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

                                      FORM 10-K
                                    ______________
          (Mark One)

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

          For the fiscal year ended December 31, 1996

          [  ] TRANSITION REPORT  PURSUANT TO SECTION  13 OR  15(d) OF  THE
               SECURITIES EXCHANGE ACT OF 1934

          For the transition period from ______ to _______

                            Commission File Number 0-27190

                           PARAMOUNT FINANCIAL CORPORATION
                (Exact Name of Registrant as Specified in Its Charter)

                  DELAWARE                                11-3072768
               (State or Other                         (I.R.S. Employer
               Jurisdiction of                       Identification No.)
              Incorporation or
                Organization)

                                  ONE JERICHO PLAZA
                               JERICHO, NEW YORK 11753
                                (Address of Principal
                                  Executive Offices)

                                    (516) 938-3400
                               (Registrant's Telephone
                             Number, Including Area Code)


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

     Securities registered pursuant to  Section 12(g) of the Act:
     
                       Units, each consisting of two shares of
                        Common Stock and two Class A Warrants
                        -------------------------------------
                                   (Title of class)

             Class A Warrants, each to purchase one share of Common Stock
             ------------------------------------------------------------
                                   (Title of class)

                       Common Stock, $0.01 par value per share
                       ---------------------------------------
                                   (Title of class)

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

                              Yes X               No__
                                 --

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

               The  aggregate  market value  of  the  voting stock  (Common
          Stock) held by non-affiliates of the Registrant on March 19, 1997
          was approximately $2,845,260, based on the closing sales price of
          such  stock  on such  date, as  reported  by the  Nasdaq SmallCap
          Market.

               The number of shares  outstanding of the Registrant's Common
          Stock,  as of  March 19,  1997 was:   7,990,000 shares  of Common
          Stock, $0.01 par value.

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

                         DOCUMENTS INCORPORATED BY REFERENCE

               The Registrant's Definitive Proxy  Statement relating to the
          Registrant's 1997 Annual Meeting of Stockholders, to be filed  by
          the Registrant  with the Securities and Exchange Commission on or
          before April 30,  1997, is hereby incorporated  by reference into
          Part III of this Annual Report on Form 10-K.


          <PAGE>


                           PARAMOUNT FINANCIAL CORPORATION

                              ANNUAL REPORT ON FORM 10-K

                                  TABLE OF CONTENTS
                                                                       PAGE
                                                                       ----

                                        PART I


               ITEM 1 - BUSINESS  . . . . . . . . . . . . . . . . . . .   1
                    General . . . . . . . . . . . . . . . . . . . . . .   1
                    Industry Background . . . . . . . . . . . . . . . .   2
                    Sales and Leasing Business  . . . . . . . . . . . .   2
                    Trading Business  . . . . . . . . . . . . . . . . .   4
                    Paratech Resources Inc. . . . . . . . . . . . . . .   4
                    Joint Venture . . . . . . . . . . . . . . . . . . .   5
                    Lease Financing Sources . . . . . . . . . . . . . .   5
                    Certain  Risks Associated with  Expansion of Lease
                    Portfolio . . . . . . . . . . . . . . . . . . . . .   6
                    Distribution and Maintenance  . . . . . . . . . . .   6
                    Customer Concentration  . . . . . . . . . . . . . .   7
                    Competition . . . . . . . . . . . . . . . . . . . .   7
                    Employees . . . . . . . . . . . . . . . . . . . . .   8
                    Government Regulation . . . . . . . . . . . . . . .   8

               ITEM 2 - PROPERTIES  . . . . . . . . . . . . . . . . . .   8

               ITEM 3 - LEGAL PROCEEDINGS . . . . . . . . . . . . . . .   8

               ITEM 4 - SUBMISSION  OF MATTERS TO A VOTE  OF SECURITY-
                           HOLDERS  . . . . . . . . . . . . . . . . . .   8

                                       PART II

               ITEM  5 -  MARKET  FOR REGISTRANT'S  COMMON EQUITY  AND
                             RELATED STOCKHOLDER MATTERS  . . . . . . .   9

