<PAGE>   1


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

                                   FORM 10-KSB

(Mark One)

[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934

                   For the fiscal year ended December 31, 1997
                                       or
[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

                For the transition period ......... to .........

                         Commission file number 0-20272

                          RESOURCE CAPITAL GROUP, INC.
                    ----------------------------------------
                 (Name of Small Business Issuer in its Charter)

                     DELAWARE                           13-3617377
                     --------                           ----------
          (State or Other Jurisdiction of           (I.R.S. Employer
           Incorporation or Organization)            Identification No.)

                  419 Crossville Road
                  Suite 204
                  Roswell, Georgia                          30075
                  ----------------                          -----
               (Address of Principal Executive Offices)   (Zip Code)

                                 (770) 649-7000
                                 --------------
                 Issuer's Telephone Number, Including Area Code

         Securities registered under Section 12(b) of the Exchange Act:

                                      None
                                      ----

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

                     Common Stock, par value $.01 per share
                     --------------------------------------
                                (Title of Class)

     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 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
    ---       ---

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge. In definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

            State issuer's revenues for its most recent fiscal year.
                                   $2,041,621

     State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of December 31, 1997.

                                 Not applicable

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

     State the number of shares outstanding of each of the issuer's classes of
common equity, as of December 31, 1997.

              Common stock, par value $.01 per share 416,726 shares


<PAGE>   2





                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
PART I                                                                                            PAGE
                                                                                                  ----
<S>                        <C>                                                                    <C>
         Item  1.          Description of Business                                                  1

         Item  2.          Description of Properties                                                6

         Item  3.          Legal Proceedings                                                        7

         Item  4.          Submission of Matters to a Vote of                                       7
                             Security Holders

PART II

         Item  5.          Market for Common Equity and Related                                     7
                             Stockholder Matters

         Item  6.          Management's Discussion and Analysis or                                  7
                             Plan of Operation

         Item  7.          Financial Statements                                                    11

         Item  8.          Changes in and Disagreements with                                       11
                             Accountants on Accounting and
                             Financial Disclosure

PART III

         Item  9.          Directors, Executive Officers, Promoters                                11
                             and Control Persons; Compliance with
                             Section 16(a) of the Exchange Act

         Item 10.          Executive Compensation                                                  13

         Item 11.          Security Ownership of Certain Beneficial                                13
                             Owners and Management

         Item 12.          Certain Relationships and Related                                       14
                             Transactions

PART IV

         Item 13.          Exhibits and Reports on Form 8-K                                        15

         Signatures                                                                                18
</TABLE>




<PAGE>   3




                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

General

     Resource Capital Group, Inc. (the Company), was organized as a Delaware
corporation in November, 1990. In 1991, the Company issued 433,425 shares of
common stock to 683 shareholders under the registration requirements of Section
5 of the Securities Act of 1933, as amended. The Company began operations and
its Common Stock was originally issued and eligible for trading on September 1,
1991.

Background Information

     The Company was organized to become successor in interest to AGS Properties
(AGS) and assumed various general and limited partnership interest of AGS. In
1991 the Company acquired the 1% general partner interest and a 27.55% limited
partner interest in AGS Partners MLP, L.P. (MLP) which owns an apartment complex
in Nashville, Tennessee and an apartment complex in Oklahoma City, Oklahoma.

     The Company also assumed AGS' 2.55% general partnership interest and 43.10
% limited partnership interests in AGS Meadow Oaks Associates (Meadow) which
owns an apartment complex in Kansas City, Kansas.

     The Company was established primarily to own, hold, dispose of and invest
in junior mortgage loans and wraparound mortgage loans and to acquire, own,
operate and dispose of income producing real property.

Mortgage Loan Investments

     MLP issued seven (7) subordinated promissory notes to the Company in 1991
which were secured by mortgages and deeds of trust on its properties and other
assets. A summary of the remaining subordinated notes at December 31, 1997 is
as follows:

<TABLE>
<CAPTION>
Secured Asset                  Maturity Date             Amount
-------------                ----------------         ----------
<S>                          <C>                      <C>
Aspen Walk Apts.             December 1, 2005         $  325,554
Rolling Hills Apts.          October  1, 2005          1,657,947
                                                      ----------

                                                      $1,983,501
                                                      ==========
</TABLE>

                                        1


<PAGE>   4




         All of the Company's remaining mortgage loan investments are owed by
MLP. The Notes held by the Company are prepayable in whole at any time without a
prepayment penalty. The mortgages require monthly payments of interest only
through maturity. Interest accrues at 15% per annum. The mortgages also require
the payment of additional interest on the sale or refinancing of the mortgaged
property equal to a 35% participation in the net proceeds as defined.

Real Property Investments

         In June 1997 Woodstock Office I, LLC (Woodstock) was formed and
capitalized with a cash contribution funded by the Company as the 100% member
to enable it to acquire an 11,250 square foot office building located in
Cherokee County, Georgia for $600,000. Subsequently, in November 1997 Woodstock
obtained a $570,000 mortgage payable on the property enabling Woodstock to
return a large portion of the Company's original capital contribution.

         In June 1997 the Company acquired a 100% interest in 8046 Roswell Road
LLC (8046 Roswell) from Hunter Management Company (Hunter) in exchange for
$323,000 in cash and the assumption of a $476,915 mortgage payable. 8046 Roswell
owns an 8,000 square foot office complex in Fulton County, Georgia.

         In September 1997 the Company acquired all of the outstanding shares of
stock in Hunter in exchange for 10,000 shares of the Company's common stock.
Hunter has the minority interest in and manages various properties owned by the
Company's subsidiaries.

         In September 1996 Colonial Park Commons LLC (Colonial) was formed and
capitalized with a $300,000 contribution, of which $297,000 was funded by the
Company while the remaining $3,000 was funded by Hunter. Colonial acquired an
18,387 square foot office building located in Fulton County, Georgia for
$1,010,000. The purchase was financed in part with a $787,500 mortgage payable.
Additionally in September 1996, Meggan Lot, LLC (Meggan) and Heide Lot, LLC
(Heide) were also formed and capitalized with a $100,000 contribution into each
of which $99,000 was funded by the Company while the remaining $1,000 was funded
by Hunter. Meggan and Heide each paid $100,000 to acquire approximately .8 acres
of land surrounding the Colonial property in Fulton County, Georgia.

In 1995 8050 Roswell Associates, LLC (8050 Roswell) was formed and capitalized
with a $440,000 contribution, of which $330,000 was funded by the Company while
the remaining $110,000 was funded by Hunter. 8050 Roswell acquired a 9,000
square foot office building

                                        2


<PAGE>   5



located in Fulton County, Georgia for $425,000 and subsequently obtained a
$360,000 mortgage payable on the property. Additionally, in 1995 419 Crossville
Associates, LLC (Crossville) was formed and capitalized with a $1,000,000
capital contribution of which $750,000 was funded by the Company while the
remaining $250,000 was funded by Hunter. Crossville acquired a 19,000 square
foot office building located in Fulton County, Georgia for $975,000. In May 1996
Crossville obtained a $880,000 mortgage note on its property. In January 1998
Crossville refinanced its mortgage payable for $1,100,000.

         The Company is actively seeking new real estate acquisitions and
investments. In February 1998 920 Holcomb Bridge LLC (Holcomb) was formed and
capitalized with a $300,000 capital contribution funded by the Company as the
100% member. Holcomb acquired a 14,500 square foot office building located in
Fulton County, Georgia for $1,250,000. The purchase was financed in part with a
$970,000 mortgage payable. At December 31, 1997 the Company had a $200,000
deposit in escrow pending the closing of this transaction.

         Although the Company is currently in negotiations it is not committed
to make any other real property acquisitions. However, the Company is evaluating
various potential property acquisitions and is engaging in discussions with
sellers regarding the purchase of properties for the Company. Purchase
agreements are subject to various terms and conditions, including receipt of
satisfactory closing documentation. There can be no assurance that all of the
terms and conditions of any agreement will be satisfied and therefore it is
possible that certain investments will not be acquired.

         The Company has obtained adequate insurance coverage for all properties
acquired.

Note and Mortgages Payables

Note Payable

         The Company issued a promissory note in favor of its former Executive
Vice President as a settlement of the termination of his employment agreement.
The terms of the agreement provide for monthly payments over a six year period
ending December 31, 1998. The Company discounted this note at 6%.

