<PAGE>

FORM 10-QSB

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

                                   FORM 10-QSB

(Mark One)

/X/      QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934

                              For the quarterly period ended November 30, 2000
                                                            -------------------

/ /      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

                      For the transition period from ____________ to __________

                      Commission file number __________________________________


                           ROYAL FINANCIAL CORPORATION
--------------------------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)


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

             2000 E. LAMAR BLVD., SUITE 290, ARLINGTON, TEXAS 76006
--------------------------------------------------------------------------------
                    (Address of principal executive offices)

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

--------------------------------------------------------------------------------
                 (Former name, former address and former fiscal
                       year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 / /

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

Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes / / No / /


                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
         7,474,382
-------------------------

Transitional Small Business Disclosure Format (Check one):    Yes / /  No /X/

<PAGE>

                           ROYAL FINANCIAL CORPORATION
                                   Form 10-QSB
                                November 30, 2000

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                  Page No.
                                                                                                  --------
<S>                                                                                               <C>
         PART I      FINANCIAL INFORMATION

                     ITEM 1.  FINANCIAL STATEMENTS                                                   3
                              Consolidated Balance Sheets:
                                       November 30, 2000 and August 31, 2000                         3

                              Consolidated Statements of Operations:
                                       Three-month Periods Ended November 30, 2000 and 1999          4

                              Consolidated Statements of Cash Flows:
                                       Three-month Periods Ended November 30, 2000 and 1999          5

                              Notes to Consolidated Financial Statements                             6

                     ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS                                   8

         PART II     OTHER INFORMATION

                     ITEM 1.  Legal Proceedings                                                      9

                     ITEM 2.  Exhibits and Reports                                                  10
</TABLE>

                                       2
<PAGE>

                  ROYAL FINANCIAL CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                             November 30,     August 31,
                                                                                 2000            2000
                                                                             ------------    ------------
                                                                              (Unaudited)
                                ASSETS
<S>                                                                          <C>             <C>
CURRENT ASSETS:
     Cash and cash equivalents                                                   $339,081         $48,715
     Receivables                                                                  208,851         680,326
     Manufactured home inventory                                                  155,000         412,636
     Other current assets                                                          13,477          33,674
                                                                             ------------    ------------
                              Total Current Assets                                716,409       1,175,351
INVESTMENTS:
     Land held for sale                                                           800,000         800,000
     Mortgage loan portfolio, net                                                 717,974         705,225
     Other                                                                         79,693          79,915
                                                                             ------------    ------------
                              Total Investments                                 1,597,667       1,585,140
PROPERTY, PLANT AND EQUIPMENT-MANUFACTURED
     HOUSING COMMUNITY, NET                                                     2,352,927       2,361,000

OFFICE PROPERTY AND EQUIPMENT, NET                                                 16,932          19,735

OTHER ASSETS                                                                       12,745          12,745
                                                                             ------------    ------------
                               Total Assets                                    $4,696,680      $5,153,971
                                                                             ============    ============
                  LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
     Accounts payable and accrued liabilities                                $     19,175    $    123,701
     8 1/2% Senior Convertible Debentures                                       1,290,000       1,290,000
                                                                             ------------    ------------
                               Total Current Liabilities                        1,309,175       1,413,701
STOCKHOLDERS' EQUITY:
     Common stock, $.001 par value: authorized 50,000,000 shares;
          issued and outstanding, 7,474,382 shares                                  7,474           7,474
     Additional paid-in capital                                                14,064,647      14,064,647
     Accumulated deficit                                                      (10,684,616)    (10,331,851)
                                                                             ------------    ------------
                                Total Stockholders' Equity                      3,387,505       3,740,270
                                                                             ------------    ------------
                                Total Liabilities and Stockholders' Equity   $  4,696,680    $  5,153,971
                                                                             ============    ============
</TABLE>

       The accompanying notes are an intergal part of these statements.

