SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q



                   Quarterly Report Under Section 13 or 15(d)
                     of the Securities Exchange Act of 1934


For the Quarter Ended                                    Commission File Number
  September 30, 1996                                              0-19516


                             SUNRISE RESOURCES, INC.
             (Exact name of registrant as specified in its charter)


      MINNESOTA                                                 41-1632858
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

                        5500 Wayzata Boulevard, Suite 725
                         Golden Valley, Minnesota 55416
                    (Address of principal executive offices)

               Registrant's telephone number, including area code
                                 (612) 593-1904

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

                 Yes  [X]        No [ ]


Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

     7,188,721 shares of Common Stock, $.01 par value as of November 6, 1996



                                        1


<PAGE>

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements
        Included herein is the following unaudited financial information:

        Consolidated Balance Sheets as of September 30, 1996 and March 31, 1996.

        Consolidated  Statements of Operations for three month and six
        month periods ended September 30, 1996 and 1995.

        Consolidated  Statements  of Cash  Flows  for  the  six  month
        periods ended September 30, 1996 and 1995.

        Notes to Consolidated Financial Statements.

                                        2


<PAGE>

SUNRISE RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                             September 30,            March 31,
                                                                                1996                   1996
                                                                             -------------          -----------
ASSETS                                                                       (Unaudited)
<S>                                                                          <C>                    <C>
   Cash and cash equivalents                                                 $  1,834,000           $ 1,629,000
   Accounts receivable, less allowance for doubtful accounts
     of $755,000 and $626,000                                                   3,908,000             3,537,000
   Income taxes receivable                                                             --             1,157,000
   Inventory held for sale                                                        108,000               123,000
   Loans receivable, less allowance for possible losses of $2,837,000
     and $2,773,000                                                            11,356,000            14,074,000

   Investment in leasing operations:
     Direct financing leases                                                   57,822,000            65,165,000
     Operating leases, less accumulated depreciation of
       $21,612,000 and $19,927,000                                             35,590,000            28,962,000
     Equipment held for lease                                                   9,334,000             6,474,000
      Initial direct costs                                                        574,000               670,000
                                                                             ------------           -----------
       Total investment in leasing operations                                 103,320,000           101,271,000
                                                                             ------------           -----------

   Furniture and fixtures, less accumulated depreciation
     of $457,000 and $396,000                                                     469,000               515,000
   Other assets                                                                   123,000               172,000
   Goodwill and non-compete agreement, less
      accumulated amortization of $72,000 and $50,000                             585,000               607,000
                                                                             ------------           -----------
       Total assets                                                          $121,703,000          $123,085,000
                                                                             ============           ===========

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES
   Financing arrangements:
     Borrowings under lines of credit                                        $ 24,585,000          $ 18,298,000
     Note payable to King Management Corporation                                1,593,000             4,127,000
     Recourse participations in loans receivable                                1,702,000             4,582,000
     Discounted lease rentals                                                  46,897,000            56,520,000
                                                                             ------------           -----------
       Total financing arrangements                                            74,777,000            83,527,000
                                                                             ------------           -----------
   Accounts payable                                                             9,246,000             4,837,000
   Accrued liabilities                                                          4,128,000             3,919,000
   Accrued income taxes                                                           731,000                    --
   Deferred tax liability                                                       1,498,000             1,498,000
                                                                             ------------           -----------
       Total liabilities                                                       90,380,000            93,781,000
                                                                             ------------           -----------

COMMITMENTS AND CONTINGENCIES (Note 6)

SHAREHOLDERS' EQUITY
   Common stock, par value $.01 per share, authorized
     17,500,000 shares, 7,189,000 shares issued
     and outstanding at both dates                                                 72,000                72,000
   Capital stock, undesignated, par value $.01 per share,
     authorized 2,500,000 shares, none issued or outstanding                           --                    --
   Additional paid-in capital                                                  25,601,000            25,601,000
   Retained earnings                                                            5,650,000             3,631,000
       Total shareholders' equity                                              31,323,000            29,304,000
                                                                             ------------           -----------
       Total liabilities and shareholders' equity                            $121,703,000          $123,085,000
                                                                             ============           ===========
</TABLE>

The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.


                                        3


<PAGE>

SUNRISE RESOURCES, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
<TABLE>
<CAPTION>

                                                       Three Months                          Six Months
                                                    Ended September 30,                  Ended September 30,
                                            ------------------------------------  ------------------------------------
                                                   1996               1995               1996                1995
                                            -----------------   ----------------  -----------------   ----------------
<S>                                          <C>                <C>                 <C>                <C>
REVENUES
   Operating leases                          $     6,142,000    $     5,427,000     $    11,866,000    $    11,060,000
   Direct financing leases                         2,046,000          2,573,000           4,221,000          4,873,000
   Equipment sales                                 2,314,000          4,563,000           4,801,000          6,207,000
   Interest Income                                   178,000            661,000             397,000          1,260,000
   Fee income                                         58,000            128,000             123,000            230,000
                                             ---------------    ---------------     ---------------    ---------------
     Total Revenues                               10,738,000         13,352,000          21,408,000         23,630,000
                                             ---------------    ---------------     ---------------    ---------------

COSTS AND EXPENSES
   Depreciation                                    3,682,000          3,443,000           6,838,000          7,072,000
   Interest                                        1,603,000          2,156,000           3,313,000          4,240,000
   Provision for lease and loan losses               205,000            710,000             426,000            758,000
   Cost of equipment sold                          1,885,000          4,208,000           4,065,000          5,626,000
   Compensation expense                            1,003,000            798,000           1,784,000          1,778,000
   Other operating expenses                          580,000            653,000           1,101,000          1,286,000
                                             ---------------    ---------------     ---------------    ---------------
     Total Costs and Expenses                      8,958,000         11,968,000          17,527,000         20,760,000
                                             ---------------    ---------------     ---------------    ---------------

INCOME FROM OPERATIONS
   BEFORE PROVISION
   FOR INCOME TAXES                                1,780,000          1,384,000           3,881,000          2,870,000

PROVISION FOR INCOME TAXES                           854,000            552,000           1,862,000          1,147,000
                                             ---------------    ---------------     ---------------    ---------------

NET INCOME                                   $       926,000    $       832,000     $     2,019,000    $     1,723,000
                                             ===============    ===============     ===============    ===============


NET INCOME PER COMMON
   AND COMMON
   EQUIVALENT SHARE                          $         0.13     $          0.12     $          0.28    $          0.24
                                             ==============     ===============     ===============     ==============

WEIGHTED AVERAGE NUMBER
   OF COMMON AND
   COMMON EQUIVALENT
   SHARES OUTSTANDING                              7,222,000          7,189,000           7,202,000          7,191,000
                                             ===============    ===============     ===============    ===============
</TABLE>

The accompanying notes to the consolidated  financial statements are an integral
part of these statements.