     The following is a summary of the remaining payments due under this
agreement:

<TABLE>
      <S>    <C>                          <C>
                    1998                  $88,000
      Less:  unamortized discount         ( 2,742)
                                          -------
                                          $85,258
                                          =======
</TABLE>
                                        3


<PAGE>   6



Mortgages Payable

         The mortgages payable by the Company as of December 31, 1997 consist of
the following:

<TABLE>
<S>                                                                                                    <C>
8050 Roswell - The mortgage payable bears interest at 9.53% and matures in July
2010. The terms of the mortgage require that monthly payments of $3,766 be
applied first to interest and the balance to reduction of principal. Interest on
this loan adjusts every five years and is computed as 325 basis points over the
average yield on U.S. Treasury securities, as defined.                                                 $   330,734

Crossville - The mortgage payable bears interest at 8.8% per annum and matures
in June 2011. The terms of the mortgage require monthly payments of $8,821 be
applied first to interest with the balance to reduction of principal. Interest
on this loan adjusts every five years and is computed as 325 basis points over
the average yield on U.S. Treasury securities, as defined.  (a)                                            836,479

Colonial - The mortgage payable bears interest at 9.375% per annum and matures
in October 2006. The terms of the mortgage require monthly payments of $7,276 be
applied first to interest with the balance to reduction of principal. Interest
on this loan adjusts every five years and is computed as 300 basis points over
the average yield on U.S. Treasury securities, as defined.                                                 770,877

8046 Roswell - The mortgage payable bears interest at 7.00% per annum and
matures on June 1, 2009. The terms of the mortgage require monthly payments of
$4,866 be applied first to interest and the balance to reduction of principal.
Interest on this loan adjusts on June 1, 1998 to 8.00% and again on June 1, 2002
and is computed as 300 basis points over the average yield on U.S. Treasury
securities, as defined.                                                                                    464,264

Woodstock - The mortgage payable bears interest at 9.31% per annum and matures
in December 2017. The terms of the mortgage require monthly payments of $5,243
be applied first to interest with the balance to reduction of principal.
Interest on this loan adjusts every five years, commencing on December 1, 2002
and is computed as 300 basis points over the average yield on U.S. Treasury
securities, as defined                                                                                     570,000
                                                                                                       -----------
                                                                                                       $ 2,972,354
                                                                                                       ===========
</TABLE>


                                        4


<PAGE>   7



(a) On January 9, 1998 Crossville refinanced its mortgage payable for
$1,100,000. The new mortgage payable bears interest at 7.75% per annum and
matures January 2008. The terms of the mortgage require monthly payments of
$8,693 be applied first to interest with the balance to reduction of principal.
In addition, non-interest bearing escrow deposits equal to one twelve of the
anticipated annual tax assessments are required. Furthermore, the terms of the
new mortgage includes prepayment penalties, as defined.

A schedule of future amortization payments, inclusive of the new Crossville
mortgage, at December 31, 1997 follows:

<TABLE>
         <S>                       <C>
         1998                      $82,550
         1999                       92,447
         2000                      100,740
         2001                      109,784
         2002                      119,648
         Thereafter              2,730,706
                                ----------
                                $3,235,875
                                ==========
</TABLE>

The majority of the mortgage notes payable have been guaranteed by the Company.

Other Business Factors

         The business of the Company is not seasonal and the Company does no
foreign or export business.

Personnel

         As of December 31, 1997, the Company had five employees. The Company
also supervises, as sole general partner of MLP and Meadow, approximately 25
people who are located at the various properties. The Company has contracted
with Vincam Human Resources, Inc. (Vincam) to provide professional employer and
administrative services to the Company and to the properties. Vincam is the
employer of record for tax reporting purposes and provides various benefits to
the employees including life, medical, dental and vision insurance coverage,
401K benefits, worker's compensation insurance coverage and other services. None
of the Company's staff is employed on a part-time basis. The employees are not
represented by a collective bargaining unit.

Offices

         The Company's headquarters are located at 419 Crossville Road, Suite
204, Roswell, Georgia 30075 where the Company leases approximately 1,300 square
feet of space from Crossville.


                                        5


<PAGE>   8



ITEM 2.  DESCRIPTION OF PROPERTIES

         The Company's executive, administrative and operational offices are
located at 419 Crossville Road, Suite 204, Roswell, Georgia, 30075 where the
Company leases approximately 1,300 square feet of space from Crossville.

         In June 1997 the Company purchased a 100% interest in Woodstock.
Woodstock owns and is currently renovating a 11,250 square foot office building
located in Woodstock, Cherokee County, Georgia. Woodstock leases office space to
various tenants at rates ranging from $11.50 to $14.50 per square foot and terms
ranging from 2 to 4 years. At December 31, 1997 the property was 59% occupied
with 1997 rental revenue since acquisition of $43,101. The gross potential rent
for the building based on December 1997 rents is $146,092 annually. The 1997
real estate taxes on this property totaled $5,103.

         In June 1997 the Company purchased a 100% interest in 8046 Roswell.
8046 Roswell owns an 8000 square foot office building located in Atlanta, Fulton
County, Georgia. 8046 Roswell leases office space to various tenants at rates
ranging from $14 to $15 per square foot and terms ranging from 1 to 3 years. At
December 31, 1997 the property was 100% occupied with 1997 rental revenue since
acquisition of $56,277. The gross potential rent for the building based on
December 1997 rents is $118,235 annually. The 1997 real estate taxes on this
property totaled $4,828.

         In September 1997 the Company acquired all of the outstanding shares of
stock in Hunter in exchange for 10,000 shares of the Company's common stock.
Hunter owns the minority interest in 8050 Roswell, Crossville, Colonial, Heide
and Meggan and manages various properties owned by the Company's subsidiaries.

         In September 1996, the Company purchased a 99% interest in Colonial.
Colonial owns a 18,387 square foot office building located in Roswell, Fulton
County, Georgia. Colonial leases office space to various tenants at rates
ranging from $12.54 to $14.74 per square foot and terms ranging from 2 to 5
years. At December 31, 1997 the property was 100% occupied with 1997 rental
revenue of $239,099. The gross potential rent for the building based on December
1997 rents is $233,716 annually. The 1997 real estate taxes on this property
totaled $13,391.

In 1996, the Company purchased a 99% interest in Meggan and Heide. Meggan and
Heide own development lots totaling .8 acres adjoining the Colonial property.
The 1997 real estate taxes on these lots totaled $3,591.

         In 1995, the Company purchased a 75% interest in 8050 Roswell. 8050
Roswell owns a 9,000 square foot office building located in Atlanta, Fulton
County, Georgia. Roswell entered into a five year lease of the entire building
to a single tenant for $88,500

                                        6


<PAGE>   9



annually with the tenant being responsible for all electricity and fuel bills.
The 1997 real estate taxes on this property totaled $7,165.

         In 1995, the Company purchased a 75% interest in Crossville. Crossville
owns a 19,000 square foot office building located in Roswell, Fulton County,
Georgia. Crossville leases office space to various tenants at rates ranging from
$10.50 to $14.50 per square foot and terms ranging from 2 years to 6 years. At
December 31, 1997 the property was 94% occupied with annual rental revenue of
$230,000. The gross potential rent for the building, if based on December 1997
rents is $240,198 annually. The 1997 real estate taxes on this property totaled
$13,677.

 ITEM 3.  LEGAL PROCEEDINGS

         The Company is not aware of any material pending or threatened legal
proceedings against the Company or its officers and directors.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         There were no matters submitted to a vote of security holders during
1997.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         On September 1, 1991 the Common Stock originally issued to the public,
was valued at $10 per share (denominated value).

         Although the Company anticipates that it will request listing as soon
as permissible and practicable, the Company shares are not currently traded on
the NASDAQ Over-the-Counter Market.

         As of December 31, 1997, there were 685 record holders of the Company's
Common Stock and 416,726 shares outstanding. At December 31, 1997, there was no
established broker-dealer price quotation for the Company's Common Stock. There
are currently no market-makers for the Company's Common Stock.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Liquidity and Capital Resources

         The Company's liquidity is based primarily on its cash reserves, real
estate operating and investment income, its ability to obtain mortgage
financing, plus the interest income and loan repayments received on its notes
receivable from MLP. These funds

                                        7


<PAGE>   10



are used to pay the Company's normal operating expenses and fund
new acquisitions.

         As of December 31, 1997, the Company had cash reserves of $673,725. The
Company's cash reserves and current level of income are sufficient to meet the
Company's current level of operating expenses on an ongoing basis.

         For the year ended December 31, 1997, the Company received $297,525 in
interest income from MLP. During the same period, advances to MLP increased by
$155,451 to help it finance major capital improvements to the Rolling Hills
property. MLP plans to continue to make major capital improvements to its
properties in an attempt to maximize the resale values of the properties.

         The ultimate realization of the Company's investment in and receivable
from MLP is dependent on the future operations and/or sale of the MLP
properties. MLP is negotiating a sale of Rolling Hills Apartments for a sales
price of $7,650,000. The Company expects to receive approximately $2,600,000 in
proceeds from the sale, including the repayment of the $1,657,947 note
receivable from MLP and the repayment of advances to MLP. The sale is expected
to close by June , 1998. However no assurance can be given that the sale will be
completed.

         The operating properties of the MLP and the various other real estate
partnerships in which the Company is the general partner are financed with
non-recourse debt. The Company is not liable for the principal or interest on
the partnership mortgages and the other assets of the partnerships are more than
adequate to satisfy other recourse liabilities. Therefore, the Company's
liquidity should not be adversely affected by general partner obligations.

         Prior to 1997 the Company was the general partner of AGS Carriage House
Associates (Carriage) and AGS Compass Pointe Associates (Compass) and owned a 5%
interest in each. During 1996 the Company also became the primary Limited
Partner of Carriage and Compass. In 1996, the Company expanded both partnerships
to raise additional capital. In this regard the Company contributed $807,415 to
these two properties and acquired a 94% limited partner interest in the
partnerships. Hunter contributed $8,155 in capital and obtained a 1% limited
partner interest. The capital was utilized by the partnerships to fully
reinstate the first mortgages secured by the properties. The properties were
sold on May 15, 1997 for $4,866,684. As a result of the sale the Company
realized approximately $1,100,000 in cash and reported a gain of $525,779.