                                       3
<PAGE>

                  ROYAL FINANCIAL CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                              Three Months Ended
                                                                 November 30,
                                                       ---------------------------------
                                                           2000                 1999
                                                       ------------        -------------
                                                                   (Unaudited)
<S>                                                    <C>                 <C>
Revenues
     Gains (losses) on sales of operating assets
          Loans                                          $   --            $        (492)
          Real estate                                        --                   65,803
     Lot rental income                                     58,755                 43,275
     Sales of manufactured homes                          202,990                 56,500
                                                       ----------          -------------
                                                          261,745                165,086
Operating expenses
     Cost of sales of manufactured homes sold             287,999                 51,664
     Salaries and benefits                                 91,260                117,981
     Professional fees                                     38,413                 54,188
     Promotional                                            8,788                 16,423
     Travel and lodging                                    12,331                  2,537
     General and administrative                            65,787                 37,480
     Depreciation                                           3,355                 14,498
     Office rent                                           16,997                 16,483
     Insurance                                             20,079                 18,110
     Real estate holding costs                             22,906                 29,689
     Taxes - payroll and other                             27,395                 28,471
     Due diligence                                           --                    2,801
                                                       ----------          -------------
                                                          595,310                390,325
                                                       ----------          -------------
           Operating loss                                (333,565)              (225,239)
Other income (expense)
     Interest income                                        8,113                  3,447
     Interest expense                                     (27,313)               (39,859)
     Loss on sale of office property and equipment           --                  (26,400)
     Failed offering costs                                   --                   (3,500)
                                                       ----------          -------------
                                                          (19,200)               (66,312)
                                                       ----------          -------------
           Net loss                                    $ (352,765)           $  (291,551)
                                                       ==========          =============
Loss per share - basic and diluted                     $    (0.05)           $     (0.04)
                                                       ==========          =============
Weighted average shares outstanding                     7,474,382              7,464,382
                                                       ==========          =============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        4
<PAGE>

                  ROYAL FINANCIAL CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                      Three Months Ended
                                                                                         November 30,
                                                                               -------------------------------
                                                                                  2000                  1999
                                                                               ---------             ---------
                                                                                         (Unaudited)
<S>                                                                            <C>                   <C>
Cash flows from operating activities
     Net loss                                                                  $(352,765)            $(291,551)
     Adjustments to reconcile net loss to net cash provided by
          (used in) operating activities
               Depreciation                                                        3,355                14,498
               Amortization                                                         --                  13,528
               Loss on sale of office property and equipment                        --                  26,400
               Provision for losses on Manufactured Home inventory                  --                  11,525
               Changes in operating assets and liabilities                          --
                    Receivables                                                  471,475                     -
                    Prepaid expenses and other assets                            277,833                75,790
                    Accounts payable and accrued liabilities                    (104,526)                9,687
                                                                               ---------             ---------
                         Net cash provided by (used in) operating activities     295,372              (140,123)
                                                                               ---------             ---------
Net cash provided by (used in) investing activities
     Purchase of additional land                                                    --                 (56,143)
     Principal collections on tax lien certificates                                  222                   691
     Purchases of property and equipment                                            (552)              (16,340)
     Sale of property and equipment                                                8,073                10,175
     Investment in loans                                                         (12,749)              (69,191)
     Collection on loans                                                            --                  49,130
     Disposition of loans                                                           --                  62,533
     Sale of real estate and other assets                                           --                 410,163
     Purchases of real estate properties and other investments                      --                 (87,758)
                                                                               ---------             ---------
                         Net cash provided by (used in) investing activities      (5,006)              303,260
                                                                               ---------             ---------
Net increase in cash and cash equivalents                                        290,366               163,137

Cash and cash equivalents, beginning of period                                    48,715               315,927
                                                                               ---------             ---------
Cash and cash equivalents, end of period                                       $ 339,081             $ 479,064
                                                                               =========             =========
Supplemental information on cash flows:
                          Supplemental Cash Flow Information
                                   Interest paid                               $  27,313
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       5
<PAGE>

                  ROYAL FINANCIAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                November 30, 2000
                                   (Unaudited)

NOTE A - ORGANIZATION AND BASIS OF PRESENTATION

ORGANIZATION

         Royal Financial Corporation (together with its subsidiaries, the
"Company") is a real estate investment company with a portfolio consisting of
a manufactured housing community in Florida, undeveloped land in Florida
zoned for manufactured housing development, and non-performing mortgage loans
collateralized by commercial real estate properties.

         The Company came into being in August 1998 when Royal Mortgage
Corporation and Davenport Ventures, Inc. merged and the name was changed to
Royal Financial Corporation. The controlling shareholder group of both
companies prior to the merger was substantially the same. Accordingly, the
merger was treated as a combination of entities under common control.