                                        4


<PAGE>

SUNRISE RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>


                                                                                 Six Months
                                                                             Ended September 30,
                                                                          1996                1995
                                                                       ----------          ----------
<S>                                                                 <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income                                                          $   2,019,000        $  1,723,000
Adjustments to reconcile net income to net cash
      provided by operating activities:
    Provision for lease and loan losses                                   410,000             758,000
    Depreciation and amortization                                       6,860,000           7,094,000
    Change in operating assets and liabilities:
        Accounts receivable                                              (499,000)         (2,143,000)
        Income taxes receivable                                         1,157,000                  --
        Other assets                                                      145,000             (70,000)
        Inventory held for sale                                            15,000             146,000
        Accounts payable                                                4,409,000            (591,000)
        Accrued liabilities                                               209,000           1,934,000
        Accrued income taxes                                              731,000             (23,000)
                                                                  ---------------     ---------------
           NET CASH PROVIDED BY OPERATING
              ACTIVITIES                                               15,456,000           8,828,000
                                                                  ---------------     ---------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Investment in loans receivable                                     (1,221,000)        (29,657,000)
    Principal portion of loans receivable collected                     3,875,000          25,327,000
    Purchase of equipment for lease                                   (22,364,000)        (24,805,000)
    Principal portion of direct financing leases collected             13,228,000          11,081,000
    Purchase of furniture and fixtures                                    (19,000)           (102,000)
                                                                  ----------------    ---------------
           NET CASH USED IN INVESTING ACTIVITIES                       (6,501,000)        (18,156,000)
                                                                  ----------------    ---------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Borrowings on lines of credit                                       9,700,000          20,020,000
    Payments on lines of credit                                        (3,413,000)        (16,350,000)
    Proceeds from discounted lease financing                            4,339,000          20,029,000
    Payments on discounted lease financing                            (13,962,000)        (11,202,000)
    Proceeds from participations in loans receivable                           --             280,000
    Payments on participations in loans receivable                     (2,880,000)         (1,320,000)
    Proceeds from note payable to King Holding Corporation                     --             224,000
    Payments on note payable to King Holding Corporation               (2,534,000)         (3,603,000)
                                                                  ---------------     ---------------
           NET CASH (USED IN) PROVIDED BY FINANCING
              ACTIVITIES                                               (8,750,000)          8,078,000
                                                                  ----------------    ---------------

NET INCREASE (DECREASE) IN CASH AND
    CASH EQUIVALENTS                                                      205,000          (1,250,000)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                        1,629,000           2,398,000
                                                                  ---------------     ---------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                          $   1,834,000        $  1,148,000
                                                                  ===============     ===============
</TABLE>


The accompanying notes to the consolidated  financial statements are an integral
part of these statements.

                                        5


<PAGE>

SUNRISE RESOURCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTH PERIODS ENDED SEPTEMBER 30, 1996 and 1995 (Unaudited)

1.   ACCOUNTING POLICIES

     In the opinion of management the accompanying  financial statements contain
     all  adjustments  necessary  to present  fairly the  financial  position of
     Sunrise  Resources,  Inc. and Subsidiaries  (the "Company") as of September
     30, 1996 and March 31, 1996,  the Company's  results of operations  for the
     three  months and six months  ended  September  30, 1996 and 1995,  and the
     Company's cash flows for the six months ended  September 30, 1996 and 1995.
     All such adjustments are of a normal and recurring nature.

     These  statements  should  be read in  conjunction  with  the  Notes to the
     Financial  Statements contained in the Company's Annual Report on Form 10-K
     for the fiscal year ended March 31,  1996,  filed with the  Securities  and
     Exchange  Commission,  and with  Management's  Discussion  and  Analysis of
     Financial Condition and Results of Operations  appearing on pages 9 through
     15 of this  quarterly  report.  Results  for the  interim  periods  are not
     necessarily indicative of sales trends or future results and performance.

2.   INCOME TAXES

     Income tax expense has been provided based on management's  estimate of the
     annualized  effective  tax rate of 48% for the three and six month  periods
     ended September 30, 1996, and 40% for the three and six month periods ended
     September 30, 1995.

3.   LOANS RECEIVABLE

     Loans by Collateral Type
     The composition of the loans receivable portfolio by collateral type was as
     follows:
<TABLE>
<CAPTION>

                                                                         September 30,          March 31,
                                                                             1996                  1996
                                                                        ---------------     --------------
<S>                                                                     <C>                <C>

     Commercial loans, collateralized primarily by receivables          $       480,000    $     1,282,000
     Commercial loans, collateralized by equipment, marketable
       securities and other                                                   5,484,000          7,563,000
     Real estate loans                                                        2,376,000          4,205,000
     Impaired loans                                                           8,416,000          8,150,000
     Non-recourse participations                                             (2,455,000)        (4,216,000)
                                                                        ---------------    ---------------
                                                                             14,301,000         16,984,000
     Less:
       Allowance for possible loan losses                                    (2,837,000)        (2,773,000)
       Unearned fees from loan origination                                     (108,000)          (137,000)
                                                                        ---------------    ---------------
                                                                        $    11,356,000    $    14,074,000
                                                                        ===============    ===============
</TABLE>

Loan Portfolio Activity and Allowance for Possible Loan Losses -

As of September 30, 1996 and March 31, 1996, the Company's  recorded  investment
in  impaired  and  other  loans and the  related  valuation  allowances  were as
follows:

<TABLE>
<CAPTION>
                                        September 30, 1996                     March 31, 1996
                                ------------------------------------    -----------------------------------
                                  Recorded           Valuation             Recorded            Valuation
                                 Investment          Allowance            Investment           Allowance
<S>                              <C>             <C>                 <C>                <C>
     Impaired loans -
       Nonaccrual                $  8,191,000    $    2,612,000      $     7,925,000    $     2,514,000
       Other                          225,000           225,000              225,000            225,000
     Performing loans               8,340,000                --           13,050,000             34,000
     Nonrecourse participations    (2,455,000)               --          ( 4,216,000)                --
                                 ------------    --------------       --------------    ---------------
                                 $ 14,301,000    $    2,837,000      $    16,984,000    $     2,773,000
                                 ============    ==============       ==============     ==============
</TABLE>


                                        6
<PAGE>


     The activity in the allowance for possible loan losses during the three and
     six month periods ended September 30, 1996 and 1995 was as follows:
<TABLE>
<CAPTION>

                                                          Three Months                      Six Months
                                                     Ended September 30,               Ended September 30,
                                                 ----------------------------       ------------------------------
                                                   1996                1995           1996                1995
                                                 ----------           ----------    ----------          ----------
<S>                                              <C>                  <C>           <C>                 <C>

         Balance, beginning of period            $2,803,000           $2,155,000    $2,773,000          $2,125,000
         Provisions for loan losses                  34,000              605,000        64,000             635,000
         Write-offs                                      --                   --            --                  --
                                                 ----------           ----------    ----------          ----------
         Balance, end of period                  $2,837,000           $2,760,000    $2,837,000          $2,760,000
                                                 ==========           ==========    ==========          ==========
</TABLE>


     The  average  investment  in  impaired  loans  for the  three and six month
     periods ended September 30, 1996 and 1995 was $8.4 million,  $10.2 million,
     $8.3 million and $7.2 million, respectively.