         The Company's business plan includes accelerating its transition from
investments in mortgage receivables and apartment buildings into the ownership
and operation of small properties, primarily suburban office buildings
concentrated in Atlanta, Georgia and other fast growing metropolitan areas in
the southeast.

         In this regard, the Company has developed a concept it calls
"Smart Space".  The "Smart Space" concept involves the subdividing,

                                        8


<PAGE>   11



upgrading, and prefinishing office space into 500 to 2500 square foot ready to
occupy suites. The upgraded suites generally command higher rental rates
because they generally include the addition of private interior bathrooms,
mini kitchens, sheetrock ceilings, recessed lighting, crown moldings, chair
rails, upgraded carpets and finishes in traditional colors. The concept also
includes individually metering each suite for utilities with the tenants
generally paying for their own utilities and janitorial services.

         The Company acquires buildings for the purpose of converting them to
"Smart Space" suites. Early results indicate that the Company can operate
"Smart Space" buildings more profitably than conventional office buildings.
Conceptually, once space has been renovated the Company does not move walls or
reconfigure the space again cutting down on turnover vacancy rates and saving
on build-out expenses which is the largest cost of operating office buildings.
Further, leases are generally written with the tenants paying for their own
utilities and janitorial expenses further reducing the costs to operate the
properties.  All buildings are managed, leased and maintained from a central
location saving on administrative expenses.

         As a result of the Company's recent success in this niche market,
mortgage financing has been readily available to the Company from various
sources including a small insurance company and local and regional banks. With
mortgage financing available the Company intends to expand into other
neighboring southeast markets.

         The Company expects to be able to fund the expansion of its holdings
in this direction by a combination of mortgage financing and internal funding.
It believes it will be able to expand without seeking financing other than
conventional mortgages for at least the next two years. The proceeds from the
repayment of the Company's investments in mortgage receivables from MLP and
the disposition of its general and limited partner interests in apartment
buildings is expected to provide the balance of the funds.

         In June 1997 the Company formed Woodstock Office I LLC (Woodstock) with
a $600,0000 capital contribution. Woodstock acquired an 11,250 square foot
office building in Woodstock, Cherokee County, Georgia. Subsequent to the
purchase of the office complex, Woodstock obtained a $570,000 mortgage payable
on the property.

         In June 1997 the Company acquired a 100% interest in 8046 Roswell Road
LLC (8046 Roswell) from Hunter Management Company in exchange for $323,000 in
cash and the assumption of a $476,915 mortgage payable. 8046 Roswell owns an
8000 square foot office complex in Atlanta, Fulton County, Georgia.

         In September 1997 the Company acquired all of the outstanding shares of
stock in Hunter in exchange for 10,000 shares of the Company's common stock.
Hunter has a minority interest in and manages various properties owned by the
Company's subsidiaries.

                                        9


<PAGE>   12



         Based on 1998 and future budgets and recent property valuations it
appears the Company's real estate investments should produce future operating
cash flows and future resale values for the Company.

         In February 1998 the Company formed 920 Holcomb Bridge LLC (Holcomb)
with a $300,000 capital contribution. Holcomb acquired a 14,500 square foot
office building in Roswell, Fulton County, Georgia for $1,250,000. The purchase
was financed in part with a $970,000 mortgage payable. At December 31, 1997 the
Company had a $200,000 deposit in escrow pending the closing of this
transaction.

         In 1997 the Company netted approximately $175,000 in cash from
operations and received approximately $3,500,000 from investing activities
principally from the Carriage and Compass sale. The Company utilized
approximately $3,300,000 of this cash to repay notes and mortgages payables for
a net increase in cash of approximately $375,000 for the year.

Results of Operations

   1997 versus 1996

           After expenses related to the transition mentioned above, for the
year ended December 31, 1997, the Company realized net income of $134,795
compared to net income of $26,751 in 1996. Total revenue in 1997 was $2,041,621
versus $1,558,471 in 1996. This increase in revenue was primarily the result of
the May 1997 sale of Carriage and Compass and the recognition of the $525,779
gain from sale.

         Total expenses for the year ended December 31, 1997 were $1,791,774
compared to $1,509,263 in 1996. The increase in expenses from 1997 to 1996
included the amortization of the remaining loan costs in the amount of
approximately $196,000 for the Carriage and Compass mortgages.

         General and administrative expenses of $576,703 increased $123,672 over
the 1996 level. This increase includes expenses attributable to the September
1997 acquisition of Hunter, increased Keyman and directors insurance and
increased legal, professional and other expenses relating to the Company's
disposition of its apartments and other investments.

         Depreciation and amortization of $372,026 increased $207,203 from 1996
primarily due to the amortization of the remaining loan costs in the amount of
approximately $196,000 mentioned above.

         Interest expense increased $9,786 in 1997 due to the mortgages obtained
or assumed on the 1997 acquisitions.

Year 2000 Conversion

         The Company does not believe that the year 2000 conversion will have a
material adverse effect on the Company's operations.

                                       10


<PAGE>   13




Inflation

     Inflation in the future may increase rental revenues as well as operating
expenses, all in accordance with general market trends.

ITEM 7.  FINANCIAL STATEMENTS

     See Index to Consolidated Financial Statements on Page F-1 of Item 7 of
Form 10-KSB for financial statements.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE

     There have been no changes in or reported disagreements with the
accountants on any matter of accounting principles, practices or financial
statement disclosure.

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
         PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

         The principal officers and directors of the Company are:

<TABLE>
<CAPTION>
          Name                         Age   Office
          ----                         ---   ------
          <S>                          <C>   <C>
          Albert G. Schmerge, III      53    Chairman of the Board,
                                             Chief Executive Officer,
                                             President and Director

          Norman F. Swanton            59    Secretary and Director

          Martin D. Newman             59    Director
</TABLE>

         All Directors are elected to three year terms.


Albert G. Schmerge III

         Prior to the formation of the Company, Mr. Schmerge was the sole
general partner and Chief Executive Officer of AGS Properties. Mr. Schmerge
began specializing in real estate investments and acquisitions in 1970. He
combined several family owned and related businesses and co-founded AGS
Properties in 1974 which operated in the acquisition, management and operation
of many large real estate properties, primarily apartments, located throughout
the United States. In addition, his experience includes syndication, mortgage
financing and refinancing, construction, operations/management and purchase and
sales of income and investment properties.

                                       11


<PAGE>   14




         Mr. Schmerge earned a Bachelor of Science degree from Villanova
University, and a Masters of Business Administration from Iona Graduate School
of Business. After several years in the electronics and satellite industry he
entered the financial planning and real estate investment business with his
father in 1968.

         Mr. Schmerge has been the President and CEO of the Company since 1991.
Just prior to the formation of the Company, he was a general partner of AGS
Properties, a well known and highly respected real estate owner/operator and had
acted as the general partner as it grew in the 1970's and 1980's to participate
and control more than 70 real estate partnerships and entities over the years.
In his capacity as General Partner he was responsible for the acquisition,
formation, financial structuring, financing and sale of several hundred million
dollars worth of real estate, primarily suburban apartment developments and
suburban office properties.

Norman F. Swanton

         Mr. Swanton currently serves as Chairman of the Board and
Chief Executive Officer of Warren Resources, Inc. which engages in
the acquisition and development of existing oil properties.  From
1989 to 1992, Mr. Swanton also served as President and Investment
Manager of Harbor View Horizons Corp., which engaged in equity
options trading.  From October 1986 to June 1989, Mr. Swanton was
also an independent financial advisor managing investment funds for
his own account and outside investors.

         Mr. Swanton received a B.A. Degree from Long Island University in 1962
and attended Bernard Baruch Graduate School of Business PH.D. Program in
Accountancy and Finance.

Martin D. Newman

         Mr. Newman currently is a partner in the law firm of Fromme, Schwartz,
Newman & Cornicello LLP. His law expertise includes many aspects of real estate,
corporate representation of public and private companies, particularly those
engaged in the ownership, operation and management of real estate and securities
representation of public, private and not-for profit entities generally as
issuer's counsel, in connection with private placements and public offerings,
including such matters arising under the Securities Exchange Act of 1934,
periodic reporting requirements under said Act and other compliance matters.
Previously, Mr. Newman was with the law firms of Ballon, Stoll, Bader and
Nadler, PC and Wien Malkin & Bettex. He was also with the law firm of Chadbourne
& Parke from 1968 to 1977 and a staff attorney with the U.S. Securities and
Exchange Commission from 1963 to 1967.

         Mr Newman received a B.A. Degree from the University of Michigan in
1960 and a JD from Harvard Law School in 1963.

                                       12


<PAGE>   15



ITEM 10.  EXECUTIVE COMPENSATION

         In 1996, the Company amended the employment agreement and extended the
term to June 30, 1999 with Albert G. Schmerge III, the Chairman of the Board,
Chief Executive Officer, President and Director of the Company. The amended
agreement calls for an annual base salary of $250,000 plus an annual bonus equal
to 10% of the Company's net income in excess of a 10% return on shareholder
equity. Salaries earned by Mr. Schmerge during 1997 amounted to $250,000.

