry data and the past
experience of the Company and will be reviewed and modified as required in
response to actual portfolio

36
<PAGE> 38

performance. Financial statements may be required for larger transactions (in
the $30,000 to $100,000 range) as a complement to the scoring system.

The Company oversees its leasing program through a lease administration and
management system, known as the "Fidelity Asset Tracking System." The system
currently administers 520 leases with respect to more than 12,500 pieces of
equipment for six public leasing partnerships managed by FLPM and has the
capacity to administer leases with respect to more than 200,000 pieces of
equipment. The system controls invoicing, collection, sales and property taxes
and financial and other reporting to management (including reports regarding
regular payments, payment shortages, advance payments, security deposits,
insurance payments and late or finance charges). The Company will supplement the
system with an internal audit department (which will evaluate the safeguarding
of assets, reliability of financial information and compliance with the
Company's credit policies) and a collection department.

The Company is marketing its leasing services primarily through the
establishment of vendor programs. See "Business -- Equipment Leasing: Strategy:
Focus on Vendor Programs, Particularly with Smaller Manufacturers." The Company
has currently entered into vendor program relationships with five vendors:
Minolta Corporation (copiers), Celsis Incorporated (microbial testing systems),
American Marabacom Communications (Teleco) (telephone systems), CSi (test
equipment) and ATI Communications (telephone systems). Under a typical vendor
program, the Company will work with the vendor and the lessee to structure the
lease, finance the lease, purchase the related equipment and administer the
lease, including providing all billing and collection services (except for
private-label leasing, referred to below). At the end of the initial lease term,
the Company and the vendor will typically coordinate the re-marketing of the
equipment. The Company seeks to establish vendor relationships by (i) obtaining
manufacturers' endorsements of the Company's finance programs, (ii) offering
inventory financing credit lines to a manufacturer's vendors, (iii) developing
customized sales training programs to offer to vendors and (iv) assisting the
manufacturers and their vendors in establishing a sales package including the
lease financing provided by the Company. The Company anticipates that it will
also compete by establishing private-label leasing programs with its vendors.
Private-label leasing involves the lease by a vendor of its own equipment on a
lease form bearing the vendor's name as lessor (but otherwise identical to the
Company's lease form), the sale of the lease and equipment to the Company, and
the provision of basic administrative services by the vendor (such as billing
and collecting rent). The Company will provide assistance, particularized rental
payment structures and other customized lease terms, remarketing, customized
invoicing and management information reports. The Company also seeks to develop
programs marketing directly to end-user groups, primarily through small business
affinity groups or associations, participation in trade shows and conventions,
and media advertising.

It is anticipated that a significant portion of the Company's revenues from
leasing operations will be derived from residuals. See "Risk Factors --
Equipment Leasing Considerations: Residuals." The Company anticipates that
residuals will principally involve the original end-users; however, equipment
not sold or re-leased to end-users will be disposed of in the secondary market.
While residual realization is generally higher with original end-users than in
the secondary market, the secondary market (essentially, networks of
distributors and dealers in various equipment categories) is well developed in
the product categories the Company intends to pursue and transactions in these
product categories have historically resulted in residual recoveries, on
average, equal to the book value of the equipment. Equipment reacquired by the
Company prior to lease termination (through lease default or otherwise) will be
sold in the secondary market.

Partnership Management

The Company acts as the general partner and manager of six public limited
partnerships formed between 1985 and 1990 with total assets at September 30,
1996 of $39.9 million, including $24.2 million (book value) of equipment with an
original cost of $71.0 million. A seventh partnership wound up its operations in
the first quarter of fiscal 1996. The partnerships lease computers and related
peripheral equipment to investment grade, middle market, capital intensive
companies. The principal stated objective of each of the limited partnerships is
to generate leasing revenues for distribution to the investors in the
partnerships.

37
<PAGE> 39

For its services as general partner, the Company receives management fees,
an interest in partnership cash distributions and a reimbursement of specified
expenses related to administration of the partnerships (including costs of
non-executive personnel, legal, accounting and third-party contractor fees and
costs, and costs of equipment used in a partnership's behalf). Management fees
range from 3% to 6% of gross rents except that, if leases are full payout
leases, management fees range from 1% to 3% of gross rents. In four of the
partnerships, management fees are subordinated to the receipt by limited
partners of a cumulative annual cash distribution of 11% (two partnerships) or
12% (two partnerships) of the limited partners' aggregate investment. The
Company's interest, as general partner, in cash distributions from the
partnerships is 5% (one partnership), 3.5% (one partnership) and 1% (four
partnerships).

Finance Placement and Advisory

The Company also operates a lease finance placement and advisory business
which focuses on two related types of leasing transactions: the origination of
leases by others and the identification of third-party lease funding sources.
Lease transactions generated by the division are generally full payout leases.
The Company generally receives between 1% and 4% of the equipment cost at the
time the transaction is closed for its services in arranging a transaction. In
some of the transactions it generates, the Company also enters into a
remarketing agreement that entitles it to fees upon residual sale. During fiscal
1996, lease finance and placement generated revenues of $650,000.

Competition

The Company believes that, although the small ticket leasing business has
experienced substantial consolidation in the past few years, the business of
equipment leasing remains highly competitive. The Company believes, however,
that small ticket leasing, to be viable, requires the financing and monitoring
of large amounts of equipment and related assets. Because of the complexity and
cost of developing and maintaining the platforms and vendor programs to handle
such high volumes, the Company believes that there are substantial barriers to
others entering into this business. Accordingly, the Company believes that its
principal competitors are and will be primarily major financial institutions and
their affiliates. The Company also believes that the scale on which these
competitors generally operate inhibits their attention to the needs of the
Company's targeted market of small manufacturers and regional distributors and
provides the Company with an under-served market niche.

ENERGY OPERATIONS

General

The Company produces natural gas and, to a lesser extent, oil from
locations principally in Ohio, Pennsylvania and New York. At September 30, 1996,
the Company had (either directly or through partnerships and joint ventures
managed by it) interests in 769 wells (of which the Company operates 579 wells),
310 miles of natural gas pipelines and 66,000 acres of mineral rights. Natural
gas produced from wells operated by the Company is collected in gas gathering
pipeline systems owned by partnerships managed by the Company (and in which the
Company also has an interest) and by systems directly owned by the Company, and
is sold to a number of customers, such as gas brokers and local utilities, under
a variety of contractual arrangements. Oil produced from wells operated by the
Company is sold at the well site to regional oil refining companies at the
prevailing spot price for Appalachian crude oil.

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<PAGE> 40
Well Operations

The following table sets forth information as of September 30, 1996
regarding productive oil and gas wells operated by the Company for the
partnerships it manages as well as for its own account both in gross and net to
the Company's interest:
<TABLE>
<CAPTION>
NUMBER OF PRODUCTIVE
WELLS
-----------------------
GROSS(1) NET(1)
-------- ------
<S> <C> <C>
Oil Wells........................................... 186 38
Gas Wells........................................... 583 397
--- ---
Total............................................. 769 435
=== ===
<FN>
- ---------------

(1) Includes the Company's equity interest in wells owned by 52 partnerships and
joint ventures. Does not include royalty or overriding interests held by the
Company.
</TABLE>

The following table sets forth net quantities of oil and natural gas
produced, average sales prices, and average production (lifting) costs per
equivalent unit of production, for the periods indicated, including the
Company's equity interests in the production of 52 partnerships and joint
ventures, for the periods indicated.

<TABLE>
<CAPTION>
PRODUCTION AVERAGE SALES PRICE AVERAGE LIFTING COST
------------------------ ------------------- PER EQUIVALENT
FISCAL YEAR OIL (BBLS) GAS (MCF) PER BBL PER MCF MCF(1)
- ----------- ---------- --------- ------- ------- --------------------
<S> <C> <C> <C> <C> <C>
1996 33,862 1,165,477 $18.53 $2.34 $ 1.04
1995 36,420 1,198,245 $16.74 $2.31 $ 1.06
1994 34,002 1,161,685 $15.74 $2.45 $ 1.00
1993 30,788 1,178,727 $18.64 $2.39 $ 1.08
<FN>
- ---------------

(1) Oil production is converted to mcf equivalents at the rate of six mcf per
barrel.
</TABLE>

Neither the Company nor the partnerships and joint ventures it manages are
obligated to provide any fixed quantities of oil or gas in the future under
existing contracts.

Exploration and Development

The following table sets forth information with respect to the number of
wells completed in Ohio and New York (the only areas in which Company drilling
activities occurred) at any time during fiscal years 1993, 1994, 1995, and 1996,
regardless of when drilling was initiated.

<TABLE>
<CAPTION>
EXPLORATORY WELLS DEVELOPMENT WELLS
-------------------------------- ---------------------------------
PRODUCTIVE DRY PRODUCTIVE DRY
------------- -------------- -------------- --------------
GROSS NET GROSS NET GROSS NET GROSS NET
----- --- ----- ---- ----- ---- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 3.0 .52 1.0 .29 2.0 1.50 -- --
1995 3.0 .36 2.0 .36 1.0 .87 2.0 1.75
1994 2.0 .18 2.0 1.18 -- -- -- --
1993 -- -- -- -- -- -- -- --
</TABLE>
All drilling has been on acreage held by the Company. The Company does not
own its own drilling equipment; rather, it acts as a general contractor for well
operations and subcontracts drilling and certain other work to third parties.

Oil and Gas Reserve Information

An evaluation of the Company's estimated proved developed oil and gas
reserves as of September 30, 1996, was verified by E.E. Templeton & Associates,
Inc., an independent petroleum engineering firm. Such

39
<PAGE> 41

study showed, subject to the qualifications and reservations therein set forth,
reserves of 12.9 million mcf of gas and 310,000 barrels of oil at September 30,
1996. See Note 13 to the Consolidated Financial Statements.

The following table sets forth information with respect to the Company's
developed and undeveloped oil and gas acreage as of September 30, 1996. The
information in this table includes the Company's equity interest in acreage
owned by 52 partnerships and joint ventures.

<TABLE>
<CAPTION>
UNDEVELOPED
DEVELOPED ACREAGE ACREAGE
----------------- -----------------
GROSS NET GROSS NET
------ ------ ------ ------
<S> <C> <C> <C> <C>
Arkansas................................................ 2,560 403 -- --
Kansas.................................................. 160 20 -- --
Louisiana............................................... 1,819 206 -- --
Mississippi............................................. 40 3 -- --
New York................................................ 12,861 10,738 14,599 13,558
Ohio.................................................... 34,961 28,111 11,335 10,296
Oklahoma................................................ 4,243 635 -- --
Pennsylvania............................................ 2,365 1,742 -- --
Texas................................................... 4,520 209 -- --
------ ------ ------ ------
63,529 42,067 25,934 23,854
====== ====== ====== ======
</TABLE>

The terms of the oil and gas leases held by the Company's managed
partnerships and by the Company for its own account vary, depending upon the
location of the leased premises and the minimum remaining terms of undeveloped
leases, from less than one year to five years. Rentals of approximately $7,600
were paid in fiscal 1996 to maintain leases on such acreage in force.

The Company believes that the partnership, joint venture and Company
properties have satisfactory title. The developed oil and gas properties are
subject to customary royalty interests generally contracted for in connection
with the acquisition of the properties, burdens incident to operating
agreements, current taxes and easements and restrictions (collectively,
"Burdens"). Presently, the partnerships and the Company are current with respect
to all such Burdens.

At September 30, 1996, the Company had no individual interests in any oil
and gas property that accounted for more than 10% of the Company's proved
developed oil and gas reserves, including the Company's interest in reserves
owned by 52 partnerships and joint ventures.

Pipeline Operation

The Company operates, on behalf of three limited partnerships of which it
is both a general and limited partner (in which it owns 13%, 46% and 22%
interests), and for its own account, various gas gathering pipeline systems
totaling approximately 310 miles in length. Such pipeline systems are located in
Ohio, New York and Pennsylvania.

Well Services

The Company provides a variety of well services to wells of which it is the
operator and to wells operated by independent third party operators. These
services include well operations, petroleum engineering, well maintenance and
well workover and are provided at rates in conformity with general industry
standards.

Sources and Availability of Raw Materials

The Company contracts for drilling rigs and purchases tubular goods
necessary for the drilling and completion of wells from a substantial number of
drillers and suppliers, none of which supplies a significant portion of the
Company's annual needs. During fiscal 1995 and fiscal 1996 to date, the Company
faced no

40
<PAGE> 42

shortage of such goods and services. The duration of the current supply and
demand situation cannot be predicted with any degree of certainty due to
numerous factors affecting the oil and gas industry, including selling prices,
demand for oil and gas, and governmental regulations.

Major Customers

The Company's natural gas is sold under contract to various purchasers. For
the year ended September 30, 1996, gas sales to two purchasers accounted for 13%
and 29% of the Company's total production revenues. Gas sales to one purchaser
individually accounted for approximately 16% and 15% of total revenues from
energy production for fiscal years 1994 and 1995, respectively.

Competition

The oil and gas business is intensely competitive in all of its aspects.
The oil and gas industry also competes with other industries in supplying the
energy and fuel requirements of industrial, commercial and individual customers.
Domestic oil and gas sales are also subject to competition from foreign sources.
Moreover, competition is intense for the acquisition of leases considered
favorable for the development of oil and gas in commercial quantities. The
Company's competitors include other independent oil and gas companies,
individual proprietors and partnerships. Many of these entities possess greater
financial resources than the Company. While it is impossible for the Company to
accurately determine its comparative industry position with respect to its
provision of products and services, the Company does not consider its oil and
gas operations to be a significant factor in the industry.

Markets

The availability of a ready market for oil and gas produced by the Company,
and the price obtained therefor, will depend upon numerous factors beyond the
Company's control including the extent of domestic production, import of foreign
natural gas and/or oil, political instability in oil and gas producing countries
and regions, market demands, the effect of federal regulation on the sale of
natural gas and/or oil in interstate commerce, other governmental regulation of
the production and transportation of natural gas and/or oil and the proximity,
availability and capacity of pipelines and other required facilities. Currently,
the supply of both crude oil and natural gas is more than sufficient to meet
projected demand in the United States. These conditions have had, and may
continue to have, a negative impact on the Company through depressed prices for
its oil and gas reserves.

Governmental Regulation

The exploration, production and sale of oil and natural gas are subject to
numerous state and federal laws and regulations. Compliance with the laws and
regulations affecting the oil and gas industry generally increases the Company's
costs of doing business and consequently affects its profitability. Inasmuch as
such regulations are frequently changing, the Company is unable to predict the
future cost or impact of complying with such regulations. The Company is not
aware of any pending or threatened matter involving a claim that it has violated
environmental regulations which would have a material effect on its operations
or financial position.