     Interest  payments  received  on  impaired  loans are  recorded as interest
     income unless collection of the remaining recorded  investment is doubtful,
     at which time  payments  received are recorded as  reductions of principal.
     The Company did not recognize any interest income on impaired loans for the
     respective three and six month periods ended September 30, 1996 and 1995.

     When,  in the opinion of  management,  a reasonable  doubt exists as to the
     collectibility  of interest  or fee  income,  the accrual of such income is
     discontinued and uncollected income accruals are reversed. During the three
     and six months  ended  September  30,  1996 and 1995,  the  Company did not
     recognize fee and interest income totaling $139,000, $736,000, $266,000 and
     $0,  respectively,  relating  to  the  impaired  loans  referred  to in the
     preceding paragraph.

4.   DISCOUNTED LEASE RENTALS

     Discounted lease rentals consist of the following:

                                      September 30,        March 31,
                                          1996                1996
                                      --------------    ---------------

         Non-recourse                $    37,612,000    $    43,969,000
         Recourse                          9,285,000         12,551,000
                                     ---------------    ---------------
                                     $    46,897,000    $    56,520,000
                                     ===============    ===============

5.   ARRANGEMENTS

     Lines of Credit -
     The Company has a $25 million line of credit  facility  with a bank for use
     in its normal operations. Advances under this line of credit are subject to
     a borrowing  base  limitation  of $25 million at September  30,  1996.  The
     balance outstanding as of quarter end was $24.6 million. Advances under the
     line are at prime, and are  collateralized  by substantially  all otherwise
     unsecured assets of the Company. This line expired as of September 30, 1996
     and was renewed  under  identical  terms for another  twelve  month  period
     ending September 30, 1997.

     Note Payable to King Management Corporation -
     At September 30, 1996, the Company had an  outstanding  note payable to The
     King Management  Corporation,  an affiliate of Peter King,  former Chairman
     and member of the Board. This note was  collateralized by certain lease and
     rental  equipment.  The note was payable in semi-monthly  installments  and
     bore interest at prime.  The maturity date was February  1996. At September
     30, 1996,  the Company was in default  with regards to that note.  The note
     was subsequently paid off in connection with recent  financing.  See Note 7
     "Subsequent Events".


                                        7


<PAGE>


     Event of Non-Compliance -
     As of March 31,  1996,  the Company was not in  compliance  with a recourse
     discounted loan agreement,  with a balance of  approximately  $5.6 million,
     and had not repaid a note payable to The King Management  Corporation which
     matured in  February  1996 with a balance of  approximately  $4.1  million.
     These  events  resulted in an event of  noncompliance  under  cross-default
     provisions of the Company's bank line of credit agreement.  As of September
     30, 1996, balances outstanding under the recourse discounted loan agreement
     and The King Management  Corporation note were  approximately  $4.8 million
     and $1.6 million,  respectively.  On November 8, 1996, all debt outstanding
     to The King  Management  Corporation  was repaid in full.  This resulted in
     eliminating  all related  defaults  under that  facility.  In addition,  on
     November 8, 1996, the Company amended the terms of its recourse  discounted
     loan  agreement,  simultaneously  receiving  a  waiver  of  all  events  of
     non-compliance under that agreement.

6.   COMMITMENTS AND CONTINGENCIES

     Litigation -
     Peter  King has  commenced  arbitration  proceedings  against  the  Company
     relating to the  February  1995 merger of the  Company  with The P.J.  King
     Companies,  Inc. (d/b/a  International  Leasing Corporation) ("ILC") on the
     basis that, in his view,  problems underlying the net investment in several
     direct  financing  loans and leases  arose prior to the merger and were not
     disclosed. He has also asserted other claims regarding valuation of certain
     other  assets of the  Company at the time of the  merger.  In  addition  to
     seeking money damages or additional shares of the Company Common Stock, Mr.
     King may attempt to obtain rescission of the merger. Such an attempt, which
     will  be  resisted  by the  Company,  could  result  in Mr.  King  and  his
     affiliates  reacquiring  ownership of ILC's vendor  leasing  business as it
     existed in  February  1995 and all other ILC assets  and  liabilities.  The
     matter is currently scheduled to be heard in late November 1996.

     On August 15,  1996,  a lessee of the Company  filed for  protection  under
     Chapter 11 of the Bankruptcy  Code.  The Bankruptcy  court has approved the
     lessee's  motion to reject its lease with the Company.  After having made a
     $6.8 million  provision  for loss on lease  receivables  pertaining to this
     customer in fiscal 1995,  the  Company's  net  investment  in the lease was
     approximately  $363,000 as of September 30, 1996. The Company  believes the
     value of the leased  equipment  will be adequate to cover the Company's net
     investment.

7.   EVENTS SUBSEQUENT TO SEPTEMBER 30, 1996

     On October 1, 1996, the Company and The King Management  Corporation signed
     an amendment to the original  security  agreement dated June 22, 1995. This
     amendment  authorized  the  borrowing of $1,955,000 by the Company from The
     King Management  Corporation.  Such borrowing was secured by certain leased
     equipment and payable in 60 days.  All amounts  outstanding  were repaid on
     November 8, 1996.

     On October 31, 1996, Sunrise Resources,  Inc., Sunrise Leasing  Corporation
     and  Sunrise  Funding  Corporation  I  entered  into  an  agreement  with a
     subsidiary of Dougherty  Dawkins,  Inc. to place up to $20 million of notes
     issued by Sunrise Funding Corporation to private  institutional  investors.
     On November 8, 1996,  Sunrise  Funding  Corporation I became a wholly-owned
     subsidiary of Sunrise Leasing Corporation. The notes are secured by certain
     leases contributed to the subsidiary by Sunrise Leasing  Corporation.  This
     securitization  facility  was closed on November  8, 1996,  with an initial
     funding of  $13,000,000.  The funds were used to repay the $3.1  million of
     loans from The King  Management  Corporation,  to pay accrued  interest and
     fees in connection with the amendment of the Company's recourse  discounted
     loan agreement (under which the Company had been in default),  and to repay
     the $9.4 million  outstanding under the Company's bank line of credit. This
     reduction to the outstanding  bank line of credit makes credit available to
     fund additional equipment purchases.


