<PAGE>   1

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

                                  FORM 10-K/A
                                AMENDMENT NO. 2

(Mark One)  [ ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
                Exchange Act of 1934 For the Fiscal Year Ended

            [X] Transition Report Pursuant to Section 13 or 15(d) of the
                Securities Exchange Act of 1934 For the Transition Period from
                October 1, 1995 to March 31, 1996.

                           Commission File No. 0-9539

                  S E A R C H  C A P I T A L  G R O U P,  I N C.
             (Exact name of registrant as specified in its charter)

            DELAWARE                                             41-1356819
  (State or other jurisdiction                                  (IRS Employer
  of incorporation or organization)                          Identification No.)

      700 NORTH PEARL, SUITE 400
        PLAZA OF THE AMERICAS
      NORTH TOWER, LOCK BOX 401
            DALLAS, TEXAS                                       75201-7490
  (Address of principal executive offices)                      (Zip Code)

       Registrant's telephone number, including area code: (214) 965-6000
                               ------------------

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

          Securities registered pursuant to Section 12(g) of the Act:
                          COMMON STOCK, $.01 PAR VALUE
               9%/7% CONVERTIBLE PREFERRED STOCK, $.01 PAR VALUE
                        WARRANTS EXPIRING MARCH 14, 2001
                                (Title of class)

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                 Yes [X] No [ ]

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

       APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS
                        DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and 
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan 
confirmed by a court.
                                 Yes [X] No [ ]

As of June 17, 1996, there were 27,208,225 outstanding shares (with an
aggregate market value of $35,914,857) of Registrant's $.01 par value common
stock, and the aggregate market value of shares held by non-affiliates of the
Registrant was $26,541,957 based on the average of the high and low sale price
and 20,107,543 shares held by non-affiliates.



<PAGE>   2


                                     PART I

ITEM 1.  BUSINESS


OVERVIEW OF THE COMPANY.

         Search Capital Group, Inc. (herein called "Search" and together with
its consolidated subsidiaries called the "Company") is an industry specific
financial services Company specializing in the purchase and management of used
motor vehicle receivables purchased from franchise and independent automobile
and light truck dealers ("Dealers"). The Dealers originate these receivables by
financing the sale of vehicles to purchasers who do not qualify for credit from
traditional lending sources. These receivables generally carry imputed interest
rates in the range of 18% to 26%

         The automobile finance industry is the second largest consumer finance
market in the United States totaling $353 billion as of December, 1995,
according to the Federal Reserve Board. Automobile financing is usually
provided by finance companies affiliated with manufacturers and banks, credit
unions and independent finance companies. The financings are generally
segmented according to the type of car sold (new or used) and the credit
characteristics of the borrower (generally, prime or non-prime). Non-prime
borrowers are individuals who, due to either incomplete or imperfect credit
histories, are unable to obtain traditional financing through a bank or one of
the finance companies affiliated with manufacturers. The Company specializes in
financing used cars and trucks to these non-prime borrowers through its
wholly-owned operating subsidiary, Automobile Credit Acceptance Corp.


DESCRIPTION OF HISTORICAL OPERATIONS AND REORGANIZATION OF FUND SUBSIDIARIES.

         Prior to November 1994, the Company primarily financed the purchase of
used motor vehicle receivables through the private and public sale of
interest-bearing notes (the "Notes") issued by wholly owned subsidiaries
organized specifically for this purpose (the "Fund Subsidiaries") and through
reinvestment of operating cash flow. Each offering of Notes was issued by a
newly organized subsidiary without recourse to Search or its other
subsidiaries. The Notes offered by each of the Fund Subsidiaries were not rated
by a national credit agency.

         After November 1994, due primarily to higher than expected losses in
the collection of its receivables held by these Fund Subsidiaries, the Company,
directed by then existing management, abandoned its Note offering activities
and sharply reduced all receivables purchasing activities while attempting to
evaluate and, where necessary, modify or remedy purchasing and collection
procedures. At the same time, the Company's directors began searching for new
management which could further identify problems, stabilize operations, and
develop a financial plan and strategy for turnaround and future growth. On
January 20, 1995, George C. Evans joined the Company as President, Chief
Executive officer, and a director of the Company. Mr. Evans was appointed
Chairman of the Board of Directors on May 5, 1995. Mr. Evans has over 30 years
of experience in the consumer lending and financial services industry,
including having served as President and Chief Operating Officer of Associates
Financial Services, Vice Chairman of Associates Corporation of North America
and Chairman and Chief Executive Officer of Associates International and its
subsidiaries. During 1995, four other managers who previously held senior
positions in finance, operations, and marketing at Associates Corporation of
North America or its subsidiaries joined Search. For a detailed description of
current management, see Item 10, Directors and Executive Officers of the
Company.

         From late 1994, shortly before Mr. Evans joined the Company, until
March 1996, the Company operated under financial constraints and limited
ability to raise new operating capital. The purchasing of receivables for the
Fund Subsidiaries was governed by trust indentures (the "Trust Indentures")
which restricted management's ability to alter its receivables purchasing
criteria in accordance with stricter standards developed by new management. In
addition, the Company's inability to access credit sources due to the
historical losses on the Company's receivables portfolio and limitations on
investment of funds repaid on existing portfolios dramatically reduced the
Company's ability to finance the purchase of new receivables. At the same time,
to improve the quality of the Company's portfolio of receivables purchasing
procedures were tightened and management significantly reduced the number of
Dealers from whom the Company would purchase receivables.

         At Search's annual meeting of shareholders, held May 10, 1995, Search
announced a preliminary outline of a plan to convert the approximately $69
million debt owed by the Fund Subsidiaries into equity of Search. On August 14,
1995, in order to consummate the debt-to-equity conversion plan, it was
necessary for each of the Fund Subsidiaries to file for 


                                       1


<PAGE>   3

reorganization under Chapter 11 of the U. S. Bankruptcy Code. On August 25,
1995, an organizational meeting was held by the U. S. Bankruptcy Trustee to
select a committee (the "Committee") to represent the Noteholders ("Creditors")
during the bankruptcy proceedings. On December 19, 1995, Search, the Fund
Subsidiaries and the Committee agreed to a consensual plan of reorganization.
On March 4, 1996, the Court entered an order (the "Confirmation Order")
confirming the Third Amended Joint Plan of Reorganization (the "Joint Plan")
for all of the Fund Subsidiaries, after sufficient affirmative votes for
confirmation of the Joint Plan were obtained from the holders ("Noteholders")
of the outstanding Notes issued by the Fund Subsidiaries. The Notes and the
Noteholders constituted essentially all of the indebtedness and creditors,
respectively, of the Fund Subsidiaries. The effective date of the Joint Plan
was March 15, 1996 (the "Effective Date").

         As a consequence of effectiveness of Joint Plan, on the Effective
Date, the assets of the Fund Subsidiaries (less funding of a litigation trust
and professional fees) were transferred to Search by operation of law on the
Effective Date in exchange for Search Common Stock and 9%/7% Convertible
Preferred Stock and cash to be distributed to the former Noteholders of the
Fund Subsidiaries. Under the Joint Plan, the Notes and the indebtedness
represented by the Notes, together with their related Trust Indentures, were
deemed canceled upon the Effective Date.


OPERATIONS SINCE REORGANIZATION OF THE FUND SUBSIDIARIES.

         Except for the historical information contained herein, this Form 10-K
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results could differ materially from those discussed here.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed in the section entitled Risk Factors.

         Since confirmation of the Joint Plan, the Company has implemented new
programs intended to expand its receivables purchasing operations into higher
credit quality receivables. Although these new programs target the Company's
historical market of purchasers with non-standard credit histories, the Company
intends to focus more on purchasers with job and residence stability, higher
income, and re-established positive credit. Receivables purchased under the new
programs typically carry interest rates ranging from approximately 18% to 26%.
The receivables purchased under the new programs are generally secured by
automobiles up to 6 years in age, having been driven (i) no more than an
average of 25,000 miles per year and (ii) having fewer than 80,000 total miles.
For each receivable purchased pursuant to the new programs, the Company
generally receives an acquisition fee and purchases the receivables at a
discount, ranging from 8% to 12%, depending upon the value and the term of the
receivable which range from 24 to 60 months.

         The Company purchases receivables from a network of automobile and
light truck Dealers ("Dealer Network") that originates motor vehicle
receivables through the sale of used automobiles and light trucks. During the
reorganization process, because the Company had abandoned its Note offering
activities and sharply reduced all receivables purchasing activities, it also
experienced a significant reduction in the size of the Dealer Network. The
Company is currently marketing its new programs to Dealers through the efforts
of employees and marketing representatives. The marketing representatives
include both individuals and organizations specializing in the marketing of
financing programs to Dealers.

         The Dealers are unaffiliated with the Company. Each Dealer enters into
an agreement with the Company and agrees to use Company-approved contract
forms. Under the dealer agreements, the Company is under no obligation to
purchase any receivables from the Dealer.

         It is the Company's goal to market the new programs primarily to
franchise Dealers and qualified independent Dealers. The Company has set
standards for Dealers to qualify as members of the Dealer Network. In most
cases, to qualify for membership in the Dealer Network, each Dealer must have
been in business at least two years, be in good standing with regulatory and
auto-association authorities and meet certain credit standards. The Company
generally verifies that a Dealer meets these standards through credit bureau
reporting services. Franchise Dealers normally qualify for membership in the
Dealer Network.

         Membership in the Dealer Network can be terminated at the Company's
discretion. The Company personnel review the receivables submitted by and
purchased from each Dealer. Decisions to terminate a Dealer from the Dealer
Network are made on a case-by-case basis depending on the past performance of
the Dealer and performance of the receivables purchased from such Dealer.


                                       2


<PAGE>   4

         Dealers communicate and initiate receivable sales transactions
directly with the Company's centralized purchasing personnel by faxing a
consumer application to the Company. the Company's decision to purchase a
receivable is typically communicated to the Dealer in approximately one hour,
and if the application is approved, documentation is completed generally in one
week. the Company pays the Dealer for the sale of the receivable after receipt
and review of the original receivable contract and other required documents and
after verification procedures are completed.

         Historically, the Company's principal market focus has been in the
southern and southwestern states where "self-help" repossession laws promote
efficient collection efforts with respect to defaulted receivables, and where
milder climates generate higher collateral values for used vehicles. See Item
1. Business. "Regulation." However, the Company is currently expanding the
market focus of its new programs in states with laws similar to those states in
which the Company currently operates.

         Historically, the Company's receivables purchasing criteria were
governed by the terms of the Trust Indentures governing the Notes. The Trust
Indentures were canceled as of the Effective Date of the Joint Plan, and no
longer govern the criteria the Company uses to evaluate the quality of a
receivable. As of May 31, 1996, 93.2% of the receivables owned by the Company
were purchased using the criteria set forth in the Trust Indentures. The Trust
Indentures established specific criteria with respect to the price, purchase
discount, term, downpayment, installments and interest rate for the receivables
the Company purchases and also with respect to price, cost to the Dealer,
average wholesale value, age, mileage and make of the motor vehicles securing
such receivables. The Company believes that the most significant of these
criteria were as follows:

       o The average purchase price of receivables could not exceed 53% of the
         total remaining unpaid installments of the receivables;
       o The average purchase price for a receivable could not significantly
         exceed the approximate average wholesale value and/or the Dealer's
         actual cost for the underlying financed vehicle;
       o The receivable generally had to have an original term of 36 months or
         less;
       o The age of each financed vehicle could not generally exceed eight years
         for automobiles or nine years for trucks;
       o The obligor on the receivable was required to make a down payment in 
         cash plus a net trade-in  allowance of at least 25% of the Dealer's
         cost in the financed vehicle;

         The new programs also target used vehicle motor vehicle receivables
whose obligors have non-prime credit histories, but place more emphasis on job,
income and residence stability and re-established positive credit of the
obligor. Receivables purchased under the new programs typically carry imputed
interest rates ranging from approximately 18% to 26%. The receivables purchased
under the new programs are generally secured by automobiles up to 6 years in
age, having been driven (i) no more than an average of 25,000 miles per year
and (ii) having fewer than 80,000 total miles. In connection with the new
programs, the Company has established criteria to evaluate the quality of
receivables. the Company believes that the most significant of these criteria
are as follows:

       o The obligor must show one year verifiable residence and three years
         traceable residence;
       o the Company must be able to verify 1 year of employment for each
         obligor;
       o Obligor must show a positive pay history within the previous two
         years; 
       o Obligor must show gross income of at least $1200 per month; 
       o The maximum payment for the purchased vehicle cannot exceed 20% of the
         obligor's gross income; 
       o The debt to income ratio of the obligor cannot exceed 50% of gross 
         income;
       o Downpayment must be 10% of the retail selling price of the vehicle.

         The Company's receivables purchasing personnel review each receivable
for compliance with the foregoing criteria, utilizing standard and supporting
documentation provided via facsimile by the selling Dealer and national
computerized databases that automatically interact with the Company's
proprietary Auto Note Management System Software ("ANMS"). The Company
verifies, by reference to published wholesale vehicle value guides, the average
wholesale prices of the underlying vehicles. In most instances, the Company
performs this pre-purchase receivable evaluation within one hour, thereby
assisting the Dealer in the timely sale of the underlying vehicle. This one
hour turnaround time is considered by the Company to be an important
competitive factor, and the Company monitors its turnaround time through its
ANMS.


                                       3


<PAGE>   5

         The Company's underwriting strategy differs from many of its
competitors. Many of the Company's competitors make only bulk purchases of
receivables and/or retain recourse against the selling Dealer for non-payment
of the receivable through quasi-loan arrangements, dealer holdbacks or reserve
accounts or other collection collateral or guaranties. The purchase and credit
criteria and verification procedures also differ from competitor to competitor.
Certain other competitors will only purchase "seasoned" receivables, i.e.
receivables that have existed and performed in an acceptable manner for a
period of time.

         In addition to the purchases of individually selected receivables, the
Company is currently seeking the acquisition of pools of non-prime credit
automobile receivables ("Bulk Purchases") from Dealers or other finance
companies. The Company expects to use the acquisition of Bulk Purchases as a
means of increasing the number of receivables in its portfolio of receivables.
The receivables forming a potential Bulk Purchase are analyzed on both an
individual and a pooled basis using criteria similar to the criteria used to
evaluate loans purchased from Dealers. In addition, the historical performance
of receivables forming a potential Bulk Purchase are analyzed. Individual
receivables that do not meet the Company's credit criteria will be excluded
from the Bulk Purchase, or if a large number of the receivables forming the
potential Bulk Purchase do not meet the Company's credit criteria, the entire
Bulk Purchase may be rejected.

         Following the purchase of each receivable, the Company mails a
statement to each obligor a minimum of 5 days before each payment becomes due.
These statements instruct each obligor to remit payments directly to the
Company's post office box. Payments may also be made in person at the Company's
offices or via Western Union Quick Collect(TM) service or through Ace Cash
Express(TM). The Company's collections operations are currently based in
Dallas, Texas and, the Company operates branch collections offices in the
following cities: Garland, Texas; Arlington, Texas; Houston, Texas; and
Memphis, Tennessee.

         The Company has a staff of collection personnel that monitor payments
of the receivables and that contact obligors via telephone when payments are
delinquent. Collections personnel generally have (i) a minimum of one year
collection experience, (ii) the ability to obtain corrective action on
delinquent accounts and (iii) knowledge and ability to comply with state and
federal debt collection laws. Generally, if the receivable shows any indication
of default, the receivable is subject to enhanced collection efforts, including
intensified telephone and written contacts aimed at identifying the likelihood
and expected amount of payment on the receivable. At any time thereafter, the
Company may (i) contract with an independent third party repossession firm to
locate and peacefully repossess the motor vehicle securing the receivable or
(ii) seek and obtain an order of a court of competent jurisdiction for turnover
of the motor vehicle. The decision to repossess a motor vehicle is made on a
case-by-case basis by a collections unit manager. Factors considered by these
unit managers include recent payments and willingness on the part of the
obligor to commit to payment upon a date certain. Any delays in repossession
expose the Company to the risk of reduced resale value for the vehicle due to
additional mileage and the possibility of damage or lack of necessary
maintenance or repairs to the vehicle. Company policy does not currently allow
an account's payments to be deferred except in very rare instances and only
with senior management approval.

         The Company's collection and repossession activities are administered
with use of the ANMS. The Company's ability through the ANMS to relationally
cross-reference receivable collection statistics to a vehicle, Dealers,
customers and geographic locations assists the Company in monitoring
receivables and adjusting purchase procedures and prices.

         Following repossession of a vehicle, the Company generally sells the
vehicle on a wholesale basis at the highest available bid at an unaffiliated
motor vehicle auction. During the period from October 1994 until December 1995,
the Company sold many of its repossessed vehicles directly to consumers at
three used car lots operated by the Company. The sale of the vehicles in this
manner, rather than on a wholesale basis, created a new undiscounted receivable
with associated risks of default and payment delays. The Company closed all
three lots by December 31, 1995.

         The Company's current ANMS and related systems are connected with
outside databases, such as national credit bureaus and wholesale vehicle
valuation guides. These systems contribute to the Company's ability to satisfy
the Dealer Network's needs by enhancing the Company's ability to meet its
targeted one-hour receivable processing commitment. During August 1996, the
Company will begin combining the receivable processing capabilities of its ANMS
with a data processing and communications system developed by Norwest Financial
Information Services Group (the "Norwest System"). The Company believes that
the Norwest System will allow the Company to more efficiently expand its
operations into new regions of the United States, as well as provide the
Company with flexibility to expand its operations into other areas of consumer
lending. 



                                       4


<PAGE>   6
RECEIVABLES CHARACTERISTICS

         General. Set forth below is a summary of pertinent statistics
regarding the average active receivable in the Company's portfolio of motor
vehicle receivables, as of March 31, 1996 and September 30, 1995.


AVERAGE RECEIVABLE CHARACTERISTICS

<TABLE>
<CAPTION>
                                                                              AS OF                         AS OF
                                                                         March 31, 1996              SEPTEMBER 30, 1995
                                                                         --------------              ------------------
<S>                                                                             <C>                           <C> 
   Purchase price to customer of underlying vehicle                           $8,020                        $8,026
   Dealer's profit on receivable sale                                           $963                          $959
   Age of vehicle                                                          5.2 Years                     5.9 Years
   Wholesale value of vehicle                                                 $4,613                        $4,640
   Down payment (including net trade-in credit)                               $1,593                        $1,588
   Receivable term                                                         31 Months                   31.6 Months
   Annual Percentage Rate                                                      23.9%                         24.2%
   Semi-monthly payment                                                         $150                          $150
   Original receivable balance (principal and unearned interest)              $9,569                        $9,549
   Purchase price for receivable                                              $4,870                        $4,969
   Receivable cost as % of receivable balance                                    51%                           52%
   Receivable discount as % of receivable balance                                49%                           48%
</TABLE>

         At March 31, 1996, the Company had an aggregate of 7,996 motor vehicle
receivables in its portfolio with an aggregate total unpaid balance of
$37,086,000, including $6,435,000 in unearned interest and $13,353,000 in
credit loss allowance. Additionally, the Company had a total of 333 vehicles
held for resale having an estimated value of approximately $566,000.

         Seasonality.  The Company's operations are seasonably impacted by
higher delinquency rates during certain holiday periods.

         Delinquency. Generally, the Company considers a receivable to be
impaired if the contractual delinquency is greater than 60 days or the
collateral has been repossessed. Once impaired, the Company places the
receivable on nonaccrual status, which stops the recognition of interest
income. The following table breaks out the receivables that the Company
considers unimpaired or accrual status and impaired or nonaccrual status (i.e.,
contractual delinquency is greater than 60 days or repossessed collateral) as
of March 31, 1996 and September 30, 1995.



                                      5



<PAGE>   7
<TABLE>
<CAPTION>

                                                   MOTOR VEHICLE RECEIVABLES - AGING AND DELINQUENCIES
                                                                  (Dollars in thousands)
                                         AS OF March 31, 1996                           AS OF SEPTEMBER 30,1995
                               -----------------------------------------      -------------------------------------------
                                               Total (1)    % of Total                        Total (1)       % of Total
                                Number of       Unpaid        Unpaid           Number of        Unpaid          Unpaid
    Contractual Delinquency    Receivables   Installments   Installments      Receivables    Installments    Installments
    -----------------------    -----------   ------------   ------------      -----------    ------------    ------------
<S>                              <C>           <C>           <C>                 <C>           <C>            <C>
    Accrual Receivables
       0 to 30 days past due      6,871        $31,816          86%              8,233         $45,464              68%
       31-60 days past due          704          3,179           9%              1,572           8,294              12%
                                  -----        -------       ------             ------         -------           -----
         Subtotal                 7,575         34,995          95%              9,805          53,758              80%
                                  -----        -------       ------             ------         -------           -----
    Nonaccrual Receivables
       61-180 days past due         420          2,091           5%              1,696           9,182              14%
       181+ days past due             1              -           -                 627           3,737               6%
                                  -----        -------       -----              ------         -------           -----
         Subtotal                   421          2,091           5%              2,323         $12,919              20%
                                  -----        -------       -----              ------         -------           -----
    All Receivables (2)           7,996        $37,086       100.0%             12,128         $66,677           100.0%
                                  =====        =======       =====              ======         =======           =====

       Vehicles held for resale
         @ collateral value         333        $   566         N/A                 599         $   601             N/A 
                                  =====        =======                          ======         =======                    
</TABLE>

(1)  Includes unearned income.
(2)  Active receivables exclude 333 and 599 accounts that have been reclassified
     to vehicles held for resale at March 31, 1996 and September 30, 1995,
     respectively.

         The percentage of contractually delinquent accounts has decreased from
September 30, 1995 to March 31, 1996. At the end of September 30, 1995, 20% of
the Company's active contracts were at least 61 days contractually delinquent
compared to 5% at March 31, 1996. The decrease in accounts at least 61 days
contractually delinquent is due to increased collection efforts and tightened
credit criteria and the Company's charge-off policy implemented in June 1995.


FINANCING

         Sale of Asset-Backed Notes by Fund Subsidiaries. Until November 1994,
the Company financed its receivables purchasing activities through public and
private sale of unrated, automobile receivables-backed Notes issued by its Fund
Subsidiaries. Generally, the sale of automobile receivables-backed securities
requires a rating by a rating agency. The Company did not seek such a rating
for its Notes. From 1992 until 1994, the Company sold a total principal amount
of approximately $72,000,000 of Notes through its Fund Subsidiaries. After
November 1994, due primarily to higher than expected losses in the collection
of its receivables held by these Fund Subsidiaries, the Company abandoned its
Note offering activities. See Item 1. Business. "Description of Historical
Operations and Reorganization of Fund Subsidiaries" above.

         Financing with Hall Financial Group, Inc. and Affiliates. In November
1995, Hall Financial Group, Inc. ("HFG") provided interim financing of
approximately $2.3 million pending confirmation of the Fund Subsidiaries' Joint
Plan. After the Joint Plan's confirmation, in April 1996, HFG assigned its
rights to its subsidiary, Hall Phoenix/Inwood, Ltd. ("HPIL"), which exercised a
right to convert a portion of the debt into 2,500,000 shares of Search's Common
Stock. Search repaid the remaining $567,000 of debt. In addition, HPIL
purchased from Search 1,638,378 shares of Common Stock, 2,032,812 shares of
9%/7% Convertible Preferred Stock and five-year warrants to purchase, at $2.00
per share (increasing $0.25 per year), 676,178 shares of Common Stock in
consideration for a total cash payment of $4,346,000 to Search.