SOURCES OF FUNDS

Historically, the Company has relied upon internally generated funds to
finance its growth. Since 1992, internally generated funds have been augmented
by refinancings of the Company's portfolio loans by borrowers. See
"Business -- Asset Acquisition and Resolution: Sale of Participations and
Refinancings." The Company has also obtained funds by the issuance, in May 1994,
of an $8 million principal amount 9.5% Senior Note due 2004 to PICO, by the
sale, in fiscal years 1995 and 1996, of $12 million of participations in the
Company's portfolio loans to PICO and by the sale, in fiscal 1996, of a $2
million participation in a portfolio loan to Commerce Bank, N.A. ("Commerce").
In addition, the Company has entered into an initial

41
<PAGE> 43

$20 million credit facility for its equipment leasing operations. See "Risk
Factors -- General: Ability to Generate Funding for Growth."

The Senior Note. The Senior Note is secured by substantially all of the
Company's oil and gas properties and nine of the Company's portfolio loans.
Under the agreement pursuant to which the Senior Note was sold, the Company may
not, without the holder's consent: (i) sell, lease or dispose of all or
substantially all of the Company's assets; (ii) merge or consolidate with any
entity other than a Company affiliate, unless the entity assumes and complies
with the covenants in the note agreement; (iii) incur debt senior to the Senior
Note or debt secured by any assets pledged as security for the Senior Note; (iv)
pay dividends on Common Stock where such dividends, together with any other
dividends previously paid in the same fiscal year, are more than the Company's
net income (before extraordinary gain or income items but after extraordinary
deduction or loss items) for the immediately preceding fiscal year; and (v)
issue any class of stock senior to the Common Stock. The Company also agreed to
(a) maintain a debt to equity ratio of not more than 1.5 to 1; (b) maintain a
ratio of operating cash flow to interest due on the Senior Note of not less than
1.5 to 1; (c) maintain the value of the assets pledged as security for the
Senior Note at 170% of the Senior Note's outstanding principal balance; and (d)
use its best efforts to cause the nomination of one person designated by the
Senior Noteholder to the Company's board of directors and the investment
committee thereof. John R. Hart, a director of the Company and a member of the
investment committee of the board of directors, is the person currently
designated. See "Management -- Directors and Executive Officers." In connection
with the issuance of the Senior Note, the Company granted the Senior Noteholder
warrants to purchase 449,440 shares of Common Stock. See "Description of Capital
Stock -- Warrants." As of the date of this Prospectus, the Company is in
compliance with all of its covenants under the Senior Note.

Participations. In fiscal years 1994 and 1995, PICO provided refinancing
of $12 million with respect to the Company's portfolio loans through the
purchase of participation interests in such loans. See "Business -- Asset
Acquisition and Resolution: Sale of Participations and Refinancings." If a
borrower defaults in the payment of debt service on any of these participations,
the Company is required to replace the defaulted obligation with a performing
obligation. See "Risk Factors -- Asset Acquisition and Resolution
Considerations: Sales of Participations to Insurance Company." The Company
receives an annual mortgage servicing fee of 0.25% of the principal amount of
any participations sold to PICO. In connection with these financing
arrangements, the Company has issued to PICO warrants to purchase 533,710 shares
of Common Stock. For a description of the terms of such warrants, see
"Description of Capital Stock -- Warrants."

In fiscal 1996, the Company sold a $2 million participation in a portfolio
loan to Commerce. If the amount of the participation has not been repaid to
Commerce before September 27, 2011, the Company is required to repurchase the
participation for a price equal to the unpaid principal balance of the
participation plus accrued interest. The Company receives no servicing fee in
connection with the participation. Commerce was not granted any warrants to
purchase Common Stock.

Lease Financing Credit Facility. The Company entered into an initial $20
million revolving credit facility with term loan availability with CoreStates
Bank on November 6, 1996. The facility has the following principal terms: (i)
the loans will be secured by a first lien on the equipment leases being financed
(and on the underlying equipment), a guaranty by the Company and a pledge of the
capital stock of FLI; (ii) revolving credit loans may be converted to term loans
(with terms of 18, 24 or 36 months), provided that term loans must be in
increments of $2 million and no more than five term loans may be outstanding at
any time; (iii) FLI will be required to maintain a debt (excluding non-recourse
debt) to "worth" ratio of 4.5:1, a minimum net worth equal to $5 million plus
75% of FLI's net income (except that, if FLI has a minimum net worth of $2
million, FLI may utilize up to $1.5 million of the facility without meeting the
general minimum net worth requirement), and specified ratios of cash flow to the
sum of debt service plus 25% of outstanding obligations; and (iv) the Company
will be required to maintain minimum shareholders' equity of $24 million
following this offering.

42
<PAGE> 44

OFFICE PROPERTY

The Company's executive office and headquarters for asset acquisition and
resolution operations is in Philadelphia, and is leased under an agreement
providing for rents of $49,600 per year through May 2000. See
"Management -- Certain Relationships and Related Transactions." The Company's
equipment leasing headquarters is located in Ambler, Pennsylvania, and is leased
under agreements providing for rents of $125,000 per year through November 2000.
The Company owns a 9,600 square foot office building and related land in Akron,
Ohio, housing its energy and accounting operations. The Company also maintains
two energy field offices in Ohio and New York and an equipment lease brokerage
office in California. Rents paid for fiscal 1996 for these offices totalled
$188,900.

EMPLOYEES

As of September 30, 1996, the Company employed 65 persons.

LITIGATION

The Company is party to various routine legal proceedings arising out of
the ordinary course of its business. Management believes that none of these
actions, individually or in the aggregate, will have a material adverse effect
on the financial condition or operations of the Company.

43
<PAGE> 45

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following sets forth certain information regarding the directors and
executive officers of the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ------------------------------------------ --- ----------------------------------------
<S> <C> <C>
Edward E. Cohen(1)........................ 57 Chairman of the Board of Directors,
President, Chief Executive Officer and
Director
Michael L. Staines(2)..................... 47 Senior Vice President, Secretary and
Director
Freddie M. Kotek.......................... 40 Senior Vice President -- Leasing
Scott F. Schaeffer........................ 34 Senior Vice President -- Real Estate
Nancy J. McGurk........................... 40 Vice President -- Finance and Treasurer
Carlos C. Campbell(1)..................... 58 Director
John R. Hart(3)........................... 36 Director
Andrew M. Lubin(3)........................ 49 Director
Alan D. Schreiber, M.D.(3)................ 54 Director
John S. White(2).......................... 56 Director
</TABLE>

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

(1) Term as director expires in 1999.

(2) Term as director expires in 1997.

(3) Term as director expires in 1998.

Edward E. Cohen has been Chairman of the Board of Directors of the Company
since 1990, its Chief Executive Officer and a director since 1988 and its
President since 1995. He is Chairman of the Board and a director of Bryn Mawr
Resources, Inc. (see "Security Ownership of Certain Beneficial Owners and
Management"), and Chairman of the Board of Directors and a director of BCMI, a
real estate construction and management company. See "Management -- Certain
Relationships and Related Transactions." Since 1981, Mr. Cohen has been Chairman
of the Executive Committee and a director of JeffBanks, Inc. (a bank holding
company with total assets of approximately $1 billion). From 1969 through 1989,
Mr. Cohen was Chairman of the Board or Chairman of the Executive Committee of
State National Bank of Maryland (now First Union Bank of Maryland) and/or its
holding company. Mr. Cohen is the father of Daniel G. Cohen. See
"Management -- Other Significant Employees."

Michael L. Staines has been Senior Vice President, Secretary and a director
of the Company since 1989.

Freddie M. Kotek has been a Senior Vice President of the Company since 1995
and an Executive Vice President of Resource Properties, Inc. (a wholly owned
subsidiary of the Company) since 1993. Prior thereto, he was a First Vice
President of Royal Alliance Associates (an investment banking and brokerage
firm) from 1991 to 1993, and a Senior Vice President and Chief Financial Officer
of Paine Webber Properties (a real estate investment firm) from 1990 to 1991.

Scott F. Schaeffer has been a Senior Vice President of the Company since
1995 and President of Resource Properties, Inc. (a wholly owned subsidiary of
the Company) since 1992. From 1992 to 1995 he was also Vice President -- Real
Estate of the Company. Prior thereto, from 1985 to 1992 Mr. Schaeffer was Vice
President of the Dover Group, Ltd. (a real estate investment firm).

Nancy J. McGurk has been Vice President -- Finance of the Company since
1992 and Treasurer and Chief Accounting Officer of the Company since 1984.

44
<PAGE> 46

Carlos C. Campbell has been a director of the Company since 1990. He is
President of C.C. Campbell and Company (a management consulting firm), Vice
Chairman of the Board of Directors of Computer Dynamics, Inc. (a computer
services corporation) and a director of Sensys, Inc. (a telecommunication/asset
management corporation).

John R. Hart has been a director of the Company since 1994. Mr. Hart has
been Chief Executive Officer of Quaker Holdings, Ltd. (an investment firm) since
1991, and President and Director of PICO since 1995 and 1993, respectively.
Prior thereto, from 1984 to 1991 he was a principal of Detweiler, Ryan, & Co.,
Inc. (an investment firm).

Andrew M. Lubin has been a director of the Company since 1994. He has been
President of Delaware Financial Group, Inc. (a private investment firm) since
1984.

Alan D. Schreiber, M.D. has been a director of the Company since 1994. Dr.
Schreiber has been Chief Scientific Officer of CorBec Pharmaceuticals, Inc. (of
which he was a founder) since 1993. He has been a Professor of Medicine and
Assistant Dean for Research and Research Training at the University of
Pennsylvania School of Medicine since 1973.

John S. White has been a director of the Company since 1993. He has been
Chairman of the Board and Chief Executive Officer of DCC Securities Corporation
(a securities brokerage firm) since 1990.

OTHER SIGNIFICANT EMPLOYEES

The following sets forth certain information regarding other significant
employees of the Company:

Abraham Bernstein, age 63, is the Chairman, Chief Executive Officer and
President of FLI, a subsidiary of the Company. From 1982 to 1993, he was the
President and Chief Executive Officer of Tokai Financial Services, Inc., the
equipment leasing subsidiary of Tokai Bank of Japan. From 1993 to 1995, the
contractual period during which Mr. Bernstein's restrictive covenant with Tokai
was in effect, Mr. Bernstein was a Managing Director of the Rittenhouse
Consulting Group (a financial consulting company).

Crit DeMent, age 43, is the Executive Vice President of FLI. Prior thereto,
from 1983 through 1996 he was Vice President -- Marketing and Leasing
Associate -- Senior Account Representative for Tokai Financial Services, Inc.

Mark A. Mayper, age 42, is the President of FLFS, a subsidiary of the
Company, and was Senior Vice President of its predecessor, heading its lease
syndication business, since 1987. From 1984 to 1987, he was legal counsel and
Assistant Vice President of FNS Corporate Funding, a subsidiary of First
Nationwide Savings.

Joseph T. Ellis, Jr., age 35, is the Director of Vendor Services for FLI.
Prior thereto, from 1985 through February 1996, he held various marketing and
sales positions with Tokai Financial Services, Inc., most recently as the
Director of Program Management and Strategic Market Development.

Jeffrey C. Simmons, age 38, has been Vice President -- Energy of the
Company since 1994. Prior thereto, from 1988 to 1994 he was Director of Well
Services of the Company.

Daniel G. Cohen, age 27, is Vice President -- Financial Services of the
Company. Prior to joining the Company in November 1995, Mr. Cohen was
principally engaged in graduate studies at the University of Pennsylvania,
following his graduation from the University of Chicago in 1991. Mr. Cohen is
the son of Edward E. Cohen. See "Management -- Directors and Executive
Officers."

EXECUTIVE OFFICER COMPENSATION

The following tables set forth certain information concerning the
compensation paid or accrued during each of the last three fiscal years by the
Company and its subsidiaries to the Company's Chief Executive Officer and each
of the Company's other most highly compensated executive officers whose
aggregate salary and bonus (including amounts of salary and bonus foregone to
receive non-cash compensation) exceeded $100,000.

45
<PAGE> 47

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------- ------------------------------------
RESTRICTED SECURITIES
NAME AND PRINCIPAL STOCK UNDERLYING LTIP ALL
POSITION YEAR SALARY BONUS OTHER AWARD(1) OPTIONS(2) PAYOUTS(3) OTHER(4)
- ------------------------ ---- -------- -------- ----- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Edward E. Cohen 1996 $250,000 $135,000 $ 0 $ 31,990 95,506 $0 $9,607
Chairman & Chief 1995 210,000 130,000 0 19,824 0 0 0
Executive Officer 1994 97,500 59,000 0 13,966 0 0 0
Freddie M. Kotek 1996 145,000 30,000 0 31,990 39,326 0 5,600
Senior Vice President 1995 145,000 45,000 0 19,824 0 0 3,760
Scott F. Schaeffer 1996 145,000 50,000 0 31,990 22,472 0 3,963
Senior Vice President 1995 145,000 45,000 0 19,824 0 0 3,058
Michael L. Staines 1996 120,000 12,500 0 28,420 11,236 0 0
Senior Vice President & 1995 112,500 7,500 0 16,023 0 0 0
Secretary 1994 105,000 0 0 9,368 0 0 0
<FN>

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

(1) Reflects shares awarded under the Company's Employee Stock Ownership Plan,
valued at the closing price of the Company's Common Stock at September 30 of
each year ($12.75, $8.40 and $5.50 per share for fiscal years 1996, 1995,
and 1994, respectively). For purposes of this table, all shares are assumed
to be fully vested. Messrs. Cohen and Staines were 100% vested as of
September 30, 1996. Shares awarded to Messrs. Schaeffer and Kotek were
vested 40% and 20%, respectively, as of such date.

(2) Total options held at September 30, 1996, for Messrs. Cohen, Kotek,
Schaeffer and Staines were 179,776, 39,326, 50,562, and 39,326,
respectively.

(3) Except for the Company's Employee Stock Ownership Plan and the stock option
plans, reported elsewhere in this table, the Company does not have long-term
incentive plans or pension or profit-sharing plans.

(4) All such amounts are matching payments made by the Company under the
Company's 401(k) plan.
</TABLE>

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

<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES FY-END FY-END
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME AND PRINCIPAL POSITION ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE(1)
- ------------------------------------ ----------- -------- -------------- ----------------
<S> <C> <C> <C> <C>
Edward E. Cohen..................... 0 $0 63,203/116,573 $613,701/240,280
Chairman & Chief
Executive Officer
Freddie M. Kotek.................... 0 0 0/39,326 0/179,327
Senior Vice President
Scott F. Schaeffer.................. 0 0 21,068/29,494 210,464/172,627
Senior Vice President
Michael L. Staines.................. 0 0 21,068/18,258 210,464/121,391
Senior Vice President &
Secretary
<FN>

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

(1) Value is calculated by subtracting the total exercise price from the fair
market value of the securities underlying the options at September 30, 1996.
</TABLE>

46
<PAGE> 48

During the first quarter of fiscal 1996, the Company issued incentive stock
options to the following persons in the following amounts: Mr. E.
Cohen -- 95,506 shares; Mr. Staines -- 11,236 shares; Mr. Kotek -- 39,326
shares; Mr. Schaeffer -- 22,472 shares; and Ms. McGurk -- 11,236 shares.
Twenty-five percent of the options become exercisable on December 18, 1996, with
additional 25% amounts becoming exercisable on each December 18 thereafter
through December 18, 1999, when all such options are exercisable. The options
expire in 2005 and are exercisable at a price of $8.19 per share (the market
price at the date of grant) except that Mr. E. Cohen's options expire in 2000
and are exercisable at a price of $9.01 per share. For a description of certain
options issued during 1996 with respect to the common stock of a subsidiary, see
"Management -- Management Arrangements Regarding Leasing Operations."