                                        8


<PAGE>

ITEM 2. Management's  discussion and analysis of financial condition and results
of operations.

Revenues

The Company classifies its lease  transactions,  as required by the Statement of
Financial Accounting Standards No. 13 ("FASB 13"), as either direct financing or
operating leases. Revenue, costs and resulting income are recognized during each
of the accounting periods during the term of the lease. The allocation of income
among the  accounting  periods  within a lease term will vary depending upon the
lease classification.

The  Company  segregates  the sources of its revenue  into five  categories  for
financial  statement  purposes:  (i)  operating  leases;  (ii) direct  financing
leases; (iii) sales of new and used equipment; (iv) interest income; and (v) fee
income.

Operating Leases.  All leases that are not classified as direct financing leases
are  treated  as  operating  leases.  Monthly  payments  from  these  leases are
recognized as leasing  revenue.  The Company's  cost of the leased  equipment is
recorded on the balance sheet and is depreciated on a  straight-line  basis over
the  lease  term  to  the  Company's   estimate  of  residual  value.   Revenue,
depreciation  expense and the resultant margin for operating leases are recorded
evenly  over the term of the lease.  If the lease is  discounted  to a financial
institution, the related interest expense declines over the term of the lease as
the principal is reduced, with the resultant net margin being lower in the early
periods of the lease and higher in the later periods.

Direct Financing  Leases.  These leases transfer  substantially all benefits and
risks of equipment  ownership to the lessee. A lease is a direct financing lease
if the creditworthiness of the customer and the collectibility of lease payments
are reasonably certain and it meets one of the following criteria: (i) the lease
transfers  ownership  of the  equipment  to the customer by the end of the lease
term; (ii) the lease contains a bargain purchase option; (iii) the lease term at
inception  is at  least  75% of  the  estimated  economic  life  of  the  leased
equipment;  or (iv) the present value of the minimum lease  payments is at least
90% of the fair value of the leased equipment at inception of the lease.

Direct financing leases consist of future lease payments plus the residual value
(collectively  referred  to as the "gross  investment").  Residual  value is the
estimated  fair market value at the time of lease  termination.  The  difference
between the gross investment in the lease and the cost (or carrying  amount,  if
different)  of the leased  equipment is recorded as unearned  revenue.  The "net
investment"  in the lease is the gross  investment  less unearned  revenue.  The
unearned  revenue is amortized to leasing revenue over the lease term to produce
a constant  percentage return on the net investment  whether or not the lease is
discounted to a financial institution.

Equipment Sales.  Revenue from equipment sales transactions is recognized by the
Company at the time title to the equipment  passes to the customer.  Leases that
entitle the customer to purchase the leased  equipment  for a nominal sum at the
end of the lease term and which are  discounted  on a  nonrecourse  basis at the
lease   commencement   date,  leaving  the  Company  with  no  interest  in  the
transaction, are treated by the Company as a sale of equipment.

Interest Income. Interest income is accrued on unimpaired loans receivable under
the effective interest method.  Interest income is not recognized on loans which
have been identified by the Company as impaired.

Fee Income.  The  Company  earns fee income  principally  for  arranging  leases
between  unrelated  parties.  These fees are  recognized  at the closing of such
transactions.  At  lease  termination,  the  Company  may  also be  entitled  to
additional  fee income equal to a portion of the net proceeds  from a subsequent
lease or sale of the equipment.  The Company's portion of such net proceeds,  if
any, is reported  as fee income at the time of the  subsequent  lease or sale of
the equipment.

Financing

As of September 30, 1996, the Company's  total  borrowings of $74.8 million were
comprised of $37.6 million and $37.2 million in  nonrecourse  and recourse debt,
respectively,   representing   50.3%   and  49.7%  of  total   funds   borrowed,
respectively.  This  compares  to March 31,  1996  where the  Company  had total
borrowings of $83.5  million,  which were  comprised of  nonrecourse  discounted
lease rentals  totaling  $44.0 million and recourse  borrowings  totaling  $39.5
million, representing 52.6% and 47.4%, of total funds borrowed.


                                        9


<PAGE>

In addition to the finance arrangements described above, the Company had entered
into certain SFR lending transactions prior to fiscal 1995, and sold nonrecourse
participation  in those loans to financial  institutions.  As of  September  30,
1996,  these  loans and the  related  nonrecourse  participations  totaled  $2.5
million.   Since  the   Company's   only   obligation   with  respect  to  these
participations  is as a servicer  for a fee,  the loans and related  nonrecourse
participations  have been  eliminated  from the Company's  consolidated  balance
sheets.

As of September  30,  1996,  the Company was not in  compliance  with a recourse
discounted loan agreement, with a balance of approximately $4.8 million, and had
not repaid a note payable to The King  Management  Corporation  which matured in
February  1996 with a  balance  of  approximately  $1.8  million.  See Note 5 to
Consolidated  Financial  Statements under Item 1 above. On November 8, 1996, all
debt  outstanding to The King  Management  Corporation  was repaid in full. This
resulted in eliminating all related  defaults under that facility.  In addition,
on November 8, 1996,  the Company  amended the terms of its recourse  discounted
loan   agreement,   simultaneously   receiving   a  waiver  of  all   events  of
non-compliance  under  that  agreement.  See  Note 7 to  Consolidated  Financial
statements under Item 1 above.

On November 8, 1996,  the Company's  wholly-owned  subsidiary,  Sunrise  Funding
Corporation I, completed the initial closing of a  securitization  facility with
an  initial  funding  of  $13,000,000.  See  Note  7 to  Consolidated  Financial
Statements under Item 1 above.


Cash Flows from Leases

Cash flows are not affected by how a  particular  lease is  classified,  but are
affected by the Company's  decision on how its investment in a particular  lease
will be financed.  When the Company discounts lease payments on a nonrecourse or
recourse  basis  with a  financial  institution,  the  discounted  future  lease
payments are received up-front,  and are recorded on the Company's balance sheet
as discounted  lease rentals.  If, however,  the Company chooses not to discount
the  remaining  lease  payments,  the total lease  payments  are received by the
Company over the lease term.

Sunrise Financial Resources, Inc.

The Board of Directors made the  determination in fiscal 1996 to discontinue the
SFR  business.  The Company has sold the SFR  asset-based  lending  accounts and
one-half of its SFR commercial accounts.  Management believes the loan portfolio
is reflected at its estimated liquidation value as of September 30, 1996.