         GECC Line of Credit.  Upon  confirmation  of the Joint Plan, in March 
1996, the Company retired the remaining debt of $173,000 owing on its line of
credit from General Electric Credit Corporation.

         Effect of Joint Plan. As a result of the confirmation and
effectiveness of the Joint Plan, approximately $69,300,000 of debt owed by the
Fund Subsidiaries to Noteholders was canceled. The assets of the Fund
Subsidiaries (net of a $350,000 deposit to a litigation trust and $2,000,000
escrowed for payment for professional fees), consisting primarily of
approximately $29,000,000 of net receivables and $16,345,000 of cash, were
deemed transferred to Search. Following the effectiveness of the Joint Plan,
consummation of the transactions with HPIL in April 1996 and repayment of the
GECC line of credit, the Company had no borrowed debt, approximately
$31,000,000 in net receivables and approximately $21,600,000 in cash. See "Item
8. Financial Statements and Supplementary Data" and "Liquidity and Capital
Resources."


                                       6




<PAGE>   8

         Future Financings. The Company presently intends to continue
purchasing receivables and expand its operations into other consumer lending
areas, both of which will require future financing. The Company is currently
pursuing several alternatives to meet its needs for liquidity. These financing
alternatives include subordinated debt financing, securitizations and bank
lines of credit.


COMPETITION

         The Company has numerous competitors engaged in the business of buying
new and used motor vehicle receivables at a discount. The Company in the past
had few competitors that purchased receivables from high credit risk
individuals who purchased medium-priced, used motor vehicles in the Company's
then primary geographic markets consisting generally of the metropolitan areas
of Arizona, Georgia, Florida, South Carolina, Oklahoma, Tennessee and Texas.
The Company's new programs target receivables whose obligors have somewhat
lower credit risk than obligors of receivables previously purchased by the
Company. Though the Company expects to market the new programs in a more
diverse geographic region, the Company expects to encounter more competition in
the purchase of such lower risk receivables. The Company competes to some
extent with providers of alternative financing services, such as floor plan
lines of credit from financial institutions, lease financing and dealer
self-financing, and certain purchasers of receivables for higher-priced, used
motor vehicles. National or regional rental car companies, finance companies,
used car companies, auction houses, dealer groups or other firms with equal or
greater financial resources than the Company could elect to compete with the
Company in its market. These competitive factors could have a material adverse
effect upon the operations of the Company.


REGULATION

         Numerous federal and state consumer protection laws impose
requirements upon the origination and collection of consumer receivables. State
laws impose finance charge ceilings and other restrictions on consumer
transactions and may require certain contract disclosures in addition to those
required under federal law. These requirements impose specific statutory
liabilities upon creditors who fail to comply with their provisions. In
addition, certain of these laws make an assignee (purchaser) of such contract
liable to the obligor thereon for any violations committed by the assignor
(seller). the Company's ANMS verifies the accuracy of disclosure for each
receivable that it purchases; however, the Company, as an assignee of such
receivables, may be unable to enforce some of its receivables or may be subject
to liability to the obligors under some of its receivables if such receivables
do not comply with various laws and regulations or the seller violated such law
or regulation.

         In the event of default by an obligor on a receivable, the Company has
the remedies of a secured party under the Uniform Commercial Code ("UCC"). The
UCC remedies of a secured party include the right to repossession by self-help
means, unless such means would constitute a breach of the peace. Unless the
obligor voluntarily surrenders a vehicle, self-help repossession, by an
independent third-party repossession entity engaged by the Company, is the
method usually employed by the Company when an obligor defaults. Self-help
repossession is accomplished by retaking possession of the motor vehicle. If a
breach of the peace is likely to occur, or if applicable state law so requires,
the Company must obtain a court order from the appropriate state court and
repossess the vehicle in accordance with that order.

         In most jurisdictions, including those states in which the Company
presently does or intends to do business, the UCC and other state laws require
the secured party to provide the obligor with reasonable notice of the date,
time, and place of any public sale or the date after which any private sale of
the collateral may be held. Unless the obligor waives his rights after default,
the obligor has the right to redeem the collateral prior to actual sale by
paying the secured party the unpaid installments (less any required discount
for prepayment) of the receivable plus reasonable expenses for repossessing,
holding, and preparing the collateral for disposition and arranging for its
sale, plus in some jurisdictions, reasonable attorneys' fees, or, in some
states, by payment of delinquent installments.


                                       7


<PAGE>   9

EMPLOYEES

         As of April 30, 1996 the Company had 98 employees, of which 64 were
engaged in receivables purchasing and collections, 6 dealing with the
repossession and resale of repossessed vehicles, 22 in administration and 6 in
senior management.


RISK FACTORS

         The Company faces certain risks associated with the operation of it
business that in some cases have affected, and in the future could affect, the
Company's actual results from operations. These risk factors include, but are
not limited to, the following:

         Availability of Funding. The purchase of contracts requires the
Company and/or its subsidiaries to raise significant amounts of funds from
various sources, including banks, finance companies, and other lenders. There
can be no assurance that lenders will provide sufficient credit on terms the
Company will find acceptable. One of the Company's planned financing sources is
expected to be securitizations. There can be no assurance that the Company's
future securitization activities will increase its profitability. Further,
there can be no assurance that funding will be available to the Company through
the issuance of automobile receivables-backed securities or, if available, that
it will be on terms acceptable to the Company.

         Defaults on Automobile Receivables/Shift to New Credit Market. The
Company has no historical information related to the quality of receivables it
is currently purchasing under its new receivables purchasing programs. A
significant increase in delinquencies, repossessions, charge-offs or related
receivables could have a material adverse effect on the Company's financial
performance.

         Leverage. The ratio of debt to the sum of net worth of the Company may
from time to time be from 5 to 1 to as much as 7 to 1. This degree of leverage
will increase the Company's vulnerability to adverse general economic
conditions and to increased competitive pressures.

         Qualified Personnel. The Company plans to commence a consumer finance
business and to expand its automobile receivables purchasing business. The
success of this strategy is dependent upon the Company's ability to hire and
retain qualified managers and other personnel.

         Dealers. the Company plans to expand its receivables purchasing
activities by re-establishing relationships and establishing new relationships
with dealers. Dealers often already have favorable secondary financing sources,
which may restrict the Company's ability to develop dealer relationships and
delay the Company's growth. Competitive conditions in the Company's markets may
result in a reduction in the price discounts available from or fees paid by
dealers and a lack of available contracts, which could adversely effect the
Company's profitability and its growth plans.

         Key Officers. The Company's future success depends in some measure
upon its Chief Executive Officer who has significant experience in the consumer
financing business. An unexpected loss of services of this officer could have a
material adverse effect upon the Company. The Company does not currently
maintain key person life insurance on the Chief Executive Officer but intends
to obtain such coverage.

         Reliance on Information Processing Systems. The Company's Business
depends upon its ability to store, retrieve, process and manage significant
amounts of information. The Company's management information systems, including
servers, networks, databases, backup and other systems essential for receivable
management, are located and maintained in the Company's Dallas, Texas
headquarters. Interruption, impairment of data integrity, loss of stored data,
breakdown or malfunction of the Company's information processing systems caused
by telecommunications failure, conversion difficulties, undetected data input
and transfer errors, unauthorized access, viruses, natural disasters,
electrical power outage or disruption, or other events could have a material
adverse effect on the Company's business financial condition and results of
operations.

         Increases in Interest Rates. While the automobile receivables
purchased by the Company in most cases bear interest at a fixed rate near the
maximum rates permitted by law, the Company will finance its purchases of a
substantial


                                       8


<PAGE>   10

portion of such contracts by incurring indebtedness with floating interest
rates. As a result, the Company's interest costs could increase during periods
of rising interest rates, which may decrease net interest margins and thereby
adversely affect the Company's profitability.

         Competition. The Company has numerous competitors engaged in the
business of buying new and used motor vehicle receivables at a discount. The
new programs target receivables whose obligors have somewhat lower credit risk
than obligors of receivables previously purchased by the Company. Though the
Company expects to market the new programs in a more diverse geographic region,
the Company expects to encounter more competition in the purchase of such lower
risk receivables. These competitive factors could have a material adverse
effect upon the operations of the Company.

         Regulation. Numerous federal and state consumer protection laws impose
requirements upon the origination and collection of consumer receivables. These
federal laws and regulations include, among others, the Truth-in-Lending Act,
the Equal Credit Opportunity Act, the Federal Trade Commission Act, the Fair
Credit Reporting Act, the Fair Indebtedness Collection Practices Act, the
Magnuson-Moss Warranty Act and the Federal Reserve Board's Regulation Z. The
Company believes that it maintains all licenses and permits required for its
current operations and is in substantial compliance with all applicable
federal, state and local laws. There can be no assurance, however, that the
Company will be able to maintain all requisite licenses and permits. The
failure to satisfy those and other legal requirements could have a material
adverse effect in the operation of the Company. Further, the adoption of
additional, or the revision of existing, laws and regulations could have a
material adverse effect on the Company's business.

         The Federal Trade Commission ("FTC") has adopted the
holder-in-due-course rule which has the effect of subjecting persons who
finance consumer credit transactions (and certain related lenders and their
assignees) to all claims and defenses which the purchaser could assert against
the seller of the goods and services. Failure of the Dealers to comply with
state and federal credit and trade practice laws and regulations could result
in consumers having rights of rescission and other remedies that could have an
adverse effect on the Company. The FTC's Rule of Sale of Used Vehicles requires
that all sellers of used vehicles prepare, complete and display a "Buyer's
Guide" which explains the warranty coverage (if any) for such vehicles.

         State laws regulate, among other things, the interest rate and terms
and conditions of motor vehicle retail installment loans. These laws also
impose restrictions on consumer transactions and require loan disclosures in
addition to those required under federal law. These requirements impose
specific statutory liabilities upon creditors who fail to comply with their
provisions. As a consumer finance Company, the Company is subject to various
consumer claims and litigation seeking damages and statutory penalties based
upon, among other theories of liability, usury, wrongful repossession, fraud
and discriminatory treatment of credit applicants.


ITEM 3.  LEGAL PROCEEDINGS

         On July 7, 1994, a class action civil lawsuit was filed against Search,
certain of its officers and directors, one of its former accounting firms and
the lead underwriter and one of its principals involved in the issuance of
Search's common stock. This action was filed in the United States District
Court for the Northern District of Texas, Dallas Division, and was styled Ellen
O'Shea, et al v. Search Capital Group, Inc., et al, Civil Action No.
3:94-CV-1428-J. On July 11, 1994, and on July 13, 1994, similar actions in John
R. Boyd, Jr., et al. v. Search Capital Group, Inc., et al., Civil Action No.
3:94-CV-1452-J; and Gary Odom v. Search Capital Group, Inc., et al., Civil
Action No. 3:94-CV-1494-J, respectively, were also filed. The above cases were
consolidated in September 1994 under Civil Action No. 3:94-CV-1428-J (the
"O'Shea Class Action Suit").

         The O'Shea Class Action Suit was filed on behalf of all purchasers of
Search's common stock during the period beginning December 10, 1993 and ending
through July 5, 1994, which was the date that Search made a public announcement
regarding lower earnings. The O'Shea Class Action Suit contended that Search
made misstatements in its registration statements concerning the Company's
computerized system, accounting methodologies used by the Company,
collectibility of its receivables and repossession rates of autos that secured
its receivables. The plaintiffs also complained of allegedly false public
filings, press releases and reports issued during 1994. The plaintiffs sought
damages, rescission, punitive damages, pre-judgment interest, fees, costs,
equitable relief and or injunctive relief and such other relief as the court
deemed just and proper.


                                       9


<PAGE>   11
         On April 26, 1996, the court entered a Final Judgment and Order of
Dismissal approving a settlement (the "Settlement") entered into between Search
and counsel for the plaintiffs. This Settlement was initially filed with the
court on August 4, 1995, and an amended version of the Settlement was filed on
November 13, 1995. The Settlement provided for a cash payment by Search of
$287,000 and the issuance by Search of its common stock with a value of
$2,613,000. As a result of the settlement Search issued 1,848,000 shares of its
common stock.

         In December 1993, Automobile Credit Acceptance Corp., a wholly-owned
subsidiary of Search ("ACAC"), was joined as a defendant in a pending civil
action filed in the 153rd Judicial District Court, Tarrant County, Texas,
styled Autostar Solutions, Inc. v. Tim Clothier and Automobile Credit
Acceptance Corp., Cause No. 153-144940. The plaintiff in this action alleges
the existence of a partnership between the plaintiff and another defendant and
seeks damages, actual and exemplary, and an injunction for alleged conversion
and misappropriation of certain property, including computer programs,
allegedly owned by the plaintiff. In the petition, the plaintiff alleges that
ACAC wrongfully assisted its co-defendant and tortiously interfered with the
plaintiff's contracts and business and has claimed, as damages, $750,000. ACAC
believes that these allegations are without merit. Discovery in the case is
still ongoing and no opinion can be given as to the final outcome of the
lawsuit.

         On August 14, 1995, the Fund Subsidiaries filed a petition in the U.S.
Bankruptcy Court in the Northern District of Texas, Dallas Division, seeking
protection under Chapter 11 of the U.S. Bankruptcy Code. These cases were
consolidated for joint administration under Case No. 395-34981-RCM-11. On March
4, 1996, the Court entered the Confirmation Order confirming the Joint Plan for
all of the Fund Subsidiaries. The Joint Plan was effective March 15, 1996. See
"Item 1, Business, Description of Historical Operations and Reorganization of
Fund Subsidiaries," and Note 2 to the Notes to Consolidated Financial
Statements in Item 7 for a description of the Joint Plan.

   
         On January 9, 1996, Search received notice from plaintiffs that a suit
had been filed on December 21, 1995 against Search, certain of its former
officers and directors, and certain underwriters of three of the Fund
Subsidiaries. The case is styled Janice and Warren Bowe, et. al. vs. Search
Capital Group, Inc., et. al., Cause No. 1:95CV 649GR, and was filed in the
Federal District Court for the Southern District of Mississippi. The case was
reassigned under Cause No 1:95CSV649BR upon recusal of the judge originally
assigned to this case because of his relationship with certain defendants. The
plaintiffs allege violations of the securities laws by the defendants and seeks
unspecified damages, rescission, punitive damages and other relief. The
plaintiffs also seek establishment of a class of plaintiffs consisting of all
persons who have purchased Notes issued by three of the Fund Subsidiaries.
Although no assurances can be given, the Company believes it has meritorious
defenses to this action and will defend itself vigorously. While the ultimate
outcome of this litigation cannot be determined, management estimates that the
total expenses and losses from the litigation will be at least $500,000, and,
accordingly, management has established a reserve of $500,000 for this
litigation.
    

         There are presently no other legal proceedings, threatened or pending,
relating to the Company which would, in the opinion of management, have a
material impact on earnings or the financial condition of the Company.


                                      10


<PAGE>   12



                                    PART II


ITEM 6.  SELECTED FINANCIAL DATA

         Set forth below is a table of selected consolidated financial data for
the fiscal year ended December 31, 1992; the nine month period ending September
30, 1993; the fiscal years ended September 30, 1994 and September 30, 1995 and
the six month period ended March 31, 1996:


<TABLE>
<CAPTION>
                                                    6 MONTHS   6 MONTHS     YEAR        YEAR    9 MONTHS   9 MONTHS     YEAR
                                                     ENDED      ENDED       ENDED      ENDED      ENDED     ENDED      ENDED
      (In thousands, except per share data)         3/31/96    3/31/95     9/30/95    9/30/94    9/30/93   9/30/92    12/31/92
                                                   --------   --------    --------   --------   --------   -------    --------
<S>                                                <C>        <C>         <C>       <C>         <C>        <C>        <C>
Statement of Operations Data:
Interest revenue                                   $  3,541   $  8,694  $   13,472   $ 14,054   $ 7,096    $ 1,493    $ 2,739
Interest expense (1)                                 (1,306)    (6,437)    (11,205)    (9,968)   (4,173)      (708)    (1,909)
Provision for credit losses (2)                      (4,982)    (5,337)     (3,128)   (20,180)        -          -          -
                                                   --------   --------  ----------   --------   -------    -------    -------
Net interest  income (loss) after provision
 for credit losses                                   (2,747)    (3,080)       (861)   (16,094)    2,923        785        830
Operating and Other expenses                          8,098      7,221      15,881      9,296     3,051        663      1,470
Settlement expense                                      535          -       2,837        560         -          -          -
Reorganization expense                                    -          -         315          -         -          -          -
Other income                                              -          -           -          -         -        338          -
                                                   --------   --------  ----------   --------   -------    -------    -------
Income (loss) from continuing operations            (11,380)   (10,301)    (19,894)   (25,950)     (128)       460       (640)
Extraordinary gain on debt discharge                  8,709          -           -          -         -          -          -
                                                   --------   --------  ----------   --------   -------    -------    -------
Net income (loss)                                    (2,671)   (10,301)    (19,894)   (25,950)     (128)       460       (640)
Preferred stock dividends                               327        120         240        240       263        123        206
                                                   --------   --------  ----------   --------   -------    -------    -------
Income(loss) available to common stockholders      $ (2,998)  $(10,421) $ (20,134)   $(26,190)  $ (391)    $  $337    $ (846)
                                                   ========   ========  =========    ========   ======     =======    ====== 

Net income (loss) per share of common stock
  from continuing operations                       $  (1.12)  $  (1.12) $    (2.25)    $(2.33)  $ (0.06)   $    .09   $ (0.22)
Gain per share on extraordinary item                    .83          -           -          -         -          -          -
Net income (loss) per share of common stock        $   (.29)     (1.12) $    (2.25)    $(2.33)  $ (0.06)        .09    $(0.22)
Weighted average number of common shares
outstanding (4)                                      10,447      9,296       8,967     11,258     6,131      3,679      3,851

Operating Data:
Number of active Dealers at period end (3)               22        125         125        206       126         51         68
Number of receivables at period end                   7,996     15,425      15,425     18,995     6,991      2,222      2,962
Number of receivables purchased during period         1,169      2,771       5,328     18,377     6,331      2,589      3,452

(In thousands)                                      3/31/96    3/31/95     9/30/95    9/30/94   9/30/93    9/30/92   12/31/92
                                                    -------    -------     -------    -------   -------    -------   --------
Balance Sheet Data:
Net contracts receivable                            $17,298   $ 76,655  $   34,948   $ 61,823   $29,396    $ 6,565    $11,009
Total assets                                         37,346     59,985      49,922     75,126    44,223     14,147     19,912
Notes payable (prepetition subject to compromise)         -          -      69,320          -         -          -          -
Notes payable                                             -     69,160           -     70,768    40,562     11,774     18,000
Total liabilities                                    10,935     74,783      75,557     79,502    42,013     12,099     18,838
Stock repurchase commitment                           2,078          -       2,078          -         -          -          -
Stockholders' equity (deficit)                       24,333    (14,798)    (25,635)    (4,376)     2,210      1,939      1,074
</TABLE>

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

(1)   Includes amortization of offering expenses incurred in connection with
      Note offerings of $1,221,000, $1,391,000, $2,840,000, $2,158,000, 
      $762,000, $230,000 and $306,000, respectively.
(2)   The provision for credit losses is first recorded in 1994 because of the
      adoption of SFAS 114. See the discussion in "Item 7.  Management's 
      Discussion and Analysis of Financial Condition and Results of Operations"
      under the caption "Interest Income and Provision for Credit Losses."
(3)   Active Dealers are those Dealers who sold receivables to the Company
      during the last 30 days of the current period, and the last 60 days of the
      fiscal year ended September 31, 1995.
(4)   The weighted average common shares outstanding are significantly less than
      the outstanding common shares shown on F-5 due to the effective date of 
      the Joint Plan beginning on March 15, 1996.


                                      11


<PAGE>   13



ITEM 7.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
                  AND RESULTS OF OPERATIONS GENERAL

         Except where otherwise indicated, the following discussion relates to
the operations of the Company on a consolidated basis.


Interest Income and Provision for Credit Losses

         Through the third quarter of fiscal 1994, the Company aggregated pools
of loans and recorded interest revenue and allowance for credit losses for the
pools based on AICPA Practice Bulletin 6, Amortization of Discounts on Certain
Acquired Loans ("PB6"). Under PB6 no credit loss was recognized on a portfolio
of retail installment sales contracts unless the aggregate of the undiscounted
expected future cash flows for that portfolio of loans was less than the
carrying amount of the respective portfolio. Each of the Fund Subsidiaries
aggregated its loan portfolio into a separate and distinct pool for collective
evaluation under PB6. Each portfolio of loans held by each of the Fund
Subsidiaries was considered a separate and distinct pool for treatment under
PB6.

         Under PB6, the Company recorded an allowance for credit losses upon
acquisition of the retail installment sales contracts in an amount equal to the
difference between the total future contractual payments and the estimated
undiscounted future cash collections. The difference between the undiscounted
future cash collections and the acquisition amount of the installment contracts
was amortized to interest revenue over the period in which payments on the
receivables were expected to be collected. Under PB6, if the estimate of the
total probable collections was increased or decreased but still greater than
the sum of the acquisition amount less collections plus the discount amortized
to date, the remaining amount of the discount to be amortized to interest
income was adjusted and amortized over the remaining life of the loans.
Accordingly, changes in estimates of future cash collections were recognized
through prospective yield adjustments.

         In the fourth quarter of fiscal 1994, Search elected early adoption of
Statements of Financial Accounting Standards Nos. 114 and 118 ("SFAS 114"),
which address the accounting by creditors for impairment of a loan and related
income recognition and disclosures. In accordance with SFAS 114, contracts
receivable are analyzed on a loan-by-loan basis. Search evaluates the
impairment of loans based on contractual delinquency, as well as other factors
specific to the receivable. When a concern exists as to the collectibility of
an account, interest income ceases to be recognized. The receivables, once
impaired, are collateral dependent; that is, once a receivable is in default,
Search looks to the underlying collateral for repayment of the receivable.
Therefore, at impairment, Search records an allowance for credit losses to
record the receivable at the fair value of the collateral. If the measure of
the impaired receivable is less than the net recorded investment in the
receivable, Search recognizes an impairment by creating an additional allowance
for credit losses in excess of the initial allowance provided, with a
corresponding charge to provision for credit losses. The provision for credit
losses is adjusted for any differences between the final net proceeds of an
impaired receivable and its net carrying value.

         Search continues to record receivable purchases at cost. Contractual
finance charges are initially recorded as unearned interest and amortized to
interest income using the interest method. As noted above, amortization of
interest income ceases upon impairment. An initial allowance for credit losses
is recorded at the acquisition of a note receivable equal to the unearned
discount, the difference between the amount financed and the acquisition cost.
The recognition of this initial allowance is recorded as an adjustment to the
provision for credit losses.

         The following table, containing estimates that the Company believes
are reasonably accurate, compares on an unaudited basis how much the provision
for credit losses would have been charged, net of the effect of increased
income, if the Company had accounted for the impairment of loans under PB6 on a
loan-by-loan basis versus the pooled methodology used by the Company. The
amount shown for PB6 on a pooled methodology used by the Company for 1994 is
the amount that the Company would have charged against the provision for credit
losses and the reduction in interest income had the Company reported its
results under that method for fiscal year 1994.