DIRECTOR COMPENSATION

Each director who does not serve as an officer of the Company is paid a
retainer of $500 per month. Each non-employee director who is a chairman of a
committee of the Board of Directors is paid an additional retainer of $500 per
month. Each non-employee director who is a member of a committee of the Board of
Directors, but not its chairman, is paid $500 per meeting. A total of $61,000
was paid to five directors during fiscal 1996 for attendance at Board and
committee meetings.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Until April 1996, Mr. Cohen was of counsel to Ledgewood Law Firm, P.C., a
law firm which provides legal services to the Company. Such firm was paid
$402,000 during fiscal 1996 and $562,000 during fiscal 1995 for legal services,
primarily related to the purchase and restructuring of real estate mortgages.
Such firm was paid $464,000 during fiscal 1994, at which time Mr. Cohen was a
principal of such firm, for legal services primarily related to the purchase of
real estate mortgages and the placement of the Senior Note.

The Company holds commercial real estate loans of borrowers whose
underlying properties are managed by BCMI. The Company has advanced funds to
certain of these borrowers for improvements on their properties which have been
performed by BCMI. In five instances, the President of BCMI has also acted as
the general partner of the borrower. Mr. Cohen is Chairman of the Board of
Directors and a minority shareholder (approximately 8%) of BCMI. BCMI has agreed
to subordinate its management fees to receipt by the Company of minimum required
debt service payments under the obligations held by the Company.

The Company also maintains normal banking and borrowing relationships with
Jefferson Bank, a subsidiary of JeffBanks, Inc. Mr. Cohen and his spouse are
officers and directors of JeffBanks, Inc. (and his spouse is Chairman and Chief
Executive Officer of Jefferson Bank and JeffBanks, Inc.), and are principal
shareholders thereof. The Company borrowed $2.5 million from Jefferson Bank in
the first quarter of fiscal 1995 under terms which the Company believes were no
less favorable to it than those available from independent third parties. The
loan was repaid in fiscal 1995. The Company anticipates that it may effect other
borrowings in the future from Jefferson Bank; it anticipates that any such
borrowings will be on terms similar to those which could be obtained by an
unrelated borrower.

In December 1994, the Company acquired a loan with a face amount of
$3,000,000 from California Federal Bank, FSB, at a cost of $1,671,695. The loan
is secured by a property owned by a borrower whose general partner is the
President of BCMI. Mr. Cohen is a limited partner in such partnership. The
borrower refinanced the Company's loan in September 1995, applying $1,975,000 of
the proceeds to the repayment of the Company's loan. As a result, the Company
obtained a gain on its investment of $303,305, while maintaining a continuing
interest in the loan of approximately $1 million. In August 1994, the Company
acquired from third parties a loan, in the original principal amount of
$3,550,000 (and with a then-outstanding balance of $4,388,644), for an
investment of $1,612,674. The borrower is a limited partnership of which Mr.
Lubin, a director of the Company, is currently the general partner. Mr. Lubin
assumed such position after the Company's acquisition of the loan. Previously,
the general partner had been the President of BCMI. The borrower subsequently
refinanced the loan with another third party, and repaid the Company $934,300,
leaving the Company with a net investment of $419,039. In April 1996, the
Company provided $114,948 of financing to a partnership controlled by the
President of BCMI for the purchase by such partnership of a property

47
<PAGE> 49

owned, through foreclosure, by Jefferson Bank. After first mortgage financing,
the Company had a net investment of $109,206. The Company leases its executive
offices and asset acquisition and resolution headquarters in Philadelphia from a
partnership of which Mr. Schaeffer is the general partner and Mr. Cohen is a
limited partner. See "Business -- Office Property."

The Company has obtained material amounts of financing from PICO. See
"Business -- Sources of Funds." Mr. Hart, who became director of the Company in
connection with the Senior Note portion of such financings, is an executive
officer and director of PICO.

MANAGEMENT ARRANGEMENTS REGARDING LEASING OPERATIONS

In March 1996, the Company, through FLI, entered into employment
arrangements with Abraham Bernstein. Under the terms of the arrangements, Mr.
Bernstein has assumed the positions of Chairman, Chief Executive Officer and
President of FLI for a three-year term, and is responsible for developing the
Company's small ticket equipment leasing business. Mr. Bernstein receives a base
salary of $150,000 per year and is eligible for bonuses based upon the
performance of FLI. In addition, Mr. Bernstein has received options to purchase
10% of the common stock of FLI (1 million shares) at an aggregate price of
$220,000 and, should FLI declare a dividend, will receive payments on the
options in an amount equal to the dividends that would have been paid on the
shares subject to the options had they been issued. FLI has also established
another stock option plan, in the amount of 500,000 shares of FLI common stock,
for grant (at the discretion of FLI's board of directors) to Messrs. DeMent and
Ellis and other employees of FLI. In the event that, prior to FLI becoming a
public company, FLI issues stock to anyone other than the Company or Mr.
Bernstein, Mr. Bernstein is entitled to receive such additional options as will
allow him to maintain his 10% equity position in FLI (excluding shares issuable
pursuant to the employee stock option plan referred to above), at an exercise
price equal to the price paid or value received in the additional issuance. The
Company does not anticipate making any such issuances.

The options issued to Mr. Bernstein vest 25% per year beginning in March
1997 (becoming fully invested in March 2000), and terminate in March 2005,
provided that no more than $100,000 of shares (measured by "fair market value")
may be purchased in any year pursuant to option exercises. The options become
fully vested and immediately exercisable in the event of a "change in control"
of the Company (defined as occurring when Mr. Cohen is no longer an officer or a
5% or more shareholder of the Company). Mr. Bernstein has certain rights,
commencing after March 5, 2000, to require FLI to register his option shares
under the Securities Act. In the event FLI does not become a public company by
March 5, 2001, Mr. Bernstein may require that FLI thereafter buy, for cash, FLI
shares subject to Mr. Bernstein's options at a price equal to ten times FLI's
after-tax earnings per share for the fiscal year ended immediately prior to the
giving of notice by Mr. Bernstein of his exercise of this right, in accordance
with the following schedule:

<TABLE>
<CAPTION>
PERCENT OF SHARES
ORIGINALLY SUBJECT TO
OPTION WHICH FLI CAN BE
THROUGH MARCH 5 REQUIRED TO PURCHASE
- --------------- -----------------------
<S> <C>
2002 25%
2003 50%
2004 75%
2005 100%
</TABLE>

Obligations of FLI to repurchase shares in any year in excess of $500,000
(including amounts deferred in prior years) may be deferred to the following
year. The Company anticipates that amounts invested in FLI by the Company in
excess of its required $2 million initial investment that the Company has agreed
to make (including substantially all of the proceeds of this offering allocated
to equipment leasing operations) will be in the form of loans to FLI. Debt
service payable with respect to such loans will reduce the amount of FLI's
after-tax earnings per share, thus reducing the cost to the Company of any
exercise by Mr. Bernstein of his right to sell FLI shares to the Company,
referred to above.

48
<PAGE> 50

SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the number and percentage of shares of
Common Stock owned, as of October 31, 1996, by (a) each person who, to the
knowledge of the Company, is the beneficial owner of 5% or more of the
outstanding shares of Common Stock, (b) each of the Company's present directors,
(c) each of the Company's executive officers, and (d) all of the Company's
present executive officers and directors as a group. This information is
reported in accordance with the beneficial ownership rules of the Commission
under which a person is deemed to be the beneficial owner of a security if that
person has or shares voting power or investment power with respect to such
security or has the right to acquire such ownership within 60 days. Shares of
Common Stock issuable pursuant to options or warrants are deemed to be
outstanding for purposes of computing the percentage of the person or group
holding such options or warrants but are not deemed to be outstanding for
purposes of computing the percentage of any other person. See notes (4), (5),
(6) and (7) below, for information concerning outstanding options and warrants.

<TABLE>
<CAPTION>
COMMON STOCK
----------------------------------
AMOUNT PERCENT
BENEFICIAL OWNER OWNED(1) OF CLASS
---------------- --------- --------
<S> <C> <C>
Directors
---------
Carlos C. Campbell.............................. 25 *
Edward E. Cohen................................. 692,476 2)(3)(4)(5)(8) 34.94%
John R. Hart.................................... 983,150(6) 34.16%
Andrew M. Lubin................................. 280 *
Alan D. Schreiber, M.D.......................... 3,370 *
Michael L. Staines.............................. 37,500(4)(5)(7) 1.95%
John S. White................................... 0 *

Executive Officers
------------------
Freddie M. Kotek................................ 15,803(5)(8) *
Nancy J. McGurk................................. 20,289(4)(5)(8) 1.07%
Scott F. Schaeffer.............................. 34,020(4)(5)(8) 1.77%
All present officers............................ 1,786,912(2)(3)(4) 58.93%
and directors as a group (5)(6)(7)(8)
(10 persons)

Other owners of 5% or
More of Outstanding Shares(9)
Physicians Insurance Company of Ohio(6)......... 983,150 34.16%
Bryn Mawr Resources(2).......................... 583,430 30.79%
J.W. Straker Trust.............................. 176,185 9.30%
<FN>

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

* Less than 1%

(1) Includes that portion (25%) of the options to acquire Common Stock granted
to certain officers and directors during the first quarter of fiscal 1996
which are exercisable within 60 days of the date hereof. See
"Management -- Executive Officer Compensation."

(2) Includes the 583,430 shares of Common Stock beneficially owned by Bryn Mawr
Resources, Inc. ("Bryn Mawr") and held of record by BMR Holdings, Inc., a
subsidiary of Bryn Mawr. Bryn Mawr has filed Schedule 13D with the
Commission concerning its ownership of the Company's Common Stock. Mr. Cohen
is an officer, director and principal shareholder of Bryn Mawr.

(3) Mr. Cohen has voting power for shares held by the Company's Employee Stock
Ownership Plan which have not been allocated to the accounts of eligible
employees. However, all shares held in the name of the Plan have been
allocated to the accounts of eligible employees. Accordingly, only shares
allocated to Mr. Cohen's account are included in the share amount for Mr.
Cohen. See note (5).
</TABLE>

49
<PAGE> 51

(4) Includes shares issuable on exercise of options granted in fiscal 1993 and
the first quarter of fiscal 1996 under the 1989 Key Employee Stock Option
Plan of: Mr. Cohen -- 87,079 shares, Mr. Schaeffer -- 26,685 shares, Mr.
Staines -- 15,449 shares and Ms. McGurk -- 7,022 shares.

(5) Includes shares allocated under the Employee Stock Ownership Plan in the
amounts of: Mr. Cohen -- 20,089 shares; Mr. Staines -- 13,624 shares; Mr.
Schaeffer -- 7,047 shares; Mr. Kotek -- 5,170 shares and Ms. McGurk -- 8,960
shares.

(6) Represents shares issuable pursuant to warrants exercisable by PICO, of
which Mr. Hart is an officer and director. For information relating to such
warrants, see "Description of Capital Stock -- Warrants."

(7) Includes 8,427 shares issuable on exercise of options granted to Mr. Staines
in fiscal 1993 under the 1984 Key Employee Stock Option Plan.

(8) Includes shares allocated under the Resource America, Inc. Employee Savings
Plan (the Company's 401(k) plan) in the amount of: Mr. Cohen -- 1,878
shares; Mr. Kotek -- 802 shares; Ms. McGurk -- 4,307 shares and Mr.
Schaeffer -- 288 shares, as to which each has voting power.

(9) The address for PICO is 13515 Yarmouth Drive N.W., Pickerington, Ohio 43147;
the address for Bryn Mawr Resources is 1521 Locust Street, Fourth Floor,
Philadelphia, PA 19102; and the address for the J.W. Straker Trust is 4120
Harbour Oaks Court, Bonita Bay, Bonita Springs, Florida 33923-2642.

DESCRIPTION OF CAPITAL STOCK

GENERAL

The Company is authorized to issue 9,000,000 shares of capital stock,
consisting of 8,000,000 shares of Common Stock, par value $.01 per share, and
1,000,000 shares of preferred stock, par value $1.00 per share ("Preferred
Stock"). As of October 31, 1996, there were 1,894,761 shares of Common Stock
outstanding and no shares of Preferred Stock outstanding.

Prior to the date of this Prospectus, the Common Stock was divided into
Class A Common Stock and Class B Common Stock, with the difference between the
classes relating primarily to voting for the election of directors. However,
pursuant to the terms under which the Class B Common Stock was established, the
Class B Common Stock merged automatically into the Class A Common Stock upon the
effective date of the registration statement of which this Prospectus is a part
and the merged class was redesignated as Common Stock.

COMMON STOCK

Holders of Common Stock are entitled to dividends when, as and if declared
by the Company's Board of Directors and in such amounts as the Board of
Directors may deem advisable. See "Price Range of Common Stock and Dividend
Policy." In the event of any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, holders of Common Stock are entitled,
after payment or provision for payment of the debts or other liabilities of the
Company, and subject to the prior rights of holders of any Preferred Stock which
may then be outstanding, to share ratably in the remaining assets of the
Company. Shares of Common Stock do not possess preemptive rights. Holders of
Common Stock are entitled to one vote for each share held of record on each
matter submitted to a vote at a meeting of shareholders. For a description of
certain provisions of the Company's Certificate of Incorporation and Delaware
law which affect the voting rights of shareholders of the Company and provide
for a classified board of directors, see "Description of Capital
Stock -- Anti-Takeover Provisions of Delaware Law" and " -- Classes of
Directors."

PREFERRED STOCK

Preferred Stock may be issued from time to time in one or more series and
the Board of Directors, without further approval of the shareholders, is
authorized to fix the dividend rights and terms, conversion rights, voting
rights, redemption rights and terms, liquidation preferences, sinking funds and
any other rights, preferences, privileges and restrictions applicable to each
such series of Preferred Stock. The issuance of

50
<PAGE> 52

Preferred Stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could, among other things, adversely
affect the voting power of the holders of Common Stock and, under certain
circumstances, make it more difficult for a third party to gain control of the
Company. The Company has no current plan to issue any Preferred Stock.

WARRANTS

The Company has issued warrants to purchase an aggregate of 983,150 shares
of Common Stock to PICO in connection with certain financing provided by PICO,
as follows (adjusted to give effect to stock dividends): (i) warrants to
purchase 449,440 shares at a price of $3.38 per share were issued in conjunction
with the issuance of the Senior Note, and (ii) warrants to purchase 533,710
shares, consisting of 112,360 shares at a price of $3.38 per share and 421,350
shares at a price of $4.18 per share, were issued in conjunction with the
purchase by PICO of senior participations in loans held by the Company (see
"Business -- Sources of Funds"). John R. Hart, a director of the Company, is an
officer and director of PICO. See "Management -- Directors and Executive
Officers" and "Security Ownership of Certain Beneficial Owners and Management."