BASIS OF PRESENTATION

         The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Item 310(b) of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In management's opinion, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation of the unaudited interim financial statements have
been included. Operating results for interim periods reflected are not
necessarily indicative of the results that may be expected for a full fiscal
year. These financial statements should be read in conjunction with the
financial statements and notes thereto for the year ended August 31, 2000
included in the Company's Form 10-KSB.

NOTE B - ACCOUNTING FOR LONG-LIVED ASSETS TO BE DISPOSED OF

         Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be disposed
of", requires that long-lived assets to be disposed of and for which
management has committed to a plan to dispose of the assets, be reported at
the lower of carrying amount or fair value less cost to sell. During the past
fiscal year, the Company developed a plan to begin marketing for sale the
Manufactured Housing Community. Subsequently, the Company sold the
Manufactured Housing Community during December 2000 for $2.6 million, less
closing costs of approximately $239,000. Accordingly, the Company's
investment in Property, Plant, and Equipment - Manufactured Housing Community
is reflected in the accompanying consolidated balance sheet as of November
30, 2000 at the lower of carrying amount on fair value less cost to sell and
no depreciation has been recognized for this asset in the accompanying
consolidated statement of operations for the three months ended November 30,
2000. Additionally, the Company's current investment strategy is to shift a
majority of the Company's assets to cash and cash equivalents, as discussed
in Note C. Accordingly, all investments of the Company are reflected in the
accompanying consolidated balance sheet as of November 30, 2000 at the lower
of carrying value or at estimated realizable values.

NOTE C - SUBSEQUENT EVENTS

         During December 2000, the Company sold its Manufactured Housing
Community for $2.6 million, less closing costs of approximately $239,000. The
proceeds from this sale allowed the Company to retire its Senior Convertible
Debentures of $1,290,000 plus accrued interest. In addition, the Company paid
$1,046,413 in a special distribution, 100% of which is a return of capital
for tax purposes, to shareholders of record at November 30, 2000 which
represented a special distribution rate of $.14 per share with payment date
being December 20, 2000.

                                       6
<PAGE>

NOTE D - PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment - manufactured housing community consist of the
following:

<TABLE>
<CAPTION>
                                                                   November 30,
                                                                       2000
                                                                   ------------
<S>                                                                <C>
        Land                                                       $   929,515
        Land improvements and buildings                              1,408,258
        Furniture, fixtures and equipment                               89,591
                                                                   ------------
                                                                     2,427,364
        Less accumulated depreciation                                  (74,437)
                                                                   ------------
        Net                                                        $ 2,352,927
                                                                   ------------

Office property and equipment consist of the following:
        Furniture, fixtures and equipment                          $    98,312
        Less accumulated depreciation                                  (81,380)
                                                                   ------------
        Net                                                        $    16,932
                                                                   ============
</TABLE>

NOTE E - CHANGES IN STOCK OPTIONS

         On December 16, 1999, the Company issued stock options to the
Company's directors to purchase a total of 40,000 shares of the Company's
common stock at an exercise price of $0.20 per share. These options are fully
vested at date of grant and expire in five years.

          As of November 30, 2000 there were a total of 1,330,000 options
outstanding at a weighted average exercise price of $2.28.

NOTE F - RELATED PARTY TRANSACTIONS

         At November 30, 2000, the Company had a loan to e.io, inc. of
$208,851 including interest at 8%, and owns shares of e.io, inc. common stock
at a cost of $77,047. Officers of the Company owned an aggregate of
approximately 11% of the outstanding stock at August 31, 2000. On December 1,
2000, e.io, inc. raised additional capital which diluted the officers of
Royal to 1% of the outstanding stock of e.io, inc.

NOTE G - SEGMENT REPORTING

         The Company currently has two major operating segments:
Manufactured Housing and Residential.

         The Manufactured Housing Segment has two primary sources of revenue:
rental of homesites and the sale of manufactured homes. The primary source of
revenue for the Residential Segment is disposition/sale of mortgage loans and
real estate properties. In computing income (loss) by operating segment, the
following items were considered in the Corporate and Other category: interest
expense, payroll and administrative expenses not directly attributable to
other segments and financing costs. Corporate assets are principally
investment in land, cash, furniture, fixtures and equipment, receivables and
deferred charges.