Outside Director Compensation

         The non-salaried outside directors of the Company, Mr. Norman F.
Swanton and Mr. Martin D. Newman receive a stipend of $750 for each Board of
Directors meeting attended. It is anticipated that the Board will hold four
regular meetings each year. The Board appointed an audit committee and a
compensation committee, which is comprised of the Outside Directors.

         In 1997 the Company issued 8,230 common stock purchase warrants to the
outside directors as a group which was equal to a 2% capitalization of the
Company. Each warrant allows the purchase of one share of the Company's common
stock at a price of $1 per share. The warrants are exercisable until July 31,
2001.

         Mr. Swanton is also paid a consultant fee for financial consulting
services rendered to the Company at the rate of $20,000 per year pursuant to a
consulting agreement terminable at will by the Company.

Officer Compensation

         Effective July 1, 1996, the Company amended the employment agreement
and extended the term to June 30, 1999 with Albert G. Schmerge III. The amended
agreement calls for an annual base salary of $250,000 plus an annual bonus equal
to 10% of the Company's net income in excess of a 10% return on shareholder
equity.

         The employment agreement also provided for Mr. Schmerge to continue to
participate in employee benefit plans consisting of life and medical insurance
plans.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
          AND MANAGEMENT

         (a) As of December 31, 1997, two persons owned of record or were known
by the Company to own beneficially more than five percent (5%) of the Common
Stock then outstanding.

                                       13


<PAGE>   16



         (b) The following table sets forth certain information with respect to
the beneficial ownership (determined in accordance with Securities and Exchange
Commission Rule 13d-3 under the Securities Exchange Act of 1934) of the
Company's Common Stock by each person known to the Company to beneficially own
more than 5% of the Company's outstanding Common Stock, by each director of the
Company and by all officers and directors as a group.

<TABLE>
<CAPTION>
        Name and Address of             Amount of          Percent
         Beneficial Owner          Beneficial Ownership   of Class
         ----------------          --------------------   --------
        <S>                        <C>                    <C>
        Albert G. Schmerge III (1)       48,000           11.2953%
        Norman F. Swanton (2)             5,615(6)         1.3213%
        Cullen Associates (3)            31,808            7.4850%
        Judith F. Schmerge,
        as Trustee (4)                    3,533            0.8314%
        Martin D. Newman (5)              5,128(6)         1.2067%
        Officers and Directors
        as a Group (three people)        58,743(6)        13.8233%
        --------------------
</TABLE>

(FOOTNOTES)

(1)  Mr. Schmerge is an Officer and Director of the Company.
(2)  Mr. Swanton is an Officer and Director of the Company.
(3)  A partnership owned by the estate of Albert G. Schmerge III's
     father and his family.
(4)  A grantor trust having as its trustee Judith F. Schmerge, the wife of
     Albert G. Schmerge, III, the Chairman & President of the Company, and as
     its beneficiaries, Judith F. Schmerge and her children.
(5)  Mr. Newman is a Director of the Company.
(6)  Includes 8,230 common stock purchase warrants issued to the
     outside directors as a group in 1997. Each warrant allows the purchase of
     one share of the Company's common stock at a price of $1 per share. The
     warrants are exercisable until July 31, 2001.

         (c) There are no other arrangements which may at a subsequent date
result in a compensatory change in control of the Company.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Reference is made to the Notes to Consolidated Financial Statements
contained in this report for various transactions between the Company and its
affiliates.

         (a)  No management person is indebted to the Company.

         (b) There have been no significant transactions with promoters.

                                     Part IV


                                       14


<PAGE>   17



ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)  The following documents are filed as part of this report:

             (1)(2) The financial statements indicated in Item 7, "Financial
Statements".

         An annual report will be sent to the Shareholders subsequent to this
filing and the Company will furnish copies of such report to the Commission at
that time.

         (b)  Exhibits

         The following is a complete list of Exhibits filed as part of the Form
10-KSB Annual Report. Exhibit numbers correspond to the numbers in the Exhibit
Table of Item 601(a) of Regulation S-B, which are incorporated herein:

<TABLE>
         <S>  <C>                                                               <C>
         (2)  (a)  Second Amended Joint Disclosure Statement                    *
                   with respect to Plans of Reorganization of
                   AGS Northbrook Associates, AGS Properties
                         and Related Debtors.

              (b)  First Amended Plan of Reorganization of                      *
                   Birchwood Associates dated February 27,
                   1991.

              (c)  First Amended Plan of Reorganization of                      *
                   AGS Aspen Walk Associates dated February
                   27, 1991.

              (d)  First Amended Plan of Reorganization of                      *
                   AGS Rolling Hills Associates dated
                   February 27, 1991

              (e)  First Amended Plan of Reorganization of                      *
                   AGS Jackson Associates dated February 27,
                   1991.

              (f)  First Amended Plan of Reorganization of                      *
                   AGS Southern Lights Associates dated
                   February 27, 1991.

                       *The exhibit was previously included with the
                        Form 10 filed in June, 1992
</TABLE>

                                       15


<PAGE>   18


<TABLE>
         <S>  <C>                                                               <C>
              (g)  First Amended Plan of Reorganization of                      *
                   AGS Fountain Lake Associates dated
                               February 27, 1991.

              (h)  Confirmation Order dated June 12, 1991                       *
                   by Chief United States Bankruptcy Judge
                   Burton Lifland.

              (i)  Second Amended Plan of Reorganization of                     *
                   AGS Fountains Associates dated January, 1992.

              (j)  Confirmation Order dated March 10, 1992                      *
                   by Chief United States Bankruptcy Judge
                   Burton Lifland.

         (3)  Articles of Incorporation and By-laws.                            *

              (a) Certificate of Correction to Certificate of                   *
                   Amendment to Certificate of Incorporation
                   of Resource Capital Group, Inc.

         (4)  Form of certificate representing Common Stock                     *
                   of the Issuer.

         (10) (a) Amended and Restated Agreement of Limited                     *
                   Partnership of AGS Partners MLP, L.P.
                   dated September 1, 1991.

              (b) Stock Option Agreement dated as of July                       *
                  1, 1991 between Resource Capital Group,
                  Inc. and Mr. Norman F. Swanton, a
                   Director of the Company.

              (c) Consulting Agreement dated July 1, 1991,                      *
                   between Resource Capital Group, Inc. and
                   Norman F. Swanton, a Director of the Company.

              (d) Employment Agreement, dated as of July 1,                      *
                   1991 between the Issuer and Albert G.
                   Schmerge, III, the Issuer's Chairman,
                   President, Chief Executive Officer and
                   Director.

              (e) Minutes of Board of Directors meeting                           *
                   January 15, 1993.
</TABLE>

        *The exhibit was perviously included with the Form 10 filed in June,
         1992 on the Form 10 KSB filed 1993 or 1994.


                                       16


<PAGE>   19


<TABLE>
      <S>  <C>                                                                  <C>
           (f) Letter Agreement dated August 16, 1993                           *
               between Resource Capital Group, Inc. and
               Household Commercial Realty, Inc. including
               Assignment of Deed of Trust.

           (g) Settlement Agreement dated November 23, 1993                     *
               between Resource Capital Group, Inc. and
               Eastrich Multiple Investor Fund, L.P.

           (h) Operating agreement dated April 25, 1995 for                     *
               8050 Roswell Associates, LLC a Georgia
               Limited Liability Company

           (i) Operating agreement dated November 8, 1995                       *
                for 419 Crossville Associates, LLC a Georgia
               limited liability Company.

      (27) Financial Data Schedule (for SEC use only)

      28)  (a) Report on Form 8-K filed February 7, 1995                        *
               regarding the sale of Birches and Foxfire
               Apartments by AGS Partners MLP, L.P.

           (b) Report on Form 8-K originally filed on                           *
               November 21, 1995 and amended on January 23,
               1996 regarding the purchase of a 75%
               interest in 419 Crossville Associates, LLC
               in November, 1995

           (c) Report on Form 8-K filed May 27, 1997
               regarding the sale of Carriage House and
               Compass Pointe Apartments.
</TABLE>

       *   The exhibit was previously included with the Form 10-KSB filed in
           1994, 1995 or 1996.

                                       17


<PAGE>   20




                                   SIGNATURES

In accordance with Section 13 or 15 (d) of the Securities Exchange Act of 1934,
the Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized

                                        RESOURCE CAPITAL GROUP, INC.
                                        ----------------------------

                         By:/s/ Albert G. Schmerge III
                            --------------------------

                            Albert G. Schmerge III,
                            Chairman of the Board, Chief
                            Executive Officer President
                            and Director

                        Date:  March 27, 1998

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.

<TABLE>
<CAPTION>
Signature                        Title                      Date
---------                        -----                      ----
<S>                            <C>                       <C>
/s/Albert G. Schmerge III      Chairman of the Board,    March 27, 1998
-------------------------
Albert G. Schmerge III         Chief Executive Officer
                               President and Director

/s/Norman F. Swanton           Secretary-Treasurer       March 27, 1998
-------------------------      and Director
Norman F. Swanton
</TABLE>


                                       18


<PAGE>   21





                          RESOURCE CAPITAL GROUP, INC.