                                      12

<PAGE>   14
<TABLE>
<CAPTION>

(Dollars in thousands)                                                 FOR THE YEARS ENDING
                                         ----------------------------------------------------------------------------------
(Unaudited)                               DECEMBER 31, 1992    SEPTEMBER 30, 1993      SEPTEMBER 30, 1994     CUMULATIVE
                                         --------------------- ---------------------- ---------------------- --------------
<S>                                                <C>                   <C>                   <C>             <C>   
PB6 on a net loan-by-loan basis                    $135                  $45                   $5,668          $5,848
PB6 on a pooled basis                                 -                    -                    5,259           5,259
                                                   ----                  ---                   ------          ------
Increase (Decrease) in Credit Losses               $135                  $45                   $  409          $  589
                                                   ====                  ===                   ======          ======
</TABLE>

         Calculating the provision for credit losses under PB6 on a
loan-by-loan basis and PB6 on a pooled basis would have resulted in a
difference in earnings for those years due to the way that individual amounts
are separated from pooled amounts.

         The Company reported its results by applying PB6 using a pooled
methodology for fiscal years 1992 and 1993. Differing interpretations of PB6
are that it permits the evaluation of impaired loans using either a pooled or a
loan-by-loan methodology.

         When PB6 is applied on a pooled basis, the excess loan impairment
reserve, arising when the net investment is greater than the amount probable of
collection on individual loans, is netted against the excess unearned interest
and discount of the other loans in the same pool of loans. If there are not
adequate available unearned interest and discount balances in the pool of
loans, the excess over those collective balances would be charged directly to
the provision for credit losses.

         When PB6 is applied on a loan-by-loan basis, the excess loan
impairment reserve, arising when the net investment is greater than the amounts
probable of collection on individual loans, is charged directly to the
provision for credit losses and is not netted against unearned interest and
discount for other loans in the pool, thus resulting in a larger direct charge
to the provision for credit losses than would arise on a pooled basis. In
addition, when PB6 is applied on a loan-by-loan basis, the expected future cash
collections on non-impaired loans is greater than the average expected future
cash collections of the pool of loans. This excess of future cash collections
results in an increased unearned discount for non-impaired loans, which is
amortized to interest income on a prospective basis.

         Prior to adoption of SFAS 114, the Company, as more fully explained
below, only recorded credit losses when the aggregate of undiscounted expected
future cash flows of a pool of loans did not exceed the carrying amount of the
respective pool. In 1994, credit losses of $5,259,000, which represented the
excess of the carrying amount of the respective pools over the undiscounted
expected future cash flows of the respective pools, would have been recorded
notwithstanding the adoption of SFAS 114.

         In accordance with the adoption of SFAS 114, the portion of the
increase in allowance for credit losses (applicable to the $14,921,000 recorded
to reduce individually impaired loans to the fair value of their underlying
collateral), some of which, if any, is attributable to prior years, was
included in current operations of the year of adoption (fiscal 1994), and no
cumulative effect is shown on the statement of operations. The Company is
evaluating impairment of its contract receivables on a loan-by-loan basis since
the adoption of SFAS 114.

         The following table, containing unaudited PB6 estimates that the
Company believes are reasonably accurate, compares the provision for credit
losses and reduction in interest income under PB6 and under SFAS 114 for fiscal
year 1994:

<TABLE>
<CAPTION>
          (Dollars in thousands)                                              YEAR ENDED SEPTEMBER 30, 1994
                                                                            -----------------------------------
<S>                                                               <C>                   <C>
          Provision for Credit Losses                                                      $20,180

          PB6:
              Interest Revenue Reduction                          4,413
              Provision for Credit Losses                           846                      5,259
                                                                  ------                   -------
          Increases in Losses due to Adoption of SFAS 114                                  $14,921
                                                                                           =======
</TABLE>

         Under SFAS 114, the impairment on a loan in excess of any existing
reserve is charged to the provision for credit losses in the current period.
Therefore, when measuring the provision for credit losses, the primary
difference is the prospective treatment of impairment under PB6 as compared to
the current treatment under SFAS 114. SFAS 114 recognizes


                                      13



<PAGE>   15

all of the impairment into the current period instead of adjusting the
amortization of the remaining unearned interest and discount over the remaining
life of the loan.

         Under PB6, when the total probable collections for a loan is greater
than the net investment, any adjustment to the estimated undiscounted
collections is recorded as a reduction to unearned interest and discount, with
the remaining unearned interest and discount being amortized over the remaining
life of the loan, reducing the future yield of the loan. Therefore, under PB6,
credit losses are only recorded when the future expected yield of the loan
portfolio has been reduced to zero and the net investment is greater than the
undiscounted probable collection.

         Management elected early adoption of SFAS 114 in fiscal 1994 because
the measurement of credit losses provided by this statement is considered
preferable.

         During 1994, the Company expanded its business rapidly purchasing
18,377 contracts compared to 6,331 in 1993. The deterioration in contract
performance in 1994 due to the increase in first payment default rates and
lower repossession proceeds caused the need for a higher loss provision. Under
PB6, some of the impairment would have reduced future interest income over the
life of the remaining loans. Under SFAS 114, the loss was recognized during the
last quarter of 1994 upon conversion to SFAS 114.

RESULTS OF OPERATIONS

         Contract Purchasing Activity. Contract purchases increased rapidly
during the nine months ended September 1993 and the fiscal year ended September
1994. Due to the inadequate collections on contract receivables, the Company
tightened purchasing procedures in January 1995. Total contract collections
over the life of a group of loans is primarily dependent on repossession rates,
number of payments received prior to repossession and repossession proceeds.
While eventual repossession rates can only be forecasted during the life of a
group of contracts, the percentage of contracts that have not made their first
payment ("first payment defaults") is a good indication of the quality of
receivable purchased within a specific period. First payment defaults are more
serious than other repossessions because the differences between repossession
proceeds and the cost of the receivable are not reduced by customer payments
prior to repossession.

                Chart 1 - Number of Contracts Booked by Quarter

                                     CHART





                                      14


<PAGE>   16

       Chart 2 - First Payment Defaults by Quarter Contracts were Booked.

                                     CHART



         First Payment Default. The changes in first payment defaults suggest
that when contract purchasing volume increased in 1994, the quality of the
contracts being purchased deteriorated. After analysis of these contracts, the
Company realized that the high number of first payment defaults were due, in
part, to (i) dealers overstating to the Company the amount of the downpayment
made by obligors and (ii) dealers overstating the value of the automobile
securing the receivables. Obligors, because they had little downpayment
invested in the automobile or because they felt they had paid too high a price
for the automobile, were willing to allow the automobile to be repossessed
rather than begin making payments. After year end September 1994, the Company
was able to reduce first payment defaults by being more selective in the
contracts purchased and initiating personal interviews in order to verify
amount of downpayments.


Comparison of the Period Ended March 31, 1996 to the Six Months Ended March 31,
1995

         The Company changed its fiscal year from September 30 to March 31 in
order to start a new fiscal year reflecting the reorganization effective March
15, 1995. Therefore, the comparison below compares the six months ended March
31, 1996 to the comparable six months ended March 31, 1995.

         The Company purchased 1,169 contracts, at a cost of $5,471,000, during
the six months ending March 31, 1996 compared to 2,417 contracts, at a cost of
$10,670,000, during the six months ending March 31, 1995. The decrease in
contracts purchased of 1,248, or 52%, is a result of a decrease in the amount
of funds available for reinvestment in contracts due to more fund subsidiaries
being restricted from purchasing contracts in 1996 than during the six month
period in 1995. Virtually all of the contracts purchased during both periods
were purchased under the criteria contained in the trust indenture for each
fund subsidiary. Effective March 15, 1996, the trust indentures were canceled
and all new originations are now under the Company's new purchasing criteria.
See Item 1. Business. "Operations Since Reorganization of the Fund
Subsidiaries" for a discussion of the Company's new underwriting standards.

         For the six months ended March 31, 1996, the Company had interest
revenue of $3,541,000 compared to $8,694,000 for the six months ended March 31,
1995. The decrease in interest revenue of $5,153,000, or 59%, is due to a
decrease in average net interest earning receivables from $61,100,000, for the
six months ended March 31, 1995, to $34,790,000, for the six months ended March
31, 1996.


                                    15


<PAGE>   17

         Interest expense decreased $5,131,000, or 80%, from $6,437,000 for the
six months ended March 31, 1995 to $1,306,000 for the six months ended March
31, 1996. The decrease in interest expense is due primarily to termination of
interest accrual on the debt of the fund subsidiaries as of the date of filing
for bankruptcy, August 15, 1995, or the fund's maturity date, whichever
occurred first. See note 5 to the consolidated financial statements. The
decrease in interest expense was partially offset the increase in interest
expense associated with outstanding lines of credit.

         The provision for credit losses decreased $355,000, or 7%, from
$5,337,000 for the six months ended March 31, 1995, to $4,982,000 for the six
months ended March 31, 1996. The decrease in the provision for loan losses is
due to adequate provisions for loan losses being provided in prior periods.

         General and administrative expenses increased $877,000 or 12% from
$7,221,000 to $8,098,000. The increase in general and administrative expense is
due to higher cost associated with repossessing vehicles and legal and
administrative costs.

         Net loss for the six months ended March 31, 1996 was $2,998,000
compared to $10,421,000 for the six months ended March 31, 1995. The decrease
in net loss is due primarily to $8,709,000 of gain on extraordinary Items
related to extinguishment of debt on fund subsidiaries. See Note 5 to the notes
to Consolidated Financial Statements.


Comparison of Twelve Month Periods Ended September 30, 1995 and the Twelve Month
Period Ending September 30, 1994

         The Company purchased 5,328 contracts, at a cost of $24,830,000,
during the twelve months ending September 30, 1995 compared to 18,377,
contracts at a cost of $88,124,000 purchased during the twelve months ended
September 30, 1994. The decrease in contract purchases of 13,049, or 71%, was
due to tightened purchasing procedures, reductions in new funds raised, and a
smaller Dealer Network.

         Interest revenue decreased 4% from $14,054,000 to $13,472,000 for the
year ended September 30, 1995, due to decreased contracts receivables. Interest
expense increased 12% from $9,968,000 to $11,205,000 due to increased offering
cost amortization and the fact that the ACF VI debt of $10,675,000 was
outstanding for all of 1995 as compared to a portion of 1994. The increase in
interest expense was somewhat mitigated by ceasing the interest expense accrual
for the note debts of the fund subsidiaries as a result of the bankruptcy
petitions or maturity dates (whichever event occurred first). See Note 5 in
Notes to Consolidated Financial Statements.

         The provision for credit losses decreased 85% from $20,180,000 to
$3,128,000 due to generally adequate allowance established in prior years and
the adequacy of the initial allowance on current year purchases to cover losses
during the twelve months ended September 30, 1995. In addition, purchase
activity was down substantially in 1995 compared to 1994. As most additional
allowances are recorded in the first six months of a contract's life, this
decrease in purchasing activity also had an impact on the decreased provision
for credit losses.

         General and administrative expenses increased from $9,296,000 to
$15,881,000. The increase in general and administrative expense is primarily
due to increased repossession, remarketing, and collection costs. During the
years ended September 30, 1995, the Company incurred $1,270,000 of additional
cost in the repossession and remarketing of vehicles as compared to such costs
in 1994. The largest increases were in repossession and repair fees which
increased from $1,432,000 to $2,332,000. During the year ended September 30,
1995, the Company repossessed a total of 7,273 vehicles compared to 6,449
during the year ended September 30, 1994.

         The net loss before dividends decreased $6,056,000 from $25,950,000 in
fiscal 1994 to $19,894,000 in fiscal 1995. The decrease in net loss was
primarily due to a decrease in the provision for credit losses of $17,052,000
partially offset by increases in interest expense of $1,237,000 and general and
administrative expenses of $6,561,000 and increases in settlement and
reorganization charges of $2,592,000.


                                      16


<PAGE>   18

LIQUIDITY AND CAPITAL RESOURCES

Joint Plan of Reorganization

         Until November 1994, the Company financed its receivables purchasing
activities through public and private sale of unrated, automobile
receivables-backed notes issued by its Fund Subsidiaries. From 1992 until 1994,
the Company sold a total principal amount of approximately $72,000,000 of notes
through its Fund Subsidiaries. After November 1994, due primarily to higher
than expected losses in the collection of its receivables held by these Fund
Subsidiaries, the Company abandoned its note offering activities. In August
1995, search caused each of the eight Fund Subsidiaries to file for
reorganization under chapter 11 of the U.S. Bankruptcy Code. The Joint Plan of
Reorganization for the Fund Subsidiaries ("Joint Plan") was confirmed and
became effective on March 15, 1996.

         As a result of the confirmation and effectiveness of the Joint plan,
approximately $69,300,000 of debt owed by the Fund Subsidiaries to Noteholders
was canceled in exchange for Search Common Stock, 9%/7% convertible preferred
stock, warrants and cash distributed to former Noteholders of the Fund
Subsidiaries.  The assets of the Fund Subsidiaries (net of a $350,000 deposit
to a litigation trust and $2,000,000 escrowed for payment for professional
fees), consisting primarily of approximately $29,000,000 of net receivables and
$16,345,000 of cash, were deemed transferred to Search. Following the
effectiveness of the Joint Plan and certain financing transactions (see "Item
1. Business -- Financing"), the Company had no borrowed debt, approximately
$31,000,000 in net receivables and approximately $21,600,000 in cash. See "Item
8. Financial Statements and Supplementary Data" and "Liquidity and Capital
Resources." The Company has redeemable shares that require payment of
approximately $2,078,000 in May 1997. The warrants issued as part of the Plan
of Reorganization and to HPIL, if not exercised by the expiration date of March
2001, may be "put" back to the Company at $.25. The total potential liability
at March 2001 under these warrants is $1,419,000.


General

         The Company's business will have an ongoing requirement to raise
substantial amounts of cash to support its activities. The principal cash
requirements include amounts to purchase receivables, cover operating expenses,
and to pay preferred stock dividends. The Company has a significant amount of
cash on hand as of March 31, 1996 which it considers adequate to meet its
reasonably anticipated needs. The Company intends to invest a portion of this
cash into finance receivables. In the future, additional liquidity will be
necessary to support growth of the Company's loan portfolio and operations. The
Company intends to leverage its net equity and subordinated debt in the future.

         Search has obtained a commitment for a line of credit to purchase
receivables which would then be assigned to special purpose entities for future
securitization. Search has also received a commitment for a line of credit to
purchase receivables which would remain on Search's balance sheet. These
commitments are subject to completion of definitive documentation. Search is
also pursuing additional banking lines of credit. These financings would be
utilized for the purchase of contract receivables. Search believes the
financings as contemplated would be adequate to fund anticipated future
operations of Search.

         The Company's annual dividend requirements on the outstanding shares
of its 12% Preferred Stock and 9%/7% Preferred Convertible Stock, as of May 31,
1996, were $240,000 and $5,375,000, respectively. The annual dividend
requirement on the Company's 9%/7% Convertible Preferred Stock will remain at
the 9% level, or $5,375,000, for the first three years and then decrease to the
7% level, or $4,181,000, for the remaining four-year term. Any conversion to
Common Stock would reduce these dividend requirements.


Operating Activities

         During the six months ended March 31, 1996, the Company utilized cash
of $4,141,000 in its operations as compared to cash of $10,741,000 used in
during the twelve months ended September 30, 1995. The net loss for the six
months ended March 31, 1996 decreased from a net loss of $19,894,000 for the
year ended September 30, 1995 to a net loss of $2,671,000 for the six months
ended March 31, 1996. A significant portion of the decrease in loss from 1995
to 1996 resulted from an extraordinary gain on debt extinguishment of
$8,709,000. General and administrative expenses decreased from $15,881,000 to
$8,098,000, while settlements and reorganization expenses decreased by
$2,617,000 from $3,152,000 to $535,000. The decrease in general and
administrative expenditures is due to there being only six monthly periods
included in 1996 compared to twelve monthly periods included in 1995.


                                       17




<PAGE>   19

Investing Activities

         During the twelve months ended September 30, 1995, the Company's
investing activities provided cash of $17,592,000 as compared to cash of
$20,423,000 provided by investing activities during the six months ended March
31, 1996. This change resulted primarily from reduced contract purchases of
$19,359,000 and an increase in unrestricted cash of $12,624,000, partially
offset by decreased collection proceeds of $29,731,000. Additionally, upon
completion of the Joint Plan, $21,600,000 in cash was released from the Fund
Subsidiaries to Search.


Financing Activities

         During the twelve months ended September 30, 1995, the Company
Utilized cash of $7,348,000 in its financing activities as compared to cash of
$1,093,000 provided by financing activities during the six months ended march
31, 1996. In 1995, the Company raised only $1,779,000 through note offerings
and repaid $2,429,000 on its line of credit and repaid $5,077,000 of the Notes
payable. During the six months ended March 31, 1996, the Company had net
borrowings of $1,225,000 under lines of credit, did not raise any funds through
Note offerings and did not repay any of the Notes payable. Because of the
bankruptcy, no payments were made on the Fund Subsidiaries' Notes Payable and
GECC was settled in full.


Nonaccrual Receivables

         The following table sets forth the receivables which are accounted for
on a nonaccrual basis. The Company has no receivables which are both accruing
and contractually past due 90 days or more.

<TABLE>
<CAPTION>
                                                   MOTOR VEHICLE RECEIVABLES - AGING AND DELINQUENCIES
                                                                  (Dollars in thousands)
                                         AS OF March 31, 1996                           AS OF SEPTEMBER 30,1995
                               -----------------------------------------      -------------------------------------------
                                               Total (1)    % of Total                        Total (1)       % of Total
                                Number of       Unpaid        Unpaid           Number of       Unpaid          Unpaid
    Contractual Delinquency    Receivables   Installments   Installments      Receivables    Installments    Installments
    -----------------------    -----------   ------------   ------------      -----------    ------------    ------------
<S>                              <C>           <C>           <C>                 <C>           <C>            <C>
    Accrual Receivables
       0 to 30 days past due      6,871        $31,816          86%              8,233         $45,464              68%
       31-60 days past due          704          3,179           9%              1,572           8,294              12%
                                  -----        -------       ------             ------         -------           -----
         Subtotal                 7,575         34,995          95%              9,805          53,758              80%
                                  -----        -------       ------             ------         -------           -----
    Nonaccrual Receivables
       61-180 days past due         420          2,091           5%              1,696           9,182              14%
       181+ days past due             1              -           -                 627           3,737               6%
                                  -----        -------       -----              ------         -------           -----
         Subtotal                   421          2,091           5%              2,323         $12,919              20%
                                  -----        -------       -----              ------         -------           -----
    All Receivables (2)           7,996        $37,086       100.0%             12,128         $66,677           100.0%
                                  =====        =======       =====              ======         =======           =====
       Vehicles held for resale
         @ collateral value         333        $   566           -                 599         $   601               - 
                                  =====        =======                          ======         =======                    
</TABLE>

(1)      Includes unearned income.
(2)      Active receivables exclude 333 and 599 accounts that have been 
         reclassified to vehicles held for resale at March 31, 1996 and 
         September 30, 1995, respectively.


Potential Problem Receivables

         Receivables are considered nonaccrual receivables due to their
contractual delinquency exceeding 60 days or due to repossession of underlying
collateral. The Company also considers certain delinquent receivables that are
in the contractual status of less than 60 days past due to be potential problem
receivables based on collections. Uncertainty as to overall economic
conditions, regional considerations, and current trends in portfolio growth
cause the Company to review these accounts for potential problems.


                                      18


<PAGE>   20
Receivables Concentrations

         The Company considers Texas and Tennessee to be states with receivable
concentrations because receivables with obligors in each of these states exceed
10% of total outstandings.


Inflation

         Historical statistics indicate that collateral value, vehicle sales
price, and receivable interest rates are relatively stable within the Company's
market segment. Significant inflation in prices could adversely impact the
Company's ability to acquire receivables at favorable prices. General increases
in interest rates will result in increases in the Company's interest expense.


Seasonality

         The Company's operations are seasonably impacted by higher delinquency
rates during certain periods, including November and December holiday periods.


Changes in Asset Quality

         The Company believes that it is upgrading its credit quality through
higher underwriting and collateral standards compared to prior periods. No
assurance can be given at this time as to whether these new standards will
improve the Company's credit loss experience rate.


Recent Accounting Pronouncement

         Information as to recent accounting pronouncements is contained in
Note 8 of the Notes to Consolidated Financial Statements.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         See index at page F-1.



                                      19

<PAGE>   21
                  SEARCH CAPITAL GROUP, INC. AND SUBSIDIARIES

         CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL INFORMATION


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                        PAGE
                                                                                                        ----
<S>                                                                                                     <C>
Independent Certified Public Accountants' Report                                                        F-2

Consolidating Balance Sheets as of March 31, 1996 and September 30, 1995                                F-3

Consolidating Statements of Operations for the six months ended March 31, 1996,
the years ended September 30, 1995 and 1994.                                                            F-4

Consolidated Statement of Changes in Stockholders' Equity (Capital Deficit) for
the period from October 1, 1993 through March 31, 1996.                                                 F-5

Consolidated Statements of Cash Flows for the six months ended March 31, 1996,
the years ended September 30, 1995 and 1994.                                                            F-6

Notes to Consolidated Financial Statements                                                              F-7
</TABLE>


All financial statement schedules are omitted because they are not applicable,
not required, or the information required to be set forth therein is included
in the financial statements or the notes thereto.



                                      F-1

<PAGE>   22






INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT



To The Board of Directors and Stockholders
Search Capital Group, Inc.
Dallas, Texas

         We have audited the accompanying consolidated balance sheets of Search
Capital Group, Inc. and its subsidiaries ("the Company") as of March 31, 1996,
and September 30, 1995, and the related consolidated statements of operations,
changes in stockholders' equity (capital deficit), and cash flows for the six
months ended March 31, 1996, and the years ended September 30, 1995 and 1994.
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 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Search Capital Group, Inc. and Subsidiaries as of March 31, 1996, and September
30, 1995, and the results of its operations and its cash flows for the six
months ended March 31, 1996, and the years ended September 30, 1995 and 1994 in
conformity with generally accepted accounting principles.

         As discussed in Note 4 to the consolidated financial statements in
1994, the Company elected early adoption of Statements of Financial Accounting
Standards Nos. 114 and 118, thus changing its method of accounting for loan
impairments.