                                       7
<PAGE>

<TABLE>
<CAPTION>
                               Three Months Ended November 30, 2000
-------------------------------------------------------------------------------------------------
                                       Manufactured                    Corporate
                                          Housing     Residential      and other     Consolidated
                                       -----------    -----------    -----------    -----------
<S>                                    <C>            <C>            <C>            <C>
Lot rental income                      $    58,755    $      --      $      --      $    58,755
Manufactured home sales                    202,990           --             --          202,990
Manufactured home cost of goods sold      (287,999)          --             --         (287,999)
Interest and other                            --            8,113           --            8,113
Loss on sale of loans                         --             --             --             --
Gain on sale of real estate                   --             --             --             --
                                       -----------    -----------    -----------    -----------
               Total revenue           $   (26,254)   $     8,113    $      --      $   (18,141)
Net Loss                               $   (89,553)   $  (115,814)   $  (147,398)   $  (352,765)
Depreciation                           $      --      $       767    $     2,588    $     3,355
Identifiable assets                    $ 2,507,927    $ 1,597,667    $   591,086    $ 4,696,680
Capital expenditures                   $      --      $      --      $       552    $       552

<CAPTION>

                               Three Months Ended November 30, 1999
-------------------------------------------------------------------------------------------------
                                       Manufactured                  Corporate
                                         Housing      Residential     and other    Consolidated
                                       -----------    -----------    -----------    -----------
<S>                                    <C>            <C>            <C>            <C>
Lot rental income                      $    43,275    $     --       $     --       $   43,275
Manufactured home sales                     56,500          --             --           56,500
Manufactured home cost of goods sold       (51,664)         --          (51,664)
Interest and other                            --            --            3,447          3,447
Loss on sale of loans                         --            (492)          --             (492)
Gain on sale of real estate                   --          65,803           --           65,803
                                       -----------    -----------    -----------    -----------
               Total revenue           $    48,111   $    65,311    $     3,447    $   116,869
Net income (loss)                      $   (24,127)  $    48,127    $  (315,551)   $  (291,551)
Depreciation                           $      --     $      --      $    14,498    $   14,498
Identifiable assets                    $ 3,594,294   $ 2,702,568    $ 1,915,579    $ 8,212,441
Capital expenditures                   $    16,554   $    79,902    $   132,976    $   229,432
</TABLE>

ITEM 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS

         The following discussion should be read in conjunction with the
Company's unaudited financial statements and notes thereto included herein,
and the Form 10-KSB for the fiscal year ended August 31, 2000. In connection
with, and because it desires to take advantage of, the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995, the
Company cautions readers regarding certain forward looking statements in the
following discussion and elsewhere in this report and in any other statement
made by, or on the behalf of the Company, whether or not in future filings
with the Securities and Exchange Commission. Forward looking statements are
statements not based on historical information and which relate to future
operations, strategies, financial results or other developments. Forward
looking statements are necessarily based upon estimates and assumptions that
are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond the Company's
control and many of which, with

                                       8
<PAGE>

respect to future business decisions, are subject to change. These
uncertainties and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any forward
looking statements made by, or on behalf of, the Company. The Company
disclaims any obligation to update forward looking statements.

OVERVIEW

         The Company was originally organized as Davenport Ventures, Inc.
("Davenport") in the state of Nevada on August 18, 1993. In June 1998,
controlling interest in the Company was acquired by certain shareholders of
Royal Mortgage Corporation. On August 10, 1998 the shareholders of Davenport
and Royal Mortgage Corporation, a Texas corporation ("RMC") approved the terms
of a Restated and Amended Agreement and Plan of Merger between the two
entities. As a result of the merger, the total number of common shares
outstanding as of August 18, 1998 (the effective date of the merger) was
7,464,382. The Company changed its name from Davenport Ventures, Inc. to Royal
Financial Corporation and changed its year end from December 31 to August 31.

         In March 1999, the Company's Form 10-SB was approved by the
Securities and Exchange Commission and the Company became a reporting company
under the Securities Exchange Act of 1934, as amended.

         The Company is a real estate financial holding company which invests
in the asset backed real estate and mortgage markets. The Company's
investments include commercial non-performing mortgages, tax lien certificates
which result from unpaid property taxes owed to municipal and county taxing
authorities, ownership and operation of a manufactured housing community in
Florida, and land for future development of manufactured housing communities.

         The Company is in the process of selling its operating assets to
raise cash to pay its debts. In December 2000, the Company sold its
Manufactured Housing Community, retired its Senior Convertible Debentures and
paid a $1,046,413 special distribution ($.14 per share) to shareholders of
record at November 30, 2000. Once a substantial portion of the Company's
assets have been converted to cash, the Board will evaluate the real estate
market and make a decision regarding the reinvestment of funds or the return
of capital to shareholders.