The warrants expire in 2004 (as to 561,800 shares) and 2005 (as to 421,350
shares) and contain standard anti-dilution provisions regarding stock or other
securities dividends, stock reclassifications, splits and combinations, sale of
Common Stock for consideration less than the exercise price, issuance of
subscription rights to shareholders, and issuance of dividends other than
regular cash dividends or cash distributions out of net profits. In addition,
the warrants contain anti-dilution provisions with respect to the exercise of
options under any stock option plan of the Company created after the date of the
warrants where the shares issuable pursuant to the options are issuable at
prices less than the exercise price under the warrant. No option plans have been
created after the date of the warrants, although one such option plan was
amended in October 1995 to increase the number of shares subject to option
grant. No option grant thereunder has been at a price less than the exercise
price of any warrant.

The warrants provide the warrantholder with the right to cause the Company
to file a registration statement under the Securities Act for the shares covered
by the warrants upon the demand of the warrantholders. Any such registration is
at the expense of the warrantholder. The warrants further provide that
warrantholders have the right to include some portion or all of the shares
subject to the warrants in a registration statement otherwise being filed by the
Company, subject to underwriting cutbacks, delays and termination.
Warrantholders have the right to effect two such registrations, and bear a
proportionate share of the expenses of registration.

ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW

The Company is a Delaware corporation and consequently is subject to
certain anti-takeover provisions of the Delaware General Corporation Law (the
"Delaware Law"). Under the business combination provision contained in Section
203 of the Delaware Law ("Section 203"), a Delaware corporation may not engage
in any business combination with any interested shareholder for a period of
three years following the date such shareholder became an interested
shareholder, unless (i) prior to such date the board of directors of the
corporation approved either the business combination or the transaction which
resulted in the shareholder becoming an interested shareholder, or (ii) upon
completion of the transaction which resulted in the shareholder becoming an
interested shareholder, the interested shareholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding, for purposes of determining the number of shares
outstanding, (a) shares owned by persons who are directors and also officers and
(b) employee stock plans, in certain instances), or (iii) on or subsequent to
such date the business combination is approved by the board of directors and
authorized at an annual or special meeting of shareholders by at least
two-thirds of the outstanding voting stock that is not owned by the interested
shareholder. Section 203 defines an interested shareholder of a corporation to
be any person (other than the corporation and any direct or indirect
majority-owned subsidiary of the corporation) who (i) owns, directly or
indirectly, 15% or more of the outstanding voting stock of the corporation or
(ii) is an affiliate or associate of the corporation and was the owner of 15% or
more of the outstanding voting stock of the corporation at any

51
<PAGE> 53

time within the three-year period immediately prior to the date on which it is
sought to be determined whether such person (and the affiliates and the
associates of such person) is an interested shareholder. Section 203 defines
business combinations to include certain mergers, consolidations, asset sales,
transfers and other transactions resulting in a financial benefit to the
interested shareholder.

The restrictions imposed by Section 203 will not apply to a corporation if
(i) the corporation's original certificate of incorporation contains a provision
expressly electing not to be governed by Section 203 or (ii) the corporation, by
the action of shareholders holding a majority of outstanding voting stock,
adopts an amendment to its certificate of incorporation or by-laws expressly
electing not to be governed by Section 203 (such amendment will not be effective
until 12 months after adoption and shall not apply to any business combination
between such corporation and any person who became an interested shareholder of
such corporation on or prior to such adoption). The Company has not opted out of
Section 203. Section 203 could under certain circumstances make it more
difficult for a third party to gain control of the Company, deny shareholders
the receipt of a premium on their Common Stock and have a depressive effect on
the market price of the Common Stock.

CLASSES OF DIRECTORS

The Board of Directors of the Company is currently classified into three
classes. One class of directors is elected each year and the members of such
class hold office for a three-year term or until their successors are duly
elected and qualified. The classification of directors will have the effect of
making it more difficult for a third party to change the composition of the
Board of Directors without the support of the incumbent Board. At least two
annual shareholder meetings, instead of one, will be required to effect a change
in the control of the Board, unless shareholders remove directors for cause.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Company's Common Stock is American
Stock Transfer & Trust Company.

52
<PAGE> 54

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representative,
have severally agreed to purchase from the Company the following respective
number of shares of Common Stock at the offering price less the underwriting
discounts and commissions set forth on the cover page of this Prospectus:

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
Friedman, Billings, Ramsey & Co., Inc.............................
---------
Total........................................................... 1,200,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all of the shares offered hereby (other than those
covered by the over-allotment option described below), if any of such shares are
purchased.

The Company has been advised by the Underwriters that the Underwriters
propose to offer the shares of Common Stock to the public at the offering price
set forth on the cover page of this Prospectus and to certain dealers at such
price less a concession not in excess of $ per share. The Underwriters
may allow, and such dealers may reallow, a concession not in excess of
$ per share to certain other dealers. After the initial offering, the
offering price and other selling terms may be changed by the Representative of
the Underwriters.

The Company has granted to the Underwriters an option, exercisable not
later than 30 days after the date of this Prospectus, to purchase up to 180,000
additional shares of Common Stock at the initial offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased by
it shown in the above table bears to 1,200,000 and the Company will be
obligated, pursuant to the option, to sell such shares to the Underwriters. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of Common Stock offered hereby. If purchased, the
Underwriters will offer such additional shares on the same terms as those on
which the 1,200,000 shares are being offered.

The Company, its management and directors and PICO have agreed to refrain
during certain periods (as described below), without the prior written consent
of the Representative, from (i) offering, pledging, selling, contracting to
sell, selling any option or contract to purchase, purchasing any option or
contract to sell, granting any option for the sale of, or otherwise disposing of
or transferring, directly or indirectly, any share of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock, or
filing any registration statement under the Securities Act with respect to any
of the foregoing or (ii) entering into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the Common Stock, whether any such swap or
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The
aforementioned restrictions apply to the Company, and its management and
directors, for a period of 180 days from the date of this Prospectus and to PICO
for a period ending on the earlier of (i) 270 days from the date of this
Prospectus or (ii) six months after the date of the exercise of its warrants.

The initial public offering price for the Common Stock offered hereby has
been determined by negotiation among the Company and the Underwriters. Among the
factors considered in making such determination were the history and prospects
for the industries in which the Company competes, an assessment of the Company's
management, the past and present operations of the Company, the historical
results of operations of the Company and the trends of its revenues and
earnings, the prospects for future earnings of the Company, the general
condition of the securities markets at the time of the offering, the price of
the Company's Common Stock and the prices of similar securities of generally
comparable companies. There can be no assurance that the Common Stock will trade
in the public market subsequent to the offering at or above the public offering
price.

53
<PAGE> 55

The Company has agreed to indemnify the Underwriters against certain
liabilities including liabilities under the Securities Act.

LEGAL MATTERS

The legality of the Common Stock offered hereby is being passed upon by
Ledgewood Law Firm, P.C., Philadelphia, Pennsylvania. For a discussion of
certain relationships between such firm and the Company, see
"Management -- Certain Relationships and Related Transactions" and "Security
Ownership of Certain Beneficial Owners and Management." Certain legal matters
will be passed upon for the Underwriters by Simpson Thacher & Bartlett (a
partnership which includes professional corporations), New York, New York.

EXPERTS

The consolidated financial statements and schedules of the Company and its
subsidiaries as of September 30, 1996 and 1995 and for each of the years in the
three-year period ended September 30, 1996 included in this Prospectus have been
included herein in reliance upon the reports of Grant Thornton LLP, independent
certified public accountants, upon the authority of such firm as experts in
accounting and auditing.

54
<PAGE> 56

RESOURCE AMERICA, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
RESOURCE AMERICA, INC.:
Report of Independent Certified Public Accountants............................... F-2
Consolidated balance sheets at September 30, 1996 and 1995....................... F-3
Consolidated statements of income for the years ended September 30, 1996, 1995
and 1994...................................................................... F-4
Consolidated statements of changes in stockholders' equity for the years ended
September 30, 1996, 1995 and 1994............................................. F-5
Consolidated statements of cash flows for the years ended September 30, 1996,
1995, and 1994................................................................ F-6
Notes to consolidated financial statements....................................... F-7
</TABLE>

F-1
<PAGE> 57

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Stockholders and Board of Directors
RESOURCE AMERICA, INC.

We have audited the accompanying consolidated balance sheets of Resource
America, Inc. and subsidiaries as of September 30, 1996, 1995 and 1994, and the
related consolidated statements of income, changes in stockholders' equity, and
cash flows for each of the three years in the period ended September 30, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Resource
America, Inc. and subsidiaries as of September 30, 1996, 1995 and 1994, and the
consolidated results of their operations and cash flows for each of the three
years in the period ended September 30, 1996, in conformity with generally
accepted accounting principles.

Grant Thornton

Cleveland, Ohio
October 25, 1996

F-2
<PAGE> 58

RESOURCE AMERICA, INC.

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 1996, AND 1995

<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents....................................... $ 4,154,516 $ 2,457,432
Accounts and notes receivable................................... 1,478,702 1,303,556
Prepaid expenses and other current assets....................... 472,673 163,045
----------- -----------
Total current assets......................................... 6,105,891 3,924,033
Net Investment in Direct Financing Leases (less provision for
possible losses of $7,167)...................................... 729,446 --
Property and Equipment
Oil and gas properties and equipment (successful efforts)....... 24,034,987 24,039,762
Gas gathering and transmission facilities....................... 1,535,781 1,514,127
Other........................................................... 1,666,085 1,072,243
----------- -----------
27,236,853 26,626,132
Less accumulated depreciation, depletion, and amortization...... (14,856,874) (14,043,455)
----------- -----------
12,379,979 12,582,677
Investments in Real Estate Loans.................................. 21,797,768 17,991,415
Restricted Cash................................................... 935,346 904,409
Other Assets (less accumulated amortization of $884,636 and
$907,722)....................................................... 2,010,498 2,147,430
----------- -----------
$43,958,928 $37,549,964
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable................................................ $ 584,985 $ 721,673
Accrued liabilities............................................. 596,783 516,066
Accrued income taxes............................................ 376,946 --
Current portion of long-term debt............................... 105,000 91,000
----------- -----------
Total current liabilities.................................... 1,663,714 1,328,739
Long-term Debt, net of current portion............................ 8,966,524 8,522,682
Deferred Income Taxes............................................. 2,206,000 1,147,000
Commitments and Contingencies..................................... -- --
STOCKHOLDERS' EQUITY
Preferred Stock, $1.00 par value, 1,000,000 authorized
shares...................................................... -- --
Common Stock, $.01 par value; 8,000,000 authorized shares.... 20,472 8,179
Additional paid-in capital................................... 21,760,695 19,214,210
Retained earnings............................................ 12,458,344 10,532,719
Less treasury stock, at cost................................. (2,698,985) (2,721,437)
Less loan receivable from ESOP............................... (417,836) (482,128)
----------- -----------
Total stockholders' equity................................. 31,122,690 26,551,543
----------- -----------
$43,958,928 $37,549,964
=========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE> 59

RESOURCE AMERICA, INC.

CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES
Real estate finance............................... $ 7,171,232 $ 6,114,258 $ 2,522,472
Equipment leasing................................. 4,465,918 -- --
Energy: production................................ 3,420,762 3,452,327 3,441,752
: services................................. 1,735,791 1,879,001 2,079,800
Interest.......................................... 197,410 148,331 135,546
16,991,113 11,593,917 8,179,570
COSTS AND EXPENSES
Energy: exploration and production................ 1,581,901 1,732,388 2,003,745
: services................................. 869,435 1,026,136 1,131,457
Real estate....................................... 520,714 800,970 248,000
Equipment leasing................................. 2,339,141 -- --
General and administrative........................ 2,087,265 2,265,036 1,900,917
Depreciation, depletion and amortization.......... 1,368,555 1,334,956 1,346,602
Interest.......................................... 871,674 1,091,027 310,332
Other -- net...................................... 6,842 (2,028) 22,274
----------- ----------- -----------
9,645,527 8,248,485 6,963,327
----------- ----------- -----------
Income from operations......................... 7,345,586 3,345,432 1,216,243
OTHER INCOME (EXPENSE)
Gain (loss) on sale of property................... 7,165 (1,305) (7,610)
Income before income taxes..................... 7,352,751 3,344,127 1,208,633
Provision (benefit) for income taxes................ 2,206,000 630,000 (100,000)
----------- ----------- -----------
Net income..................................... $ 5,146,751 $ 2,714,127 $ 1,308,633
=========== =========== ===========
Net income per common share -- primary.............. $1.88 $1.23 $.64
=========== =========== ===========
Weighted average common shares outstanding.......... 2,756,900 2,235,400 2,076,100
=========== =========== ===========
Net income per common share -- fully diluted........ $1.87 $1.18 $.62
=========== =========== ===========
Weighted average common shares outstanding.......... 2,763,000 2,292,700 2,117,100
=========== =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE> 60

RESOURCE AMERICA, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK TOTAL
------------------- PAID-IN RETAINED ---------------------- ESOP SHARE STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT AMOUNT EQUITY
--------- ------- ----------- ----------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30,
1993................ 817,912 $ 8,179 $19,036,420 $ 6,670,876 (115,545) $(2,243,374) $(610,711) $22,861,390
Treasury shares
acquired............ (15,857) (194,063) (194,063)
Warrants issued....... 100,000 100,000
Repayment of ESOP
loan................ 64,291 64,291
Net income............ 1,308,633 1,308,633
--------- ------- ----------- ----------- -------- ----------- --------- -----------
Balance, September 30,
1994................ 817,912 8,179 19,136,420 7,979,509 (131,402) (2,437,437) (546,420) 24,140,251
Treasury shares
acquired............ (21,298) (284,000) (284,000)
Cash dividends........ (160,917) (160,917)
Warrants issued....... 77,790 77,790
Repayment of ESOP
loan................ 64,292 64,292
Net income............ 2,714,127 2,714,127
--------- ------- ----------- ----------- -------- ----------- --------- -----------
Balance, September 30,
1995................ 817,912 8,179 19,214,210 10,532,719 (152,700) (2,721,437) (482,128) 26,551,543
Treasury shares
issued.............. (24,350) 1,889 39,650 15,300
6% stock dividends.... 82,688 826 2,452,476 (2,453,302) --
150% stock dividend... 1,136,609 11,367 (11,367) --
Issuance of stock
under stock option
plan................ 10,000 100 77,400 77,500
Treasury shares
acquired............ (1,637) (17,198) (17,198)
Cash dividends........ (756,457) (756,457)
Warrants issued....... 40,959 40,959
Repayment of ESOP
loan................ 64,292 64,292
Net income............ 5,146,751 5,146,751
--------- ------- ----------- ----------- -------- ----------- --------- -----------
Balance, September,
1996................ 2,047,209 $20,472 $21,760,695 $12,458,344 (152,448) $(2,698,985) $(417,836) $31,122,690
========= ======= =========== =========== ======== =========== ========= ===========
</TABLE>