                                              /s/ BDO Seidman, LLP
                                              ---------------------------------
                                              BDO Seidman, LLP
                                              Certified Public Accountants


Dallas, Texas
May 10, 1996


                                      F-2

<PAGE>   23

                  SEARCH CAPITAL GROUP, INC. AND SUBSIDIARIES

                          Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                   March 31, 1996                September 30, 1995
                                                          -----------------------------------    ------------------
ASSETS                                                     Historical     Pro forma (Note 3)
                                                          ------------    -------------------
<S>                                                          <C>               <C>                    <C>         
Gross contracts receivable (Note 4)                        $ 37,086,000      $ 37,086,000            $ 66,677,000
Unearned interest                                            (6,435,000)       (6,435,000)            (13,106,000)
                                                           ------------      ------------            ------------
Net contracts receivable                                     30,651,000        30,651,000              53,571,000
Allowance for credit losses                                 (13,353,000)      (13,353,000)            (18,623,000)
Loan origination costs                                        3,984,000         3,984,000               3,754,000
Amortization of loan origination costs                       (3,578,000)       (3,578,000)             (2,937,000)
                                                           ------------      ------------            ------------
    Net contract receivables - after allowance
     for credit losses & other costs                         17,704,000        17,704,000              35,765,000
                                                           ------------      ------------            ------------
Cash and cash equivalents                                    17,817,000        21,582,000                 442,000
Restricted cash (Note 2)                                             --                --               8,105,000
Vehicles held for resale                                        566,000           566,000                 601,000
Deferred note offering cost, net (Note 1)                            --                --               3,062,000
Property and equipment, net                                   1,062,000         1,062,000               1,306,000
Other assets, net                                               197,000           197,000                 641,000
                                                           ------------      ------------            ------------
  Total assets                                             $ 37,346,000      $ 41,111,000            $ 49,922,000
                                                           ============      ============            ============

LIABILITIES AND STOCKHOLDERS' EQUITY (CAPITAL DEFICIT)

Lines of credit (Notes 3 & 6)                              $  2,283,000      $         --            $  1,058,000
Accrued settlements  (Notes 14 & 15)                            688,000           688,000               2,912,000
Accrued restructuring  (Note 2)                                      --                --                 214,000
Accounts payable and other liabilities                        7,356,000         7,356,000               2,051,000
Accrued interest                                                 15,000                --                   2,000
Redeemable warrants (Note 8)                                    593,000           673,000                      --
                                                           ------------      ------------            ------------
    Liabilities                                              10,935,000         8,717,000               6,237,000
                                                           ------------      ------------            ------------

Prepetition notes payable and accrued
 interest - subject to compromise (Notes 2,5)                        --                --              69,320,000
                                                           ------------      ------------            ------------

        
Stock repurchase commitment (Note 9)                          2,078,000         2,078,000               2,078,000
                                                           ------------      ------------            ------------

Stockholders' Equity (Capital Deficit)
Preferred stock (Note 8)                                        154,000           174,000                   4,000
Common stock (Note 8)                                           248,000           289,000                 108,000
Additional paid-in capital                                   79,124,000        85,046,000              24,697,000
Accumulated deficit                                         (54,043,000)      (54,043,000)            (51,372,000)
Treasury stock                                               (1,150,000)       (1,150,000)             (1,150,000)
                                                           ------------      ------------            ------------
    Total stockholders' equity (capital deficit)             24,333,000        30,316,000             (27,713,000)
                                                           ------------      ------------            ------------

   Total liabilities and stockholders' equity
        (capital deficit)                                  $ 37,346,000      $ 41,111,000            $ 49,922,000
                                                           ============      ============            ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-3

<PAGE>   24


                  SEARCH CAPITAL GROUP, INC. AND SUBSIDIARIES

                     Consolidated Statements of Operations


<TABLE>
<CAPTION>
                                             Six Months Ended March
                                                    31, 1996                    Year Ended September             Year Ended
                                                    (Note 1)                          30, 1995               September 30, 1994
                                          ------------------------------      -------------------------   -------------------------
<S>                                       <C>                                   <C>                             <C>             
Interest revenue                          $  3,541,000                          $ 13,472,000                    $ 14,054,000    
Interest expense                             1,306,000                            11,205,000                       9,968,000    
                                          ------------                          ------------                    ------------    
Net interest income (loss)                   2,235,000                             2,267,000                       4,086,000    
                                                                                                                                
Provision for credit losses                  4,982,000                             3,128,000                      20,180,000    
                                          ------------                          ------------                    ------------    
Net interest income (loss) after                                                                                                
       provision for credit losses          (2,747,000)                             (861,000)                    (16,094,000)   
                                          ------------                          ------------                    ------------    
                                                                                                                                
General and administrative expense           8,098,000                            15,881,000                       9,296,000    
Settlement expense                             535,000                             2,837,000                         560,000    
Reorganization expense (Notes 2 & 10)               --                               315,000                              --    
                                          ------------                          ------------                    ------------    
Operating and other expense                  8,633,000                            19,033,000                       9,856,000    
                                          ------------                          ------------                    ------------    
                                                                                                                                
Loss before extraordinary item             (11,380,000)                          (19,894,000)                    (25,950,000)   
Extraordinary gain on discharge of                                                                                              
       debt (Notes 2 & 5)                    8,709,000                                    --                              --    
                                          ------------                          ------------                    ------------    
Net loss                                    (2,671,000)                          (19,894,000)                    (25,950,000)   
                                                                                                                                
Preferred stock dividends                     (327,000)                             (240,000)                       (240,000)   
                                          ------------                          ------------                    ------------    
Net loss attributable to common                                                                                                 
    stockholders                          $ (2,998,000)                         $(20,134,000)                   $(26,190,000)   
                                          ============                          ============                    ============    
                                                                                                                                
                                                                                                                                
Loss per common share before                                                                                                    
    extraordinary item                    $      (1.12)                         $      (2.25)                   $      (2.33)   
Gain on extraordinary item                        0.83                                    --                              --    
                                          ------------                          ------------                    ------------    
Loss per common share                     $      (0.29)                         $      (2.25)                   $      (2.33)   
                                          ============                          ============                    ============    
                                                                                                                                
Weighted average number of                                                                                                      
      common shares outstanding             10,447,000                             8,967,000                      11,258,000    
                                          ============                          ============                    ============    
</TABLE>


          See accompanying notes to consolidated financial statements.



                                      F-4

<PAGE>   25

                  SEARCH CAPITAL GROUP, INC. AND SUBSIDIARIES

    Statement of Changes in Stockholders' Equity (Capital Deficit) (Note 8)

           For the period from October 1, 1993 through March 31, 1996



<TABLE>
<CAPTION>
                                               Preferred Stock -12%        Preferred Stock - 9%/7%              Common stock
                                           ---------------------------   ---------------------------   ---------------------------
                                              Shares         Amount         Shares         Amount         Shares          Amount
                                           ------------   ------------   ------------   ------------   ------------   ------------
<S>                                        <C>            <C>            <C>            <C>            <C>            <C>       
Balance, October 1, 1993                        400,000   $      4,000             --             --     12,165,670   $    122,000
                                           ------------   ------------   ------------   ------------   ------------   ------------
  Issuance of common shares for cash                 --             --             --             --      2,785,000         28,000
  ESOP termination, net of expenses                  --             --             --             --       (306,152)        (3,000)
  Stock cancellation                                 --             --             --             --     (2,946,988)       (30,000)
  12% preferred stock dividends                      --             --             --             --             --             -- 
  Net loss                                           --             --             --             --             --             -- 
                                           ------------   ------------   ------------   ------------   ------------   ------------
Balance, September 30, 1994                     400,000          4,000             --             --     11,697,530       117,000
                                           ------------   ------------   ------------   ------------   ------------   ------------
  Stock purchase at May 5, 1995                      --             --             --             --             --             -- 
  Stock repurchase commitment                        --             --             --             --       (923,344)        (9,000)
  12% preferred stock dividends                      --             --             --             --             --             -- 
  Net loss                                           --             --             --             --             --             -- 
                                           ------------   ------------   ------------   ------------   ------------   ------------
Balance, September 30, 1995                     400,000          4,000             --             --     10,774,186        108,000
                                           ------------   ------------   ------------   ------------   ------------   ------------
  Exercise of options                                --             --             --             --         35,840          1,000
  Class action suit settlement (Note 14)             --             --             --             --      1,848,000         18,000
  Reorganization (Note 2)                            --             --     15,031,648        150,000     12,115,001        121,000
  12% preferred stock dividends                      --             --             --             --             --             -- 
  9% preferred stock dividends                       --             --             --             --             --             -- 
  Net loss                                           --             --             --             --             --             -- 
                                           ------------   ------------   ------------   ------------   ------------   ------------
Historical balance at March 31, 1996            400,000          4,000     15,031,648        150,000     24,773,027        248,000
                                           ------------   ------------   ------------   ------------   ------------   ------------
PRO FORMA INFORMATION (NOTE 3)
     Debt conversion                                 --             --             --             --      2,500,000         25,000
     Additional investment                           --             --      2,032,800         20,000      1,638,400         16,000
                                           ------------   ------------   ------------   ------------   ------------   ------------
Pro forma balance at March 31, 1996             400,000   $      4,000     17,064,448   $    170,000     28,911,427   $    289,000
                                           ============   ============   ============   ============   ============   ============

<CAPTION>

                                             Treasury Stock                                                         Stockholders'
                                       ---------------------------     Additional      ESOP Notes    Accumulated       Equity
                                          Shares         Amount      Paid-In Capital   Receivable      Deficit    (Capital Deficit)
                                       ------------   ------------   ---------------  ------------   ------------ -----------------
<S>                                    <C>            <C>             <C>             <C>            <C>            <C>       
Balance, October 1, 1993                  2,526,389   $    (25,000)   $  8,711,000    $ (1,073,000)  $ (5,528,000)  $  2,211,000
                                       ------------   ------------    ------------    ------------   ------------   ------------
  Issuance of common shares for cash             --             --      19,379,000              --             --     19,407,000
  ESOP termination, net of expenses              --             --        (874,000)      1,073,000             --        196,000
  Stock cancellation                             --             --          30,000              --             --             --
  12% preferred stock dividends                  --             --        (240,000)             --             --       (240,000)
  Net loss                                       --             --              --              --    (25,950,000)   (25,950,000)
                                       ------------   ------------    ------------    ------------   ------------   ------------
Balance, September 30, 1994               2,526,389        (25,000)     27,006,000              --    (31,478,000)    (4,376,000)
                                       ------------   ------------    ------------    ------------   ------------   ------------
  Stock purchase at May 5, 1995             500,000     (1,125,000)             --              --             --     (1,125,000)
  Stock repurchase commitment                    --             --      (2,069,000)             --             --     (2,078,000)
  12% preferred stock dividends                  --             --        (240,000)             --             --       (240,000)
  Net loss                                       --             --              --              --    (19,894,000)   (19,894,000)
                                       ------------   ------------    ------------    ------------   ------------   ------------
Balance, September 30, 1995               3,026,389     (1,150,000)     24,697,000              --    (51,372,000)   (27,713,000)
                                       ------------   ------------    ------------    ------------   ------------   ------------
  Exercise of options                            --             --          10,000              --             --         11,000
  Class action suit settlement 
    (Note 14)                                    --             --       2,595,000              --             --      2,613,000
  Reorganization (Note 2)                        --             --      52,149,000              --             --     52,420,000
  12% preferred stock dividends                  --             --        (120,000)             --             --       (120,000)
  9% preferred stock dividends                   --             --        (207,000)             --             --       (207,000)
  Net loss                                       --             --              --              --     (2,671,000)    (2,671,000)
                                       ------------   ------------    ------------    ------------   ------------   ------------
Historical balance at March 31, 1996      3,026,389     (1,150,000)     79,124,000              --    (54,043,000)    24,333,000
                                       ------------   ------------    ------------    ------------   ------------   ------------
PRO FORMA INFORMATION (NOTE 3)
     Debt conversion                             --             --       1,692,000              --             --      1,717,000
     Additional investment                       --             --       4,230,000              --             --      4,266,000
                                       ------------   ------------    ------------    ------------   ------------   ------------
Pro forma balance at March 31, 1996       3,026,389   $ (1,150,000)   $ 85,046,000              --   $(54,043,000)  $ 30,316,000
                                       ============   ============    ============    ============   ============   ============
</TABLE>



          See accompanying notes to consolidated financial statements




                                      F-5

<PAGE>   26



                 SEARCH CAPITAL GROUP, INC. AND SUBSIDIARIES
 
                    Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                          Six Months Ended            Year Ended              Year Ended
                                                          March 31, 1996         September 30, 1995      September 30, 1994
                                                       ---------------------    ---------------------    --------------------
<S>                                                     <<C>                      <C>                    <C>                   
OPERATING ACTIVITIES:                                                                                                          
  Net loss                                              $ (2,671,000)                $(19,894,000)            $(25,950,000)    
     Adjustments to reconcile net loss to                                                                                      
       cash provided by (used in) operations:                                                                                  
     Provision for credit losses                           4,982,000                    3,128,000               20,180,000     
     Amortization of deferred offering costs               1,221,000                    2,840,000                2,158,000     
     Amortization of loan origination costs                  641,000                    1,047,000                1,728,000     
     Depreciation and amortization                           262,000                      384,000                  217,000     
     Extraordinary gain on discharge of debt              (8,709,000)                          --                       --     
     Loss on disposition of fixed assets                     112,000                           --                       --     
  Changes in assets and liabilities:                                                                                           
    Decreases (increases) in other assets, net               470,000                      (86,000)                  60,000     
    Increases (decreases) in accounts payable                                                                               
       and accrued expense                                  (449,000)                   1,840,000                3,488,000     
                                                        ------------                 ------------             ------------     
  Cash provided by (used in) operations                   (4,141,000)                 (10,741,000)               1,881,000     
                                                        ------------                 ------------             ------------     
                                                                                                                               
INVESTING ACTIVITIES:                                                                                                          
  Purchase of contract receivables including                                                                                   
     origination fees                                     (5,471,000)                 (24,830,000)             (88,124,000)    
  Principal payments on contract receivables                                                                                   
      including proceeds from sales of vehicles           17,921,000                   47,652,000               33,912,000     
  Purchases of property and equipment                       (132,000)                    (711,000)                (957,000)    
  (Increases) decreases in restricted cash                 8,105,000                   (4,519,000)               3,416,000     
  Decrease in notes receivable, related party                     --                           --                  167,000     
                                                        ------------                 ------------             ------------     
                                                                                                                               
  Cash provided by (used in) investing                    20,423,000                   17,592,000              (51,586,000)    
                                                        ------------                 ------------             ------------     
                                                                                                                               
FINANCING ACTIVITIES:                                                                                                          
  Net borrowings (repayments) under line of credit         1,225,000                   (2,429,000)               3,487,000     
  Notes payable proceeds                                          --                    1,779,000               31,206,000     
  Notes payable repayments                                        --                   (5,077,000)              (1,000,000)    
  Capital lease (repayments) financing                       (24,000)                     (58,000)                 308,000     
  Notes payable offering costs                                    --                     (198,000)              (3,455,000)    
  Proceeds from sale of stock, net of expense                     --                           --               19,407,000     
  Proceeds from exercise of options                           12,000                           --                       --     
  Purchase of  treasury stock                                     --                   (1,125,000)                      --     
  Change in ESOP Note Receivable                                  --                           --                  196,000     
  Payment of dividends                                      (120,000)                    (240,000)                (240,000)    
                                                        ------------                 ------------             ------------     
                                                                                                                               
  Cash provided by (used in) financing activities          1,093,000                   (7,348,000)              49,909,000     
                                                        ------------                 ------------             ------------     
                                                                                                                               
CHANGE IN CASH AND CASH EQUIVALENTS:                                                                                           
  Change in cash and cash equivalents                     17,375,000                     (497,000)                 204,000     
  Cash and cash equivalents - beginning                      442,000                      939,000                  735,000     
                                                        ------------                 ------------             ------------     
                                                                                                                               
  Cash and cash equivalents - ending                    $ 17,817,000                 $    442,000             $    939,000     
                                                        ============                 ============             ============     
                                                                                                                               
SUPPLEMENTAL INFORMATION:                                                                                                      
  Cash paid for interest                                $     71,000                 $  9,272,000             $  7,426,000     
                                                        ============                 ============             ============     
</TABLE>


          See accompanying notes to consolidated financial statements.


                                    F-6

<PAGE>   27


                  SEARCH CAPITAL GROUP, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


1.    SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND PRACTICES

      General. The accompanying consolidated financial statements include the
accounts of Search Capital Group, Inc. ("Search") including its subsidiaries 
("the Company") as follows:
                              
<TABLE>
<CAPTION>
                                                                                                  Ownership    
                              Subsidiary                                                          Percentage   
                              ----------                                                          ----------   
            <S>                                                                                        <C>     
           Automobile Credit Holdings, Inc. ("ACHI")                                                 100%
           Automobile Credit Acceptance Corp. ("ACAC") (100% owned by ACHI)                          100%
           Consumer Dealer Autocredit Corporation ("CDAC") (100% owned by ACHI)                      100% *
           Eight Fund Subsidiaries and two previous Fund Subsidiaries                                100%
           Newsearch, Inc.                                                                           100% *
           Search Funding Corp. ("SFC")                                                              100%
           Automobile Wholesaling, Inc.                                                              100% *
           Search Automobile Leasing Corporation                                                     100% *
             * Currently inactive.
</TABLE>

         The Fund Subsidiaries are special purpose subsidiaries of Search which
raised money through the issuance of interest bearing notes for the purchase of
contract receivables. The Fund Subsidiaries (see Note 2 for discussion of
bankruptcy proceedings) have accounted for all transactions, where applicable,
related to the reorganization proceedings in accordance with Statement of
Position 90-7 "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code," ("SOP 90-7") issued by the American Institute of Certified
Public Accountants ("AICPA") in November 1990.

         ACAC raised capital to be used by the Fund Subsidiaries to purchase,
at a significant discount, retail installment sale contracts generated by the
sale of used automobiles and light trucks. ACAC also serviced the contracts on
behalf of the Fund Subsidiaries and will continue to service the contracts for
the Company.

         In 1996, the Company changed its fiscal year end to March 31. The
prior  year consolidated statements have been formatted to conform with the
1996 presentation.

         Basis of Consolidation. The consolidated financial statements include
the accounts of the Company, after elimination of all significant intercompany
accounts and transactions, and have been prepared in accordance with generally
accepted accounting principles.

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

         Contracts Receivable, Allowance for Credit Losses, and Interest
Income. The Company records receivables purchased at cost. Contractual finance
charges are recorded as unearned interest and amortized to interest income
using the interest method. An initial allowance for credit losses is recorded
at the acquisition of a receivable equal to the difference between the amount
financed and the acquisition cost, which is what the Company estimates to be
fair value. The Company considers all of its contracts receivable to be
consumer installment loans to individuals. In accordance with Statement of
Financial Accounting Standards No. 114 ("SFAS No. 114"), these receivables are
reviewed individually for impairment generally using the receivable's
contractual delinquency or repossession status. All receivables which exceed 60
days contractual delinquency or with respect to which the underlying collateral
has been repossessed are considered impaired. Once impaired, a receivable is
placed on nonaccrual status and written down to its net realizable value, and
no interest income is recognized until the receivable returns to nonimpaired
status. Therefore, at impairment, the  Company writes down the receivable to
its estimated net realizable value, which is the fair value of the underlying
collateral if it has been repossessed or the estimated recoverable cash flow if
no repossession has occurred. If the new recorded amount of the impaired
receivable is less than the Company's net recorded investment in the
receivable, the Company recognizes a charge to provision for credit losses in
the amount of the deficiency and increases the allowance for credit losses by a
corresponding amount. The provision for credit losses is adjusted for any
differences between the final net proceeds from resale of the underlying
collateral and the estimated net realizable value. All payments received on
impaired receivables are considered a return of principal. Generally, the
Company charges off a receivable against the allowance for credit losses at 180
days contractual delinquency if no significant payments have been received in
the last six months, or earlier after receipt of the sale proceeds from
liquidation of the collateral securing the receivable. 




                                     F-7


<PAGE>   28
         Subsequent proceeds received on a previously charged-off receivable are
recorded as a recovery to the allowance for credit losses. Any excess of cost
paid ("premium") for net receivables acquired is recorded as an asset and
amortized over the life of the related loans acquired as an adjustment to yield
using the interest method.

         Loan Origination Costs. The Company performs substantially all of the
functions associated with origination of the contracts and capitalizes the
related costs. The portion capitalized is amortized by the interest method
against income as an adjustment of yield.

         Deferred Notes Payable Offering Costs. Costs directly related to notes
payable offerings were capitalized and amortized to expense by the interest
method over the contractual terms of the notes. Deferred offering costs were
the commissions, printing, legal, accounting and other expenditures incurred in
issuing the notes to the investors.

         Vehicles Held for Resale. Vehicles held for resale represents the 
estimated collateral value of motor vehicles in the Company's possession and 
are carried at the lower of cost or estimated net realizable value (estimated
auction value less estimated costs to sell at the time of repossession). The 
Company classifies a loan as vehicle held for resale upon physically 
repossessing the vehicle and until the vehicle is sold at auction. The 
deficiency balance, if any, is then charged off.

         Property and Equipment.    Property and equipment includes assets which
are depreciated over 3 year and 5 year lives and leasehold improvements which
are amortized over the remaining term of the lease.

         Net Loss Per Share Attributable to Common Stockholders. The net loss
per share attributable to common stockholders has been computed based on the
weighted average number of shares of Search common stock outstanding during
each period and after deducting preferred stock dividends declared. Common
stock equivalents are included in the calculations except when their effect
would be antidilutive.

         Income Taxes. The Company files a consolidated federal income tax
return. The Company uses the asset and liability method to provide for income
taxes under which deferred tax assets and liabilities are recognized for the
tax consequences of temporary differences by applying enacted statutory tax
rates applicable to future years to differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities.

         Statement of Cash Flows. For purposes of reporting cash flows, the
Company considers short term cash investments with original maturities of three
months or less to be cash equivalents. Cash held in a Fund Subsidiary was
restricted to payment of allowable expenses and investment in contract
receivables until the note balance of the Fund Subsidiary was satisfied.


2.       CHAPTER 11 BANKRUPTCY FILING OF THE FUND SUBSIDIARIES AND CONFIRMATION 
         OF THE JOINT PLAN OF REORGANIZATION

         As of March 31, 1996, the Fund Subsidiaries consisted of six public
and two private corporations as follows:

         Automobile Credit Fund 1991-III, Inc. ("ACF 91-III") - Private
         Automobile Credit Finance, Inc. ("ACF") - Public
         Automobile Credit Partners, Inc. ("ACP") - Private
         Automobile Credit Finance 1992-II, Inc. ("ACF 92-II") - Public
         Automobile Credit Finance III, Inc. ("ACF III") - Public
         Automobile Credit Finance IV, Inc. ("ACF IV") - Public
         Automobile Credit Finance V, Inc. ("ACF V") - Public
         Automobile Credit Finance VI, Inc. ("ACF VI") - Public

         At September 30, 1995, Fund Subsidiaries' cash balances of $8,105,000
were restricted for reinvestment use or held in sinking funds to be applied to
the repayment of the Fund Subsidiaries Notes.



                                      F-8


<PAGE>   29

         On August 14, 1995, only the Fund Subsidiaries filed for
reorganization under Chapter 11 of the U. S. Bankruptcy Code. Search and its
unrestricted subsidiaries did not seek protection under the Code but Search was
a co-proponent of a joint plan of reorganization for the Fund Subsidiaries. On
March 4, 1996, the Court entered an order ("Confirmation Order") confirming the
Third Amended Plan of Reorganization ("Joint Plan") for all of the Fund
Subsidiaries, effective on March 15, 1996 ("Effective Date").

         Total secured claims of all noteholders under the Joint Plan were
$53,240,000, and total unsecured claims were $16,080,000, for total claims of
$69,320,000, which comprised the total of notes payable and accrued interest
due the Noteholders (Note 5). The Joint Plan allowed noteholders to choose one
of two options. Under one of the options ("Equity Option"), noteholders would
receive with respect to the secured portion of their claims shares of Search
common stock, shares of a new series of 9%/7% convertible preferred stock and a
cash payment equal in amount as if dividends had been calculated on the
preferred stock from July 1, 1995 to the Effective Date. Under the other option
("Collateral Option"), noteholders would receive with respect to the secured
portion of their claims distributions of the proceeds of the continued
collection or the sale of the motor vehicle receivables securing their Notes.
According to the Joint Plan, the number of shares of common stock to be issued
would be calculated as of the Effective Date so that noteholders would receive
preferred stock and common stock equal, on a fully diluted basis, to 75% of the
value of all shares of new 9%/7% preferred stock, common stock, existing 12%
preferred stock, warrants, stock options and rights then outstanding, or agreed
to be issued by Search (with certain exceptions, including any shares issued to
Hall Phoenix Inwood Limited, (HPIL) under the Funding Agreement, see Note 3).
At a special shareholders meeting on March 1, 1996, shareholders of Search
approved two amendments to Search's Certificate of Incorporation, increasing
Search's authorized capital stock to 130,000,000 shares of common stock and
60,000,000 shares of new preferred stock. The Certificate of Incorporation also
was amended to prohibit Search from issuing any non-voting capital stock.