                        Consolidated Financial Statements
                                 for year ended
                                December 31, 1997


<PAGE>   22



Item 7. Consolidated Financial Statements



                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                         Page
<S>                                                                                                      <C>
Independent Auditor's Report                                                                              F-2

Consolidated Balance Sheet                                                                                F-3

Consolidated Statement of Operations                                                                      F-4

Consolidated Statement of Stockholders' Equity                                                            F-5

Consolidated Statement of Cash Flows                                                                      F-6

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

                                       F-1


<PAGE>   23



                          Independent Auditor's Report

To the Board of Directors
Resource Capital Group, Inc.

We have audited the accompanying consolidated balance sheet of Resource Capital
Group, Inc. and Subsidiaries as of December 31, 1997, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the two years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Resource Capital
Group, Inc. and Subsidiaries at December 31, 1997, and the results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.



                                                    PANNELL KERR FORSTER PC

New York, NY
January 24, 1998, except for note 11 as to which
the date is February 12, 1998.


                                       F-2


<PAGE>   24




                          RESOURCE CAPITAL GROUP, INC.

                           Consolidated Balance Sheet
                                December 31, 1997

                                     Assets

<TABLE>
<S>                                                                                    <C>               <C>
Cash and cash equivalents (note 2)                                                                       $  673,725

Investment in marketable equity securities (note 2)                                                          22,063

Investments in and receivables from partnerships (notes 2 and 3)                                          2,841,452

Real and personal property, at cost (notes 1, 2 and 4)
     Land                                                                              $  1,437,426
     Buildings and improvements                                                           2,937,581
     Furniture and equipment                                                                164,482
                                                                                       ------------
                                                                                          4,539,489
     Less accumulated depreciation                                                         (163,294)      4,376,195
                                                                                       ------------

Deferred costs - net of accumulated amortization of $9,810 (note 2)                                         114,270

Deposit on property acquisition (note 11)                                                                   200,000

Other assets                                                                                                130,136
                                                                                                         ----------
                                                                                                         $8,357,841
                                                                                                         ----------


                      Liabilities and Stockholders' Equity

Liabilities
     Note payable (note 10)                                                                              $   85,258
     Accounts payable                                                                                        16,110
     Accrued expenses
         Interest                                                                      $     22,620
         Payroll                                                                             84,405
         Professional fees                                                                   41,000
         Property taxes                                                                      19,534
         Other                                                                               17,132         184,691
                                                                                       ------------
     Security deposits                                                                                       34,262
     Mortgages payable (note 5)                                                                           2,972,354
     Deferred tax liability (note 8)                                                                        171,237
                                                                                                         ----------
                  Total liabilities                                                                       3,463,912

Commitments and contingencies (notes 4, 5 and 9)

Stockholders' equity
     Common stock - $.01 par value per share, authorized
      1,000,000 shares, issued 508,608 shares (note 6)                                        5,086
     Additional paid-in capital                                                           4,607,494
     Retained earnings                                                                      408,624
     Unrealized gain on investment (note 2)                                                   4,437
     Treasury stock, at cost, (note 6)                                                     (131,712)      4,893,929
                                                                                       ------------      ----------
                                                                                                         $8,357,841
                                                                                                         ----------
</TABLE>


See notes to consolidated financial statements

                                       F-3


<PAGE>   25




                          RESOURCE CAPITAL GROUP, INC.

                      Consolidated Statement of Operations


<TABLE>
<CAPTION>
                                                                                             Year Ended
                                                                                             December 31
                                                                                     --------------------------
                                                                                        1997             1996
                                                                                     ----------      ----------
<S>                                                                                  <C>             <C>
Income
     Rental operations (notes 1 and 4)                                               $1,105,287      $1,059,962
     Equity in earnings of unconsolidated partnerships - net (note 3)                    64,986           1,181
     Management fees - affiliated entity (note 9)                                        91,593          60,000
     Interest - affiliated entity (notes 3 and 7)                                       212,581         212,581
     Gain on settlement of note - affiliated entity (note 7)                                 --         147,122
     Gain on sale of properties (note 4)                                                525,779              --
     Interest and other income                                                           41,395          77,625
                                                                                     ----------      ----------
                  Total income                                                        2,041,621       1,558,471
                                                                                     ----------      ----------

Expenses
     Rental operations (notes 1 and 4)                                                  496,646         554,796
     General and administrative                                                         576,703         453,031
     Interest (notes 5 and 10)                                                          346,399         336,613
     Depreciation and amortization (note 2)                                             372,026         164,823
                                                                                     ----------      ----------
                  Total expenses                                                      1,791,774       1,509,263
                                                                                     ----------      ----------

                  Income before minority share of income                                249,847          49,208

Minority share of income (note 1)                                                        15,586          14,373
                                                                                     ----------      ----------
                  Income before provision for income taxes                              234,261          34,835

Provision for income taxes (note 8)                                                      99,466           8,084
                                                                                     ----------      ----------
                  Net income                                                         $  134,795      $   26,751
                                                                                     ----------      ----------

Basic earnings per share (note 2)                                                    $      .33      $      .06
                                                                                     ----------      ----------

Weighted average shares outstanding (note 2)                                            410,060         415,246
                                                                                     ----------      ----------
</TABLE>




See notes to consolidated financial statements


                                       F-4


<PAGE>   26




                          RESOURCE CAPITAL GROUP, INC.

                 Consolidated Statement of Stockholders' Equity
                   For Years Ended December 31, 1997 and 1996

<TABLE>
<CAPTION>
                                                                                Unrealized
                                                         Additional               Gain                     Total
                                               Common     Paid-in    Retained   (Loss) on    Treasury   Stockholders'
                                               Stock      Capital    Earnings   Investment    Stock        Equity
                                              ------   ------------ ---------  ----------- ----------   -------------
<S>                                           <C>      <C>          <C>        <C>         <C>          <C>
Balance, December 31, 1995                    $4,986   $4,459,034   $247,078   $ (3,754)   $ (60,543)   $ 4,646,801

Net income for year ended December 31, 1996       --           --     26,751         --           --         26,751

Treasury stock acquired (note 6)                  --           --         --         --      (71,169)       (71,169)

Change in unrealized loss on investment           --           --         --     20,001           --         20,001
                                              ------   ----------   --------   --------    ---------    -----------

Balance, December 31, 1996                     4,986    4,459,034    273,829     16,247     (131,712)     4,622,384

Net income for year ended December 31, 1997       --           --    134,795         --           --        134,795

Issuance of warrants (note 6)                     --       24,690         --         --           --         24,690

Issuance of common stock (note 6)                100      123,770         --         --           --        123,870

Change in unrealized gain on investment           --           --         --    (11,810)          --        (11,810)
                                              ------   ----------   --------   --------    ---------    -----------

Balance, December 31, 1997                    $5,086   $4,607,494   $408,624   $  4,437    $(131,712)   $ 4,893,929
                                              ------   ----------   --------   --------    ---------    -----------
</TABLE>



See notes to consolidated financial statements


                                       F-5


<PAGE>   27



                          RESOURCE CAPITAL GROUP, INC.

                      Consolidated Statement of Cash Flows

<TABLE>
<CAPTION>
                                                                                            Year Ended
                                                                                            December 31
                                                                                     ---------------------------
                                                                                         1997              1996
                                                                                     ----------      -----------
<S>                                                                                 <C>             <C>
Cash flows from operating activities
     Net income                                                                     $   134,795     $    26,751
     Adjustments to reconcile net income to net cash provided (used)
      by operating activities
         Depreciation and amortization                                                  372,026         164,823
         Equity in loss of unconsolidated partnerships                                   33,317          83,763
         Minority share of income                                                        15,586          14,373
         Provision for deferred income taxes                                             89,630          12,616
         Gain of sale of properties                                                    (525,779)             --
         Issuance of stock warrants                                                      24,690              --
         Gain on settlement of note - affiliated entity                                      --        (147,122)
         Gain on sale of marketable equity securities                                   (18,521)             --
         Changes in certain other accounts, net of acquisitions
              Deferred costs and other assets                                           164,330          46,824
              Accounts payable                                                          (43,574)       (273,696)
              Accrued expenses                                                          (34,661)       (669,381)
              Receivables from partnerships                                                  --         225,000
              Security deposits                                                         (37,089)         16,190
                                                                                    -----------     -----------
                  Net cash provided (used) by operating activities                      174,750        (499,859)
                                                                                    -----------     -----------
Cash flows from investing activities
     Net advances to investees                                                         (155,451)       (197,500)
     Proceeds from sale of properties                                                 4,866,684              --
     Additions to real and personal property                                           (175,152)       (155,793)
     Purchase of subsidiaries                                                          (938,417)     (1,263,314)
     Proceeds from sale of marketable equity securities                                  89,024              --
     Deposit on purchase of property                                                   (200,000)             --
                                                                                    -----------     -----------
                  Net cash provided (used) by investing activities                    3,486,688      (1,616,607)
                                                                                    -----------     -----------
Cash flows from financing activities
     Repayment of mortgages payable                                                  (3,704,657)             --
     Proceeds from mortgage payable                                                     570,000       1,667,500
     Note amortization payments                                                         (70,570)        (54,852)
     Mortgage amortization payments                                                     (81,141)       (174,460)
     Purchase of treasury stock                                                              --         (71,169)
     Net distributions to minority interest                                                  --        (188,100)
                                                                                    -----------     -----------
                  Net cash provided (used) by financing activities                   (3,286,368)      1,178,919
                                                                                    -----------     -----------
                  Net increase (decrease) in cash and cash equivalents                  375,070        (937,547)
Cash and cash equivalents at beginning of year                                          298,655       1,236,202
                                                                                    -----------     -----------
Cash and cash equivalents at end of year                                            $   673,725     $   298,655
                                                                                    -----------     -----------