See accompanying notes to consolidated financial statements

F-5
<PAGE> 61

RESOURCE AMERICA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................................... $ 5,146,751 $ 2,714,127 $ 1,308,633
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion, and amortization...... 1,368,555 1,334,956 1,346,602
Amortization of discount on senior note and
deferred finance costs....................... 74,650 74,020 21,684
Provision for losses........................... 7,167 -- --
Deferred income taxes.......................... 1,059,000 473,000 (160,000)
Accretion of discount.......................... (953,776) (1,175,887) (346,151)
Gain on dispositions and investments........... (3,649,714) (1,727,227) (1,088,159)
Property impairments and abandonments.......... 70,562 56,497 547,342
Change in operating assets and liabilities:
(Increase) decrease in accounts
receivable.............................. (175,146) 81,084 (46,439)
(Increase) decrease in prepaid expenses
and other current assets................ (309,628) 87,914 46,658
Increase (decrease) in accounts payable... (136,688) (291,272) 227,492
Increase (decrease) in accrued income
taxes................................... 376,946 (100,000) 100,000
Increase in other current liabilities..... 80,717 50,494 300,804
----------- ----------- -----------
Net cash provided by operating activities......... 2,959,396 1,577,706 2,258,466
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of business, less cash acquired......... -- (876,535) --
Capital expenditures................................ (1,097,122) (817,139) (1,036,545)
Cost of equipment acquired for lease................ (731,483) -- --
Proceeds from sale of assets........................ 18,577,374 10,348,220 2,156,881
Increase in other assets............................ (151,914) (59,452) (540,774)
Increase in investments in real estate loans........ (17,650,139) (14,708,125) (3,097,812)
Revenue recognized in excess of cash received on
leases............................................ (6,869) -- --
----------- ----------- -----------
Net cash used in investing activities............... (1,060,153) (6,113,031) (2,518,250)
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term borrowings................................ 536,201 2,000,000 8,000,000
Dividends paid...................................... (756,457) (160,917) --
(Increase) decrease in restricted cash.............. (30,937) 4,864,030 (5,046,728)
Increase in other assets............................ -- -- (642,425)
Principal payments on debt.......................... (26,568) (4,523,912) (21,248)
Purchase of treasury stock.......................... (17,198) (284,000) (194,063)
Short-term borrowings............................... -- 2,500,000 --
Proceeds from issuance of stock..................... 92,800 -- --
----------- ----------- -----------
Net cash provided by (used in) financing
activities........................................ (202,159) 4,395,201 2,095,536
Increase (decrease) in cash and cash equivalents.... 1,697,084 (140,124) 1,835,752
Cash and cash equivalents at beginning of year...... 2,457,432 2,597,556 761,804
----------- ----------- -----------
Cash and cash equivalents at end of year............ $ 4,154,516 $ 2,457,432 $ 2,597,556
========== ========== ==========
</TABLE>

See accompanying notes to consolidated financial statements

F-6
<PAGE> 62

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- NATURE OF OPERATIONS

Resource America, Inc. ("The Company") is a specialty finance company
engaged in three lines of business: the acquisition and resolution of commercial
real estate loans, commercial equipment leasing, and energy operations,
including natural gas and oil production. Based on net assets and net income,
the asset acquisition and resolution of commercial real estate loans is the
dominant business line at the current time. It is anticipated that the
commercial equipment leasing business line will grow substantially in relation
to the other two business lines over the next several years. The markets for the
Company's business lines are as follows: in energy, gas is sold to a number of
customers such as gas brokers and local utilities; oil is sold at the well site
to regional oil refining companies in the Appalachian basin; in asset
acquisition and resolution, the Company obtains its real estate loans on
properties located throughout the United States from commercial banks and other
financial institutions; and in commercial equipment leasing, the Company will
market its equipment leasing product nationwide through vendor programs with
equipment manufacturers who are likely to generate $10 million or less annually
in equipment leases, regional distributors and other vendors.

The Company's ability to acquire and resolve commercial real estate loans
and to fund equipment lease transactions will be dependent on the continued
availability of funds. The availability of third-party financing for each of
these specialty finance businesses will be dependent upon a number of factors
over which the Company has limited or no control, including general conditions
in the credit markets, the size and liquidity of the market for the types of
real estate loans or equipment leases in the Company's portfolio and the
respective financial performance of the loans and equipment leases in the
Company's portfolio.

The Company's growth will also depend on its continued ability to generate
attractive opportunities for acquiring commercial real estate loans at a
discount and to originate equipment leases. The availability of loans for
acquisition on terms acceptable to the Company will be dependent upon a number
of factors over which the Company has no control, including economic conditions,
interest rates, the market for and value of properties securing loans which the
Company may seek to acquire, and the willingness of financial institutions to
dispose of troubled or under-performing loans in their portfolios.

Mortgage loans and equipment leases are subject to the risk of default in
payment by borrowers and lessees. Mortgage loans are further subject to the risk
that declines in real estate values could result in the Company being unable to
realize the property values projected.

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Resource
America, Inc., and its wholly owned subsidiaries and its pro rata share of the
assets, liabilities, income, and expenses of the oil and gas partnerships in
which the Company has an interest. All material intercompany transactions have
been eliminated. All per share amounts and references to numbers of shares have
been restated to give effect to 6% stock dividends paid in January 1996 and
April 1996 and a five-for-two stock split (effected in the form of a 150% stock
dividend) in May 1996.

OIL AND GAS PROPERTIES

The Company follows the successful efforts method of accounting.
Accordingly, property acquisition costs, costs of successful exploratory wells,
all development costs, and the cost of support equipment and facilities are
capitalized. Costs of unsuccessful exploratory wells are expensed when
determined to be nonproductive. The costs associated with drilling and equipping
wells not yet completed are capitalized as uncompleted wells, equipment, and
facilities. Geological and geophysical costs and the costs of carrying and

F-7
<PAGE> 63

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

retaining undeveloped properties, including delay rentals, are expensed as
incurred. Production costs, overhead, and all exploration costs other than costs
of exploratory drilling are charged to expense as incurred.

Unproved properties are assessed periodically to determine whether there
has been a decline in value, and if such decline is indicated, a loss is
recognized. The Company compares the carrying value of its oil and gas producing
properties to the estimated future cash flow from such properties, less
applicable income taxes in order to determine whether the carrying value of such
properties should be reduced. No adjustment was necessary as of September 30,
1996, 1995, or 1994.

On an annual basis, the Company estimates the costs of future
dismantlement, restoration, reclamation, and abandonment of its gas and oil
producing properties. Additionally, the Company evaluates the estimated salvage
value of equipment recoverable upon abandonment. At September 30, 1996 and 1995,
the Company's evaluation of equipment salvage values was greater than or equal
to the costs of future dismantlement, restoration, reclamation, and abandonment.

DEPRECIATION, DEPLETION, AND AMORTIZATION

Proved developed oil and gas properties, which include intangible drilling
and development costs, tangible well equipment, and leasehold costs, are
amortized on the unit-of-production method using the ratio of current production
to the estimated aggregate proved developed oil and gas reserves. The net book
value of producing properties is limited to the value of their future net cash
flow based on unescalated prices and costs less a provision for estimated income
taxes.

Depreciation of property and equipment, other than oil and gas properties,
is computed using the straight-line method over the estimated economic lives,
which range from 3 to 25 years.

Intangible assets consist primarily of contracts acquired through
acquisitions recorded at fair value on their acquisition dates and the excess of
the acquisition cost over the fair value of the net assets of a business
acquired (goodwill). The contracts are being amortized on a declining balance
method over their respective estimated lives, ranging from 5 to 13 years.
Goodwill is being amortized on a straight-line basis over 15 years.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used by the Company in
estimating the fair value of each class of financial instruments for which it is
practicable to estimate that value.

For cash and cash equivalents, receivables and payables, the carrying
amounts approximate fair value because of the short maturity of these
instruments. For long-term debt, including current maturities, the fair value of
the Company's long-term debt approximates historically recorded cost since
interest rates approximate market.

The carrying cost of investments in direct financing leases approximates
fair value.

For investments in real estate loans, the Company believes the carrying
amounts of the loans are reasonable estimates of their fair value considering
the nature of the loans and the estimated yield relative to the risks involved.

USE OF ESTIMATES

Preparation of the 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 at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.

F-8
<PAGE> 64

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

REVENUE RECOGNITION

Real Estate Finance Revenues

The difference between the Company's cost basis in a loan and the sum of
projected cash flows from, and the appraised value of, the underlying property
is accreted into interest income over the estimated life of the loan using a
method which approximates the level interest method. Projected cash flows from
the property are reviewed on a regular basis and changes to the projected
amounts reduce or increase the amounts accreted into interest income over the
remaining life of the loan.

Gains on the sale of a participation in or refinancing of a portfolio loan
are allocated between the portion of the loan sold or refinanced and the portion
retained based upon the fair value of those respective portions on the date of
sale or refinance. The fair value of the loan is the current appraised value of
the property underlying the loan. Any gain recognized on a sale of a
participation or a refinancing is brought into income on the date of such sale
or refinancing.

Equipment Leasing

Equipment leasing is comprised of management fees, brokerage fees and a
share of net income from partnerships in which a subsidiary of the Company
serves as general partner as well as finance income on direct financing leases.
Management fees are earned for management services provided to the partnerships.
Such fees are recognized as earned.

Direct finance leases as defined by Statement of Financial Accounting
Standards ("SFAS") No. 13 "Accounting for Leases," are accounted for by
recording on the balance sheet the total future minimum lease payments
receivable plus the estimated unguaranteed residual value of leased equipment
less the unearned lease income. Unearned lease income represents the excess of
the total future minimum lease payments plus the estimated unguaranteed residual
value expected to be realized at the end of the lease term over the cost of the
related equipment. Unearned lease income is recognized as revenue over the term
of the lease by the effective interest method. Initial direct costs incurred in
consummating a lease are capitalized as part of the investment in direct finance
leases and amortized over the lease term as a reduction in the yield.

Energy

Working interest, royalties and override revenues are recognized based on
production. Well service income is recognized as revenue as services are
performed.

ACCOUNTING STANDARDS

In March 1995, the Financial Standards Board (FASB) issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of." This standard requires the review of long-lived assets for
impairment. SFAS No. 121 is required to be adopted for financial statements with
fiscal years beginning after December 15, 1995 and requires the cumulative
effect of the accounting change to be reported in net income in the year of
adoption. The Company believes adoption of this standard will not have a
material adverse impact on the Company's financial position or results of
operation.

In October 1995, FASB issued SFAS No. 123, "Accounting for Stock Based
Compensation." The Company recognizes compensation expense with respect to stock
option grants to employees using the intrinsic value method prescribed by
Accounting Principles Board Opinion No. 25. The Company does not intend to elect
the fair value method of accounting for employee stock-based compensation
encouraged, but not required, by Statement of Financial Accounting Standards No.
123, "Accounting for Stock Based Compensation."

F-9
<PAGE> 65

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." This
statement is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996, and is to be
applied prospectively. Earlier or retroactive application is not permitted.
Management has not completed an analysis of the impact of applying this new
statement, however, the Company intends to begin applying this new standard,
effective January 1, 1997.

CASH FLOW STATEMENTS

The Company considers temporary investments with a maturity at the date of
acquisition of 90 days or less to be cash equivalents.

<TABLE>
<CAPTION>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: 1996 1995 1994
-------------------------------------------------- -------- ---------- --------
<S> <C> <C> <C>
Cash paid (refunded) during the year for:
Interest........................................ $796,911 $1,103,527 $ 22,812
Income Taxes.................................... 770,000 254,981 (40,000)
</TABLE>

RESTRICTED CASH

The Company's restricted cash is invested in short-term highly-liquid
investments. Classified as a noncurrent asset, it represents collateral for a
portion of the Company's long-term debt.

LIMITED PARTNERSHIPS

A substantial portion of the Company's activities and revenues are
attributable to limited partnerships ("Partnerships") in which it serves as
general partner and assumes the customary rights and obligations for the
Partnerships. As the general partner in these various limited partnerships, the
Company is liable for partnership liabilities and can be liable to limited
partners if it breaches its responsibilities with respect to the operations of
the limited partnerships. Investments in leasing partnerships are accounted for
on the equity basis.

The Company is entitled to receive management fees, reimbursement for
administrative costs, and to share in the Partnerships' revenue and costs and
expenses according to the respective Partnership agreements. Such fees and
reimbursements are recognized as income and are included in energy services and
equipment leasing revenue. Amounts reimbursed for costs incurred as operator of
certain oil and gas partnership properties and the general partner of certain
equipment leasing partnerships for the years ended September 30, 1996, 1995 and
1994 were $1,558,000, $525,000, and $722,000, respectively. The Company includes
in its operations the portion of the oil and gas Partnerships' revenues and
expenses applicable to its interests therein.

INCOME TAXES

The Company recognizes deferred tax assets and liabilities for the
estimated future tax effects attributable to temporary differences between the
financial statement and tax bases of assets and liabilities and carryforwards
utilizing enacted rates. Deferred tax provision or benefit represents the change
during the period in the deferred tax asset and liability balances.

EARNINGS PER SHARE

Earnings per common share -- primary are determined by dividing net income
by the weighted average number of common shares and common share equivalents
outstanding during each period. Common share equivalents include shares issuable
under the terms of various stock option and warrant agreements (see Notes 5 and
8). Fully diluted earnings per share reflect additional dilution related to
stock options and warrants due

F-10
<PAGE> 66

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

to the use in that computation of the market price of the Company's shares at
the end of the period, which price is higher than the average price for the
period.

RECLASSIFICATIONS

Certain reclassifications have been made to the 1994 and 1995 consolidated
financial statements to conform with the 1996 presentation.

NOTE 3 -- TRANSACTIONS WITH RELATED PARTIES

The Company administers the activities of certain partnerships that it
sponsors (see Note 2). Energy service revenues primarily represent services
provided to Partnerships and joint ventures managed by the Company.

In accordance with industry practice, the Company charges each producing
well in the Partnerships and joint ventures a fixed monthly overhead fee and a
proportionate share of certain lease operating expenses. These charges are to
reimburse the Company for certain operating and general and administrative
expenses.

Until April 1996, the Chairman of the Company was of counsel to Ledgewood
Law Firm, P.C., a law firm which provides legal services to the Company. The
firm was paid $402,000 and $562,000 during fiscal 1996 and 1995, respectively,
for legal services, primarily related to the purchase and restructuring of real
estate mortgages. Additionally, during fiscal year 1994, at which time the
Chairman was a principal of the firm, the firm was paid $464,000 for legal
services primarily related to the purchase of real estate mortgages and the
placement of the senior note referred to in Note 5.