         Before the Effective Date, Value Partners, Ltd. ("VPL") purchased all
of the secured claims of noteholders who had elected the Collateral Option
(approximately $12,800,000 of original Note principal amount) and changed the
election for such secured claims to the Equity Option. The selling noteholders
retained their unsecured claims. As a consequence of this transaction, 100% of
the secured claims of noteholders received treatment under the Equity Option.

         With respect to the unsecured portion of noteholders' claims, the
noteholders and any other holders of unsecured claims, will receive from Search
a pro rata share of warrants to purchase an aggregate of 5,000,000 shares of
common stock (the "Warrants"). The Warrants will be issued after the unsecured
claims of non-noteholders have been finally determined by the Court. (See Note
8).

         The Joint Plan required that a trust ("Litigation Trust") be
established for the benefit of the holders of unsecured claims, including the
Noteholders, with a total funding of $350,000. The Litigation Trust is
authorized to pursue claims and causes of action of the Fund Subsidiaries and
of certain participating Noteholders. Proceeds will be distributed pro rata to
unsecured claim holders. The Litigation Trust cannot pursue any causes of
action during the first year following the Effective Date where tolling
agreements have been executed. The Litigation Trust will automatically
terminate if Search's Common Stock trades at an average price of $2.50 per
share for 30 consecutive trading days during the first year following
effectiveness of the Joint Plan.

         On the Effective Date, the net assets of the Fund Subsidiaries were
transferred to Search, and the Fund Subsidiaries are to be liquidated and
dissolved as soon as possible thereafter. The Notes and the indebtedness
represented by the Notes were deemed canceled when the Confirmation Order
became final. The trust indentures for the Notes, and all related restrictions,
were also deemed canceled. As a result of the implementation of the Joint Plan
and the cancellation of the Notes, a net extraordinary gain from the
extinguishment of debt was reported in the amount of $8,709,000 (See Note 5).

         The Joint Plan provided that the Board of Directors of Search select
two additional directors from qualified director nominees submitted by the
official Creditors Committee for the Debtors. These new directors have been
selected by the Board, but pursuant to their request, will not be appointed as
directors until Search obtains directors and officers liability insurance
coverage, which Search is pursuing. The duration of the term of one of the new


                                      F-9


<PAGE>   30
directors will be three years, and the duration of the term of the other new
director will be two years. These two new members will also be appointed to
membership on the Compensation Committee of the Board for the one year period
immediately following the Effective Date.

3.       PRO FORMA INFORMATION AND TRANSACTIONS WITH HALL AND AFFILIATES

         The consolidated pro forma balance sheet as of March 31,1996, contains
the accounts of the Company, after elimination of all significant intercompany
accounts and transactions after giving effect to the following significant
events. Subsequent to March 31, 1996, Search consummated certain of the Hall
Financial Group (HFG) transactions as described below. The transactions are
included in the pro forma balance sheet of the Company as if the transactions
were effective March 31, 1996.

          On November 30, 1995, Search entered into a Funding Agreement
("Funding Agreement") with HFG. Pursuant to the Funding Agreement, HFG made
loans totaling $2,283,000 ("HFG Notes") to Search. The HFG Notes could, at the
election of HFG or its assigns, be converted into a maximum 2,500,000 shares of
Search common stock. Effective April 2, 1996, HPIL, as assignee from HFG of the
HFG Notes, fully exercised the rights of the holder of the HFG Notes to convert
the Notes into 2,500,000 shares of Search common stock. Because the conversion
price specified in the HFG Notes for these shares was less than the full amount
due HFG, Search paid to HPIL the remaining portion of the debt evidenced by the
HFG Notes ($567,000) in cash.

         The Funding Agreement also provided to HFG the option to purchase
common stock, 9%/7% preferred stock, and warrants Effective April 2, 1996,
HPIL, as assignee of HFG, fully exercised this purchase option by paying
$4,346,000 cash to Search for which Search issued 1,638,400 shares of common
stock and 2,032,800 shares of 9%/7% preferred stock, and warrants to purchase
676,000 shares of common stock to HPIL.

         Pursuant to the Funding Agreement, HFG was entitled to elect one
director to Search's Board if HFG converted the HFG Notes into common stock and
to elect another director if HFG purchased at least $1,000,000 Present Value of
securities from Search. These new directors, pursuant to their request, will be
appointed as directors when Search obtains directors and officers liability
insurance, which Search is pursuing. As a result of satisfaction of these
conditions, HFG has designated two HFG officers as its representatives for
appointment to Search's Board.

4.       CONTRACTS RECEIVABLE, ALLOWANCE FOR CREDIT LOSSES AND INTEREST INCOME

         Through the third quarter of fiscal 1994, the Company recorded
interest revenue and allowance for credit losses based on AICPA Practice
Bulletin 6, "Amortization of Discounts on Certain Acquired Loans," ("PB6").
Under PB6, the Company recorded an allowance for credit losses upon acquisition
of the installment loans ("receivables") in an amount equal to the difference
between the contractual payments due and the estimated undiscounted future cash
collections. The difference between the undiscounted future cash collections
and the acquisition amount of the receivables was amortized to interest revenue
over the period in which payments on the receivables were expected to be
collected. Under PB6, if the estimate of the total probable collections was
increased or decreased but still greater than the sum of the acquisition amount
less collections plus the discount amortized to date, the remaining amount of
the discount to be amortized to interest income was adjusted and amortized over
the remaining life of the receivables. Accordingly, changes in estimates of
future cash collections were recognized through prospective yield adjustments.

         In the fourth quarter of fiscal 1994, the Company elected early
adoption of Statements of Financial Accounting Standards Nos. 114 and 118
("SFAS 114"), which address the accounting by creditors for impairment of a
loan and related income recognition and disclosures. In accordance with SFAS
No. 114, receivables are analyzed on a loan-by-loan basis. The Company evaluates
the impairment of receivables generally based on the receivables' contractual 
delinquency. The Company considers receivables that are contractually
delinquent 60 days or more or with respect to which the underlying collateral
has been repossessed to be impaired. When the receivable is considered
impaired, interest income ceases to be recognized. Once impaired, the Company
looks to the underlying collateral for repayment of the receivable. Therefore,
at impairment, the Company writes down the receivable to its estimated net
realizable value, which is the fair value of the underlying collateral if it
has been repossessed or the estimated recoverable cash flow if no repossession
has occurred. If the new recorded amount of the receivable is less than the
Company's net recorded investment in the receivable, the Company recognizes a
charge to provision for credit losses in the amount of the deficiency and
increases the allowance for credit losses by a corresponding amount. The
provision for credit losses is adjusted for any differences between the final
net proceeds from resale of the underlying collateral and the estimated net
realizable value. Generally, the Company charges off a receivable against the
allowance for credit losses at 180 days contractual delinquency, if no
significant payments have been received in the last six  months, or, if
earlier, after receipt of the sale proceeds from liquidation of the collateral
securing the receivable. Subsequent proceeds received on a previously
charged-off receivable are recorded as a recovery to the allowance for credit
losses. Any excess of cost paid ("premium") for net receivables acquired is
recorded as an asset and amortized over the life of the related loans acquired
as an adjustment to yield using the interest method.


                                     F-10


<PAGE>   31
         The Company records receivable purchases at cost. Contractual finance
charges are recorded as unearned interest and amortized to interest income
using the interest method. As noted above, amortization of interest income
ceases upon impairment. An initial allowance for credit losses is recorded at
the acquisition of a receivable equal to the unearned discount, which is the
difference between the amount financed and the acquisition cost.

         The recorded investment and related allowance for credit losses,
excluding net loan origination costs, are summarized below on a consolidated
basis:


<TABLE>
<CAPTION>
                                                                                             Net
                                                                          Allowance      Receivables
                                            Total                            for           After
(Dollars in thousands)       Number of     Unpaid          Unearned         Credit      Allowance for
As of March 31, 1996        Receivables   Installments     Interest         Losses      Credit Losses
---------------------       -----------   ------------     --------         ------      -------------
<S>                         <C>            <C>             <C>              <C>          <C>       
Impaired receivables            421         $ 2,091          $   380        $ 1,711             --   
Unimpaired receivables        7,575          34,995            6,055         11,642         17,298   
                             ------         -------          -------        -------        -------   
   Total                      7,996         $37,086          $ 6,435        $13,353        $17,298   
                             ======         =======          =======        =======        =======   
                                                                                                     
                                                                                                     
As of September 30, 1995
------------------------                                                     
Impaired receivables          2,323         $12,919          $ 1,644        $11,275             --   
Unimpaired receivables        9,805          53,758           11,462          7,348         34,948   
                             ------         -------          -------        -------        -------   
   Total                     12,128         $66,677          $13,106        $18,623        $34,948   
                             ======         =======          =======        =======        =======  
</TABLE>

         The change in the allowance for credit losses is summarized as follows
on a consolidated basis:


<TABLE>
<CAPTION>
                                                     March 31,    September 30,       September 30 
(Dollars in thousands)                                 1996           1995                1994     
                                                    ----------    -------------       ------------ 
<S>                                                 <C>            <C>                 <C>         
Balance, beginning of period                        $ 18,623       $ 44,633            $  4,656    
Allowance recorded upon purchase of receivables        2,194          9,613              37,727    
Increase in allowance for credit losses                4,982          3,169              20,180    
Receivables charged off against allowance            (14,742)       (38,792)            (17,930)   
Recovery of prior credit losses                        2,296             --                  --    
                                                    --------       --------            --------    
Balance, end of period                              $ 13,353       $ 18,623            $ 44,630    
                                                    ========       ========            ========    
Net credit losses as a percent of average net                                                      
  receivables                                             36%            56%                 26%   
</TABLE>


                                     F-11

<PAGE>   32


         The effect of non-accrual receivables on interest income for each of
the three periods presented was:

<TABLE>
<S>                                                                 <C>               <C>                 <C>    
Interest income
  As originally contracted                                          $ 1,480           $ 4,522             $ 5,520
  As recognized                                                         (98)           (1,033)             (1,922)
                                                                    -------           -------             -------
    Reduction of interest income                                    $ 1,382           $ 3,489             $ 3,598
                                                                    =======           =======             =======
</TABLE>
 
         There were no commitments to lend additional funds to customers whose
loans were classified as non-accrual as of March 31, 1996,  September 30, 1995
or September 30, 1994.

      At March 31, 1996, contractual maturities of receivables were as follows:

<TABLE>
<CAPTION>
(Dollars in thousands)          1997        1998        1999       Total
                               -------     -------     ------     -------
<S>                            <C>         <C>         <C>        <C>    
Future payments receivable     $23,445     $11,507     $2,134     $37,086
Less unearned interest           4,886       1,450         99       6,435
                               -------     -------     ------     -------
Net contracts receivable       $18,559     $10,057     $2,035     $30,651
                               =======     =======     ======     =======
</TABLE>

         In the opinion of management, a portion of the receivables will be
repaid or extended either before or past the contractual maturity date. In
addition, some receivables will default before maturity. The above tabulation,
therefore, is not to be regarded as a forecast of future cash collections.

         The Company's receivables are all secured by motor vehicles, have
fixed annual percentage rates ("APR"), and are generally installment
receivables owed by individuals. As of March 31, 1996, the Company had no other
loan types. The obligors are domestically-based at the time a receivable is
purchased by the Company from a dealer. The Company has no material amounts of
foreign receivables.

         Receivables will become nonaccrual status due to their contractual
delinquency exceeding 60 days or due to repossession of underlying collateral.
The Company also considers certain delinquent receivables that are in the
contractual status of less than 60 days past due to be potential problem
receivables based on collections. Uncertainty as to overall economic
conditions, regional considerations, and current trends in portfolio growth
cause the Company to review these receivables for potential problems.

         The Company considers Texas and Tennessee to be states with receivable
concentrations because receivables with obligors in each of these states exceed
10% of total outstanding receivables.

         Through the use of its Auto Notes Management System, management is
able to evaluate the loan impairment of the receivables on a loan-by-loan
basis.

         Prior to adoption of SFAS 114, the Company, as more fully explained
below, only recognized credit losses when the aggregate of undiscounted
expected future cash flows of a pool of receivables did not exceed the carrying
amount of the respective pool. In 1994, credit losses of $5,259,000, which
represented the excess of the carrying amount of the respective pools over the
undiscounted expected future cash flows of the respective pools, would have
been recorded notwithstanding the adoption of SFAS 114.

         In accordance with the adoption of SFAS 114, the portion of the
increase in allowance for credit losses (applicable to the $14,921,000 recorded
to reduce impaired receivables to the fair value of their underlying
collateral), some of which, if any, is attributable to prior years, was
included in current operations of the year of adoption (fiscal 1994) and no
cumulative effect is shown on the statement of operations.

         The following table, containing unaudited PB6 estimates that the
Company believes to be reasonably accurate, compares the provision for credit
losses and reduction in interest income under PB6 and under SFAS 114 for fiscal
year 1994:


                                     F-12



<PAGE>   33

<TABLE>
<CAPTION>

                                                              
                                                                      Year Ended
(Dollars in thousands)                                            September 30, 1994
                                                                  ------------------
<S>                                                               <C>    
Provision for credit losses                                           $20,180

PB6:
    Interest revenue reduction                      $ 4,413
    Provision for credit losses                         846             5,259 
                                                    -------           ------- 
Increases in losses due to adoption of SFAS 114                       $14,921 
                                                                      ======= 
</TABLE>

         Under SFAS 114, the impairment of a receivable in excess of any
existing reserve is charged to the provision for credit losses in the current
period. Therefore, when measuring the provision for credit losses, the primary
difference is the prospective treatment of impairment under PB6 as compared to
the current treatment under SFAS 114. SFAS 114 recognizes all of the impairment
in the current period instead of adjusting the amortization of the remaining
unearned interest and discount over the remaining life of the receivable.

         Under PB6, when the total probable collections for a receivable is
greater than the net investment, any adjustment to the estimated undiscounted
collections is a reduction to unearned interest and discount, with the
remaining unearned interest and discount being amortized over the remaining
life of the receivable, reducing the future yield of the loan. Therefore, under
PB6 credit losses are only recorded when the future expected yield of the
receivable portfolio has been reduced to zero and the net investment is greater
than the undiscounted probable collection.

         Management elected early adoption of SFAS 114 in fiscal 1994 because
the measurement of credit losses provided by this statement is considered
preferable.

         Most of the Company's receivables are due from individuals located in
large metropolitan areas of Texas and other southern and western states. To
some extent, realization of the receivables will be dependent on local economic
conditions. The Company holds vehicle titles as collateral for all receivables
until such receivables are paid in full.


5.       NOTES PAYABLE AND ACCRUED INTEREST

         Notes payable of the Fund Subsidiaries at September 30, 1995 and prior
to the final confirmation of the Joint Plan of Reorganization, March 15, 1996
(see Note 2), consisted of the following:


                                     F-13


<PAGE>   34
<TABLE>
<S>                                                                                    <C>
Notes payable by ACF 91-III, bearing interest at 21%, required monthly interest
payments at 15% through March 31, 1995, at which time principal and the
remaining deferred interest accrued at 6% was due - in default at maturity date.      $   590,000

Notes payable by ACP, bearing interest at 21%, required monthly interest
payments of 15% through April 30, 1995 at which time principal and the
remaining deferred interest accrued at 6% was due in default at maturity date.
                                                                                          610,000

Notes payable by ACF, bearing interest at 18%, required monthly interest
payments at 15% through December 31, 1994, at which time principal and the
remaining deferred interest accrued at 3% was due - in default at maturity
date.                                                                                   1,506,000

Notes payable by ACF 92-II, bearing interest at 15% due monthly, required
payment of principal in full on December 31, 1995.                                     10,000,000

Notes payable by ACF III, bearing interest at 15% due monthly, required payment
of principal in full on April 30, 1996.                                                15,000,000

Notes payable by ACF IV, bearing interest at 3% until October 15, 1993 and 14%
thereafter due monthly, required payment of principal quarterly from September
30, 1995 to December 31, 1996.                                                         10,000,000

Notes payable by ACF V, bearing interest at 12% due monthly, required payment of
principal quarterly from October 1, 1996 to December 31, 1997.                         19,872,000

Notes payable by ACF VI, bearing interest at 12% due monthly, required payment
of principal quarterly from July 1, 1997 to June 30, 1998.                             10,675,000
                                                                                      -----------

Total notes payable                                                                    68,253,000
Accrued Interest - prepetition                                                          1,067,000
                                                                                      -----------

Total notes payable and accrued interest                                              $69,320,000
                                                                                      ===========

</TABLE>

         As a result of the confirmation of the Joint Plan, the above debt and
accrued interest was ultimately extinguished in exchange for common stock,
9%/7% preferred stock, warrants and other provisions of the Joint Plan. The
extinguishment of debt resulted in a net extraordinary gain of $8,677,000. The
following table shows the components of the gain:

         Calculation of net extraordinary gain on debt extinguishment

<TABLE>
<S>                                   <C>
Total Notes and accrued interest     $ 69,320,000
Value of exchange                     (56,367,000)
Administrative claims                  (2,400,000)
Unamortized debt offering costs        (1,844,000)
                                     ------------
Net gain of debt extinguishment      $  8,709,000
                                     ============
</TABLE>

         As of their maturity ACF, ACF 91-III and ACP stopped accruing interest
on the remaining unpaid principal. As these Fund Subsidiaries defaulted, it was
management's position that the accrual of interest was not warranted since each
Fund Subsidiary did not have sufficient assets to fully retire the principal
portion of the Notes.

         The August 14, 1995 bankruptcy filing of the individual Fund
Subsidiaries was an event of default for each of the Fund Subsidiaries under
the terms of their respective indenture agreements. In accordance with SOP
90-7, contractual interest obligations, which are relieved from payment as a
result of the Chapter 11 proceedings, are not accrued; therefore, no interest
expense was recorded for the six months ended March 31, 1996. For the year
ended September 30, 1995, contractual interest on the above obligations
amounted to $12,453,000 which was $1,500,000 in excess of reported interest
expense. See Note 2.


                                     F-14



<PAGE>   35

6.       LINE OF CREDIT

         On June 17, 1994, SFC entered into an agreement for a line of credit
with General Electric Capital Corporation ("GECC"). The line of credit
initially had a maximum borrowing commitment of $20,000,000 and was limited to
a percentage of eligible contracts held by SFC. The line of credit was secured
by all SFC assets and was guaranteed by Search.

         In January 1995, SFC signed an agreement with GECC to revise the
existing restrictive covenants and to eliminate any future advances under the
line of credit. On March 22, 1995, GECC advised Search that it and SFC were in
default of various provisions of the original loan agreement and the January
1995 agreement. As a result of these defaults, GECC declared the outstanding
balance, as of that date, due and payable. Search, SFC and GECC established a
pay-out plan which required a minimum payment of $500,000 per quarter. As of
September 30, 1995, the line had a balance of $1,058,000.

         The Joint Plan called for Search to fully satisfy its obligation to
GECC. As a result, on March 18, 1996, Search paid GECC $173,000 which included
all principal and interest owing as of that date. This payment fully satisfied
Search's obligation to GECC.


7.       EMPLOYEE STOCK OWNERSHIP PLAN

         Effective August 1, 1994, the Board of Directors terminated the
employee stock ownership plan ("ESOP"). As part of the termination, Search
reacquired from the ESOP 306,152 shares of Search common stock at $3.50 per
share in exchange for the balance of the note receivable plus accrued interest,
totaling $1,183,000. The reacquired shares were canceled on September 29, 1994,
and the remaining 178,848 shares were allocated to participating employees.


8.       STOCKHOLDERS' EQUITY

         12% Senior Convertible Preferred Stock. As of March 31, 1996, Search
had issued 400,000 shares of its 12% preferred stock. The 12% preferred shares
have a $.01 par value and have voting rights and a liquidation preference of
$5.00 per share plus accrued and unpaid dividends. The 12% preferred shares are
convertible into one share of Search's $.01 common stock for each share of 12%
preferred at the option of the shareholder. The shares carry a cumulative
annual dividend of $0.60 per share, payable quarterly. Search may convert the
shares to common stock or may redeem the shares at $5.00 per share upon the
occurrence of certain events defined in the terms of the 12% preferred
Certificate of Designation.


         9%/7% Convertible Preferred Stock. On March 1, 1996, the Board of
Directors established a new series of preferred stock, 9%/7% preferred stock,
for the purpose of effecting the Joint Plan. As of March 31, 1996, Search had
issued in connection with the Joint Plan, or committed to issue, 15,031,648
shares of its 9%/7% preferred. During April 1996, Search issued an additional
2,032,800 shares of 9%/7% preferred stock in connection with the HFG
transaction, reflected in the pro forma consolidated balance sheet as of March
31, 1996. See Note 3. The 9%/7% preferred shares, which are essentially pari
passu to the existing 12% preferred stock, have a $.01 par value and have
voting rights and a liquidation preference of $3.50 per share plus all accrued
and unpaid dividends. The shares carry a non-cumulative dividend rate of $.315
per share until the end of the twelfth full calendar quarter following payment
of the first dividend (9% End Date) and $.245 per share after the 9% End Date.
The 9%/7% preferred shares are convertible at any time into common stock in the
ratio of two shares of common stock for each share of 9%/7% preferred.
Conversion may occur upon the occurrence of certain events as defined in the
Certificate of Designation (see Note 2).

         Common stock. On March 1, 1996, the stockholders approved an amendment
to Search's Certificate of Incorporation to increase the number of authorized
shares of $.01 par value common stock to 130,000,000 for the purpose of
effecting the Joint Plan. As of March 31, 1996, Search had issued or committed
to issue a total of



                                     F-15



<PAGE>   36


25,875,219 shares of its common stock. Of this amount, 12,115,001 shares were
issued in connection with the Joint Plan (see Note 2), 2,500,000 in connection
with the HFG conversion, 1,638,400 shares in connection with the HFG purchase
(see Note 3) and 1,848,000 shares for the settlement of the class action
lawsuit (see Note 14).

         Warrants.  During the six months ended March 31, 1996,  35,840 warrants
were exercised at an average price of $0.335 per share.  In February 1994,
25,000 warrants were exercised at a price of $0.375 per share.

         On March 1, 1996, the Board of Directors authorized Search to issue a
new class of warrants to purchase up to 5,676,178 shares of Common Stock, for
the purpose of effecting the Joint Plan. These warrants are governed by a
warrant agreement dated as of March 22, 1996. Warrants to purchase 5,000,000
shares are to be issued to noteholders and other unsecured claim holders under
the Joint Plan, and warrants to purchase 676,178 shares of Common Stock have
been issued to HPIL, as assignee of HFG, pursuant to the Funding Agreement (see
Note 3).

         The exercise price per share of these warrants is initially $2.00 and
increases by $.25 on March 15 of each successive year. These warrants will
expire on March 14, 2001, at which time Search must redeem all remaining
unexercised warrants at a redemption price of $0.25 per warrant. These warrants
are considered "put" warrants and, accordingly, have been classified outside of
permanent equity as debt at fair value. An accretion to the redemption amount
of $1,419,000 will be made over the term of five years and recorded as interest
expense using the interest method.