Supplemental disclosures of cash flow information
     Cash paid during the year for interest                                         $   370,022     $ 1,152,810
                                                                                    -----------     -----------
     Cash paid during the year for income taxes                                     $    17,267     $    83,989
                                                                                    -----------     -----------

Details of purchases in majority
 interest in subsidiaries
     Working capital                                                                $  (116,952)    $   593,868
     Real and personal property                                                      (1,422,250)     (3,777,353)
     Cost in excess of net liabilities acquired                                              --      (1,942,540)
     Mortgages payable                                                                  476,915       3,862,711
                                                                                    -----------     -----------
Consideration given for purchases of majority interest in subsidiaries               (1,062,287)     (1,263,314)
                                                                                    -----------     -----------
Cash                                                                                    938,417       1,263,314
Common stock                                                                            123,870              --
                                                                                    -----------     -----------
                                                                                    $ 1,062,287     $ 1,263,314
                                                                                    -----------     -----------
</TABLE>


See notes to consolidated financial statements


                                       F-6


<PAGE>   28


                          RESOURCE CAPITAL GROUP, INC.

                   Notes to Consolidated Financial Statements
                                December 31, 1997


Note 1 - Organization and description of business

Resource Capital Group, Inc. (the Company) was organized as a Delaware
Corporation in November 1990 to become successor in interest of AGS Properties
(AGS) and assumed various general and limited partnership interest of AGS.

As of December 31, 1997, the Company's investments include:

     AGS PARTNERS MLP, LP (MLP), acquired from AGS in 1991 and owns apartment
     complexes in Nashville, Tennessee and Oklahoma City, Oklahoma.

     AGS MEADOW OAKS ASSOCIATES (MEADOW), acquired from AGS in 1991 and owns an
     apartment complex in Kansas City, Kansas.

     8050 ROSWELL ASSOCIATES LLC (8050 ROSWELL), acquired in 1995 and owns an
     office building in Fulton County, Georgia.

     419 CROSSVILLE ASSOCIATES LLC (CROSSVILLE), acquired in 1995 and owns an
     office building in Fulton County, Georgia.

     COLONIAL PARK COMMONS LLC (COLONIAL), acquired in 1996 and owns an office
     building in Fulton County, Georgia.

     MEGGAN LOT LLC (MEGGAN), AND HEIDE LOT LLC (HEIDE), acquired in 1996 and
     owns unimproved land surrounding the Colonial property in Fulton County,
     Georgia.

     8046 ROSWELL ROAD LLC (8046 ROSWELL), acquired in 1997 and owns an office
     complex in Fulton County, Georgia.

     WOODSTOCK OFFICE I, LLC (WOODSTOCK), acquired in 1997 and owns an office
     complex in Cherokee County, Georgia.

     HUNTER MANAGEMENT COMPANY (HUNTER), acquired in 1997 and owns the minority
     interest in various investees of the Company. Additionally, Hunter manages
     the properties owned by the Company's subsidiaries.

Note 2 - Significant accounting policies

Basis of Accounting

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries, 8050 Roswell, Crossville, Colonial, Meggan,
Heide, 8046 Roswell, Woodstock and Hunter. All intercompany transactions and
balances have been eliminated in consolidation.

Prior to the acquisition of Hunter in September 1997, the Company recorded a
minority interest representing Hunters' share of the net assets and operations
of certain subsidiaries.

In 1997 the properties owned by AGS Carriage House Associates (Carriage) and AGS
Compass Point Associates (Compass) were sold and these Partnerships were
dissolved. The Company had included the operations of these Partnerships in the
consolidated financial statements from June 1, 1996 through the date of
disposition. Prior to June 1, 1996 these Partnership were accounted for under
the equity method. (See note 4)


                                       F-7


<PAGE>   29


                          RESOURCE CAPITAL GROUP, INC.

             Notes to Consolidated Financial Statements (continued)
                               December 31, 1997






The Company's general and limited partnership interests in both MLP and Meadow
are accounted for under the equity method.

Use of estimates

The consolidated financial statements of the Company are prepared in conformity
with generally accepted accounting principles, which require management to make
estimates and assumptions that effect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Long-lived assets

Management evaluates the Company's long-lived assets, which consist primarily of
its investments in real and personal property, for impairment based on the
recoverability of their carrying amounts. When it is probable that undiscounted
cash flows will not be sufficient to recover the carrying amount of a specific
property, the assets will be written down to its fair value. No such write-downs
were required in 1997 and 1996.

Disclosure about fair value of financial instruments

The carrying amount of the Company's cash and cash equivalents, receivables and
mortgages and notes payable is a reasonable approximation of fair value.

Depreciation and amortization

Depreciation of real and personal property is being provided on straight-line
and accelerated methods over estimated service lives ranging from 5 to 39 years.

Deferred mortgage costs are being amortized on a straight-line basis over the
term of the respective mortgages. As a result of the sale of Carriage and
Compass, deferred mortgage costs in the amount of $196,153, have been fully
amortized and reflected in the 1997 consolidated statement of operations.

Income taxes

Deferred tax assets and liabilities are recognized for both the expected future
tax impact of differences between the financial statement and tax basis of
assets and liabilities, and for the expected future tax benefit to be derived
from tax loss and tax credit carryforwards. Deferred tax assets are reflected at
their likely realizable amount.

Cash and cash equivalents

For purposes of reporting cash flows, cash and cash equivalents includes cash on
hand and in banks, money market funds which are available for current
operations, and certificates of deposit with original maturities of three months
or less. Substantially, all of the Company's cash and cash equivalents are
maintained in a money market and an operating account on deposit with two
separate banks. The Company has not experienced any losses on its cash deposits.


                                       F-8


<PAGE>   30



                          RESOURCE CAPITAL GROUP, INC.

             Notes to Consolidated Financial Statements (continued)
                                December 31, 1997


Earnings per share

In 1997, the Financial Accounting Standards Board issued Statement No. 128 (SFAS
128), Earnings per Share. SFAS 128 replaced the calculation of primary and fully
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of stock options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. The effects of the
Company's 8,230 outstanding stock warrants (see note 6) did not have an effect
on earnings per share and accordingly dilutive earnings per share has not been
presented.

Investment in marketable equity securities

The Company's investment in marketable equity securities are classified as
available for sale and accordingly are stated at fair value with the related
unrealized gains and losses included as a separate component of stockholders'
equity. The cost of the Company's available-for-sale securities is $17,626.
Realized gains and losses on the sale of these investments are derived using the
weighted average method for determining cost.

Reporting comprehensive income

Effective for year ended 1998, the Company will be required to adopt the
provisions of Statement of Financial Accounting Standards No. 130 (SFAS 130)
"Reporting Comprehensive Income" which was issued by the Financial Accounting
Standards Board in June 1997. SFAS 130 requires a company to report
comprehensive income and its components in a full set of financial statements.
Comprehensive income is the change in equity during a period from transactions
and other events and circumstances from nonowner sources, such as unrealized
gains (losses) on available-for-sale securities.

Investments in partnerships

The Company uses the equity method of accounting for its partnership interests
in MLP, Meadow, Carriage, (through May 1996) and Compass (through May 1996)
whereby the original costs are adjusted by the Company's share of the
undistributed earnings or losses of these entities. Since the Company is
responsible as general partner for obligations of these entities, losses
recorded under the equity method, related to the Company's investment as general
partner, could exceed the cost of the Company's general partnership investment.
Since, as a limited partner, the Company is not responsible for the obligations
of these entities in excess of its investments, the costs of such limited
partnership investments, plus advances, will not be reduced below zero for
losses related to such limited partnership interests.

The equity in earnings (loss) of MLP is adjusted annually to eliminate
transactions with the Company.


                                       F-9


<PAGE>   31




                          RESOURCE CAPITAL GROUP, INC.

             Notes to Consolidated Financial Statements (continued)
                                December 31, 1997

Note 3 - Investment in and receivables from partnerships

The balance at December 31, 1997 is summarized as follows:

<TABLE>
               <S>                                                                  <C>
               Notes receivable from MLP (a)                                        $ 1,983,501
               Accrued interest receivable on MLP notes (a)                              24,794
               Advances receivable from partnerships                                  1,197,130
               Accountability to partnerships (b)                                      (163,973)
                                                                                    -----------
                                                                                      3,041,452
               Valuation allowance (a)                                                 (200,000)
                                                                                    -----------
                                 Net                                                $ 2,841,452
                                                                                    -----------
</TABLE>


a)   In connection with the formation of both the Company and MLP in 1991, MLP
     issued various subordinated promissory notes to the Company which are
     secured mortgages and deeds of trust and require monthly payments of
     interest only at the rate of 15% per annum. The notes also require the
     payment of additional interest on the sale or refinancing of the mortgaged
     property equal to a thirty-five percent participation in the net proceeds
     as defined.