               ITEM 6 - SELECTED FINANCIAL DATA . . . . . . . . . . . .  10

               ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 
                           CONDITION AND RESULTS OF OPERATIONS  . . . .  12
                    General . . . . . . . . . . . . . . . . . . . . . .  12
                    Lease Accounting  . . . . . . . . . . . . . . . . .  13
                    Results of Operations . . . . . . . . . . . . . . .  14
                    Liquidity and Capital Resources . . . . . . . . . .  17
                    Forward Looking Statements and Associated Risk  . .  18
                    Effect of New Accounting Standards  . . . . . . . .  18
                    Inflation . . . . . . . . . . . . . . . . . . . . .  19

               ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . .  19

               ITEM 9  - CHANGES IN AND  DISAGREEMENT WITH ACCOUNTANTS
                            ON ACCOUNTING AND FINANCIAL DISCLOSURE  . .  19

                                       PART III

               ITEM 10 - ITEM 13 - DOCUMENTS INCORPORATED BY
                                      REFERENCE . . . . . . . . . . . .  19

                                       PART IV

               ITEM 14 - EXHIBITS,  FINANCIAL STATEMENT SCHEDULES, AND
                            REPORTS ON FORM 8-K . . . . . . . . . . . .  19

          SIGNATURES  . . . . . . . . . . . . . . . . . . . . . . . . .  21

          FINANCIAL STATEMENTS  . . . . . . . . . . . . . . . . . . . . F-1

                                  -i-

          <PAGE>

                                        PART I

          ITEM 1 -  BUSINESS

          GENERAL

               Paramount   Financial   Corporation   ("Paramount"  or   the
          "Company") is a comprehensive information technology ("IT") asset
          management and solution provider  offering customers a wide range
          of  integrated services, including  lease finance, network design
          and  implementation.   The  Company works  with its  customers to
          develop strategies  governing when to acquire  IT equipment, when
          to  upgrade existing equipment and when to order new equipment to
          take advantage of current  technology.  The Company also  has the
          ability to act as an outlet for the IT equipment being displaced.
          The  Company is not  tied to  any one  manufacturer and  thus can
          provide   customers  with   available  technical   and  financial
          alternatives regardless of the specific hardware platform.

               Paramount  commenced  operations  in   July  of  1991  as  a
          wholesale  trader  of used  computer  hardware.   From  inception
          through  the end  of  1995, the  Company  generated most  of  its
          revenue from this activity  (generally referred to as "broker-to-
          broker"  trading).   In  1992,  the  Company began  developing  a
          complimentary business leasing new and used computer equipment to
          corporate end-user  customers.   The Company has  always believed
          that the development of a portfolio of high quality, essential IT
          equipment on lease to relationship-based end-user customers was a
          key  element  to its  long term  business success,  since, unlike
          other assets, IT equipment is frequently upgraded and/or enhanced
          during the  term  of its  lease.   As  a result,  an owner  of  a
          portfolio  of  IT equipment,  such  as the  Company,  can realize
          significant financial  benefits over  a continuum  of time  as it
          works closely  with  its end-user  customers to  meet their  ever
          changing computing needs.

               Thus,  beginning in  1993, the Company adopted a strategy to
          aggressively expand  its  leasing operations.    This  expansion,
          however,  was restricted  by  the Company's  cash position  which
          limited its  ability to  invest in the  IT equipment's  "residual
          value," a key  element in  developing a portfolio  of this  type.
          The  residual value  of  IT equipment  represents the  difference
          between  the cost of the equipment and the cash, representing the
          discounted  net present  value  of the  equipment's lease  rental
          stream,  received by the Company at the commencement of the lease
          by  leveraging the lease on a non-service basis with bank lenders
          or other financial  institutions.   However, as a  result of  the
          Company's January  1996 initial public offering  (the "IPO"), the
          Company  has  been  able  to  significantly  expand  its  leasing
          operations.   For the year  ended December 31,  1996, the Company
          originated leasing transactions for IT equipment with an original
          cost  of  $53.7  million.   This  compares  to  the $7.7  million
          generated  during the year ended December 31, 1995, and gives the
          Company a total portfolio  of both owned and managed  leases with
          an  original cost of over $75 million  at the end of 1996.  As  a
          result of this expansion, the majority  of the Company's revenues
          for fiscal 1996 were from leasing and lease related transactions.