         Common Stock Warrants and Employee Stock Options. On August 1, 1994,
the Board of Directors adopted, subject to stockholder approval, the 1994
Employee Stock Option Plan (the "Plan"). The Plan was approved by Search's
stockholders at their annual meeting held in May 1995. Employees of the Company
or directors of subsidiaries are eligible to participate in the Plan. As of
March 31, 1996, approximately 100 persons were eligible to participate. The
Plan expires on July 31, 2004, although any option outstanding on such date
will remain outstanding until it either has expired or has been fully
exercised. The Plan is administered by the Compensation Committee of the Board.
Options granted under the Plan are not otherwise transferable other than by
will or by the laws of descent and distribution. Options are forfeited
immediately after an optionee's employment is terminated for cause or 30 days
after the optionee's mental or physical disability. The options usually vest
over a three year period. A total of 1,750,000 shares of common stock has been
reserved for sale upon exercise of options granted under the Plan. As of March
31, 1996, there were 2,581,500 outstanding options and/or warrants of which
1,500,000 can be exercised as either options or warrants at the employee's
election. Certain options issued during the year ended September 30, 1995, were
repriced to reflect the current market prices at that time.

         During the six months ended March 31, 1996, Search issued 253,000
options to employees and 436,000  warrants under the plan. All were issued at 
the market price existing at that time.

         In October 1994, 100,000 options were issued to an officer of Search
and in January 1995, 500,000 and 25,000 were issued respectively to two
officers of Search. In January 1995, an additional 285,500 options were issued
to employees. In August and September 1994, an additional 29,000 options were
issued to employees. All were issued at the market price existing at that time.

         In August 1994, 2 officers and 5 employees agreed, subject to
shareholder approval of the Plan, to the cancellation of their warrants in
exchange for options under the Plan at the then current market price of $4.25.
The canceled warrants consisted of 220,000 at $3.00 per share issued in April
1993, 70,000 at $8.75 per share issued in December 1993, and 35,000 at $14.75
per share issued in June 1994.

         Recent Accounting Pronouncement. The Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," ("FAS 123") was issued in October
1995 to establish accounting and reporting standards for stock-based employee
compensation plans such as stock option and restricted stock plans. FAS 123
defines a fair value based method of accounting for measuring compensation
expense for stock-based plans and encourages all entities to adopt that method
of accounting. However, FAS 123 also permits entities to continue to measure
compensation expense for stock-based plans using the intrinsic value based
method prescribed by APB Opinion No. 25, "Accounting for Stock Issued to
Employees." Entities electing 



                                     F-16



<PAGE>   37

to remain with the intrinsic value based method must make pro forma disclosures
of net income and earnings per share as if the fair value based method defined
by FAS 123 was applied.

         Under the fair value based method, compensation expense would be
measured as the value of an award under a stock-based plan on the date the
award is granted and would be recognized over the vesting period of the award.
Under the intrinsic value based method, compensation expense is measured as the
excess, if any, of the market price of the stock underlying the award on the
date the award is granted, over the exercise price. Under Search's Plan, awards
have no intrinsic value on the date of the grant as the exercise price equals
the market price on that date. Currently, the Company does not expect to adopt
the FAS 123 fair value based method of accounting for its plan, but intends to
provide the required pro forma disclosures in the March 31, 1997 financial
statements.


9.       STOCK CANCELLATION AND STOCK PURCHASE AGREEMENT

         On May 5, 1995, Search purchased from a director of Search 500,000
shares of Search's $.01 par value common stock for $2.25 per share. The
purchase was recorded at cost and is reflected as treasury stock.
Simultaneously with the purchase, the director resigned from the Board. Search
was also given an irrevocable proxy expiring May 5, 1997 to vote the remaining
approximately 800,000 shares of stock held by a trust formed by the former
director. These remaining shares held by the trust may be "put" back to the
Company at the expiration date for $2.25 per share, which was the market value
at the date of the agreement. These shares are shown outside of permanent 
equity on the face of the balance sheet at the redemption price. If these
redeemable shares were excluded from net loss per share, the fiscal 1996 and
1995 loss per share would be $(.31) and $(2.47), respectively.

         On July 20, 1994, certain stockholders voluntarily canceled 2,946,988
shares of common stock and warrants to purchase 390,654 shares of common stock.
Had these shares and warrants been canceled at the beginning of the fiscal year
ended September 30, 1994, the common shares outstanding and net loss per share
would have been $(2.95) on a weighted average number of common shares and
equivalents outstanding of 8,893,000 shares.


10.      RELATED PARTY TRANSACTIONS

         During the six months ended March 31, 1996 and the year ended
September 30, 1994, the Company paid or accrued approximately $25,000 and
$156,000, respectively for fees related to the Note offerings described in
Notes 4 and 5 and the class action settlement noted in Note 14 to an individual
who owned a minority interest in ACAC and two of the Fund Subsidiaries until
June 1992, and was a director of Search for a period of time in 1992 and 1993.

         During the year ended September 30, 1994, Search engaged Brean Murray,
Foster Securities Inc. ("BMFS") to serve as underwriter for Search's public
offering of common stock, and co-managing broker-dealer, together with another
independent broker-dealer, for the public offering of asset-backed debt
securities offered in 1994, by Search's subsidiaries, Automobile Credit Finance
V, Inc. and Automobile Credit Finance VI, Inc. Search paid BMFS $1,987,000 in
connection with the common stock offering and $766,000 in connection with the
public offerings of asset-backed debt securities. Also in connection with its
services as underwriter of the common stock offering, BMFS was issued warrants
to purchase 240,000 shares of common stock exercisable for a period of 5 years
at a price of $9.60 per share. BMFS, simultaneously with its receipt of the
warrants, assigned warrants to purchase 113,558 shares to Mr. A. Brean Murray.
Mr. Murray is a director of Search and Chairman of BMFS. On March 25, 1996,
subsequent to confirmation of the Joint Plan discussed in Note 2, BMFS received
a $200,000 success fee from Search.

         Additional related party transactions are described in Notes 7, 8 and
9.



                                     F-17


<PAGE>   38


11.      INCOME TAXES

         The Company files a consolidated income tax return. The components of
the Company's net deferred tax asset as of March 31, 1996 and September 30,
1995 are as follows:


<TABLE>
<CAPTION>
                                       March 31,       September 30,       September 30,
                                         1996               1995               1994
                                      ------------     -------------      --------------
<S>                                     <C>               <C>              <C>      
Deferred tax asset:
Allowance for credit losses &
   inventory reserve                  $  1,260,000      $    800,000      $  1,500,000
Net operating loss carry-forwards       13,000,000        15,400,000         8,900,000
Other tax credit carry-forwards             90,000            90,000            90,000
Accrued settlement costs                   170,000
Valuation allowance                    (14,520,000)      (16,290,000)      (10,490,000)
                                      ------------      ------------      ------------ 
   Total deferred tax asset                     --                --                --
                                      ------------      ------------      ------------
</TABLE>

         At March 31, 1996, the Company's consolidated tax return group has a
net operating loss carryforward for Federal income tax purposes of
approximately $44,100,000 which will expire, if unused, in the following years:

<TABLE>
<CAPTION>
                Years of Expiration               Amount
                -------------------             ----------- 
                 <S>                            <C>         
                  1998 to 2008                  $  4,400,000
                      2009                        27,200,000
                      2010                        12,500,000
                                                ------------
                     Total                       $44,100,000
                                                ============
</TABLE>

         Following the acquisition of the minority interest in ACHI on June 30,
1993 (see Note 3), the Company's tax consolidated group had a change in
ownership as defined under Section 382 of the Internal Revenue Code, which will
limit the utilization of the net operating loss to approximately $1,000,000 per
year on those NOL losses incurred prior to 1994.

         The debt to equity conversion as outlined in the Joint Plan of
Reorganization resulted in approximately $8,709,000 of debt discharge income.
Additionally, this debt to equity conversion resulted in an ownership change as
defined under Section 382 of the Internal Revenue Code. This will result in a
limitation on the utilization of the net operating losses incurred prior to the
debt-to-equity conversion.


12.      COMMITMENTS

         On October 28, 1992, ACAC entered into a sixty month lease for office
facilities with a basic monthly rental obligation of $13,450. This lease was
modified in 1994 to expand the office facilities from approximately 16,000
square feet to approximately 23,000 square feet at a revised monthly rental
obligation of $22,057. Rental expense for the six months ended March 31, 1996
and the years ended September 30, 1995, and 1994, was approximately $132,000,
$265,000 and $212,000, respectively.

         The Company opened four remote collection facilities during fiscal
1995. These leases expire through 1999. Lease expense for the six months ended
March 31, 1996 and fiscal 1995 was $34,000 and $20,000, respectively.

         On April 1, 1996, the Company signed a lease for an additional 6,000
square feet of office space located in Dallas, Texas. The Company plans to move
a portion of its existing operations into the facility on July 1, 1996, the
lease commitment date. The lease has a term of sixty six months and an
approximate monthly rental of $5,300. The lease commitments for this lease are
included below in the operating lease commitment schedule.



                                     F-18


<PAGE>   39


Operating lease commitments by the Company are as follows:

<TABLE>
<CAPTION>
                                                  Year Ending March 31,
                            ----------------------------------------------------------
                              1997         1998         1999         2000        2001
                            --------     --------     --------     -------     -------
<S>                         <C>          <C>          <C>          <C>         <C>    
Office leases               $377,000     $300,000     $ 96,000     $82,000     $73,000
Office equipment leases       62,000       31,000        7,000          --          --
                            --------     --------     --------     -------     -------
Total operating leases      $439,000     $331,000     $103,000     $82,000     $73,000
                            ========     ========     ========     =======     =======
</TABLE>

         In addition to the operating leases, the Company has one capitalized
lease with payments of $81,000 per year through 1998 and $67,000 in 1999.


13.      CHANGE IN FISCAL YEAR

         In 1996, the Company changed its fiscal year end to March 31. The
following table reflects the unaudited comparable period of fiscal 1995 (in
thousands except per share data):

<TABLE>
<CAPTION>


                                                      Six months ended
                                                       March 31, 1995
                                                      ----------------
<S>                                                    <C>        
Interest revenue                                        $ 8,694       
Interest expense                                          6,437       
                                                        -------       
Net interest income                                       2,257       
Provision for credit losses                               5,337       
                                                        -------       
Net interest loss after provision for credit losses       3,080       
Operating expenses                                        7,221       
                                                        -------

Net loss                                                 10,301
Preferred stock dividends                                   120
                                                        -------
Net loss attributable to common shareholders            $10,421
                                                        =======

Net loss per common share                                  1.12
                                                        =======
Weighted average number of common shares                  9,296
                                                        =======
</TABLE>

The adjustments to the March 31, 1995 interim financial statement consist of
only normal recurring adjustments.


14.      SETTLEMENT OF O'SHEA CLASS ACTION LAWSUIT

         On July 7, 1994, a class action civil lawsuit was filed against
Search, certain of its officers and directors, one of its former accounting 
firms and the lead underwriter and one of its principals involved in the
issuance of Search's common stock.  This action was filed in the United States 
District Court for the Northern District of Texas, Dallas Division, and was
styled Ellen O'Shea, et al v. Search Capital Group, Inc., et al. Civil Action
No. 3:94-CV-1428-J.  On July 11, 1994, and on July 13, 1994, similar actions
in John R. Boyd, Jr., et al. v. Search Capital Group, Inc., et al., Civil
Action No. 3:94-CV-1452-J; and Gary Odom v. Search Capital Group, Inc., et al,.
Civil Action No. 3:94-CV-1494-J, respectively, were also filed.  The above
cases were consolidated in September 1994 under Civil Action No. 3:94-CV-1428-J
(the "O'Shea Class Action Suit").

         The O'Shea Class Action Suit was filed on behalf of all purchasers of
Search's common stock during the period beginning December 10, 1993 and ending
through July 5, 1994, which was the date that Search made a public announcement
regarding lower earnings. The O'Shea Class Action Suit contended that Search
made misstatements in its registration statements concerning the Company's
computerized system, accounting methodologies used by the Company,
collectibility of its receivables and repossession rates of autos that secured
its receivables. The plaintiffs also complained of allegedly false public
filings, press releases and reports issued during


                                     F-19



<PAGE>   40

1994. The plaintiffs sought damages, rescission, punitive damages, pre-judgment
interest, fees, costs, equitable relief and or injunctive relief and such other
relief as the court deemed just and proper.

         On April 26, 1996, the court entered a Final Judgment and Order of
Dismissal approving a settlement (the "Settlement") entered into between Search
and counsel for the plaintiffs. This Settlement was initially filed with the
court on August 4, 1995, and an amended version of the Settlement was filed on
November 13, 1995. The Settlement provided for a cash payment by Search of
$287,000 and the issuance by Search of its common stock with a value of
$2,613,000. As a result of the settlement Search issued 1,848,000 shares of its
common stock. The terms of the final settlement have been recorded in the
fiscal 1996 financial statements.


15.      LEGAL PROCEEDINGS

         In December 1993, ACAC was joined as a defendant in a pending civil
action filed in the 153rd Judicial District Court, Tarrant County, Texas,
styled Autostar Solutions, Inc. v. Tim Clothier and Automobile Credit
Acceptance Corp., Cause No. 153-144940. The plaintiff in this action alleges
the existence of a partnership between the plaintiff and another defendant and
seeks damages, actual and exemplary, and an injunction for alleged conversion
and misappropriation of certain property, including computer programs,
allegedly owned by the plaintiff. In the petition, the plaintiff alleges that
ACAC wrongfully assisted its co-defendant and tortiously interfered with the
plaintiff's contracts and business and has claimed, as damages, $750,000. ACAC
believes that these allegations are without merit and has filed a general
denial and has a pending motion for partial summary judgment. Discovery in the
case is still ongoing and no opinion can be given as to the final outcome of
the lawsuit.

         On August 14, 1995, the Fund Subsidiaries filed a petition in the U.S.
Bankruptcy Court in the Northern District of Texas, Dallas Division, seeking
protection under Chapter 11 of the U.S. Bankruptcy Code (see Note 2). These
cases were consolidated for joint administration under Case No.
395-34981-RCM-11. On March 4, 1996, the Court entered the Confirmation Order
confirming the Joint Plan for all of the Fund Subsidiaries. The Joint Plan was
effective March 15, 1996.

         On January 9, 1996, Search received notice from plaintiffs that a suit
had been filed on December 21, 1995 against Search, certain of its former
officers and directors, and certain underwriters of three of the Fund
Subsidiaries. The case is styled Janice and Warren Bowe, et. al. vs. Search
Capital Group, Inc., et. al., Cause No. 1:95CV 649GR, and was filed in the
Federal District Court for the Southern District of Mississippi. The case was
reassigned under Cause No 1:95CSV649BR upon recusal of the judge originally
assigned to this case because of his relationship with certain defendants. The
plaintiffs allege violations of the securities laws by the defendants and seeks
unspecified damages, rescission, punitive damages and other relief. The
plaintiffs also seek establishment of a class of plaintiffs consisting of all
persons who have purchased Notes issued by three of the Fund Subsidiaries.
Although no assurances can be given, the Company believes it has meritorious
defenses to this action and will defend itself vigorously. While the ultimate
outcome of this litigation cannot be determined, management estimates that the
total expenses and losses from the litigation will be at least $500,000, and,
accordingly, management has established a reserve of $500,000 for this
litigation.

         There are presently no other legal proceedings, threatened or pending,
relating to the Company which would, in the opinion of management, have a
material impact on earnings or the financial condition of the Company.




                                     F-20

<PAGE>   41



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

         Pursuant to Instruction 1 of Regulation S-K, Item 304, no disclosure
is required under this item because of prior reports filed with the Securities
and Exchange Commission on forms 8-K.


                                      20

<PAGE>   42
\


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

         The following table sets forth the name and age of the directors, the
year of the annual meeting of shareholders at which each director's term will
expire and the year of his initial election or appointment as a director.

<TABLE>
<CAPTION>
                                                                                                     SHAREHOLDERS ANNUAL
                                           POSITION                               DIRECTOR            MEETING AT WHICH
       NAME                                   HELD                    AGE            SINCE             TERM WILL EXPIRE
---------------------            -----------------------------       ---          --------           -----------------
<S>                                       <C>                        <C>            <C>                     <C> 
Richard F. Bonini                Director (1)                        57             1995                    1999
Luther H. Hodges, Jr.            Director (2)                        59             1995                    1999
George C. Evans                  President, Chairman and             61             1995                    1998
                                 Chief Executive Officer (3)                                                    
A. Brean Murray                  Director (4)                        59             1993                    1998
William H. T. Bush               Director (5)                        57             1995                    1997
James F. Leary                   Director and Vice                   66             1995                    1997
                                 Chairman - Finance (6)                                                         
</TABLE>

(1)      Serves as a member of the Executive and Compensation Committees of the
         Board of Directors.
(2)      Serves as Chairman of the Compensation Committee and a member of the 
         Audit Committee of the Board of Directors.
(3)      Serves as Chairman of the Executive Committee of the Board of 
         Directors.
(4)      Serves as a member of the Audit Committee of the Board of Directors.
(5)      Serves as Chairman of the Audit Committee and a member of the 
         Compensation Committee of the Board of Directors.
(6)      Serves as a member of the Executive Committee of the Board of 
         Directors.

         Each of the Directors of the Company is a united states citizen.
During the last five years, none of the Directors (i) has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors), or
(ii) was a party to a civil proceeding of a judicial or an administrative body
of competent jurisdiction that resulted in a final judgment, decree, or final
order enjoining further violations of, or prohibiting activity subject to,
federal or state securities laws or finding any violations of such laws.


Business Histories of Directors

         GEORGE C. EVANS, joined the Company as President, Chief Executive
Officer, and Director on January 20, 1995. On May 5, 1995, Mr. Evans became
Chairman of the Board of Directors and Chairman of the Executive Committee of
the Board of Directors. Mr. Evans has over 30 years of experience in the
consumer lending and financial services industry. During 1992 and 1993, Mr.
Evans was President and CEO of Century Acceptance Corporation, a 32-state
operation engaged in consumer and automobile financing. Previously, he served
as President and Chief Operating Officer of Associates Financial Services, Vice
Chairman of Associates Corporation of North America and as Chairman and CEO of
Associates International Subsidiaries, where his responsibilities included
6,000 employees, $3.5 Billion in receivables, with 1,100 branches and annual
earnings in the $100 million range. Prior to Associates, Mr. Evans was employed
by AVCO Financial Services where he rose from Branch Manager to Senior Vice
President.

         A. BREAN MURRAY, was elected a Director of the Company in December 
1993. Mr. Murray is Chairman of Brean Murray, Foster Securities, Inc., A
privately-held securities firm, and is also Chairman of its affiliate BMI
Capital Corporation, a registered investment advisor. He founded Brean Murray,
Foster Securities Inc. In 1973. Mr. Murray has been in the Securities Industry
since 1963 as a portfolio manager, director of institutional sales, director of
venture capital and corporate finance and chief executive officer. He is a
Director of First Caribbean Corporation, a mortgage banking company in Puerto
Rico. He is a co-founder and Chairman of JABRA Corporation, a private company
that sells hands-free auditory equipment.



                                      21


<PAGE>   43

         LUTHER H.  HODGES,  JR., was appointed a director of the Company in May
1995.  Mr. Hodges is currently president of the Caroline Co., an investment
partnership in Conway, South Carolina.  Mr. Hodges has previously held positions
as Chairman and CEO of Washington Bancorporation and The National Bank of
Washington, chairman of North Carolina National Bank (now known as NationsBank)
and was formerly Under Secretary of the U.S. Department of Commerce and Deputy
Secretary of Commerce.  Mr. Hodges currently serves on the boards of numerous
other organizations and corporations, including Phaseout of America.  In 1978,
he was a candidate for the United States Senate from North Carolina.

         JAMES F. LEARY, was appointed a director of the Company in May 1995
and was named Vice Chairman-Finance of the Company in September 1995. Mr. Leary
has also been an employee of the Company since September 1995. Mr. Leary was a
founder and partner in the Sunwestern Investment Group, an investment advisory
and venture capital management firm. He previously served as director, CFO and
Senior Executive Vice President for Associates Corporation of North America.
From 1964 through 1973 he held various positions at CIT Financial Corporation,
including Assistant Treasurer. Currently, he serves on the boards of several
corporations, including Phaseout of America, Associated Materials, Inc.,
Maxserv, Inc., and certain mutual funds managed by Capstone Asset Management.

         RICHARD F. BONINI, was appointed a director of the Company in May
1995. Mr. Bonini is currently a director, Senior Executive Vice President and
Secretary for First Financial Caribbean Corporation, a mortgage banking company
in Puerto Rico. He also serves as director for the Doral Federal Savings Bank
and the Doral Mortgage Corporation.

         WILLIAM H.T. BUSH, was appointed a director of the Company in
September 1995. He served as President of Boatman's National Bank of St. Louis
and as a member of its board of directors and the board of directors of its
parent holding Company, Boatmen's Bancshares, Inc. Until June 1986. In 1986,
Mr. Bush founded the Financial Advisory Firm of Bush-O'Donnell & Company,
specializing in investment management and financial advisory services. He also
serves on the boards of directors of Mississippi Valley Bankshares, Inc.,
INTRAV, Inc., Rite Choice Managed Care, Inc., and Detroit Tool Industries, Inc.
and other civic organizations and served as a surrogate for his brother, former
President George Bush, during the 1988 and 1992 political campaigns. Mr. Bush
is also the uncle of George W. Bush, the current Governor of Texas.


BUSINESS HISTORIES OF EXECUTIVE OFFICERS.

         ANTHONY J. DELLAVECHIA, age 60, became associated with the Company in
August 1995 as an independent consultant and in January 1996, was named Senior
Executive Vice President, Operations Director. Mr. Dellavechia has over 30
years experience in the consumer lending and financial services industry. Mr.
Dellavechia served in several executive capacities including Senior Executive
Vice President, Operations Director with Associates Financial Services Company,
Inc., a division of the Associates Corporation of North America, from 1979
until his retirement in 1985. He was named President of U.S. Consumer
Operations in 1983. Prior to Associates, he worked for AVCO Financial Services
from 1957 until 1976 where he began his career as a financial representative
and progressed through the ranks to the position of Area Vice President, in
charge of that Company's largest area.

         ROBERT D. IDZI, age 51, joined the Company as Chief Financial Officer
in October 1994. In November 1994, he was elected Senior Vice President, in
December 1994, he was elected Treasurer and in February 1996, he was elected
Executive Vice President. Mr. Idzi served as Vice President, Treasurer, CFO and
Director of Unilease Computer Corporation, which engaged in the leasing of
mainframe computers and peripheral equipment, from 1986 until 1987. From 1987
until 1992, Mr. Idzi was Senior Vice President and Chief Financial Officer of
Equator Holdings, Ltd., a U.S. Based merchant bank subsidiary of the Hongkong
Shanghai Banking Group. A Certified Public Accountant, Mr. Idzi began his
career at the public accounting firm of Price Waterhouse. He received a B.S.
Degree in Accounting from Georgetown University and is a member of the American
Institute of Certified Public Accountants and the Financial Executives
Institute.