Results of Operations for the Three and Six Months Ended September 30, 1996 and
1995

Total revenue  decreased  $2.6 million  (19.6%) and $2.2 million  (9.4%) for the
three and six month  periods  ended  September  30,  1996,  as  compared  to the
corresponding  periods in fiscal 1996. The majority of the revenue decrease came
from a drop in equipment  sales, in both direct and vendor  business.  Equipment
sales were down $2.2 million  (49.3%) and $1.4 million (22.7%) for the three and
six month  periods of fiscal 1997 as compared  to the  corresponding  periods in
fiscal 1996.  Interest income and fee income has and will decline  significantly
with the winding  down of the SFR  business.  Operating  lease  revenues  showed
moderate  growth for the three and six month  period due to an  increase  in the
vendor leasing programs.  Direct financing leasing revenues  decreased  $527,000
(20.5%) and $652,000 (13.4%) for the three and six month periods ended September
30,  1996 due to a large  number of leases  coming  off-lease,  and fewer  going
on-lease due to sales people  directing  their efforts toward the vendor leasing
business.

                                       10

<PAGE>

Total leasing revenues were as follows (dollar amounts in millions):
<TABLE>
<CAPTION>

                                                       Three Months                          Six Months
                                                   Ended September 30,                  Ended September 30,
                                                   -------------------                  -------------------
                                                1996                1995               1996                1995
                                            ------------         ----------         -----------          ----------
                                            Amount    %          Amount  %          Amount    %          Amount  %
                                            ------------         ----------         -----------          ----------
<S>                                         <C>       <C>     <C>      <C>         <C>       <C>        <C>     <C>

   Leasing Revenues:
         Vendor                             $ 4.7     57%     $ 3.2    40%         $ 8.9     55%       $ 6.6    41%
         Direct                               3.5     43        4.8    60            7.2     45          9.3    59
                                              ---    ---        ---   ---            ---    ---          ---   ---
              Total                         $ 8.2    100%     $ 8.0   100%         $16.1    100%       $15.9   100%
                                            =======  ====     ======   ====         ======= ====     =======   ====

   As a percent of total revenues               76.2%            59.9%                  75.1%              67.4%
                                                =====            =====                  =====              =====
</TABLE>


Margins from leasing activities (leasing revenue, less depreciation and interest
expense of $5.3 million and $10.2  million) were 35.5% and 36.9%,  and 30.0% and
29.0% for the  three and six month  periods  of  fiscal  1997 and  fiscal  1996,
respectively. Margins will fluctuate from period to period based upon the mix of
direct  financing  and  operating  leases  and the  extent to which the  Company
finances leases with  internally  generated  funds.  The increase in margins for
fiscal 1997  relates  primarily to more leases being  financed  with  internally
generated  funds versus  externally  generated  funds  during the  corresponding
period in fiscal  1996.  Margins  will  also be  affected  by the mix and age of
direct finance and operating leases in the current portfolio.

In order to limit the impact of any interest  rate  fluctuations  on its leasing
transactions,  the Company continually  monitors its lease rate factors relative
to  interest  rates on  borrowed  funds.  The lease rate  factors  are  adjusted
periodically  on new leases to  correspond  to any change in  interest  rates on
borrowed funds supporting the related transactions.

Revenue from  equipment  sales  decreased  $2.2 million and $1.4 million for the
three  and six  month  periods  ended  September  30,  1996 as  compared  to the
corresponding  periods in fiscal  1996.  This  decrease is primarily a result of
lower off-lease  sales coming from the vendor lease business.  The gross margins
of this  activity  were 18.5% and 15.3% of sales  revenue  for the three and six
month  periods of fiscal 1997,  compared to 7.8% and 9.4% for the  corresponding
periods in fiscal 1996. These favorable gross margins in the current period were
the result of establishing more conservative  residuals on equipment that is now
coming  off-lease.  Gross  margins  will also vary  depending  on the  Company's
ability to purchase equipment at competitive prices and to negotiate  attractive
selling prices for such equipment.

Interest income  decreased  $483,000  (73.1%) and $863,000 (68.5%) for the three
and six month periods of fiscal 1997 as compared to the corresponding  period in
fiscal 1996. This decrease was caused by the  liquidation of a significant  part
of the SFR loan  portfolio  which  coincided  with  the  Company's  decision  to
discontinue its commercial and asset-based lending business.

Fee income decreased  $70,000 (54.7%) and $107,000 (46.5%) for the three and six
month periods of fiscal 1997 as compared to the same period in fiscal 1996. This
decrease was  primarily  the result of the fiscal 1996  cessation of SFR lending
activities.

Total costs and expenses decreased $3.0 million (25.2%) and $3.2 million (15.6%)
for the  three  and  six  month  periods  of  fiscal  1997  as  compared  to the
corresponding  period in fiscal 1996,  notwithstanding  significantly  increased
legal fees relating to the Company's  financing  activities and the dispute with
King Management Corporation. The Company anticipates that its legal costs should
decrease  significantly in fiscal 1998. The decrease related  principally to the
lower amount of equipment sales and the lower associated costs.

Depreciation  expense  for the three  month  period  ended  September  30,  1996
increased $239,000 (6.9%) over the same period a year ago. This increase was due
to an increase in vendor  equipment  operating leases that were added during the
second quarter of fiscal 1997.  This offset an overall  decrease for the current
six month  period of $234,000  (3.3%)  compared to the  corresponding  period in
fiscal  1996,  which was due to an overall  decline  in the amount of  operating
lease equipment during the six month period.


                                       11


<PAGE>


Interest expense  decreased  $553,000 (25.6%) and $927,000 (21.9%) for the three
and six month periods of fiscal 1997 as compared to the corresponding  period in
fiscal 1996. The decrease in interest expense reflects lower average  borrowings
during the period.

Compensation expense increased $205,000 (25.7%) for the three month period ended
September 30, 1996, compared to the same period in fiscal 1996. The increase was
the result of increased personnel associated with the expansion of the Company's
services as well as  accruals  for  year-end  merit  compensation.  Compensation
expense  for the three and six month  periods of fiscal 1996  included  one-time
charges of $104,000 and $284,000 which were part of severance agreements payable
to former employees of the Company.

Other operating  expenses  decreased $53,000 (8.4%) and $185,000 (14.4%) for the
three and six month  periods of fiscal  1997 as  compared  to the  corresponding
periods  in fiscal  1996.  The  decrease  was a direct  result of the  Company's
efforts to control operating costs and reduce overhead.