     A summary of remaining subordinated notes at December 31, 1997 is as
follows:

<TABLE>
<CAPTION>

                          Secured Asset                 Maturity Date
               ---------------------------------     -----------------------
               <S>                                   <C>                           <C>
               Aspen Walk Apartments                 December 1, 2005              $    325,554
               Rolling Hills Apartments              October 1, 2005                  1,657,947
                                                                                   ------------

                                                                                   $  1,983,501
                                                                                   ------------
</TABLE>



     Based upon an evaluation of the Company's notes receivable from MLP, during
     1995 management provided a $200,000 valuation allowance to reflect its
     estimate of their realizability.

b)   As discussed in note 2, the Company's policy is to reflect its investments
     in unconsolidated partnerships on the equity method. The following is a
     summary of the Company's investments in (accountability to) Partnerships as
     of December 31, 1997:

<TABLE>
<S>          <C>                                                                          <C>
             MLP
                  1% General partnership interest and
                  27.55% Limited partnership interest                                     $  (94,837)

             Meadow
                  2.55% General partnership interest and
                   43.10% Limited partnership interest (1)                                   (69,136)
                                                                                          ----------
                                                                                          $ (163,973)
                                                                                          ----------
</TABLE>



                                      F-10


<PAGE>   32




                          RESOURCE CAPITAL GROUP, INC.

             Notes to Consolidated Financial Statements (continued)
                                December 31, 1997

Equity in earnings (loss) of Partnership investments for the years ended
December 31, 1997 and 1996 are as follows:

<TABLE>
<CAPTION>
                                                                                  1997              1996
                                                                              -----------        -----------
                 <S>                                                          <C>                 <C>
                 MLP                                                          $  (28,211)         $  (60,232)
                 Meadow (1)                                                       (5,106)             (9,245)
                 Carriage (2)                                                         --              (6,806)
                 Compass (2)                                                          --              (7,480)
                                                                              ----------          ----------
                              Sub-total                                          (33,317)            (83,763)
                 Elimination of interest on notes payable and
                 management fees to the Company                                   98,303              84,944
                                                                              ----------          ----------
                              Total                                           $   64,986          $    1,181
                                                                              ----------          ----------
</TABLE>



     (1) As discussed in note 2, the Company does not reflect its equity in
         losses of limited partnership interest when such losses are in excess
         of the Company's investment and advances. Unrecorded losses in Meadow
         aggregated $1,168,539 at December 31, 1997.

     (2) The Company accounted for its 5% general partnership investment in
         Carriage and Compass on the equity method through May 1996. Effective
         June 1996, the operations of both Carriage and Compass were included in
         the consolidated financial statements of the Company. During 1997, both
         Carriage and Compass properties were sold (see note 4).

Summarized financial information of the Company's investments in unconsolidated
partnerships as of and for the year ended December 31, 1997 are as follows:

<TABLE>
<CAPTION>
                                                                                  MLP               Meadow
                                                                              -----------         -----------
                 <S>                                                          <C>                 <C>
                 Real and personal property - net                             $ 2,054,746         $ 2,657,311
                 Other assets                                                     413,435             482,267
                                                                              -----------         -----------
                                   Total assets                                 2,468,181           3,139,578
                                                                              -----------         -----------

                 Mortgages and accrued interest payable (A)                     5,505,902           8,631,960
                 Notes payable, accrued interest and advances
                  to Resource Capital Group, Inc.                               3,178,973                  --
                 Other liabilities                                                358,072             220,646
                                                                              -----------         -----------
                                   Total liabilities                            9,042,947           8,852,606
                                                                              -----------         -----------

                 Equity (deficit)                                              (6,574,766)         (5,713,028)
                                                                              -----------         -----------
                 Revenues                                                       2,472,354           1,452,622
                                                                              -----------         -----------
                 Net (loss)                                                   $   (98,810)        $  (274,239)
                                                                              -----------         -----------
</TABLE>



(A)  The partners, including the Company, are not personally liable for the
     mortgages encumbering the real property.


                                      F-11


<PAGE>   33




                          RESOURCE CAPITAL GROUP, INC.

             Notes to Consolidated Financial Statements (continued)
                                December 31, 1997

Note 4 -  Property acquisitions and dispositions

1997 Acquisitions

In June 1997 the Company formed Woodstock (see note 1) with a $600,000 capital
contribution. Woodstock simultaneously acquired an 11,250 square foot office
building located in Cherokee County, Georgia for $600,000. Subsequent to the
purchase of the office complex, Woodstock obtained a $570,000 mortgage payable
on the property.

In June 1997 the Company acquired a 100% interest in 8046 Roswell Road LLC (8046
Roswell) from Hunter (see note 1) in exchange for $323,000 in cash and the
assumption of a $476,915 mortgage payable. 8046 Roswell owns an 8,000 square
foot office complex in Fulton County, Georgia.

In September 1997 the Company acquired all of the outstanding shares of stock in
Hunter (see note 1) in exchange for 10,000 shares of the Company's common stock
in a business combination accounted for under the purchase method. Hunter has a
minority interest in and, manages various properties owned by the Company's
subsidiaries. The net assets of Hunter were acquired at their net book value of
$123,870, which approximated their fair value.

1997 Dispositions

In May 1997 the properties owned by Carriage and Compass, entities in which the
Company held a 99% interest, were sold for $4,866,684. As a result of these
sales the Company realized a gain in the amount of $525,779. Operating results
of these entities, exclusive of the $525,779 gain, included in the accompanying
1997 statement of operations are as follows:

<TABLE>
                    <S>                                 <C>
                    Income from rental operations       $  468,257
                                                        ----------
                    Expenses
                       Rental operations                   297,336
                       Interest                            134,192
                       Depreciation and amortization       269,007
                                                        ----------
                                                        $  700,535
                                                        ----------
</TABLE>



1996 Acquisitions

In September 1996 Colonial (see note 1) was formed and capitalized with a
$300,000 contribution of which $297,000 was funded by the Company, while the
remaining $3,000 was funded by Hunter. Colonial then acquired an 18,387 square
foot office building located in Fulton County, Georgia for $1,010,000. The
purchase was financed in part, with a $787,500 mortgage payable. Additionally,
in September 1996, Meggan and Heide (see note 1) were also formed and a $100,000
capital contribution was made into each; of which $99,000 was funded by the
Company with the remaining $1,000 funded by Hunter. Meggan and Heide each paid
$100,000 to acquire approximately .8 acres of land surrounding the Colonial
property in Fulton County, Georgia.


                                      F-12


<PAGE>   34




                          RESOURCE CAPITAL GROUP, INC.

             Notes to Consolidated Financial Statements (continued)
                                December 31, 1997

Prior to June 1996, the Company had a 5% general partnership interest in
Carriage and Compass (see note 2), Mississippi limited partnerships which each
owned and operated residential apartment complexes. During May and June 1996,
the Company paid $39,325 to 74% of the limited partners of Carriage and 91% of
the limited partners of Compass in exchange for their partnership units. The
remaining limited partners forfeited their interests pursuant to the terms of
the respective partnership agreements. The Carriage and Compass Partnerships do
not intend to allocate any profits or losses or make distributions to the
partners who forfeited their interests. Additionally, in 1996, the Company made
capital contributions aggregating $802,465 into Carriage and Compass to fund the
accrued and unpaid debt service payments. As a result of the acquisition of a
majority of the limited partner interests and the forfeiture of the remaining
limited partner interests, effective June 1, 1996 the Company effectively owned
99% (5% general partner interest and a 94% limited partner interest) of each of
Carriage and Compass. The remaining 1% was owned by Hunter. Accordingly,
effective June 1, 1996 the operations of Carriage and Compass were consolidated
in the accompanying financial statements. In connection therewith, the Company
had recorded in consolidation approximately $1,943,000 of excess cost over the
underlying equity in Carriage and Compass Partnerships, and has allocated the
excess to real and personal property.

The following summarized unaudited pro forma results of operations for the year
ended December 31, 1997 assume each of the three 1997 acquisitions occurred on
January 1, 1997.

<TABLE>
<S>                                                                             <C>
                    Total income                                                $   2,353,513
                                                                                -------------

                    Net income                                                        155,006
                                                                                -------------

                    Basic earnings per share                                    $         .38
                                                                                -------------

Note 5 - Mortgages payable

The mortgages payable as of December 31, 1997 consist of the following:

     8050 Roswell - The mortgage payable bears interest at 9.53% per annum
     and matures in July 2010. The terms of the mortgage require that
     monthly payments of $3,766 be applied first to interest and the balance
     to reduction of principal. Interest on this loan adjusts every five
     years, commencing on July 1, 2000 and is computed as 325 basis points
     over the average yield on U.S. Treasury securities, as
     defined.                                                                   $     330,734
</TABLE>





                                      F-13


<PAGE>   35




                          RESOURCE CAPITAL GROUP, INC.