In addition, during 1994 the Company retained an individual who is
associated with the Chairman of the Company in other business ventures, to
perform due diligence services in connection with the placement of the
$8,000,000 senior secured note referred to in Note 5. The Company paid
approximately $76,000 to this individual during 1994.

The Company holds commercial real estate loans of borrowers whose
underlying properties are managed by Brandywine Construction and Management,
Inc. ("BCMI"). The Company has advanced funds to certain of these borrowers for
improvements on their properties which have been performed by BCMI. In five
instances, the President of BCMI has also acted as the general partner of the
borrower. The Chairman of the Company is Chairman of the Board of Directors and
a minority shareholder (approximately 8%) of BCMI. BCMI has agreed to
subordinate its management fees to receipt by the Company of minimum required
debt service payments under the obligations held by the Company.

The Company also maintains normal banking and borrowing relationships with
Jefferson Bank, a subsidiary of JeffBanks, Inc. The Chairman of the Company and
his spouse are officers and directors of JeffBanks, Inc. (and his spouse is
Chairman and Chief Executive Officer of Jefferson Bank and JeffBanks, Inc.), and
are principal shareholders thereof. The Company borrowed $2.5 million from
Jefferson Bank in the first quarter of fiscal 1995 under terms which the Company
believes were no less favorable to it than those available from independent
third parties. The loan was repaid within fiscal 1995. The Company anticipates
that it may effect other borrowings in the future from Jefferson Bank; it
anticipates that any such borrowings will be on terms similar to those which
could be obtained by an unrelated borrower.

F-11
<PAGE> 67

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the Company acquired from third parties a loan, in the original principal amount
of $3,550,000 (and with a then-outstanding balance of $4,388,644), for an
investment of $1,612,674. The borrower is a limited partnership of which a
director of the Company is currently the general partner. A director of the
Company assumed such position after the Company's acquisition of the loan.
Previously, the general partner had been the President of BCMI. The borrower
subsequently refinanced the loan with another third party, and repaid the
Company $934,000, leaving the Company with a net investment of $419,039. In
April 1996, the Company provided $114,948 of mortgage financing to a partnership
controlled by the President of BCMI for the purchase by such partnership of a
property owned, through foreclosure, by Jefferson Bank. After first mortgage
financing, the Company had a net investment of $109,206. The Company leases its
executive offices and asset acquisition and resolution headquarters in
Philadelphia from a partnership of which an officer of the Company is the
general partner and the Chairman of the Company is a limited partner.

NOTE 4 -- INVESTMENT IN DIRECT FINANCING LEASES

Components of the net investment in direct financing leases as of September
30, 1996, as well as future minimum lease payments receivable, including
residual values, are as follows:

<TABLE>
<S> <C>
1997............................................................. $ 306,779
1998............................................................. 176,145
1999............................................................. 168,548
2000............................................................. 107,034
2001............................................................. 88,869
---------
Total minimum lease payments receivable.......................... $ 847,375
Initial direct costs, net of amortization........................ 66,769
Unguaranteed residual............................................ 75,633
Unearned lease income............................................ (253,164)
Provision for possible losses.................................... (7,167)
---------
Net investment in direct financing leases...................... $ 729,446
=========
</TABLE>

A summary of activity in the Company's allowance for possible losses
related to direct financing leases for the seven months ended September 30, 1996
is as follows:

<TABLE>
<S> <C>
Balance, beginning of period..................................... $ --
Provision charged to expense..................................... 7,167
Write offs....................................................... --
---------
Balance, end of period........................................... $ 7,167
=========
</TABLE>

Unguaranteed residual value represents the estimated amount to be received
at contract termination from the disposition of equipment financed under direct
financing leases. Amounts to be realized at contract termination depend on fair
market value of the related equipment and may vary from the recorded estimate.
Residual values are reviewed periodically to determine if the equipment's fair
market is below its recorded value.

Certain of the leases have options to purchase the underlying equipment at
the end of the lease term at fair value or the stated residual which is not less
that the book value at termination.

F-12
<PAGE> 68

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 5 -- LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Mortgage note payable to a bank, secured by real estate,
monthly installments of approximately $4,000 including
interest at 3/4% above the prime rate through May 2002
(rate of 9.5% at September 30, 1996)...................... $ 214,779 $ 241,347
Loan payable to a bank, secured by a certificate of deposit,
20 equal semiannual installments of $32,143 through
February, 2003, and quarterly payments of interest at
1/2% above the prime rate through 2003 (See Note 8)...... 417,836 482,128
9.5% senior secured note payable, interest due
semi-annually, principal due May 2004..................... 7,902,708 7,890,207
Unsecured loan payable, monthly installments of
approximately $5,200 including interest at 2.25% above the
prime rate (but not less than 7% nor greater than 14.25%)
through April 2004 at which time the unpaid balance shall
be due.................................................... 536,201 --
---------- ----------
9,071,524 8,613,682
Less amounts payable in one year............................ 105,000 91,000
---------- ----------
$8,966,524 $8,522,682
========== ==========
</TABLE>

The long-term debt maturing over the next five years is as follows:
1997 -- $105,000; 1998 -- $109,000; 1999 -- $114,000; 2000 -- $120,000 and
2001 -- $126,000.

In May 1994, the Company privately placed with an insurance company at
9.5%, a senior secured note in the principal amount of $8,000,000 together with
an immediately exercisable detachable warrant to purchase, at any time through
May 24, 2004, 449,440 shares, subject to adjustment, of the Company's common
stock at an exercise price of $3.38 per share. The value assigned to the warrant
($100,000) has been accounted for as paid-in capital, resulting in a discount
which is being amortized on a straight-line basis over the life of the note. The
senior note is collateralized by substantially all of the Company's oil and gas
properties and certain of the Company's real estate loans (see Note 12). Among
other restrictions, the note agreement limits the payment of dividends, requires
the insurance company's consent to mergers and the sale of substantial assets,
limits the Company's incurring additional indebtedness, and requires the
maintenance of certain financial ratios. At September 30, 1996 and 1995, the
Company was in compliance with such covenants.

NOTE 6 -- INCOME TAXES

The following table details the components of the Company's income tax
expense for the years 1996, 1995 and 1994.

<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Provision (benefit) for federal income tax
Current........................................ $1,147,000 157,000 60,000
Deferred....................................... 1,059,000 473,000 (160,000)
---------- -------- ---------
$2,206,000 $ 630,000 $ (100,000)
========== ======== =========
</TABLE>

F-13
<PAGE> 69

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A reconciliation between the statutory federal income tax rate and the
Company's effective federal income tax rate is as follows:

<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Statutory tax rate.............................................. 34% 34% 34 %
Statutory depletion............................................. (4) (4) (18 )
Non-conventional fuel credits................................... -- (1) (4 )
Adjustment of prior year's accruals............................. -- (3) (7 )
Adjustment to valuation allowance for deferred tax assets....... -- (7) (9 )
Other........................................................... -- -- (4 )
-- --
---
30% 19% (8 )%
== == ===
</TABLE>

The components of the net deferred tax liability are as follows:

<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Deferred tax assets:
Statutory depletion carryforward........................ $ -- $ 634,000
Investment tax credit carryforwards..................... -- 122,000
Alternative minimum tax credit carryforwards............ 61,000 221,000
Interest receivable..................................... 45,000 120,000
----------- -----------
106,000 1,097,000
Deferred tax liabilities:
Excess of tax over book depreciation, depletion, and
amortization......................................... (2,160,000) (2,138,000)
ESOP benefits........................................... (140,000) (106,000)
Other items, net........................................ (12,000) --
----------- -----------
(2,312,000) (2,244,000)
----------- -----------
Net deferred tax liability........................... $(2,206,000) $(1,147,000)
=========== ===========
</TABLE>

NOTE 7 -- STOCKHOLDERS' EQUITY

On October 16, 1995, the Company's shareholders authorized an amendment to
the Certificate of Incorporation of the Company to effect a division of the
Company's Common Stock into two classes, Class A Common Stock and Class B Common
Stock. The Company's existing Common Stock is designated as Class A Common
Stock. Class B Common Stock is currently reserved for issuance upon the exercise
of certain warrants held by Physician's Insurance Company of Ohio. This action
did not affect the number of authorized or outstanding shares of Common or
Preferred Stock. Class A Common Stock and Class B Common Stock have the same
relative rights in all matters except for the election of directors.

Subsequent to the date of this report, upon the effective date of the
filing of a registration statement, the Class B Common Stock will merge
automatically into the Class A Common Stock and the merged class will be
designated as Common Stock.

On December 20, 1995 and March 12, 1996, the Board of Directors declared 6%
stock dividends of the Company's Class A common stock payable on January 31,
1996 and April 30, 1996, to shareholders of record on January 17, 1996 and April
16, 1996, respectively. On May 9, 1996, the Board of Directors authorized a
five-for-two stock split effected in the form of a 150% stock dividend payable
on May 31, 1996 to shareholders of record on May 20, 1996. These dividends
resulted in the issuance of 1,219,297 additional shares of Class A common stock.
Earnings per share and weighted average shares outstanding have been restated to
reflect the above transactions.

On September 9, 1996, the Company's shareholders authorized an amendment to
the Certificate of Incorporation of the Company to increase the total number of
shares of capital stock authorized to 9 million,

F-14
<PAGE> 70

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of which 6.5 million are Class A Common Stock, 1.5 million are Class B Common
Stock and 1 million are Preferred Stock.

NOTE 8 -- EMPLOYEE BENEFIT PLANS

EMPLOYEE STOCK OWNERSHIP PLAN

During 1989, the Company established an Employee Stock Ownership Plan
("ESOP"), to which it sold 168,540 newly-issued shares for $1,200,000. The ESOP
is a qualified non-contributory retirement plan to acquire shares of the
Company's common stock for the benefit of all employees 21 years of age or older
and who have completed 1,000 hours of service for the Company. Contributions to
the ESOP are made at the discretion of the Board of Directors. The ESOP borrowed
the funds to purchase the shares under a seven year bank term loan that was
guaranteed by the Company. In February 1993, this loan was retired and
refinanced by a loan from the Company, which borrowed the funds for such loan
from another bank (see Note 5).

The stock purchased by the ESOP with the money borrowed is held by the ESOP
trustee in a "suspense account." On an annual basis, a portion of the common
stock is released from the "suspense account" and allocated to participating
employees. Any dividends on ESOP shares are used to pay principal and interest
on the loan. As of September 30, 1996, there were 122,412 shares allocated to
participants. Compensation expense related to the plan is based upon principal
and interest payments to the bank less dividends paid to ESOP shares, such
expense amounted to $50,300, $91,000 and $94,800 for the years ended September
30, 1996, 1995 and 1994, respectively.

The loan from the bank to the Company is payable in semiannual installments
through February 1, 2003. The loan from the Company to the ESOP was payable on a
quarterly basis through August 1, 1996. Both the loan obligation and the
unearned benefits expense (a reduction in shareholders' equity) will be reduced
by the amount of any loan principal payments made by the Company.

EMPLOYEE SAVINGS PLAN

The Company has an Employee Retirement Savings Plan and Trust under Section
401(k) of the Internal Revenue Code which allows employees to defer up to 10% of
their income on a pretax basis through contributions to the savings plan. The
Company matches up to 100% of each employee's contribution. Included in general
and administrative expenses are $44,700, $28,100 and $20,000 for the Company's
contributions for the years ended September 30, 1996, 1995, and 1994,
respectively.

STOCK OPTIONS

Under the Company's 1984 Key Employee Stock Option Plan, officers and
certain key employees may be granted options to purchase shares of stock at an
option price of not less than the fair market value on the date of the grant.
The plan also provides for the grant of Stock Appreciation Rights ("SAR's") to
accompany the grant of options. A right entitles the holder to benefit from
market appreciation in the Company's stock subject to the right between the date
of grant and the date of exercise without requiring any payment on the part of
the holder. Upon exercise of a right, the holder is entitled to receive an
amount of stock (or, at the election of the Board of Directors, cash) equal in
value to the amount of such appreciation.

A total of 56,180 shares were originally reserved for issuance under the
plan. The exercise of SAR's on 44,944 shares has reduced the number of shares
reserved to 11,236 for which options were outstanding at September 30, 1996, at
an exercise price of $2.76 per share. To exercise any part of an option, an
optionee must remain in the continuous employment of the Company for one year
after the date of grant.

In January 1990, the stockholders approved the Resource America, Inc., 1989
Key Employee Stock Option Plan ("Plan"). The Plan, for which 196,630 shares were
originally reserved, provides for the issuance

F-15
<PAGE> 71

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of Incentive Stock Options and Non-qualified Stock Options ("Options") and
SAR's. In October 1995, the Company's shareholders approved an amendment to the
Plan increasing the number of shares reserved to 393,260 shares. In fiscal 1996,
options for 28,090 shares were exercised and options for 28,090 shares were
cancelled. The Plan is administered by a Compensation Committee ("Committee") of
the Board of Directors consisting of at least two members of the Board, neither
of whom can receive Options or SAR's under the Plan. The Committee may grant to
eligible employees Options to purchase shares or SAR's and, at its discretion,
may set terms and conditions required of a recipient as a condition to his
exercise of the Option or SAR. At September 30, 1996, Options for a total of
337,080 shares were outstanding at a weighted-average exercise price of $6.32
per share.

Options under either plan become exercisable as to 25% of the optioned
shares each year after the date of grant, and expire not later than ten years
after grant.

A summary of the changes in shares under option for both plans follows:

<TABLE>
<CAPTION>
(NUMBER OF SHARES)
-------------------------------
YEARS ENDED SEPTEMBER 30, 1996 1995 1994
- ----------------------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
Outstanding, October 1..................................... 202,248 202,248 202,248
Exercised at $2.76 per share............................... (28,090) --
Canceled at $2.76 per share................................ (28,090) --
Granted at $8.19 and $9.01 per share....................... 202,248
Outstanding, September 30.................................. 348,316 202,248 202,248
Exercisable, September 30.................................. 109,551 101,124 50,562
Available for grant, September 30.......................... -- 5,618 5,618
</TABLE>

In addition, a key employee of Fidelity Leasing, Inc. ("FLI," a wholly
owned subsidiary of the Company), has received options to purchase 10% of the
common stock of FLI (1 million shares) at an aggregate price of $220,000 and,
should FLI declare a dividend, will receive payments on the options in an amount
equal to the dividends that would have been paid on the shares subject to the
options had they been issued. FLI has also established another option plan, in
the amount of 500,000 shares of common stock, for grant (at the discretion of
FLI's board of directors) to other employees of FLI. In the event that, prior to
becoming a public company, FLI issues stock to anyone other than the Company or
the key employee, the employee is entitled to receive such additional options as
will allow him to maintain his 10% equity position in FLI (excluding shares
issuable pursuant to the employee option plan referred to above), at an exercise
price equal to the price paid or value received in the additional issuance. FLI
does not anticipate making any such issuances.