         JOE B. DORMAN, age 51, joined the Company as General Counsel in
February 1995.  In March 1995, he was elected Senior Vice President. Previously,
Mr. Dorman served as Counsel to Electronic Data Systems ("EDS") of Dallas, Texas
from 1990 to 1995. Prior to joining EDS, Mr. Dorman was associated with the
Dallas law firm of Graham, Bright & Smith and the Dallas firm of McKenzie &
Baer. Mr. Dorman has also served as principal and General Counsel for Lease



                                      22

<PAGE>   44
Investment Corporation and Intercap Corporation. Mr. Dorman is licensed to
practice law in the State of Texas. He is a Certified Public Accountant and a
Member of the Bar in the State of Texas.

         ANDREW L. TENNEY  joined Search as Operations Director in January 1995.
In March 1995 he was elected Executive Vice President.  Mr. Tenney has over 30
years experience in the consumer lending and financial services industry. Prior
to joining Search, he was Executive Vice President of Century Acceptance
Corporation.  Mr. Tenney served as Executive Vice President at ABQ Financial.
Previously, he was employed at Associates Financial Services as Senior Vice
President, Marketing, and Executive Vice President in Consumer Operations.
Before joining Associates, Mr. Tenney was employed by Avco Financial Services
for 16 years rising to the level of Vice President.

         CAROLYN MALONE, age 53, was among the Company's original management
staff. As director of human resources, Ms. Malone was promoted to Vice President
in November 1994, and, in January 1995, she was elected Assistant Secretary.
Prior to her affiliation with the Company, she spent 15 years with an oil and 
gas exploration entrepreneur and seven years with McCommons Oil Company. For the
past 30 years, her business career has involved human resources, office
management and administration. Ms. Malone attended Del Mar Junior College and
graduated from Corpus Christi School of Business in 1965.  Ms. Malone received
her certification as human resource professional from the University of Texas at
Dallas in 1994.

         ANDREW D. PLAGENS, age 28, joined the Company in May 1994 as Accounting
Manager. In March 1995, he was promoted to Assistant Controller and Analyst,
effective July 1, 1995, he became Controller of the Company and in January 1996
was promoted to Vice President. Prior to joining the Company, he was employed by
Hein + Associates and Baird, Kurtz & Dobson. Mr. Plagens is a licensed CPA and a
Member of the American Institute of CPA's and the Texas Society of CPA's.

         There are no family relationships between any of the directors or
Executive Officers of the Company. Except as already described, none of the
Company's directors hold directorships in any company with a class of
securities registered pursuant to Section 12 of the Exchange Act or pursuant to
the requirements of Section 15(d) of the Exchange Act or any company registered
as an Investment Company under the Investment Company Act of 1940.


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

         Based solely on a review of the copies furnished to the Company and
written representations from the executive officers and directors, the Company
believes that all Section 16(a) filing requirements for the period ended March
31, 1996 applicable to its executive officers, directors and greater than ten
percent (10%) beneficial owners were satisfied, with the exception of the
following:

         On January 16, 1996, Anthony J. Dellavechia, an executive officer of
the Company, was granted the option to purchase 50,000 shares of the Company's
Common Stock and warrants to purchase 50,000 shares of the Company's Common
Stock. Mr. Dellavechia reported these transactions along with his initial
statement of ownership with the filing of his Form 5 on April 15, 1996.

         On March 27, 1996, Joe B. Dorman, an executive officer of the Company,
was granted the option to purchase 25,000 shares of the Company's Common Stock
and warrants to purchase 25,000 shares of the Company's Common Stock. Mr.
Dorman reported this transaction with the filing of his Form 5 on April 15,
1996.

         On March 27, 1996, Robert D. Idzi, an executive officer of the Company,
was granted warrants to purchase 50,000 shares of the Company's Common Stock.
Mr. Idzi reported this transaction with the filing of his Form 5 on April 15,
1996.

         On March 27, 1996, Carolyn Malone, a Vice President of the Company in
charge of human resources, was granted the option to purchase 25,000 shares of
the Company's Common Stock and warrants to purchase 5,000 shares of the
Company's Common Stock. Ms. Malone reported this transaction with the filing of
her Form 5 on April 15, 1996.

         On January 16, 1996, Karman L. Wallace, an executive officer of the
Company, was granted the option to purchase 25,000 shares of the Company's
Common Stock and warrants to purchase 25,000 shares of the Company's Common
Stock.



                                       23




<PAGE>   45

Mr. Wallace reported these transactions along with his initial statement of
ownership with the filing of his Form 5 on April 15, 1996.

         On March 27, 1996,  Richard F. Bonini,  a director of the Company, was
granted warrants to purchase 50,000 shares of the Company's Common Stock. Mr.
Bonini reported this transaction with the filing of his Form 5 on April 15,
1996.

         On March 27, 1996,  William H.T. Bush, a director of the Company, was
granted warrants to purchase 50,000 shares of the Company's Common Stock.  Mr.
Bush reported this transaction with the filing of his Form 5 on April 15, 1996.

         On March 27, 1996, Luther Hodges, Jr., A director of the Company, was
granted warrants to purchase 50,000 shares of the Company's Common Stock. Mr.
Hodges reported this transaction with the filing of his Form 5 filed on April
15, 1996.

         On March 27, 1996, James F. Leary, a director of the Company, was
granted warrants to purchase 50,000 shares of the Company's Common Stock and,
on March 22, 1996, purchased 1,600 shares of the Company's Common Stock. Mr.
Leary reported these transactions with the filing of his Form 5 on April 15,
1996.

         On March 27, 1996,  William H.T. Bush, a director of the Company, was
granted warrants to purchase 50,000 shares of the Company's Common Stock.  Mr.
Bush reported this transaction with the filing of his Form 5 on April 15, 1996.

         The Company believes that no other Forms 3, 4 or 5 for directors,
executive officers or greater than 10% beneficial owners were required to be
filed with the SEC for the six-month transition period ended March 31, 1996.


ITEM 11. EXECUTIVE COMPENSATION

COMPENSATION OF EXECUTIVE OFFICERS

         The following table sets forth information for the fiscal years ended
September 30, 1994 and September 30, 1995 and the six-month transition period
ended March 31, 1996, regarding the compensation of each individual who served
as the Company's Chief Executive Officer during the six-month period ended
March 31, 1996, and each of the Company's four most highly compensated
executive officers (other than the Chief Executive Officer) who served as an
executive officer of the Company at the end of the six-month period ended March
31, 1996.



                                      24


<PAGE>   46

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>

                                                         ANNUAL COMPENSATION                   LONG TERM COMPENSATION

                                                                                            SECURITIES        ALL OTHER
                                                                                            UNDERLYING     ----------------
                                                                         OTHER ANNUAL     OPTIONS/SAR'S    COMPENSATION (S)
  NAME AND PRINCIPAL POSITION      YEAR        SALARY ($)  BONUS ($)   COMPENSATION ($)        (#)         ---------------- 
  ---------------------------      ----        ----------  ---------   ----------------   -------------
<S>                               <C>          <C>          <C>        <C>                <C>               <C>
George C. Evans,                   1996(1)      150,000     185,000             -                 -                  -
  Pres., CEO, COO                  1995         162,734     112,500             -            1,000,000(3)            -        
  (from 1/20/95) (2)(5)                                                                      1,000,000(4)                        
                                                                                                                                    
Robert D. Idzi                     1996(1)       66,666      35,000             -               50,000(7)            -        
  EVP, CFO and Treasurer(2)        1995         117,308       5,000             -              204,000(3)        27,462(8)        
                                                                                                                                    
Anthony J. Dellavechia             1996(1)       31,250      25,000             -               50,000(7)        26,500(9)        
  Sr. EVP, Operations Director(2)                                               -               50,000(6)  
                                                                                                                                    
Joe B. Dorman(2)                   1996(1)       55,833      25,000             -               25,000(7)             -        
  SVP, General                                                                                  25,000(6)                    
  Counsel and Secretary            1995          67,128           -             -               50,000(3)             -        
                                                                                                50,000(4)                    
                                                                                                                                
Andrew L. Tenney                   1996(1)       62,499      25,000             -               25,000(7)             -        
  EVP and Operations Director(2)                                                                25,000(6)                    

                                   1995          79,775           -             -               50,000(3)             -        
                                                                                                50,000(4)             
</TABLE> 
------------------------------------------

(1)   The compensation shown for 1996 represents compensation for the six-month
      transition period ended March 31, 1996.
(2)   Mr. Evans was elected President, Chief Executive Officer and Chief
      Operating Officer effective January 20, 1995. In May 1995, Mr. Evans was
      also elected Chairman of the Board of Directors. Mr. Idzi was elected
      Chief Financial Officer in October 1994, Treasurer in January 1995, and
      Executive Vice President in February 1996. Mr. Dellavechia joined the
      Company as Senior Executive Vice President and Operations Director in
      January 1996. Mr. Dorman joined the Company as General Counsel in February
      1995, was elected Senior Vice President in March 1995 and was elected
      Secretary in May 1995. Mr. Vandergrift joined the Company in May 1995 and
      was elected Senior Vice President in February 1996. Mr. Tenney was elected
      Operations Director in January 1995, and in May 1995, was elected
      Executive Vice President. On April 1, 1996, Mr. Tenney resigned as an 
      executive officer of the Company and worked as a consultant from April 1,
      1996 to June 30, 1996. On July 1, 1996, Mr. Tenney assumed the position of
      Executive Vice President of Marketing. 
(3)   Includes newly granted options as well as replacement options granted in 
      exchange for the cancellation of previously granted options, as follows:
      for Mr. Evans, 500,000 options granted on January 20, 1995, all
      subsequently replaced on June 29, 1995 by the 500,000 options which he
      currently holds; for Mr. Tenney, 25,000 options granted on January 23,
      1995, all subsequently replaced on June 29, 1995 by the 25,000 options
      which he currently holds; for Mr. Idzi, 102,000 options granted on
      January 15, 1995, all subsequently replaced on June 29, 1995 by the
      102,000 options which he currently holds; for Mr. Dorman, 25,000 options
      granted on February 20, 1995 all subsequently replaced on June 29, 1995
      by the 25,000 options which he currently holds. 
(4)   Includes newly granted warrants as well as replacement warrants granted in
      exchange for the cancellation of previously granted warrants, as follows:
      for Mr. Evans, 500,000 warrants granted on May 10, 1995, all subsequently
      replaced on June 29, 1995 by the 500,000 warrants which he currently
      holds; for Mr. Tenney, 25,000 warrants granted on May 10, 1995, all
      subsequently replaced on June 29, 1995 by 25,000 warrants which he
      currently holds; for Mr. Dorman, 25,000 warrants granted on May 10, 1995,
      all subsequently replaced on June 29, 1995 by 25,000 warrants which he
      currently holds.
(5)   In June 1995, the Board determined to issue to Mr. Evans options or
      warrants (to be determined at a later date) to purchase 1,500,000 shares
      of common stock at a price of $1.375 Per share. These warrants or options
      will be issued to Mr. Evans in 500,000 share portions upon the occurrence
      of the following conditions:
      (a) 500,000 shares when the company earns $1 million before taxes and 
          dividends by the fiscal year ending March 31, 1997;
      (b) 500,000 shares when the market price of the Company's Common Stock 
          reaches $3.50 per share; and
      (c) 500,000 shares when the market price of the Company's Common Stock
          reaches $5.00 per share.
 (6) Represents options granted on March 27, 1996.
 (7) Represents warrants granted on March 27, 1996.
 (8) Relocation reimbursements. 
 (9) Represents consulting fees paid to Mr. Dellavechia during the transition
     period.

         The foregoing executive officers receive health and disability  
insurance benefits which do not exceed 10% of their respective salaries.  These
benefits are also provided to all other employees of the Company.



                                      25


<PAGE>   47

         The Company has no long-term incentive plans, pension plans, or stock
appreciation rights plans. The Company adopted, as of August 1, 1994, its 1994
Employee Stock Option Plan, which was approved at its annual meeting of
stockholders in May 1995.

         Certain 1994 Employee Stock Options and warrants to purchase Common
Stock, as summarized in the following table, were granted to executive officers
in the six-month period ended March 31, 1996.

      OPTION AND WARRANT GRANTS TO EXECUTIVE OFFICERS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
                                                                                                           POTENTIAL
                                                                                                          REALIZABLE
                                                                                                       VALUE AT ASSUMED
                                                                                                        ANNUAL RATES OF
                                  NUMBER OF                                                               STOCK PRICE
                                 SECURITIES       % OF TOTAL WARRANTS                                  APPRECIATION FOR
                                 UNDERLYING       AND OPTIONS GRANTED      EXERCISE OR                 OPTION OR WARRANT
                                WARRANTS AND      TO EMPLOYEES DURING      BASE PRICE    EXPIRATION          TERM
        NAME                  OPTIONS GRANTED #     THE FISCAL YEAR       ($ PER SHARE)   DATE (8)      5%       10%
        ----                  -----------------     ---------------       -------------   --------    ----     -------
<S>                            <C>                       <C>                     <C>       <C>         <C>      <C>     
George C. Evans                     -                      -                       -            -
                                             
Robert D. Idzi                 50,000(1)                 10.2                    1.26      3/27/06    $39,620  $100,406
                                             
Anthony J. Dellavechia         50,000(1)                 10.2                    1.25      1/16/06     39,306    99,609
                               50,000(3)                 10.2                    1.25      1/16/06     39,306    99,609
                                             
Joe B. Dorman                  25,000(1)                  5.1                    1.26      3/27/06     19,810    50,202
                               25,000(2)                  5.1                    1.26      3/27/06     19,810    50,202
                                             
Andrew  L. Tenney              25,000(1)                  5.1                    1.26      3/27/06     19,810    50,202
                               25,000(2)                  5.1                    1.26      3/27/06     19,810    50,202
</TABLE>

(1) Represents warrants to purchase Common Stock.
(2) Represents 1994 Employer Stock Options which vest in 1/3 yearly increments
    following the date of their grant.
(3) Represents stock options granted before the Fund Subsidiaries' 
    reorganization which, as a result of the change in control following the
    reorganization, are now fully vested.

         The following unexpired stock options to purchase Common Stock were
held by the executives officers of the Company listed below at March 31, 1996.

<TABLE>
<CAPTION>
                                     FISCAL YEAR END OPTION AND WARRANT VALUES
                                             NUMBER OF SECURITIES                          VALUE OF UNEXERCISED
                                        UNDERLYING UNEXERCISED OPTIONS              IN THE MONEY OPTIONS AND WARRANTS
                                        AND WARRANTS AT MARCH 31, 1996                      AT MARCH 31, 1996
                                   --------------------------------------------   ------------------------------------     
             NAME                   EXERCISABLE            UNEXERCISABLE           EXERCISABLE          UNEXERCISABLE
-------------------------          -------------          --------------          ------------          --------------           
<S>                                     <C>                     <C>                     <C>                 <C>   
George C. Evans                      1,000,000                       -               $290,000                    -
Robert D. Idzi                         152,000                       -                 35,580                    -
Anthony J. Dellavechia                 100,000                       -                 13,000                    -
Joe B. Dorman                           75,000                  25,000                  9,000               $3,000
Andrew L. Tenney                        75,000                  25,000                  9,000                3,000
</TABLE>

(1)  Calculated using the fair market value of the Common Stock underlying the
     options and warrants as of the end of the transition period ($1.38) And the
     exercise price of the options or warrants.


COMPENSATION OF DIRECTORS

         The Company pays to each director a fee of $750 per month and $1,500
per meeting attended, plus reimbursement of expenses in connection with
attending each meeting. In addition, the Company has granted each director
warrants to 



                                      26




<PAGE>   48
purchase Common Stock. See "Principal Holders of Capital Stock."
Messrs. Evans and Leary, who are employees of the Company, do not receive
separate compensation for their services as directors, although Mr. Leary, who
is an employee of search was paid salary and bonus totaling $57,999 during the
transition period.


OTHER AGREEMENTS WITH EXECUTIVE OFFICERS

         Effective January 20, 1995, George C. Evans joined the Company as
President, Chief Executive Officer, Chief Operating Officer and a member of the
Board of Directors by executing a three-year employment agreement at an annual
compensation of $250,000 minimum per year. Mr. Evans is also to receive a bonus
ranging from 25% to 100%, as determined by the Board, of annual salary. In June
1995, the Board determined to issue to Mr. Evans options or warrants (to be
determined at a later date) to purchase 1,500,000 shares of Common Stock at a
price of $1.375 per share. These warrants or options will be issued to Mr.
Evans in 500,000 share portions upon the occurrence of the following
conditions:

         (a) 500,000 shares when the Company earns $1 million before taxes and
             dividends before fiscal year ending march 31, 1997; 

         (b) 500,000 shares when the market price of the Company's Common Stock
             reaches $3.50 per share; and 

         (c) 500,000 shares when the market price of the Company's Common Stock
             reaches $5.00 per share.

         On May 1, 1996,  Mr. James F. Leary entered into a two-year employment
agreement with the Company.  During the term of this agreement,  Mr. Leary will
be paid a salary of $160,000 per year.

         As of March 31, 1996, no other employee of the Company or its 
subsidiaries was covered by an employment agreement.


EMPLOYEE STOCK OPTION PLAN

         On August 1, 1994, the Board of Directors adopted, subject to
stockholder approval, the 1994 Employee Stock Option Plan (the "Plan"). The
Plan was approved by the stockholders on May 10, 1995. The purpose of the Plan
is to advance the interest of the Company by providing additional incentives to
attract and retain qualified and competent employees, upon whose efforts and
judgment the success of the company (including its subsidiaries) is largely
dependent, through the encouragement of stock ownership in the Company by such
persons. A total of 1,750,000 shares of Common Stock (subject to adjustment to
compensate for the issuance of stock dividends or any recapitalization
resulting in a stock split-up, combination or exchange of shares of Common
Stock) have been reserved for sale upon exercise of options granted under the
Plan. Options covering 1,122,000 shares had been granted under the Plan as of
March 31, 1996.


CASHLESS WARRANTS GRANTS.

         The Company also compensates its directors, key employees and some
consultants through grants of cashless warrants. The purposes of these warrant
grants are similar to those of the Employee Stock Option Plan. The exercise
price of these warrants may be paid by the holder either (i) in cash or (ii) by
surrender of warrants equal to the cash value of the exercise price. As of
March 31, 1996, the Company had outstanding a total of 1,585,000 cashless
warrants.


COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.

         In September 1993, the Board of Directors established a compensation
committee (the  "Compensation Committee").  The Compensation Committee currently
consists of the following directors:  A. Brean Murray, Richard F. Bonini and
James F. Leary.  Mr. Leary also serves as an employee of the Company in his 
capacity as Vice-Chairman of Finance.  In addition, during the six-month period
ended March 31, 1996, the Company paid Murray, Foster Securities Inc. ("BMFS")
$200,000 for services rendered by it related to the success of the joint plan of
reorganization.  Mr. Murray is the chairman of BMFS.  See, "Certain
Relationships and Related Transactions."



                                       27



<PAGE>   49

REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION

         The Compensation Committee (the "Committee") is now comprised of three
non-employee directors: Luther H. Hodges, Jr., Chairman, Richard F. Bonini and
William H. T. Bush. The Committee regularly reviews the executive compensation
policies and practices of the Company and establishes or approves the
compensation for executive officers. The Committee also administers The
Company's 1994 Stock Option Plan.

         The Company's primary objective is to maximize stockholder value. To
aid in accomplishing this goal, the Committee is guided by two principles in
determining executive compensation policies: first, to attract, develop, reward
and retain highly talented individuals; and second, to motivate executive
officers to perform to the best of their abilities and to achieve both
short-term and long-term Company objectives that will contribute to the overall
goal of enhancing stockholder value.

         The Company's executive compensation program consists of two main
elements:

              o Annual compensation, which is comprised of base salary and
                bonus, and
              o Long-term incentives that provide a financial opportunity to
                executive officers through grants of stock options and warrants.
                The compensation that may be realized by executives through 
                these incentives is tied directly to the value of the Company's
                Common Stock in the future.

         The Committee believes that the Company's executive compensation
program reflects the fundamental principles described above and provides strong
incentives to executives to maximize Company performance.

         The base salary for Mr. George Evans, Chief Executive Officer, was
determined by direct negotiations with Mr. Evans at the time of his employment
in January 1995. The Employment Agreement for Mr. Evans specified his salary
and the range for his bonus. Of the current Board of Directors, only A. Brean
Murray was a member at that time. One of the Committee's members, A. Brean
Murray, was a member of the Board at that time. The other members of the Board
who participated in the negotiations are no longer members of the Board.

         During August 1995, the Committee, then composed of Messrs. A. Brean
Murray, Luther H. Hodges, Jr. and James F. Leary, met informally to discuss Mr.
Evans' performance and compensation. In September 1995, the deliberations of
the Committee were presented to the Board of Directors, who approved changes to
Mr. Evans' compensation. Prior to this approval, Mr. Leary, who had been
elected Vice Chairman, resigned from the Compensation Committee.

         The Committee and the Board of Directors considered the following
matters: his (i) knowledge of the consumer finance industry; (ii) reputation
and acquaintances with other persons in the finance industry; (iii) performance
in improving Company operations and employee confidence; (iv) performance in
hiring competent and experienced executives which could assist in the
"turnaround" of the Company; (v) performance in formulating and implementing
plans to convert the Company's debt to equity; (vi) performance in dealing with
shareholders and Noteholders who, at the time of his initial employment, were
hostile toward the Company's former management; (vii) performance in settling
the O'Shea shareholder class action litigation; and (viii) performance in
assembling a Board of Directors with experience ad knowledge in the finance
industry.

         Based on the foregoing evaluation, the Board of Directors, acting on
the recommendation of the Committee, approved an increase in Mr. Evans' salary
from $250,000 to $300,000 and a bonus of $250,000. Mr. Evans received the bonus
in two payments, the first portion of which, consisting of $65,000, was paid at
the end of the fiscal year ended September 1995. The remaining $185,000 was to
be paid subsequent to and conditioned upon Confirmation of the Joint Plan. The
Board also promised to grant to Mr. Evans the right to receive warrants or
options, at his election, to purchase 1,500,000 shares of Common Stock, based
on the future performance of the Company and its Common Stock per share price.

         The Committee approves the salary of the other executive officers of
the Company, including the executive officers named in the Summary Compensation
Table. The Committee at the end of each fiscal year reviews incentive bonus
awards proposed by Mr. Evans for all of the executive officers other than Mr.
Evans. The Committee and Mr. Evans jointly reviewed the individual performances
of each executive officer other than Mr. Evans, and the Committee gave
significant consideration




                                      28


<PAGE>   50

of Mr. Evans' views on the performance of each such executive officer. The
Committee also awards all warrants and 1994 Employee Stock Options to executive
officers. Again, such awards are generally proposed by Mr. Evans, and the
Committee and Mr. Evans jointly review the individual performances of each
executive officer other than Mr. Evans in making the awards.

         The size of the bonus, option and warrant awards to executive officers
were based on subjective factors, including primarily the perceived importance
of the individual's contribution to the success of the Company and upon the
amount of and value of options and warrants currently held by the individual.
The Committee also takes into consideration in granting options and warrants to
executive officers the relationship of the number of options and warrants held
by each of the executive officers to a subjective rating of the degree of
responsibility of the position held by each officer compared to that of the
other executive officers. While not having a target ownership level of Common
Stock by executive officers, the Committee has endeavored to motivate
executives by granting options at levels that present executives with an
opportunity for significant gains that are commensurate to gains in stockholder
value.