               In  1996,   the  Company  also   aggressively  expanded  its
          operations to address  the many changes in  the computer industry
          during the past  several years.   Chief among  these changes  has
          been  the   emergence  of   high  powered  alternatives   to  the
          traditional mainframe  computer and its  associated applications.
          Although it is unclear exactly where these changes will lead, the
          Company believes that the  traditional mainframe will continue to
          be  the  primary  platform  for large  organizations  with  data-
          intensive applications.  However, it is a reality of the industry
          that  the power of computing  for small to  mid-size companies is
          moving away from the mainframe and onto the desktop.  In response
          to this, and in recognition of the Company's  need to provide its
          customers with a broader  range of value added services,  in 1996

     <PAGE>       
     
          the  Company   commenced  operations   of  a  new   wholly  owned
          subsidiary,  Paratech  Resources  Inc.  ("Paratech").    Paratech
          offers customers system design, integration and other value added
          support  services for the local  area and wide  area network (LAN
          and WAN) environments.  The Company believes that the addition of
          Paratech  will  help  establish  Paramount as  a  total  solution
          provider in the  IT market.  The Company believes  that it is now
          positioned  to   offer  its  customers  comprehensive   IT  asset
          management and  solutions, from the technology  itself, through a
          plan for  keeping that technology current and a financial package
          to  effectively  acquire  that   technology.    The  addition  of
          Paratech,  the  Company  believes,  will  not  only  enhance  the
          services that Paramount can offer to its existing  customers, but
          will also enable the Company to obtain significant numbers of new
          customers who need  the types  of products and  service that  the
          Company can offer now.

               The Company is  a member  in good standing  of the  American
          Society  of  Computer  Dealers  International and  the  Equipment
          Lessors Association. 

          INDUSTRY BACKGROUND

               The  computer industry  has been  characterized by  frequent
          technological advances resulting in cost reductions, increases in
          computer processing capacity and broadened user applications. The
          introduction of new models generally does not result in equipment
          then in  service becoming technologically  obsolete, but  usually
          causes the  price of  existing equipment to  decrease, reflecting
          the increased  performance and  cost-effectiveness  of the  newer
          equipment. Users frequently replace or upgrade equipment as their
          existing equipment  becomes inappropriate  for their needs  or as
          increased data processing capacity is required. 

               Many  end-users  prefer  to  lease,  rather  than  purchase,
          computer equipment  because leasing  provides the  flexibility to
          upgrade, add  or replace equipment  during or at  the end  of the
          initial lease  term; provides  financing advantages, such  as the
          elimination of  initial cash outlays and  lower monthly payments;
          does  not result  in  a  preference  item  for  purposes  of  the
          alternative minimum tax; places the risk  of loss of value on the
          lessor  rather than the lessee; and permits the lessee to account
          for  operating  leases  as  off-balance-sheet  financing  thereby
          leaving the lessee's borrowing ability, debt to  equity ratio and
          current liabilities unscathed. 

               As more end-users  become aware of the  economic benefits of
          leasing,  they  often  turn  to  independent  leasing  companies.
          Independent  lessors   offer  tailored  financing   and  flexible
          delivery,  and  can  deliver  financing for  mixed  systems  from
          different  vendors. Responding  to  customers'  demands,  leasing
          companies  are increasingly  becoming more  flexible in  terms of
          lease duration,  equipment upgrades and payment  options. By more
          accurately assessing the residual value associated with the price
          of  equipment, lessors have become  better able to  fine tune the
          fixed monthly  payment amount. Lessors  have also found  that the
          value  of  leasing  increases  with  the ability  of  lessees  to
          transfer risks and responsibilities to lessors. 