The options issued to the key employee vest 25% per year beginning in March
1997 (becoming fully invested in March 2000), and terminate in March 2005,
provided that no more than $100,000 of shares (measured by "fair market value")
may be purchased in any year pursuant to option exercises. The options become
fully vested and immediately exercisable in the event of a change in control of
FLI. The key employee has certain rights, commencing after March 5, 2000, to
require FLI to register his option shares under the Securities Act. In the event
FLI does not become a public company by March 5, 2001, the key employee may
require that FLI thereafter buy, for cash, FLI shares subject to such employee's
options at a price equal to ten times FLI's after-tax earnings per share for the
fiscal year ended immediately prior to the giving of notice by such employee of
his exercise of this right. FLI is required to purchase 25% of such employee's
shares in each year following such employee's exercise of this right.

F-16
<PAGE> 72

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 9 -- COMMITMENTS

The Company leases office space with varying expiration dates through 2001.
Rental expense was $188,900, $60,500 and $47,000 for the years ended September
30, 1996, 1995 and 1994, respectively. Future minimum rental commitments at
September 30, 1996 and thereafter are as follows:

As of September 30, 1996, the Company had outstanding commitments to fund
the purchase of equipment which it intends to lease, with an aggregate cost of
$441,000.

NOTE 10 -- ACQUISITION

Effective September 1, 1995, the Company acquired F.L. Partnership
Management, Inc. ("FLPM"), (formerly Fidelity Leasing Corporation), an equipment
leasing company, for $1,456,000 in cash (including related expenses) and the
assumption of $312,000 in liabilities. The acquisition was accounted for as a
purchase and, accordingly, FLPM's assets and liabilities have been recorded at
their estimated fair values at the date of acquisition. The purchase price
resulted in an excess of costs over net assets acquired (goodwill) of
approximately $558,000, which is being amortized on a straight line basis over
15 years. FLPM currently manages six equipment leasing partnerships.

The following pro forma results of operations give effect to the above
acquisition as though it had occurred on October 1, 1993:

<TABLE>
<CAPTION>
1995 1994
------- -------
(IN THOUSANDS
EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
Revenue.................................................... $13,473 $10,342
Net Income................................................. 2,865 1,664
Net Income per common share................................ 1.28 .83
</TABLE>

The pro forma results of operations have been prepared for comparative
purposes only and do not purport to present actual operating results had the
acquisition been made at the beginning of each year, or of results which may
occur in the future.

F-17
<PAGE> 73

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 11 -- INDUSTRY SEGMENT INFORMATION AND MAJOR CUSTOMERS

The Company operates in three principal industry segments -- real estate,
energy and leasing. Segment data for the years ended September 30, 1996, 1995,
and 1994 are as follows:

<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(IN THOUSANDS OF $)
<S> <C> <C> <C>
Revenue:
Real estate.............................................. $ 7,171 $ 6,114 $ 2,522
Energy................................................... 5,157 5,332 5,522
Leasing.................................................. 4,466 -- --
Corporate................................................ 197 148 136
------- ------- -------
16,991 11,594 8,180
======= ======= =======
Depreciation, Depletion, and Amortization:
Real estate.............................................. 38 37 37
Energy................................................... 1,062 1,254 1,268
Leasing.................................................. 204 -- --
Corporate................................................ 65 44 41
------- ------- -------
1,369 1,335 1,346
======= ======= =======
Operating Profit (Loss):
Real estate.............................................. 6,259 4,444 1,819
Energy................................................... 1,437 1,085 488
Leasing.................................................. 1,916 -- --
Corporate................................................ (2,266) (2,184) (1,091)
------- ------- -------
7,346 3,345 1,216
======= ======= =======
Identifiable Assets:
Energy................................................... 12,675 13,790 14,570
Real estate.............................................. 22,087 18,225 10,489
Leasing.................................................. 3,019 991 --
Corporate................................................ 6,178 4,544 9,737
------- ------- -------
43,959 37,550 34,796
======= ======= =======
Capital Expenditures:
Real Estate.............................................. 17 172 2
Energy................................................... 501 637 982
Leasing.................................................. 531 -- --
Corporate................................................ 48 8 53
------- ------- -------
$ 1,097 $ 817 $ 1,037
======= ======= =======
</TABLE>

Operating profit (loss) represents total revenue less operating expenses,
excluding interest and general corporate expenses. A portion of executive
salaries, included in their entirety in general and administrative expenses on
the Company's Consolidated Statements of Operations, have been allocated to each
segment based on the time spent in each area of the business.

F-18
<PAGE> 74

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ended September 30, 1995 and 1994, respectively. Interest and fees earned from
one borrower approximated 24% of total real estate revenues for the year ended
September 30, 1995.

NOTE 12 -- INVESTMENTS IN REAL ESTATE LOANS

The Company has focused its real estate activities on the purchase of
income producing mortgages at a discount to the face value of such mortgages and
also to the appraised value of the property underlying the mortgage. Cash
received by the Company for payment on each mortgage is allocated between
principal and interest -- the interest portion of the cash received is recorded
as income to the Company. Additionally, the Company records as income the
accrual of a portion of the discount to the underlying collateral value. This
"accretion of discount" amounted to $953,774 during the year ended September 30,
1996. As the Company sells participations or receives funds from refinancings in
such mortgages, a portion of the cash received is employed to reduce the
cumulative accretion of discount included in the carrying value of the Company's
investment in real estate loans.

At September 30, 1996 and 1995,the Company held real estate loans having
aggregate face values of $79,101,000 and $51,690,000, respectively, which were
being carried at aggregate costs of $21,798,000 and $17,991,000, including
cumulative accretion of $2,066,000 and $1,168,000, respectively. The following
is a summary of the changes in the carrying value of the Company's investments
in real estate loans for the years ended September 30, 1996 and 1995:

<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Balance, beginning of period............................... $17,991,415 $10,385,587
New real estate loans.................................... 15,126,777 13,588,000
Additions to existing loans.............................. 2,564,319 1,299,696
Accretion of discount.................................... 953,774 1,175,886
Collections of principal................................. (9,377,017) (2,555,285)
Cost of mortgages sold................................... (5,461,500) (5,902,469)
-----------
Balance, end of period..................................... $21,797,768 $17,991,415
===========
</TABLE>

Investments in Real Estate Loans at September 30 consists of:

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------
1996 1995
----------- -----------
<S> <C> <C> <C>
Property 001 Subordinated wraparound note, face value of
$4,500,000, secured by residential real estate
located in Pittsburgh, PA, interest at 14.5%, due
December 31, 2002.................................... $ 2,410,665 $ 2,334,850
Property 002 Note, face value of $1,080,000, secured by
residential real estate located in Philadelphia, PA,
interest at 12%, due October 31, 1998................ 179,980 147,972
Property 003 Mortgage note, face value of $1,798,000, secured by
residential real estate located in Margate, NJ,
interest at the Chase Manhattan Bank prime rate (but
not less than 9% nor greater than 15.5%), due January
1, 2003. In August 1996, the owner of the property
refinanced the mortgage note with an unaffiliated
party, simultaneously paying the Company $627,200
toward principal and interest leaving a remaining
face value due the Company of $1,633,000............. 694,850 424,749
</TABLE>

F-19
<PAGE> 75

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------
1996 1995
----------- -----------
<S> <C> <C> <C>
Property 004 Note, face value of $1,312,000, secured by
residential real estate located in Philadelphia, PA,
interest at 2 1/2% over the monthly national median
annualized cost of funds for SAIF-insured
institutions as announced by the Federal Deposit
Insurance Corporation, due October 31, 1998.......... 226,968 189,347
Property 005 Note, face value of $4,234,000 by commercial real
estate located in Pittsburgh, PA, interest at 10.6%,
due February 7, 2001................................. 1,086,709 675,805
Property 006 Subordinated note, face value of $4,165,000, interest
at 1/2% over the Maryland National Bank prime rate,
due July 31, 1998.................................... 1,537,546 1,469,899
Property 007 Note, face value of $1,776,000, secured by a judgment
lien, relating to real estate located in St. Cloud,
MN, interest at 10%, due December 31, 2014........... 527,846 489,196
Property 008 Subordinated note, face value of $3,559,000, secured
by an unrecorded deed relating to real estate located
in Philadelphia, PA, interest at 2% over the yield of
one-year United States Treasury securities, due July
31, 1998............................................. 721,212 724,422
Property 009 Subordinated notes, face value of $1,495,000 secured
by residential real estate located in Philadelphia,
PA, interest at 2% over the Mellon Bank prime rate,
due October 31, 1999................................. 510,608 545,077
Property 010 Mortgage note, face value of $1,211,000, secured by
residential real estate located in Philadelphia, PA,
interest at 3% over the Federal Home Loan Bank of
Pittsburgh rate, due September 2, 1999............... 112,467 107,450
Property 011 Mortgage note, face value of $900,000, secured by
commercial real estate located in Washington, D.C.,
interest at 1 1/2% over the First Union National Bank
rate, due September 30, 1999......................... 414,360 289,504
Property 012 Mortgage notes, face value of $1,962,000, secured by
residential real estate located in Philadelphia, PA,
varying interest rates from 9 1/2% to 14.5%, due
December 2, 1999.
In August 1996, the owner of the property refinanced
the mortgage note with an unaffiliated party,
simultaneously paying the Company $1,079,300 toward
principal and interest on these loans................ 747,640 195,092
Property 013 Mortgage note, face value of $3,000,000, secured by
commercial real estate located in Pasadena, CA,
interest at 2.75% over the average cost of funds to
FSLIC-insured savings and loan associations, 11th
District (but not less than 5.5% nor greater than
15.5%), due May 1, 2001.............................. 302,354 295,608
</TABLE>

F-20
<PAGE> 76

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------
1996 1995
----------- -----------
<S> <C> <C> <C>
Property 014 Wraparound note, face value of $12,000,000 consisting
of a first mortgage held by the Company of $9,000,000
secured by commercial real estate located in
Washington, D.C., a note and a $3,000,000 second
mortgage held by an unrelated party, interest at 12%,
due November 30, 1998. In October 1995, the owner of
the property refinanced the mortgage note with an
unaffiliated party, simultaneously paying the Company
$6,487,000 toward principal and interest on this
loan................................................. 3,170,843 9,252,716
Property 015 Subordinated wraparound note, face value of
$3,500,000, secured by residential real estate
located in New Concord, NC, interest at 12%, due
August 25, 2000...................................... 356,147 146,765
Property 016 Wraparound note, face value of $5,198,000, secured by
real estate located in Rancho Cordova, CA, interest
at 8.5%, due December 31, 2019. In November 1995, the
Company bought the underlying first mortgage for
$1,328,000 and sold a senior participation in this
mortgage for $2,400,000, resulting in a gain of
$799,000 and a remaining face value due the Company
of $4,143,000........................................ 428,703 702,963
Property 017 Subordinated wraparound note, face value of
$3,300,000 secured by commercial real estate located
in Elkins, WV, interest at 13.6%, due in equal
installments through December 31, 2018............... 961,756 --
Property 018 Mortgage note, face value of $2,271,000, secured by
commercial real estate located in Northridge, CA,
interest at 9%, due December 27, 2000. In December
1995, the Company sold a senior participation in this
mortgage for $1,969,000 resulting in a gain of
$538,000 and a remaining face value due the Company
of $743,000.......................................... 782,973 --
Property 019 Mortgage note, face value of $4,627,000, secured by
residential real estate located in Philadelphia, PA,
interest at 7.75%, due December 31, 2000. In April
1996, the owner of the property refinanced the
mortgage note property with an unaffiliated party,
simultaneously paying the Company $3,020,000 toward
principal and interest on this loan.................. 900,017 --
Property 020 Mortgage note, face value of $4,800,000 secured by
real estate located in Cherry Hill, NJ, interest at
10%, due February 7, 2001. In September 1996, the
Company sold a senior participation in this mortgage
for $2,000,000, resulting in a gain of $625,000 and a
remaining face value due the Company of $3,072,000... 1,536,729 --
</TABLE>

F-21
<PAGE> 77

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------
1996 1995
----------- -----------
<S> <C> <C>
of$1,259,000...516,036-- Property Subordinated participation loan, face value of
022 $2,038,000, secured by real estate located in
Philadelphia, PA, interest at 85% of the 30-day rate
on $100,000 Certificates of Deposit as published by
the Wall Street Journal plus 2.75%, due October 31,
1998................................................. 1,060,176 --
Property 023 Subordinated mortgage note, face value of $600,000,
secured by real estate located in Philadelphia, PA,
interest at 12%, due March 28, 2001.................. 110,559 --
Property 024 Mortgage note, face value of $3,500,000, secured by
residential real estate located in Sharon Hill, PA,
interest at 10.5%, due December 31, 2002............. 2,500,624 --
----------- -----------
$21,797,768 $17,991,415
========== ==========
</TABLE>

As referenced above, during fiscal years 1995 and 1996 the Company sold
senior participations in seven and three real estate loans, respectively, to an
insurance company and, in fiscal 1996, one loan to a financial institution. Both
the insurance company and the financial institution have certain recourse rights
against the Company should the loans not perform under the terms of the
participation agreements. In addition, the Company issued to the insurance
company warrants to purchase 421,350 shares and 112,360 shares of the Company's
common stock at $4.18 and $3.38 per share, respectively. The total value
assigned to the warrants ($118,800) has been accounted for as paid-in capital.

Further, as referenced above, in 1996 the owners of two properties on which
the Company held mortgage notes refinanced those Notes with unaffiliated
parties. The Company received payments of principal and interest on these notes
and now holds positions which are subordinated to the new first mortgage notes
placed on the properties by the unaffiliated parties.

NOTE 13 -- SUPPLEMENTAL OIL AND GAS INFORMATION

Results of operations for oil and gas producing activities:

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------
1996 1995 1994
------- ------- -------
(IN THOUSANDS OF $)
<S> <C> <C> <C>
Revenues...................................................... $ 3,421 $ 3,452 $ 3,442
Production costs.............................................. (1,421) (1,502) (1,369)
Exploration expenses.......................................... (161) (230) (635)
Depreciation, depletion, and amortization..................... (781) (922) (977)
Income taxes.................................................. (96) -- --
------- ------- -------
Results of operations for producing activities................ $ 962 $ 798 $ 461
======= ======= =======
</TABLE>

F-22
<PAGE> 78

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CAPITALIZED COSTS RELATED TO OIL AND GAS PRODUCING ACTIVITIES

The components of capitalized costs related to the Company's oil and gas
producing activities (less impairment reserve of $21,947 in 1996 and $30,000 in
1995) are as follows:

<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Proved properties................................. $ 22,549,241 $ 22,416,419 $ 26,903,003
Unproved properties............................... 481,477 649,962 703,317
Pipelines, equipment, and other interests......... 2,540,050 2,487,508 2,561,500
------------ ------------ ------------
Total........................................ 25,570,768 25,553,889 30,167,820
Accumulated depreciation, depletion, and
amortization.................................... (14,305,928) (13,589,493) (17,381,995)
------------ ------------ ------------
Net capitalized costs........................ $ 11,264,840 $ 11,964,396 $ 12,785,825
=========== =========== ===========
</TABLE>

COSTS INCURRED IN OIL AND GAS PRODUCING ACTIVITIES

The costs incurred by the Company in its oil and gas activities during
1996, 1995 and 1994 are as follows:

<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Property acquisition costs:
Unproved properties........................... $ 2,421 $ 5,373 $ 220
Proved properties............................. 156,751 388,392 794,585
Exploration costs.................................. 316,961 317,239 702,588
Development costs.................................. 176,290 211,313 214,747
</TABLE>

OIL AND GAS RESERVE INFORMATION (UNAUDITED)

The Company's estimates of net proved developed oil and gas reserves and
the present value thereof have been verified by E.E. Templeton & Associates,
Inc., an independent petroleum engineering firm. The Company has no proven
undeveloped reserves.