Income tax  provision as a percentage of income before taxes was 48.0% and 48.0%
and 39.9% and 40.0% for the three and six month periods ended September 30, 1996
and 1995,  respectively.  The  increase  in the tax rate in the  current  fiscal
period is due to the potential  unrealizability of certain  alternative  minimum
tax credits.

As a result of the foregoing  factors,  net income increased $94,000 (11.3%) and
$296,000  (17.2%) for the three and six month periods of fiscal 1997 as compared
to the corresponding periods in fiscal 1996.

                                       12


<PAGE>

Liquidity and Capital Resources

General

The Company uses a combination of its credit lines and internally generated cash
flows to finance, on an interim basis, loans to customers and the acquisition of
equipment  for  lease or sale.  Generally,  upon  commencement  of a lease,  the
Company  attempts to assign the remaining  lease  payment  stream to a financial
institution  on a discounted,  nonrecourse  basis.  In this manner,  the Company
finances a substantial  portion of the equipment  cost on a long-term  basis and
attempts  to limit its risk,  if any,  to its equity  investment  in the loan or
equipment.  The discounted  lease  proceeds  received by the Company are used to
reduce  borrowings under the Company's credit lines.  Where the Company finances
the equipment cost either internally or on a recourse basis, the Company assumes
the entire risk on its  investment in the loan or equipment.  Recently,  Sunrise
Leasing Corporation's wholly-owned subsidiary, Sunrise Funding Corporation I has
securitized its lease receivables and related residuals. The Company anticipates
that it may enter into similar  transactions  to finance a portion of its vendor
program leases in the future.  See Note 7 to Consolidated  Financial  Statements
under Item 1 above.

At September 30, 1996,  the Company had total  borrowings  outstanding  of $74.8
million,  of which 50.3% were  nonrecourse.  At March 31, 1996,  the Company had
total borrowings outstanding of $83.5 million, of which 52.7% were nonrecourse.

As of  September  30,  1996,  the  Company  had a total  investment  in  leasing
operations of $103.3  million,  as compared to $101.3 million at March 31, 1996.
The marginal increase in investment in leasing operations was due to an increase
in new equipment installations and upgrades. The Company's investment in leasing
operations  includes  equipment held for lease,  which consists of equipment for
which a lease has been  signed  but which has not yet  commenced.  The amount of
equipment  held for  lease  fluctuates  significantly  depending  on the  dollar
amounts and commencement dates of the Company's leases.

Net cash  provided by operating  activities  was $15.5 million for the first six
months of  fiscal  1997.  Accounts  payable  increased  $4.4  million,  accounts
receivable increased $500,000, and accrued liabilities increased $200,000 due to
a  general  increase  in  the  Company's  lease  portfolio  and  other  business
activities.  The Company expects to fund these  requirements  through internally
generated  funds, as well as borrowings  under its lines of credit.  The Company
also expects to realize  additional  cash from the future  remarketing of leased
equipment.

Equipment  expenditures of $22.4 million for the first six months of fiscal 1997
were financed through $15.5 million of cash flows from  operations,  through the
discounting of $4.3 million of noncancelable  lease rentals to various financial
institutions  at fixed  rates,  and  through the use of the  Company's  lines of
credit.  The  Company  does  not  have  any  material  commitments  for  capital
expenditures, other than equipment held for lease.

Investments  in loans  receivable  were $1.2 million for the first six months of
fiscal 1997 and were financed primarily through  internally  generated funds and
use of short-term borrowings under the Company's lines of credit.

Inflation has not been a significant  factor in the Company's business in any of
the periods presented.

Financing Sources

The Company  maintains  a $25  million  line of credit.  Of this  amount,  $24.6
million had been  utilized as of September  30, 1996.  On November 8, 1996,  the
Company repaid $9.4 million on this line of credit.  Advances under the line are
collateralized by substantially  all of the Company's assets.  The interest rate
is at prime, and the Company is subject to certain financial and other covenants
relating to net worth ratios and liquidity requirements.

The Company's line of credit matured September 30, 1996. The line was renewed as
of October 1, 1996 and was  extended  under  identical  terms for a twelve month
period maturing on September 30, 1997. See "Looking Forward".

                                       13


<PAGE>

As of  March  31,  1996,  the  Company  was not in  compliance  with a  recourse
discounted loan agreement, with a balance of approximately $5.6 million, and had
not repaid a note payable to The King  Management  Corporation  which matured in
February  1996  with a balance  of  approximately  $4.1  million.  These  events
resulted in an event of  noncompliance  under  cross-default  provisions  of the
Company's  bank line of credit  agreement.  As of September  30, 1996,  balances
outstanding under the recourse discounted loan agreement and The King Management
Corporation note were approximately $4.8 million and $1.6 million, respectively.
On November 8, 1996, all debt outstanding to The King Management Corporation was
repaid in full.  This resulted in  eliminating  all related  defaults under that
facility. In addition, on November 8, 1996, the Company amended the terms of its
recourse  discounted  loan agreement,  simultaneously  receiving a waiver of all
events of non-compliance under that agreement.

The  Company  has  recently  entered  into an  agreement  with a  subsidiary  of
Dougherty  Dawkins,  Inc.  to  place up to $20  million  of  notes  issued  by a
subsidiary   of  the   Company  to   private   institutional   investors.   This
securitization  facility was closed on November 8, 1996, with an initial funding
of $13,000,000. The funds were primarily used to repay the $3.1 million of loans
from The King Management  Corporation and to pay down the Company's bank line of
credit. See Note 7 to Consolidated Financial Statements under Item 1 above. As a
result of closing this financing, the Company decided not to pursue a previously
proposed $10 million  financing from The King Management  Corporation.  However,
the Company  believes  that if its  business  grows as  anticipated,  additional
financing will be required,  and it is currently  discussing such financing with
several sources.  The ability to obtain such financing will depend,  at least in
part, on the outcome of the arbitration  hearing on the claims of the former ILC
shareholders  relating to the February  1995 merger of ILC and the Company which
is now scheduled to begin in late November 1996.

Liquidity

Based on its  completion  of the  Dougherty  Dawkins  financing  and its  recent
success in obtaining additional discount financing, the Company believes that it
will be able to finance its anticipated equipment purchasing commitments for the
remainder of fiscal 1997. In order to fund its anticipated commitments in fiscal
1998, the Company will require additional financing  facilities.  Although there
is no  assurance  that  the  Company  will  be able to  obtain  such  financing,
management is cautiously  optimistic that it will be able to obtain financing as
required to fund its equipment  purchase  commitments in fiscal 1998. If for any
reason the Company is unable to obtain additional  financing in fiscal 1998, its
revenue growth in fiscal 1998 would be materially adversely affected.