          SALES AND LEASING BUSINESS

               The  Company's  retail  sales and  leasing  operations  were
          established by Glenn Nortman, Co-Chief Executive of Paramount, in
          June 1992, making the year ended December 31, 1993 the first full
          year  of operation for this  business . Retail  sales and leasing
          involves  the selling or leasing  of new or  used IT equipment to
          computer end-users nationwide. The majority of the Company's end-
          user  customers are  Fortune 1000  and equivalent  companies with
          large  data processing needs. The  Company offers its customers a
          variety  of choices  for their  data processing  needs, including

                                  2
     <PAGE>

          equipment  manufactured by International  Business Machines Corp.
          ("IBM"),   Hitachi  Data   Systems,   Amdahl   Corporation,   EMC
          Corporation, Sun Microsystems  Inc., Hewlett-Packard Co., Storage
          Technology  Corp. and  Xerox  Corp., and  includes mainframe  and
          midrange central processing  units, peripheral devices,  upgrades
          and  component  parts; client  servers;  LAN  and WAN  networking
          equipment; telecommunications equipment; point of sale terminals;
          and personal computers. 

               The Company's  objective is to conduct  its leasing business
          with  customers whose  creditworthiness  permits  the Company  to
          obtain  long-term, non-recourse,  fixed  rate financing  for  its
          lease  transactions. All  of the  Company's equipment  leases are
          noncancellable, place the  risk of damage  or destruction to  the
          equipment on  the lessee,  have original terms  typically ranging
          from 24 to 60 months and are governed by a master lease agreement
          (the "Master  Lease"). The  specific terms  of each Master  Lease
          vary, but each  creates a triple net lease obligation on the part
          of the lessee. A Master Lease  is an important marketing tool for
          Paramount because it allows  for multiple lease transactions with
          the  same  customer  without having  to  re-execute  a  new lease
          agreement.  Instead, each  lease  is documented  by an  equipment
          schedule  which  incorporates  the  terms of  the  Master  Lease,
          providing customers of Paramount with an easy and efficient means
          of leasing equipment over time. 

               To minimize  its cash investment in  lease transactions, the
          Company  typically  enters into  non-recourse,  fixed rate  lease
          financing  with  banks   or  other  financial  institutions.   In
          connection with such loans,  the Company will (i) directly assign
          to  the lender  providing financing  the rental  stream from  the
          lease,  and  (ii) grant that  lender a  security interest  in the
          equipment   subject  to   the  lease.   In  exchange   for  these
          assignments, the Company receives up front from the lender a lump
          sum  payment equal to the  discounted present value  of the lease
          payments,  based  on  an  interest  rate  commensurate  with  the
          lessee's credit rating. In the event of the lessee's default, the
          lender  can look  only  to  the  lessee  and  the  equipment  for
          repayment and not to the Company, unless the Company is in breach
          of a  material representation or  warranty under the  loan. Since
          its inception, none of the Company's lessees have defaulted under
          their  leases. Throughout  the  term of  the  lease, the  Company
          retains title to the equipment. 

               In  connection  with its  leasing  of  IT equipment  to  its
          end-user  customers  and  depending  on  the  type  of  equipment
          involved, the  Company's relationship  with the end-user  and the
          term  of the  lease,  the Company  may  make a  "residual  value"
          investment in  these leased  assets. A residual  value investment
          represents  the difference  between the  acquisition cost  of the
          leased asset to the  Company and the discounted present  value of
          the rental stream from the lessee.  The Company plans to maximize
          the return on its residual value investments through creative and
          diligent remarketing activities,  including mid-term  extensions,
          upgrades and  early terminations.  See  "Certain Risks Associated
          with Expansion of Lease Portfolio." 

               Prior to or  at the expiration of the initial  lease term, a
          lessee  will  often reassess  and  evaluate  its high  technology
          needs.  To this  end,  the Company  consistently  works with  its
          customers  to develop  strategies  governing when  to acquire  IT
          equipment, upgrade existing equipment  and order new equipment to
          take  advantage of  current  technology. On  many occasions,  the
          lessee will renew  or extend its  lease and  add to or  otherwise
          enhance  the original  equipment  configuration. As  a result,  a
          substantial portion of the Company's transactions are with repeat
          customers. 