The Company's oil and gas reserves are located within the United States.
There are numerous uncertainties inherent in estimating quantities of proved
reserves and in projecting future net revenues and the timing of development
expenditures. The reserve data presented represent estimates only and should not
be construed as being exact. In addition, the standardized measures of
discounted future net cash flows may not represent the fair market value of the
Company's oil and gas reserves or the present value of future cash flows of
equivalent reserves, due to anticipated future changes in oil and gas prices and
in production and development costs and other factors for which effects have not
been provided.

The standardized measure of discounted future net cash flows is merely
information provided for the financial statement user as a common base for
comparing oil and gas reserves of enterprises in the industry.

<TABLE>
<CAPTION>
GAS OIL
(MCF) (BBLS)
---------- -------
<S> <C> <C>
Balance -- September 30, 1993................................. 10,465,818 261,824
Purchases of reserves in-place................................ 2,835,913 53,111
Current additions............................................. -- --
Sales of reserves in-place.................................... (1,865) (66)
Revisions to previous estimates............................... (26,065) 15,992
Production.................................................... (1,161,685) (34,002)
---------- -------
Balance -- September 30, 1994................................. 12,112,116 296,859
</TABLE>

F-23
<PAGE> 79

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
GAS OIL
(MCF) (BBLS)
---------- -------
<S> <C> <C>
in-place............893,10423,284Current additions............ 430,330 3,641
Sales of reserves in-place.................................... (79,294) (628)
Revisions to previous estimates............................... 624,471 14,423
Production.................................................... (1,198,245) (36,420)
---------- -------
Balance -- September 30, 1995................................. 12,782,482 301,159
Purchase of reserves in-place................................. 293,602 8,880
Current additions............................................. 237,070 726
Sales of reserves in-place.................................... (18,645) (1,885)
Revision to previous estimates................................ 723,242 35,002
Production.................................................... (1,165,477) (33,862)
---------- -------
Balance -- September 30, 1996................................. 12,852,274 310,020
========= =======
</TABLE>

Presented below is the standardized measure of discounted future net cash
flows and changes therein relating to proved developed oil and gas reserves. The
estimated future production is priced at year-end prices. The resulting
estimated future cash inflows are reduced by estimated future costs to develop
and produce the proved developed reserves based on year-end cost levels. The
future net cash flows are reduced to present value amounts by applying a 10%
discount factor.

<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Future cash inflows.............................. $ 34,516,625 $ 30,257,454 $ 30,334,494
Future production and development costs.......... (16,764,409) (15,199,823) (15,071,229)
Future income tax expense........................ (2,731,883) (1,260,450) (961,919)
------------ ------------ ------------
Future net cash flows............................ 15,020,333 13,797,181 14,301,346
Less 10% annual discount for estimated timing of
cash flows..................................... (6,671,674) (5,987,477) (6,340,083)
------------ ------------ ------------
Standardized measure of discounted future net
cash flows..................................... $ 8,348,659 $ 7,809,704 $ 7,961,263
=========== =========== ===========
</TABLE>

The following table summarizes the changes in the standardized measure of
discounted future net cash flows from estimated production of proved developed
oil and gas reserves after income taxes.

<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Balance, beginning of period........................ $ 7,809,704 $ 7,961,263 $ 7,281,849
Increase (decrease) in discounted future net cash
flows:
Sales and transfers of oil and gas, net of related
costs............................................. (1,927,865) (1,869,399) (1,344,839)
Net changes in prices and production costs.......... 1,391,506 (186,722) (239,502)
Revisions of previous quantity estimates............ 696,880 417,560 69,501
Extensions, discoveries, and improved recovery less
related costs..................................... 145,255 252,604 --
Purchases of reserves in-place...................... 241,657 612,008 1,916,920
Sales of reserves in-place, net of tax effect....... (25,570) (46,306) (1,425)
Accretion of discount............................... 850,640 841,775 760,714
Net change in future income taxes................... (924,022) (240,218) (131,190)
Other............................................... 90,474 67,139 (350,765)
----------- ----------- -----------
Balance, end of period.............................. $ 8,348,659 $ 7,809,704 $ 7,961,263
========== ========== ==========
</TABLE>

F-24
<PAGE> 80

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

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROSPECTUS AND ANY INFORMATION OR REPRESENTATION NOT
CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY
SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO ANY
PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information................. 2
Prospectus Summary.................... 3
Summary Consolidated Financial Data... 6
Risk Factors.......................... 8
Use of Proceeds....................... 15
Price Range of Common Stock and
Dividend Policy..................... 15
Capitalization........................ 16
Selected Consolidated Financial
Data................................ 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 19
Business.............................. 25
Management............................ 44
Security Ownership of Certain
Beneficial Owners and Management.... 49
Description of Capital Stock.......... 50
Underwriting.......................... 53
Legal Matters......................... 54
Experts............................... 54
Consolidated Financial Statements..... F-1
</TABLE>

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

1,200,000 SHARES

LOGO

RESOURCE AMERICA, INC.

COMMON STOCK

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

PROSPECTUS
--------------------
FRIEDMAN, BILLINGS,
RAMSEY & CO., INC.

, 1996

- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 81

PART II. INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

<TABLE>
<S> <C>
Registration and Filing Fees:
Securities Exchange Commission.................................................. $ 6,257
NASD............................................................................ 17,500
Total Registration and Filing Fees.............................................. $ 23,757
Printing and Engraving*........................................................... 40,000
Legal*............................................................................ 250,000
Blue Sky*......................................................................... 7,500
Accounting*....................................................................... 80,000
Transfer Agent.................................................................... 3,000
Total Other Expenses*............................................................. 20,000
--------
Total Expenses.................................................................... $424,257
========
</TABLE>

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

*Estimate

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

As permitted by Section 102(b)(7) of the Delaware General Corporation Law,
the Company's Certificate of Incorporation provides that directors of the
Company shall not be personally liable to the Company or its shareholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company or
its shareholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware General Corporation Law, relating to prohibited dividends or
distributions or the repurchase or redemption of stock, or (iv) for any
transaction from which the director derives an improper personal benefit. In
addition, the Company's By-laws provide for indemnification of the Company's
officers and directors to the fullest extent permitted under Delaware law.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or persons controlling the Company pursuant
to the foregoing provisions, or otherwise, the Company has been informed that in
the opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.

The Company maintains directors' and officers' liability insurance against
any actual or alleged error, misstatement, misleading statement, act, omission,
neglect or breach of duty by any director or officer, excluding certain matters
including fraudulent, dishonest or criminal acts or self-dealing.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

The Company issued to PICO, during 1994, 1995 and 1996, warrants to
purchase 983,150 shares of Common Stock. See "Description of Capital
Stock -- Warrants" in the Prospectus. These securities were issued pursuant to
the exemption contained in Section 4(2) of the Securities Act.

II-1
<PAGE> 82

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

<TABLE>
<CAPTION>
A. EXHIBITS.
<S> <C> <C>
--------
23.(a) Consent of Grant Thornton LLP
</TABLE>

ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions of registrant's Certificate of
Incorporation, Bylaws or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

The undersigned registrant undertakes that:

1. For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4), or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

2. For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

ITEM 18. FINANCIAL STATEMENTS AND SCHEDULES

(a) Inapplicable.

(b) Schedule IV -- Mortgage Loans on Real Estate

II-2
<PAGE> 83

INDEX TO FINANCIAL STATEMENT SCHEDULES

Report of Independent Accountants on Schedules ...................... II-5
Schedule IV - Mortgage loans on real estate ......................... II-6

All other schedules have been omitted because they are either not applicable
or the information required has been disclosed in the financial statements and
related notes included in this Prospectus.

II-3

<PAGE> 84

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON SCHEDULES

Board of Directors
RESOURCE AMERICA, INC.

In connection with our audit of the consolidated financial statements of
Resource America, Inc. and subsidiaries referred to in our report dated
October 25, 1996, which is included in the Prospectus constituting Part I of
the Registration Statement, we have also audited Schedule IV as of
September 30, 1996. In our opinion, this schedule presents fairly, in all
material respects, the information to be set forth therein.

Cleveland, Ohio
October 25, 1996

II-4
<PAGE> 85
SCHEDULE IV
RESOURCE AMERICA, INC. & SUBSIDIARIES
MORTGAGE LOANS ON REAL ESTATE

SEPT 30, 1996

<TABLE>
<CAPTION>
PRINCIPAL
PERIODIC CARRYING SUBJECT TO
INTEREST FINAL MATURITY PAYMENT PRIOR FACE AMOUNT AMOUNT OF DELINQUENT
DESCRIPTION RATE DATE TERMS LIENS OF MORTGAGES MORTGAGES INTEREST
<S> <C> <C> <C> <C> <C> <C>
FIRST MORTGAGES
Apartment bldg, Fixed interest 12/31/2002 (a) - 3,500,000 2,500,624 -
Sharon Hill, PA rate of 10.5%

SECOND LIEN LOANS
RENTAL APARTMENTS
Apartment bldg, Fixed interest 12/31/2002 (a) $2,565,000 $4,500,000 $2,410,665 -
Pittsburgh, PA rate of 14.5%

Rental Apartments, Two loans with fixed From June 1, - - - 2,318,052 $129,704
6 loans, original interest rates of 1998 to
loan amounts 12%; all remaining August 25,
ranging from loans have varying 2000
$1,080,000 to rates from 7.3% to
$3,500,000 in 14.5%
Phil. PA, Margate
NJ, & New
Concord NC

Apartment bldg, 2% over the yield of 7/31/1998 (a) 1,113,000 3,558,857 721,212 -
Philadelphia, PA one-year U. S.
Treasury securities

Apartment bldg, 3 Two loans with fixed From October - - - 1,137,203 -
loans, original interest rate of 31, 1999
loan amounts 12% & other prime to March 31,
ranging from plus 2% 2001
$600,000 to
$7,192,702 in
Philadelphia, PA

Apartment bldg, Fixed interest rate 12/31/2000 (a) 3,207,000 4,627,000 900,017 -
Philadelphia, PA of 7.75%

Apartment bldg, 85% of the 30 day 10/31/1998 (a) 1,241,000 2,038,000 1,060,176 -
Philadelphia, PA rate on $100,000
CDS as published
by Wall Street plus
2.75%

COMMERCIAL

Office bldg, Fixed rate of 10.6% 10/31/1998 (a) 840,000 4,234,402 1,086,709 13,085
Pittsburgh, PA

Office bldg, Prime plus 1.5% 9/30/1999 (a) 685,000 900,000 414,360 -
Washington, D.C.

Office bldg, Fixed interest rate 11/30/1998 (a) 6,878,000 12,000,000 3,170,843 -
Washington, D.C. of 12%

Office/Retail bldg, Prime plus 1.5% 10/31/1998 (a) 889,000 4,165,000 1,537,546 71,929
Alexandria, VA

Industrial bldg, 2.75% over the 5/1/2001 (a) 2,000,000 3,000,000 302,354 -
Pasadena, CA average cost of
funds to FSLIC-
Insured savings and
loan institutions

Retail bldgs, 3 Fixed rate from 8.5% From December - - - 1,918,305 -
loans, original to 13.6% 31, 2014 to
loan amounts December 31,
ranging from 2019
$1,776,246 to
$5,198,000 in
Rancho Cordova,
Ca & St. Could,
MN & Elkins,
W. VA.

Retail bldg, Fixed interest rate 11/01/1998 (a) 1,969,000 2,271,000 782,973 -
Northridge, CA of 9%

Office bldg, Fixed interest rate 1/31/2001 (a) 2,000,000 4,800,000 1,536,729 -
Cherry Hill, NJ of 10%
----------- ----------- ----------- ---------
$23,387,000 $49,594,259 $21,797,768 $214,718

Reconciliation of the total carrying amount of real estate loans for the year
follows:

Balance at October 1, 1995 $17,991,415
Additions during the period:

New mortgage loans $15,126,777
Amortization of discount 953,774
Additions of existing loans 2,564,319 18,644,870
-------------------------------------
$36,636,285

Deductions during the period:

Collections of principal 9,377,017
Cost of mortgages sold 5,461,500 14,838,517
-------------------------------------

Balance at September 30, 1996 $21,797,768
===========
<FN>
(a) All net cash flows from the property
(b) Cost for Federal income tax purposes equals $21,929,000
</TABLE>
II-5
<PAGE> 86

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Philadelphia,
Commonwealth of Pennsylvania, on November 22, 1996.

Resource America, Inc.

By: /s/ Edward E. Cohen
-------------------------------
Edward E. Cohen, Chairman of the
Board of Directors, Chief
Executive Officer and President

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.

/s/ Edward E. Cohen
- ---------------------------------------
EDWARD E. COHEN, Chairman of the
Board of Directors, Chief Executive
Officer, President and Director
(Chief Executive Officer)

/s/ Carlos C. Campbell
- ---------------------------------------
CARLOS C. CAMPBELL, Director

/s/ John R. Hart
- ---------------------------------------
JOHN R. HART, Director

/s/ Andrew M. Lubin
- ---------------------------------------
ANDREW M. LUBIN, Director

/s/ Alan D. Schreiber
- ---------------------------------------
ALAN D. SCHREIBER, M.D., Director

/s/ Michael L. Staines
- ---------------------------------------
MICHAEL L. STAINES,
Senior Vice President, Secretary
and Director

/s/ John S. White
- ---------------------------------------
JOHN S. WHITE, Director

/s/ Nancy J. McGurk
- ---------------------------------------
NANCY J. MCGURK, Vice
President - Finance
(Chief Accounting Officer)

By: /s/ Edward E. Cohen Date: November 22, 1996
-----------------------------------
EDWARD E. COHEN as Attorney-in- Fact
for each such person pursuant to power of
attorney heretofore filed as part of this
Registration Statement

II-6

<PAGE> 1
EXHIBIT 23(a)

CONSENT OF GRANT THORNTON LLP

We have issued our reports dated October 25, 1996, accompanying the financial
statements and schedules of Resource America, Inc. and subsidiaries contained
in the Registration Statement and Prospectus. We consent to the use of the
aforementioned reports in the Registration Statement and Prospectus, and to the
use of our name as it appears under the caption "Experts."

/s/ Grant Thornton
-------------------------------

Cleveland, Ohio
November 22, 1996