Over the past year or more, the Company has continued to monitor several problem
leases  and  loans.  See  Note  6  to  Consolidated   Financial  Statements  for
information  on  significant  lessee  bankruptcy.  While there  continues  to be
several  loans payable to the Company as to which the Company could be forced to
take additional write-offs, management does not believe that any such write-offs
would be material or that they would create new covenant  violations  on current
credit facilities or otherwise limit or reduce the Company's access to credit.

Looking Forward

Although the equipment leasing business continues to be a significant  component
of the Company's  business,  the Company has since June 1995 focused more of its
resources in building the vendor leasing business.  In addition to its currently
active vendor  programs,  the Company  signed  agreements  with four  additional
vendors,  and is in various stages of  negotiations  with several other vendors.
Management believes that new vendor programs will generate  significant revenues
for the Company in fiscal 1997 and fiscal 1998.

The former ILC  shareholders  are seeking  rescission  and damages in connection
with  the  February  1995  merger  of ILC and the  Company,  and the  matter  is
scheduled for  arbitration  in late November  1996.  See Note 6 to  Consolidated
Financial  Statements under Item 1 above.  Although the Company is disputing the
claims,  an  unfavorable  determination  by the  arbitrator  could result in the
former ILC shareholders gaining control of the Company's vendor leasing business
as it existed in February 1995 or being awarded  additional stock of the Company
which  could  cause  significant   dilution  to  the  holdings  of  the  current
shareholders.  If the Company avoids an arbitration  award granting  rescission,
and it firmly  believes it will,  management  believes  that the Company will be
able to further  increase its credit  facilities which will allow the Company to
expand its vendor leasing  business  significantly  and  materially  improve its
overall  operations  in fiscal  1998.  The  Company's  ability  to  effect  this
improvement is subject to the "Cautionary Statements" set forth below.


                                       14


<PAGE>


Because of a  customer's  default on certain  lease  payments  and its  negative
financial  circumstances,  with  respect  to  fiscal  1995  the  Company  made a
provision  for loss on lease  receivables  pertaining  to this  customer of $6.8
million. As of March 31, 1996, the Company's net investment in the related lease
relationship  was  approximately   $557,000,  and  related  recourse  borrowings
aggregated $5.6 million.  The settlement agreement signed in June 1996 among the
Company,  the lessee and the bank did not close.  The lessee was unable to raise
the $3 million  necessary and could not meet its obligation under the agreement.
The Company  subsequently  declared the lessee in default under the lease and on
August  15,  1996,  the  lessee  filed for  protection  under  Chapter 11 of the
Bankruptcy  Code.  Since filing,  the court has approved the lessee's  motion to
reject its lease with the  Company.  The Company  expects  that the value of the
equipment will be adequate to recover its net investment,  which as of September
30, 1996 was $363,000.  In addition,  the Company has  restructured  the related
recourse  discounted loan agreement that relates to this equipment,  the balance
outstanding  of which as of September 30, 1996 was  $4,765,000.  The Company has
pledged additional  collateral and the bank has waived all remaining outstanding
defaults.


Cautionary Statements

As provided for under the Private Securities  Litigation Reform Act of 1995, the
Company wishes to caution investors that the following important factors,  among
others, in some cases have affected and in the future could affect the Company's
actual  results of operations and cause such results to differ  materially  from
those  anticipated  in  forward-looking  statements  made in this  document  and
elsewhere by or on behalf of the Company.

Highly Competitive  Industry.  The data processing equipment leasing business is
highly  competitive.  The Company  competes with numerous  companies,  including
leasing companies,  commercial banks and financial  institutions,  some of which
the  company  relies on to obtain  capital to finance  its  leases.  Most of the
Company's  competitors are significantly  larger and have substantially  greater
resources than the Company. Because of its relative lack of capital, the Company
typically  chooses not to compete with large leasing  companies for those leases
in which the cost of the  equipment  greatly  exceeds the amount of  nonrecourse
financing available.

Future Growth.  The Company's ability at grow to an acceptable rate is dependent
to a great  extent  on the  expansion  of its  vendor  leasing  programs.  As of
September 30, 1996, the Company has only two significant vendor leasing programs
and has signed  agreements  for four other vendor  leasing  programs.  While the
Company  believes it has the ability and capacity to develop  other large vendor
leasing  programs,  there is no  assurance  that it will be  successful  in this
regard or that it will be able to generate acceptable revenue growth.

Risk of  Additional  Write-Offs.  While the  Company  believes  that its current
reserves are adequate, it continues to monitor closely several restricted loans.
There is no assurance  that such loans will not go into default or that they are
adequately  secured.  Any future losses on such loans  incurred in excess of the
Company's reserves could materially affect the Company's future earnings.


Peter King  Claims.  The claims of the former  ILC  shareholders  regarding  the
merger  of ILC and  Sunrise  Leasing  Corporation  will be  heard  in a  binding
arbitration  scheduled for late November 1996. The ILC  shareholders are seeking
rescission and/or substantial damages which, if granted, would be in the form of
additional shares of Company stock thereby  materially  diluting the holdings of
current shareholders. Under the rescission claim, the ILC shareholders will seek
to gain control of the Company's  entire vendor  leasing  business.  The Company
firmly  believes that  rescission is not a proper  remedy,  but if rescission is
granted,  it  would  not  cover  that  part of the new  vendor  leasing  clients
generated after the merger.

Nonrecourse Financing. The Company's growth and profitability are dependent to a
great  extent  on  the  continued  willingness  of  banks  and  other  financial
institutions to lend the Company money to finance its leasing  transactions on a
nonrecourse  basis.  In order for the  Company  to obtain  such  financing,  its
customers  must have a credit  standing which is  satisfactory  to the Company's
lenders.  There is no assurance that banks or other financial  institutions will
be willing to  continue  to finance  the  Company's  leasing  transactions  on a
nonrecourse  basis or that the Company will continue to attract  customers  that
meet the credit standards of its financing sources. Any adverse change in either
the  willingness  of  financial  institutions  to finance  the  Company's  lease
transactions  on a  nonrecourse  basis or in the  Company's  ability  to attract
creditworthy customers could adversely affect its future leasing revenue.


                                       15


<PAGE>

Recourse  Financing.  Although  nonrecourse  financing  will  continue to be the
Company's  preferred  form of  financing,  recourse  financing  may be used when
nonrecourse  financing  is not  available  for a  particular  lease  or when the
benefits  of  recourse  financing  outweigh  the risks.  The  Company  assumes a
significantly  higher degree of risk with recourse  financed  leases because the
lessee is often more  susceptible to default and the lender has direct  recourse
against the Company for the amount of any default by the lessee.  Such a default
could have a material  adverse effect on the Company if the fair market value of
the  leased  equipment  at the time of default is  insufficient  to satisfy  the
obligations  due the lender.  There is no assurance  that such defaults will not
occur.  Recently,  the Company's subsidiary has securitized certain of its lease
receivables  and related  residuals  associated  with  certain of the  Company's
vendor  program  leases,  and the  Company  anticipates  that it may enter  into
similar  transactions to finance a portion of this business in the future. If it
were unable to acquire such additional financing, the Company would need to rely
more heavily on additional  recourse  financing to further  finance this type of
business.