               The  Company's  remarketing  strategy  is  to  keep  its  IT
          equipment in  place at the end of the initial lease term in order
          to maximize revenues  and residual return.  Accordingly, prior to
          the expiration of the original  lease term, the Company initiates
          the  remarketing  process  for  the related  equipment  with  the
          existing lessee.   Typically,  remarketing IT equipment  in place

                                  3
     <PAGE>

          produces better residual returns than equipment sold or leased to
          a  third party.  In  addition, leased IT  equipment is frequently
          upgraded  and  enhanced during  the term  of  the lease,  and the
          Company looks to  extend the  term of the  lease while  providing
          these upgrades.

               The  focus  of  the  Company's activities  with  respect  to
          particular  models  of IT  equipment  changes  periodically as  a
          result of  changes in market conditions and  advances in computer
          technology.  New   product  introductions  and   deliveries  have
          historically  created opportunities to  arrange leases, re-market
          displaced equipment and provide upgrades.

          TRADING BUSINESS

               The  Company's  IT  equipment  trading business  is  run  by
          Jeffrey Nortman,  Co-Chief Executive of Paramount.   IT equipment
          trading is characterized by two features: (i) the equipment being
          traded  is  generally  used  (pre-owned)  rather  than  new,  and
          (ii) Paramount's trading  partner in  the transaction is  not the
          ultimate end-user of the equipment.  Typically Paramount will buy
          equipment  from  a  computer  leasing and  trading  company  (the
          "Broker") and resell that  equipment to a different Broker.   The
          IT equipment  that Paramount  purchases generally will  either be
          from the selling Broker's lease  portfolio or have been purchased
          by  the Broker from an end-user or  another Broker.  Depending on
          market  opportunities,  Paramount  may  purchase  one  piece   of
          equipment  and resell it, or  may package the  piece of equipment
          with other equipment to resell as a package.  In turn, the Broker
          to whom Paramount sells the IT equipment may be purchasing it for
          lease or  sale to an  end-user, sale to  another Broker, or  as a
          speculative purchase for later  sale.  These types of  trades are
          generally   referred   to   as   broker-to-broker   transactions.
          Historically,  the   largest  part  of   the  Company's   trading
          activities had been on a broker-to-broker basis.  

               Early  on  during  the year  ended  December  31,  1996, the
          Company determined that as a  result of new product announcements
          and  increased competition  among  equipment  manufacturers,  the
          market for broker-to-broker transactions was changing and offered
          limited  opportunities for the current year.  The Company decided
          to significantly  reduce its  activities in  this area and  focus
          more on the growth of its  leasing portfolio and the expansion of
          its  services business.   However, as the  Company's portfolio of
          equipment  on  lease begins  to mature,  the  Company must  be in
          position to  re-market this equipment, either to its own end-user
          customers  or  into the  broker-to-broker  market.   The  Company
          believes,  therefore,  that  as  it  carries  out  its  corporate
          strategy  of  expanding  its  leasing activities,  the  Company's
          trading business will continue to be important.  

          PARATECH RESOURCES INC.

               During  the  third quarter  of  1996  the Company  commenced
          operations of a new  wholly owned subsidiary, Paratech, to  offer
          comprehensive information technology solutions, including network
          design  and  integration,  software  applications,  training  and
          value-added  support  services  such  as Help  Desk.    Paramount
          executives  have assumed a  hands-on role in  the development and
          operation  of  Paratech,  which  is based  at  the  corporation's
          headquarters in  Jericho, New  York.   With this  new subsidiary,
          Paramount   believes that it  can establish itself  as a total IT
          solutions  company,  providing   comprehensive  sales,   leasing,
          systems integration and support capabilities.

                Paratech  was  developed  in direct  response  to  client's
          increased  demands for a broader solution  to their system needs.
          Since  the  Company  was  already  a  primary  resource  for  its
          customers'  systems sales and financing requirements, the Company
          believes that there are significant  opportunities for it to also

                                  4
     <PAGE>

          offer  systems integration, support  and value-added capabilities
          to these same customers.   In addition to the  direct involvement
          of  Paramount's Co-Chief  Executive Officers,  Glenn Nortman  and
          Jeff  Nortman, Paratech  is  staffed with  experienced technology
          solutions  sales  managers,  systems consultants/integrators  and
          technicians.