             Notes to Consolidated Financial Statements (continued)
                                December 31, 1997

<TABLE>
         <S>                                                                                           <C>
         Crossville - The mortgage payable bears interest at 8.8% per annum and
         matures in June 2011. The terms of the mortgage require monthly
         payments of $8,821 be applied first to interest with the balance to
         reduction of principal. Interest on this loan adjusts every five years
         and is computed as 325 basis points over the average yield on
         U.S. Treasury securities, as defined. (a)                                                        836,479

         Colonial - The mortgage payable bears interest at 9.375% per annum and
         matures in October 2006. The terms of the mortgage require monthly
         payments of $7,276 be applied first to interest with the balance to
         reduction of principal. Interest on this loan adjusts on October 1,
         2001 and is computed as 300 basis points over the average yield on
         U.S. Treasury securities, as defined.                                                            770,877

         8046 Roswell - The mortgage payable bears interest at 7.00% per annum
         and matures on June 1, 2009. The terms of the mortgage require monthly
         payments of $4,866 be applied first to interest and the balance to
         reduction of principal. Interest on this loan adjusts on June 1, 1998
         to 8.00% and again on June 1, 2002 and is computed as 300 basis points
         over the average yield on U.S. Treasury securities, as defined.                                  464,264

         Woodstock - The mortgage payable bears interest at 9.31% per annum and
         matures in December 2017. The terms of the mortgage require monthly
         payments of $5,243 be applied first to interest with the balance to
         reduction of principal. Interest on this loan adjusts every five years,
         commencing on December 1, 2002 and is computed as
         300 basis points over the average yield on U.S. Treasury                                         570,000
         securities, as defined.                                                                       ----------

                                                                                                       $2,972,354
                                                                                                       ----------
</TABLE>






                                      F-14


<PAGE>   36




                          RESOURCE CAPITAL GROUP, INC.

             Notes to Consolidated Financial Statements (continued)
                                December 31, 1997

(a)  On January 9, 1998 Crossville refinanced its mortgage payable for
     $1,100,000. The new mortgage payable bears interest at 7.75% per annum and
     matures in January 2008. The terms of the mortgage require monthly payments
     of $8,693 be applied first to interest with the balance to reduction of
     principal. In addition, non-interest bearing escrow deposits equal to one
     twelve of the anticipated annual tax assessments are required. Furthermore,
     the terms of the new mortgage includes prepayment penalties, as defined.

A schedule of future amortization payments, inclusive of the new Crossville
mortgage, at December 31, 1997 follows:

<TABLE>
                            <S>                        <C>
                            1998                       $   82,550
                            1999                           92,447
                            2000                          100,740
                            2001                          109,784
                            2002                          119,648
                            Thereafter                  2,730,706
                                                       ----------
                                                       $3,235,875
                                                       ----------
</TABLE>


A majority of the mortgage notes payable have been guaranteed by the Company.

Note 6 - Stockholders' equity

During 1997, the Company issued 10,000 shares of common stock in exchange for
all of the common stock in Hunter (see notes 1 and 4). The net assets of Hunter
amounted to $123,870, of which $123,770 was allocated to additional paid-in
capital with the remaining $100 being allocated to common stock at par value.

During 1997, the Company issued 8,230 common stock purchase warrants valued at
$24,690 to two members of the Board of Directors. Each warrant allows the
purchase of one share of the Company's common stock at a price of $1 per share.
The warrants are exercisable until July 31, 2001. At December 31, 1997, none of
these warrants have been exercised.

The Company had entered into a stock option agreement with its President which
allowed the purchase of 108,356 shares of the Company's common stock at a price
of $10 per share. These options were exercisable for up to 20% of the option
shares each year over a five-year term. All of these options expired,
unexercised, on June 30, 1997.

During 1996, the Company acquired as treasury stock 22,555 shares for $71,169.
At December 31, 1997, the Company has 91,882 shares of treasury stock.

Note 7 - Mortgage note receivable - affiliated entity

During 1996, the Company entered into a settlement agreement whereby it received
$147,122 in 1997, in full satisfaction of a mortgage note receivable from MLP.
The Company had placed a valuation allowance on the entire note receivable in
1994, and accordingly has reflected the $147,122 as revenue in the accompanying
1996 statement of operations.


                                      F-15


<PAGE>   37




                          RESOURCE CAPITAL GROUP, INC.

             Notes to Consolidated Financial Statements (continued)
                                December 31, 1997

Note 8 - Income taxes

The provision for (benefit of) income taxes for the years ended December 31,
1997 and 1996 is as follows:

<TABLE>
<CAPTION>
                                                                           1997         1996
                                                                         --------    ---------
                       <S>                                               <C>         <C>
                       Current
                            Federal                                      $    569    $ (25,521)
                            State                                           9,267       20,989
                                                                         --------    ---------
                                                                            9,836       (4,532)
                                                                         --------    ---------
                       Deferred                                            89,630       12,616
                                                                         --------    ---------
                                                                         $ 99,466    $   8,084
                                                                         --------    ---------
</TABLE>



The difference between the total tax provision and that obtained by applying the
statutory rate is as follows:

<TABLE>
<CAPTION>
                                                                           1997         1996
                                                                         --------    ---------
                       <S>                                               <C>         <C>
                       Tax provision at statutory rate                   $ 79,649    $  11,844
                       State taxes and other                               19,817       (3,760)
                                                                         --------    ---------
                                      Provision for income taxes         $ 99,466    $   8,084
                                                                         --------    ---------
</TABLE>



A summary of the net deferred income tax (liability) by source at December 31,
1997 is as follows:

<TABLE>
<S>                                                                                  <C>
Deferred tax asset
     Incentive stock compensation                                                    $  19,720
     Discounted note payable                                                            28,988
     Notes receivable                                                                   68,000
     Tax credit carryforward                                                            50,000
     Stock warrants                                                                      8,395
                                                                                     ---------
                  Subtotal                                                             175,103
     Valuation allowance                                                                    --
                                                                                     ---------
                  Total                                                                175,103
Deferred tax liability

     Basis in Partnership investments                                                 (346,340)
                                                                                     ---------
                  Net deferred tax (liability)                                       $(171,237)
                                                                                     ---------
</TABLE>



The Company accounts for certain items differently for income tax purposes as
compared to financial reporting purposes (see note 2). In 1997, the Company
utilized all of its available operating loss carryforwards and, in 1996 the
Company had a tax loss which was carried back to prior years.


                                      F-16


<PAGE>   38




                          RESOURCE CAPITAL GROUP, INC.

             Notes to Consolidated Financial Statements (continued)
                                December 31, 1997

Note 9 - Commitments

a.  Employment agreement

Effective July 1, 1996, the Company amended the employment agreement with its
President and extended the term to June 30, 1999. The amended agreement calls
for an annual base salary of $250,000 plus an annual bonus based on the
Company's net income, as defined.

b.  Management agreements

The real estate operations of the Company's majority owned subsidiaries and
equity investees are managed by Hunter (see note 1) under an agreement which
provides for fees equal to 5% of revenue as defined. Prior to the acquisition of
Hunter in 1997, the Company had been assisting Hunter in the management of
certain properties. Management fees earned by the Company for its assisting
Hunter and, fees earned by Hunter from the Company's equity investees subsequent
to the Company's acquisition of Hunter amounted to $91,593 in 1997 and $60,000
in 1996. Expenses incurred by the Company's subsidiaries for management fees
prior the acquisition of Hunter amounted to $45,929 in 1997 and $52,955 in 1996
and are included in rental operations expense in the accompanying consolidated
statement of operations.

c.  Operating leases

8050 Roswell, Crossville, Colonial, 8046 Roswell and Woodstock each lease their
office space under operating lease agreements expiring in various years through
2002. Future minimum annual rents to be received under operating leases
currently in effect are as follows:

<TABLE>
                            <S>                      <C>
                            1998                     $  669,732
                            1999                        532,751
                            2000                        336,000
                            2001                        202,045
                            2002                         97,446
                            Thereafter                       --
                                                     ----------
                                                     $1,837,974
                                                     ----------
</TABLE>



Included in rental revenue in 1997 and 1996 is $9,070 and $7,674, respectively,
from Hunter, which leases office space in the Company's Crossville property.
Rental revenue of Hunter subsequent to it being acquired by the Company
eliminates in consolidation.

d.  Consulting fees

The Company has entered into a consulting agreement with a member of its Board
of Directors which provides for annual fees of $20,000.


                                      F-17


<PAGE>   39




                          RESOURCE CAPITAL GROUP, INC.

             Notes to Consolidated Financial Statements (continued)
                                December 31, 1997

Note 10 - Note payable

The Company issued a promissory note in favor of its former Executive Vice
President as a settlement of the termination of his employment agreement in
1993. The terms of the agreement provide for monthly payments over a six year
period ending December 1998.

Note 11 - Subsequent event - property acquisition

On February 12, 1998 the Company purchased an office building located at 920
Holcomb Bridge Road in Fulton County, Georgia for $1,250,000. The purchase price
was funded with a $970,000 mortgage, $200,000 cash which was placed in escrow
during 1997, and $80,000 paid at closing.


                                      F-18