Major  Customers/Vendors.  As of  September  30,  1996,  $23,541,000  in leasing
operations and loans receivable balances were funded internally or with recourse
obligations held by 15 customers having balances  outstanding in amounts greater
than $500,000.  Total  investments in leases and loans  receivables to customers
considered  highly  leveraged or with cash flows from  operations  inadequate to
service  existing  obligations  were  $34,250,000  or 31% of the portfolio as of
September  30, 1996.  Defaults by such  customers  would result in a significant
loss to the  Company,  to the extent such amounts are not already  reserved.  In
addition,  as these leases and loans are funded  internally or through  recourse
financing,  the Company  would be  obligated  to repay the  remaining  principal
balance to the financial  institution  out of internally  generated  funds while
receiving no cash payments from the lessee/borrower.

In addition,  52.8% and 46.3% of the Company's leasing revenue for the three and
six month periods ended September  30,1996 was generated through a single vendor
leasing program.  Should this program  terminate,  the Company would continue to
realize related revenues for a period of up to three years. The Company believes
that during this period it would be able to replace this business.  If, however,
the Company  would be unable to replace  this  business,  the  Company's  future
financial results could be materially and adversely affected.

Control by a Small Group of Investors.  As of September  30, 1996,  39.6% of the
outstanding shares of Sunrise  Resources,  Inc. was controlled by trusts for the
benefit  of  Peter  King  and the  sons of Peter  King.  Because  of such  share
ownership,  these  trusts may be able to control the  election of all members of
the Board of Directors, and may be able to control all future corporate actions.
If the former  shareholders of ILC are successful in their  arbitration  claims,
the holdings of Company stock by these trusts could increase significantly.

Residual Values of Leased Equipment.  The value of the data processing equipment
leased by the Company to its customers  represents a substantial  portion of the
Company's  capital.  At the inception of each lease,  the Company  estimates the
residual value of the leased  equipment,  which is the estimated market value of
the equipment at the end of the initial lease term. The actual realized residual
value of  leased  equipment  may  differ  from  its  estimated  residual  value,
resulting in profit or loss when the leased equipment is sold or leased again at
the end of the  initial  lease term.  If a lessee  defaults on a lease which has
been  discounted  by the  Company  to a  financial  institution,  the  financial
institution may foreclose on its security  interest in the leased  equipment and
the Company may not realize any portion of such  residual  value.  In  addition,
data processing equipment is subject to rapid technological obsolescence typical
of the computer industry.  While the Company's  experience to date has generally
resulted in actual residual  values in excess of estimated  residual  values,  a
greater than expected  decrease in the market value of data  processing or other
equipment  leased by the  Company  could  materially  and  adversely  affect the
Company's financial condition and profitability.


                                       16


<PAGE>

PART II--OTHER INFORMATION

Item 1.        In June of 1995 the former ILC  shareholders  advised the Company
               that they were  reserving  their  rights in  connection  with the
               merger of the Company and ILC in February 1995. The claims of the
               former ILC shareholders are expected to go to arbitration in late
               November 1996. See Note 6 to Financial Statements at Part I, Item
               1, above.

Item 2.        Changes in Securities - NONE

Item 3.        Defaults  on  Senior   Securities  -  See  Note  5  to  Financial
               Statements at Part I, Item 1, above.

Item 4.        Submission of Matters to a Vote of Security Holders - NONE

Item 5.        Other Information - NONE

ITEM 6.        Exhibits and Reports on Form 8-K.

               a.   Exhibits

                    See Exhibit Index immediately following the signature page.

               b.   Form 8-K

                    There have  been  no  Current Reports on  Form  8-K filed on
                    behalf of the Company during the quarter ended September 30,
                    1996.




                                       17


<PAGE>

                                    SIGNATURE

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  Registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                               SUNRISE RESOURCES, INC.



Date:   November 14, 1996      By:/s/ Errol Carlstrom
                                  Errol Carlstrom, President and Chief Executive
                                  Officer (Principal executive officer)




                               By:/s/ Barry J. Schwach
                                  Barry J. Schwach
                                  Executive Vice President of Finance and
                                  Administration and Chief Financial Officer
                                  (Principal financial officer)




                               By:/s/ Paul R. Wotta
                                  Paul R. Wotta
                                  Controller (Principal accounting officer)



                                       18



<PAGE>



                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                           EXHIBIT INDEX TO FORM 10-Q


Commission File No.:  0-19516
For the quarter ended
September 30, 1996


                             SUNRISE RESOURCES, INC.


Exhibit
 Number                                           Description

  3.1          Restated  Articles of Incorporation, as amended - incorporated by
                  reference  to Exhibit 3.1 to the  Company's  Annual  Report on
                  Form 10-K for the year ended March 31, 1995.
  3.2          Restated Bylaws--incorporated  by reference to Exhibit 3.2 to the
                  Company's Registration Statement on Form S-18, 
                  Reg. No. 33-42477C.
  4.1          Specimen of Common Stock Certificate--incorporated  by  reference
                  to Exhibit 4 to Amendment No. 1  to the Company's Registration
                  Statement on Form S-18, Reg. No. 33-42477C.
 10.1          Amendment to  Security  Agreement dated June 22, 1995 between the
                  Company and King Holding Corporation
 10.2          First  Amendment to  Amended  and Restated Credit Agreement dated
                  October 1,  1996 between  the Company  and First Bank National
                  Association
 10.3          Promissory Note Extension Agreement dated October 1, 1996 between
                  the Company and First Bank National Association
 10.4          Employment Agreement October 14,  1994 between  the  Company  and
                  Barry J. Schwach
 10.5          Employment Agreement October 14,  1994 between  the  Company  and
                  William B. King
 10.6          Incentive Compensation Plan for Fiscal Year 1997
 10.7          Replacement Promissory note dated November 7, 1996 by the Company
                  in favor of Daiwa Bank, Limited at the Sumitomo Bank, Ltd.
 10.8          Amended and Restated Loan and Security Agreement and Waiver dated
                  November 7, 1996  between the Company and Daiwa Bank, Limited
 11.1          Per Share Earnings Computations
 27.0          Financial Data Schedule (filed with electronic version only)


*Management contract or other compensatory plan.


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