         During the transition period ended March 31, 1996, bonus, option and
warrant awards granted to executive employees were tied to the success of the
Fund Subsidiaries' reorganization. Executive officers were granted a number of
options and warrants prior to and during the transition period due to the
Company's need to conserve cash in order to complete the reorganization of its
Fund Subsidiaries, while continuing to attract qualified executive employees
notwithstanding the troubled circumstances of the Company.

         Stock options and warrants are designed to align the interests of the
recipients with those of the stockholders of the Company. Stock options and
warrants are typically granted by the Company with an exercise price equal to
the market price of the Company's Common Stock on the date of grant. The
options generally vest over three years, and the warrants immediately vest. In
the six-month transition period ended March 1996, the 1994 Employee Stock
Options that were granted prior to the effectiveness of the Joint Plan became
fully vested as a result of the substantial number of shares of stock that were
issued by the Company pursuant to the Joint Plan and the resulting deemed
change in control of the Company.

         In summary, the Committee's executive compensation decisions are
generally intended to link a significant portion of the compensation of the
Company's executive officers to individual performance and to corporate
performance and stock price appreciation. The Committee intends to continue the
policy of linking executive compensation to corporate performance and
improvement in stockholder value, recognizing that economic factors beyond
management's control may result in imbalances for a particular period but that
consistent improvement in corporate performance over the long-term will enure
to the mutual benefit of the Company's executives and its stockholders.



                                      29


<PAGE>   51

PERFORMANCE GRAPH

         The following graph presents cumulative shareholder return on the
Company's Common Stock for the five-year period ended March 31, 1996. The
Company is compared to the S&P 500 Index and the S&P Financial Index. The graph
assumes that $100 was invested in the Company's Common Stock and in each index
at the beginning of the measurement period.

         The data source for all graphs is Bloomberg data service and National
Quotation Bureau.

                COMPARISON OF CUMULATIVE TOTAL RETURN 1993-1996*

                                     GRAPH




*       Assumes the reinvestment of any dividends.

  (1)   Due to the sporadic and limited trading of the Company's Common Stock
        before March 31, 1993, only three years are shown.




                                      30

<PAGE>   52


ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

PRINCIPAL HOLDERS OF CAPITAL STOCK

         The following table sets forth certain information, as of June 17,
1996, relating to the beneficial ownership of the Common Stock, 12% Preferred
Stock (the "12% Preferred Stock") and 9%/7% Preferred Stock (i) by any person
or "group," as that term is used in Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended, known to the Company to own beneficially 5% or more of
the outstanding Common Stock or shares of Preferred Stock, and (ii) by each
current director and executive officer of the Company and by all current
directors and executive officers of the Company as a group. Except as otherwise
indicated, each of the persons named below is believed by the Company to
possess sole voting and investment power with respect to the shares of Common
Stock, 12% Preferred Stock or 9%/7% Preferred Stock beneficially owned by such
person.

<TABLE>
<CAPTION>

                               AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP (1)     PERCENTAGE OF CLASS OUTSTANDING

     NAME OF DIRECTOR OR
     EXECUTIVE OFFICER OR         NUMBER OF
           NAME AND                COMMON           NUMBER OF       NUMBER OF                                    12%
    ADDRESS OF BENEFICIAL          STOCK         9%/7% PREFERRED  12% PREFERRED  COMMON     9%/7% PREFERRED   PREFERRED
    ----------------------         ------                                              -                               
            OWNER                  SHARES         STOCK SHARES    STOCK SHARES     STOCK         STOCK          STOCK
            -----                  ------         ------------    ------------     -----         -----          -----
<S>                                <C>            <C>             <C>              <C>           <C>             <C>
   Hall Phoenix/Inwood, Ltd.    7,814,556(2)        2,032,812                     28.7%          11.9%
   750 N. St. Paul, Suite 200
   Dallas, Texas
   75201-3247                                                                                         


   Value Partners, Ltd.         2,150,174           2,667,819                      7.9%          15.6%
   2200 Ross Ave.
   Suite 4660 W
   Dallas, TX  75201                                                                                  

   Greg Muns, M.D.                   -                                20,000        -                                 5%    
   1319 Shores Circle                                                             
   Rockwall, Texas  75087                                                                                                   
                                                                                  
   Sam Coker Retirement              -                                20,000        -                                 5%   
   Trust                                                                          
   Rt. 2, Box 50                                                                                   
   Millsap, Texas  76066                                                                                                    
                                                                                  
   A. Brean Murray                483,558(3)                                      1.7%

   Luther H. Hodges, Jr.          111,000(4)                                        *
                                                                                  
   James F. Leary                 102,500(4)                                        *
                                                                                  
   William H.T. Bush              100,000(5)                                        *
                                                                                  
   Richard F. Bonini              122,862(4)            12,236                      *              *
                                                                                  
   George C. Evans              1,000,000(6)                                        3.5
   George C. Evans, as            812,127(7)                                        2.9
     holder of the SBM Trust,
     irrevocable proxy                                                                 

   Joe B. Dorman                   75,000(8)                                          *

   Robert D. Idzi                 152,000(9)                                          *                            

   Anthony J. Dellavechia         100,000(10)                                         *

   Andrew L. Tenney               100,000(11)                                         *

   All directors and executive
   officiers as a group
  (9 person)                    3,277,007               12,236                      11.0%          *      

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

*     Less than 1%

(1)   The information as to beneficial ownership of Common Stock, 12% Preferred
      Stock and 9%/7% Preferred Stock has been furnished by the Company's
      transfer agent and the respective shareholders, directors and officers of
      the Company. Each named person or group is deemed to be the beneficial
      owner of securities which may be acquired by such person or group within
      60 days through the exercise of options, warrants and rights, if any, and
      such securities are


                                      31



<PAGE>   53
      deemed to be outstanding for the purpose of computing the percentage of
      stock beneficially owned by such person or group. Such securities are not
      deemed to be outstanding for the purpose of computing the percentage of
      stock beneficially owned by any other person or group.

(2)   Includes (i) warrants to purchase 3,000,000 shares of Common Stock at
      $2.00 per share on or before November 30, 2000, and (ii) warrants to
      purchase 676,178 shares of Common Stock at $2.00 per share (increasing
      $0.25 each year) on or before March 31, 2001.

(3)   Includes (i) warrants to purchase 10,000 shares, at $8.75 per share, on or
      before December 20, 1998, (ii) warrants to purchase 113,558 shares at
      $9.60 per share on or before December 10, 1998, (iii) warrants to
      purchase 250,000 shares at $1.09 per share on or before June 29, 2005,
      and (iv) warrants to purchase 50,000 shares at $1.16 per share on or
      before March 27, 2006.

(4)   Includes warrants to purchase 50,000 shares at $1.09 per share on or 
      before June 29, 2005 and warrants to purchase 50,000 shares at $1.16 per
      share on or before March 27, 2006.

(5)   Represents warrants to purchase 50,000 shares at $1.375 per share on or
      before August 4, 2005 and warrants to purchase 50,000 shares at $1.16 per
      share on or before March 27, 2006.

(6)   Represents (i) warrants to purchase 500,000 shares at $1.09 per share
      on or before June 29, 2005 and (ii) options issued under the 1994
      Employee Stock Option Plan to purchase 500,000 shares of Common Stock at
      $1.09 per share on or before January 20, 2005, which vested in Mr. Evans
      following the Fund Subsidiaries' reorganization.

(7)   Represents 812,127 shares owned of record by the SBM Trust for which Mr.
      Evans holds an irrevocable proxy to vote. Mr. Evans has no other
      relationship with the SBM Trust.

(8)   Represents (i) warrants to purchase 25,000 shares at $1.09 per share on or
      before June 29, 2005, (ii) options issued under the 1994 Employee Stock
      Option Plan to purchase 25,000 shares of Common Stock at $1.09 per share
      on or before February 20, 2005, which vested in Mr. Dorman following the
      Fund Subsidiaries' reorganization and (iii) warrants to purchase 25,000
      shares at $1.26 per share on or before March 27, 2006.

(9)   Represents options issued under the 1994 Employee Stock Option Plan to
      purchase 102,000 shares at $1.09 per share on or before January 15, 2005,
      which vested in Mr. Idzi following the Fund Subsidiaries' reorganization,
      and warrants to purchase 50,000 shares at $1.26 per share on or before
      March 27, 2006.

(10)  Represents warrants to purchase 50,000 shares at $1.25 per share on or
      before January 16, 2006 and options issued under the 1994 Employee Stock
      Option Plan to purchase 50,000 shares at $1.25 per share on or before
      January 16, 2006, which vested in Mr. Dellavechia following the Fund
      Subsidiaries' reorganization.

(11)  Represents warrants to purchase 25,000 shares at $1.25 per share on or
      before January 16, 2006 and options issued under the 1994 Employee Stock
      Option Plan to purchase 25,000 shares at $1.26 per share on or before
      March 27, 2007, which vested in Mr. Tenney following the Fund
      Subsidiaries' reorganization.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The policy of the Company with respect to transactions with officers,
directors and affiliates is to require that such transactions be (i) on terms
no less favorable to the Company than could be obtained from unrelated third
parties and (ii) approved by a majority of the disinterested directors of the
Company. The following transactions were approved by the Board of Directors of
the Company in accordance with such policy.

         Mr. A. Brean Murray is a director of the Company and Chairman of Brean
Murray, Foster Securities Inc. ("BMFS"). In March 1996, the Company paid a
$200,000 cash fee to BMFS for its services related to the success of the Joint
Plan. These services included research and advice to the Company regarding the
feasibility, terms and marketability of securities issued under the Joint Plan,
the advantages and disadvantages of a reverse stock split, the feasibility of
the Company's plans to re-focus its receivables purchasing activities, and the
potential trading markets and values of the Company's stock following the
completion of the Joint Plan.  These fees are subject to approval by the Court
pursuant to 11 U.S.C. Section 1129(a)(4).

         Pursuant to the Joint Plan, Mr. Frederick S. Hammer will become a
member of the Board of Directors. Mr. Hammer is a principal in Inter-Atlantic
Securities Corp., which will receive a fee for its services to be rendered in
connection with obtaining potential subordinated debt financing for The
Company. Inter-Atlantic will receive the following compensation:

       o  A marketing fee in the amount of $50,000 after Inter-Atlantic has
          produced an offering memorandum to be given to potential investors.
       o  If subordinated debt financing is obtained, a private placement fee
          equal to 4.5% of the gross par amount of subordinated debt. One-half
          of the private placement fee will be paid in cash and one-half in
          subordinated debt, which will be valued at par and issued on the same
          terms as provided to the investors.


                                      32



<PAGE>   54

         Pursuant to the Funding Agreement ("Funding Agreement") entered into
on November 30, 1995 between the Company and Hall Financial Group, Inc.
("HFG"), HFG made loans totaling $2,283,000 ("HFG Notes") to Search. The
Funding Agreement gave HFG the right to convert the HFG Notes into 2,500,000
shares of the Company's common stock. Further, in connection with the Funding
Agreement, the Company granted to HFG warrants to purchase 3,000,000 shares of
the Company's Common Stock. The grants of these warrants and conversion rights
gave HFG beneficial ownership of approximately 38.7% of Company's common stock,
making HFG an affiliate of the Company.

          Effective April 2, 1996, HPIL, as assignee from HFG of the HFG Notes,
fully exercised the rights of the holder of the HFG Notes to convert the Notes
into 2,500,000 shares of Search common stock.

         The Funding Agreement also provided to HFG the option to purchase
common stock, 9%/7% Preferred Stock, and warrants. Effective April 2, 1996,
HPIL, as assignee of HFG, fully exercised this purchase option by paying
$4,346,000 cash to the Company for which the Company issued 1,638,400 shares of
common stock and 2,032,800 shares of 9%/7% Preferred Stock, and warrants to
purchase 676,000 shares of common stock to HPIL.

         Pursuant to the Funding Agreement, HFG was entitled to elect one
director to the Company's Board if HFG converted the HFG notes into common
stock and to elect another if HFG purchased at least $1,000,000 present value
of securities from the Company. These new directors, Messrs. Craig Hall and
Larry E. Levey, pursuant to their request, will appointed as directors when the
Company obtains directors and officers liability insurance, which the Company
is pursuing. As a result of satisfaction of these conditions, HFG has
designated two HFG officers as its representatives for appointment to the
Company's Board.



                                      33

<PAGE>   55



                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)      FINANCIAL STATEMENTS AND SCHEDULES

         The financial statements listed in the Index to Financial Statements
are filed as part of this annual report. No financial statement schedules are
required to be filed as part of this annual report because all information
otherwise included in schedules has been incorporated into the Notes to
Consolidated Financial Statements.

(b)      REPORTS ON FORM 8-K

         During the quarter ended March 31, 1996 the following reports on Form
8-K were filed by the Company:

         On April 3, 1996, the Company filed a report on Form 8-K announcing a
change in its fiscal year end from September 30 to March 31.

         On April 18, 1996, the Company filed a report on Form 8-K announcing
the Effective Date of the Joint Plan.

         On May 14, 1996, the Company filed a report on Form 8-K announcing the
approval of the shareholders class action suit settlement by U.S. District
Court, Northern District of Texas, Dallas Division.



                                      34

<PAGE>   56



(c)      EXHIBITS

Exhibit Number                              Description
---------------    -------------------------------------------------------------
                                                                            
2.1                Third  Amended  Joint Plan of Reorganization (incorporated by
                   reference to Exhibit 2.1 to the April 17, 1996 Form 8-K 
                   Current Report).

2.2                Modification to Third Amended Joint Plan of Reorganization
                   (incorporated by reference to Exhibit 2.2 to the April 17,
                   1996 Form 8-K Current Report).

2.3                Order Confirming Third Amended and Supplemented Joint Plan,
                   Pursuant to 11 U.S.C. ss. 1129 (incorporated by reference to
                   Exhibit 2.3 to the April 17, 1996 Form 8-K Current Report).

2.4                Chapter 11 Post-Confirmation Order (incorporated by reference
                   to Exhibit 2.4 to the April 17, 1996 Form 8-K Current
                   Report).

2.5                Order Regarding Entry Date of Order Confirming Third Amended
                   and Supplemented Joint Plan Pursuant to 11 U.S.C. ss. 1129
                   (incorporated by reference to Exhibit 2.5 to the April 17,
                   1996 Form 8-K Current
                   Report).

2.6                Order Granting Second Motion for Technical, Non-Material
                   Modification to the Third Amended and Supplemented Joint Plan
                   of Reorganization (incorporated by reference to Exhibit 2.6
                   to the April 17, 1996 Form 8-K Current Report).

3.1                Certificate of Incorporation, as amended to date.

3.2                Bylaws, as amended.

4.1                Warrant to purchase 3,000,000 shares of common stock of
                   Search Capital Group, Inc. dated as of November 30, 1995
                   (incorporated herein by reference from Exhibit 4.1 to the
                   Form 8-K Current Report dated November 30, 1995).

4.2                Certificate of Designation 9%/7% Convertible Preferred
                   Stock (incorporated by reference to Exhibit 4.1 to the
                   April 17, 1996 Form 8-K).

4.3                Warrant Agreement dated as of March 27, 1996 between Search
                   Capital Group, Inc. and American Securities Transfer, Inc.,
                   as Warrant Agent (incorporated by reference to Exhibit 4.2 to
                   the April 17, 1996 Form 8-K).

10.1               Form of Director's Warrant to purchase shares of Common Stock
                   of Search Capital Group, Inc. (incorporated by reference from
                   Exhibit 10.16 of Search Capital Group, Inc.'s Annual Report
                   on Form 10-K for the nine-month transition period ended
                   September 30, 1993)

10.2               Form of Warrant for Officers and Employees to purchase shares
                   of Common Stock of Search Capital Group, Inc. (incorporated 
                   by reference from Exhibit 10.17 of Search Capital Group, 
                   Inc.'s Annual Report on Form 10-K for the nine-month 
                   transition period ended September 30, 1993) 

10.3               1994 Employee Stock Option Plan of Search Capital Group, Inc.
                   (incorporated by reference from Exhibit 10.18 of Search 
                   Capital Group, Inc. Annual Report on Form 10-K for the fiscal
                   year ended September 31, 1994).

10.4               Stock Purchase Agreement between Search Capital Group, Inc.
                   and Louis Dorfman, Trustee of the SBM Trust (incorporated by
                   reference from Exhibit 10.9 to Search Capital Group, Inc.'s 
                   originally filed Annual Report on Form 10-K for the year 
                   ended September 30, 1995).



                                      35




<PAGE>   57
Exhibit Number                          Description
--------------      ------------------------------------------------------------
10.5                Funding Agreement dated November 30, 1995 (the "Funding
            
                    Agreement") among Search Capital Group, Inc., Search Funding
                    Corp., Automobile Credit Acceptance Corp., Automobile Credit
                    Holdings, Inc., Newsearch, Inc. and Hall Financial Group,
                    Inc. (incorporated herein by reference from Exhibit 99.1
                    to the Form 8-K Current Report of Search Capital 
                    Group, Inc. dated November 30, 1995 (the 11/95 8-K")). 
        
10.6                Convertible Promissory Note dated November 30, 1995 from
                    Search Capital Group, Inc. and Search Funding Corp. payable
                    to the order of Hall Financial Group, Inc. in the principal
                    amount of $1,284,487.28 (incorporated herein by
                    reference from Exhibit 99.2 to the 11/95 8-K).  

10.7                Promissory Note dated November 30, 1995 from Search Capital
                    Group, Inc. and Search Funding Corp. payable to the order
                    of Hall Financial Group, Inc. in the principal amount of
                    $715,512.72. (incorporated herein by reference from Exhibit
                    99.3 to the 11/95 8-K).
                                                              

10.8                Convertible Note dated November 30, 1995 from Search
                    Capital Group, Inc. and Search Funding Corp. payable to the
                    order of Hall Financial Group, Inc. in the principal amount
                    of $1,000,000.00. (incorporated herein by reference from
                    Exhibit 99.4 to the 11/95 8-K).
                                                        
10.9                Newsearch Pledge Agreement dated as of November 30, 1995
                    between Newsearch, Inc. and Hall Financial Group, Inc.
                    (incorporated herein by reference from Exhibit 99.5 to the
                    11/95 8-K).           

10.10               Search Pledge Agreement dated as of November 30, 1995
                    between Search Capital Group, Inc. and Hall Financial
                    Group, Inc. (incorporated herein by reference from Exhibit
                    99.6 to the 11/95 8-K).

10.11               ACHI Pledge Agreement dated as of November 30, 1995 between
                    Automobile Credit Holdings, Inc. and Hall Financial Group,
                    Inc. (incorporated herein by reference from Exhibit 99.7 to
                    the 11/95 8-K).

10.12               Search Security Agreement dated as of November 30, 1995
                    between Search Capital Group, Inc. and Hall Financial
                    Group, Inc. (incorporated herein by reference from Exhibit
                    99.7 to the 11/95 8-K).
                                                              
10.13               SFC Security Agreement dated as of November 30, 1995
                    between Search Funding Corp. and Hall Financial Group,
                    Inc. (incorporated herein by reference from Exhibit 99.9 to
                    the 11/95 8-K).           
        
10.14               ACAC Security Agreement dated as of November 30, 1995
                    between Automobile Credit Acceptance Corp. and Hall
                    Financial Group, Inc. (incorporated herein by reference
                    from Exhibit 99.10 to the 11/95 8-K).

10.15               First Amendment to the Funding Agreement dated December 31,
                    1995   

10.16               Second Amendment to the Funding Agreement dated March 25,
                    1996 
    
10.17               Third Amendment to the Funding Agreement dated April 1,
                    1996.      
                   
                                                                    
10.18               Letter Agreement between Search and Alex. Brown & Sons,
                    Inc. dated May 24, 1995 (incorporated by reference from
                    Exhibit 10.20 to Search Capital Group, Inc.'s Annual Report
                    on Form 10-K for the year ended September 30, 1995).
                              
10.19               Employment Letter Agreement between George C. Evans and
                    Search date January 20, 1995 (incorporated by reference
                    from Exhibit 10.21 to Search Capital Group, Inc.'s Annual
                    Report on Form 10-K for the year ended September 30, 1995).



                                      36





<PAGE>   58
Exhibit Number                          Description
--------------    --------------------------------------------------------------
10.20             Amendment to Employment Agreement of George C. Evans dated
                  May 10, 1995 (incorporated by reference from Exhibit 10.22 to
                  Search Capital Group, Inc.'s Annual Report on Form 10-K for
                  the year ended September 30, 1995). 

10.21             Employment Agreement between Search and James F. Leary dated 
                  May 1, 1996. 
                                                                       
11.1              Computation of per share earnings (loss)

22.1              List of Subsidiaries (incorporated by reference from Search
                  Capital Group, Inc.'s Annual Report on Form 10-K for the
                  fiscal year ended September 31, 1994). 

23.1              Consent of BDO Seidman, LLP

27.1              Financial data schedule
                                            
28.1              Letter agreement between the Company and Inter-Atlantic
                  Securities dated May 13, 1996.




(d)      FINANCIAL STATEMENTS EXCLUDED BY RULE 14a-3(b).                       

         None of the Registrant's financial statements are excluded from the
annual report to shareholders by Rule 14a-3(b).


                                      37






<PAGE>   59



SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

                                     SEARCH CAPITAL GROUP, INC.
                         
                         
                         
                                     By:  /s/ George C. Evans
                                        ----------------------------------------
                                        George C. Evans, President and Chief
                                        Executive Officer
                         
Date:             May 29, 1997

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

<TABLE>
<CAPTION>

SIGNATURE                               TITLE                                            DATE
---------                               -----                                            ----
<S>                             <C>                                               <C>


/s/ George C. Evans
-----------------------------                                                         May 29, 1997            
George C. Evans                  Chairman of the Board, Chief Executive
                                 Officer, Chief Operating Officer and Director


/s/ Robert D. Idzi
------------------------------                                                        May 29, 1997            
Robert D. Idzi                   Executive Vice President, Chief Financial
                                 Officer and Treasurer


/s/ Andrew D. Plagens
------------------------------                                                        May 29, 1997            
Andrew D. Plagens                Senior Vice President, Controller and
                                 Chief Accounting Officer


/s/ A. Brean Murray
------------------------------                                                        May 8, 1997            
A. Brean Murray                         Director


/s/ Richard F. Bonini
------------------------------                                                        May 29, 1997            
Richard F. Bonini                       Director


/s/ Luther H. Hodges
------------------------------                                                        May 29, 1997            
Luther H. Hodges                        Director


/s/ James F. Leary
------------------------------                                                        May 29, 1997            
James F. Leary                          Vice Chairman of Finance and Director


/s/ William H. T. Bush
-------------------------------                                                       May 29, 1997            
William H. T. Bush                      Director
</TABLE>




                                      38




<PAGE>   60

<TABLE>
<CAPTION>
SIGNATURE                               TITLE                                            DATE
---------                               -----                                            ----
<S>                             <C>                                               <C>


-------------------------------                                                  ----------------------------
Frederick S. Hammer                     Director

/s/ DOUG POWELL 
-------------------------------                                                        May 8, 1997            
Doug Powell                             Director

/s/ BARRY W. RIDINGS 
-------------------------------                                                        May 29, 1997            
Barry W. Ridings                        Director


</TABLE>





                                       39

<PAGE>   61




                                 EXHIBIT INDEX

   
<TABLE>
<CAPTION>
     Exhibit
     Number                           Description
     --------    -------------------------------------------------------------
<S>             <C>
      11.1       Computation of per share earnings (loss)

      23.1       Consent of BDO Seidman, LLP

      27.1       Financial data for the transition period ended March 31, 1996
</TABLE>