SOURCES OF REVENUES

         Currently, the majority of the Company's net revenue is derived from
the sale of manufactured homes and lot rental income from the Company's
manufactured housing community in Florida. Due to the capital nature of many
of the Company's investments, the timing of cash flows from dispositions as
well as funds needed for investment opportunities which may arise has a
certain degree of uncertainty. Management has concluded that the most prudent
use of the Company's cash reserves at this time is in low risk investments
that are readily convertible into cash.

RESULTS OF OPERATIONS - THREE MONTHS ENDED NOVEMBER 30, 2000 AND 1999

         Total revenues increased approximately $96,659 or 59% to $261,745 for
the three months ended November 30, 2000, as compared to $165,086. The primary
increase in revenue is from the sales of manufactured homes of $202,985 as the
Company is liquidating these homes in the Manufactured Housing Community that
sold in early December 2000.

         Total operating expenses, net of the cost of sales of the
manufactured homes sold, decreased approximately $31,350 or 10% to $307,311
for the three months ended November 30, 2000 as compared to $338,661 for the
three months ended November 30, 1999.

         The increase in interest income of approximately $4,666 is due to
higher average idle cash balances in the current comparable periods.

LIQUIDITY AND CAPITAL RESOURCES

         In December, 1999, the Company's Board of Directors approved a change
in investment strategy to shift the majority of the Company's assets to cash
and cash equivalents in the coming months. Once a substantial portion of the
Company's assets have been converted to cash and cash equivalents, the Board
will evaluate the real estate market and make a decision regarding the
investment of funds or the return of additional capital to stockholders.

         Cash and cash equivalents are $339,081 and $48,715 at November 30,
2000 and August 31, 2000, respectively. The increase is attributable primarily
to collections of receivables and reduction of manufactured home inventories.

                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

                  The Company is currently involved as plaintiff in various
lawsuits of a nature regularly incurred in the ordinary course of the
Company's business. Neither the Company nor any of its subsidiaries is
involved in any litigation, arbitration or other proceedings relating to

                                       9
<PAGE>

claims which are material to the Company's financial position or results of
operations. To the best of management's knowledge, there is no pending or
threatened litigation against the Company or any of its subsidiaries.

ITEM 2.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

<TABLE>
<S>               <C>
         2.1      Restated and Amended Agreement and Plan of Merger*

         3.1      Articles of Incorporation, as amended of Davenport Ventures, Inc.*

         3.2      By Laws of Davenport Ventures, Inc.*

         3.3      Articles of Merger of Royal Mortgage Corporation into Davenport
                  Ventures, Inc.*

         3.4      Articles of Incorporation, as amended, or Royal Mortgage Corporation*

         3.5      By Laws of Royal Mortgage Corporation

         3.6      Articles of Incorporation, as amended, of Royal Mortgage Brokerage,
                  Inc.*

         3.7      By Laws of Royal Mortgage Brokerage, Inc.*

         3.8      Authorization to Transact Business in Florida of Royal Mortgage
                  Brokerage, Inc.*

         3.9      Articles of Incorporation of Walden Woods of Sugarmill, Inc.*

         3.10     By Laws of Walden Woods of Sugarmill, Inc.*

         3.11     Articles of Incorporation of Walden Woods of Sugarmill Sales, Inc.*

         4.1      8 1/2% Convertible Senior Debenture due 2000 (filed as Exhibit No 4.1
                  for the fiscal quarter ended February 28, 1999 and incorporated herein
                  by reference)

         27       Financial Data Schedule (filed herewith) *filed as exhibits with the
                  same numbers as indicated above on Form 10-SB and incorporated herein
                  by reference.
</TABLE>

(b)      No reports on Form 8-K have been filed during the period for which this
         report is filed

                                       10
<PAGE>

                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

                                       ROYAL FINANCIAL CORPORATION
                                              (Registrant)

Date:    January 16, 2000               /s/  Michael J. Pilgrim
                                       -------------------------------------
                                        Michael J. Pilgrim, President & CEO

Date:    January 16, 2000               /s/  Mark J. Teinert
                                       -------------------------------------
                                        Mark J. Teinert, Secretary/Treasurer


















                                       11