               Drawing  on the  Company's  strong  relationships  with  the
          original equipment manufacturers, Paratech is applying brand name
          hardware and software lines,  including Compaq, Digital, Hewlett-
          Packard,  Hitachi Data  Systems,  IBM, Sun  Microsystems, Amdahl,
          CISCO, EMC and STK, as well as  Alta Vista, Microsoft NT, Novell,
          Oracle and other proprietary software.  The Company can address a
          wide  range of  system  requirements,  including  multi-platform,
          connectivity   and  migration   issues;  Intranet   and  Internet
          implementation; and data warehouse extractions and enhancements.

               Paratech's initial focus is on the New York-Metropolitan and
          surrounding  Tri-State area.   The Company's long  term goals for
          Paratech's operations  include the  expansion of its  business to
          encompass  computer  maintenance services,  PC rentals  and other
          related support services.  The Company believes Paratech not only
          gives  the  Company  an expanded  set  of  services  that it  can
          leverage  to  its  sales  and  leasing  business,  but  also  has
          significant growth potential in its own right.   According to the
          International Data Corporation, the  network services market will
          grow 20 percent annually, to nearly $27 billion by the year 2000.
          The  addition of Paratech,  the Company believes,  will allow the
          Company to become an active participant in that growth.

          JOINT VENTURE

               In an  effort to expand  its leasing  activities to  include
          non-data processing  high technology  equipment, the Company  has
          created a joint  venture to lease a state-of-the-art food vending
          and cooking product. 

               In June 1995,  the Company  and KRh Thermal  Systems ("KRh")
          formed  KRh  Financial  LLC ("KRhF")  to  lease  to  food service
          operators  the  Hot Choice   Vending Machine,  a fully-integrated
          freezer-to-oven vending machine designed to deliver fully-cooked,
          high quality fast  food in  about a minute.  KRh is a  California
          general partnership  managed by  Kaiser Thermal  Systems, Inc., a
          wholly-owned subsidiary of Kaiser Aerospace and Electronics,  and
          Thermaltech  Development, LP. The  Company owns  20% of  KRhF. In
          addition, under a related service agreement, the Company provides
          leasing  services to  KRhF  for  which  the  Company  is  paid  a
          prescribed  fee.  During the  year ended December  31, 1996, KRhF
          successfully   leased  and  financed   vending  machines  for  an
          aggregate sale price in excess of $200,000.  KRh is  still is the
          early  stages  of  its business,  and  the  results  of KRhF  are
          immaterial to the overall financial position of Paramount.

          LEASE FINANCING SOURCES

               The  Company maintains  several informal  relationships with
          banks  and  other  financial  institutions  for  the  purpose  of
          discounting  lease transactions  on  a non-recourse  basis. These
          banks  and   financial  institutions  are  in   the  business  of
          discounting lease  transactions  and  actively  look  to  acquire
          transactions  that  meet   their  criteria  of  credit   quality,
          transaction  size,  term,  documentation   and  rate.  Prior   to
          committing  to  a  lease  transaction, the  Company  reviews  the
          creditworthiness and  other key characteristics of  the lease and
          discusses the same  with one or more of these  banks or financial
          institutions  in  an  attempt  to  get  prior  approval  for  the
          transaction.   This  avoids   the  possibility  of   the  Company
          committing to a transaction  that it would be unable  to finance.
          To the  extent that a time  lag exists between the  date that the

                                  5 
     <PAGE>                               
     
          Company must  pay its vendors for  the IT equipment to  be leased
          and the date that the non-recourse lease financing is funded, the
          Company  can and  in limited  circumstances has  used its  bridge
          financing lines.   See  "Management's Discussion and  Analysis of
          Financial  Condition and  Results  of  Operations--Liquidity  and
          Capital Resources." 

          CERTAIN RISKS ASSOCIATED WITH EXPANSION OF LEASE PORTFOLIO

               The Company plans to continue to greatly expand its computer
          lease portfolio.  In connection therewith the Company may have to
          make  significant residual  value investments. There  are certain
          risks  inherent in  making residual  value investments.   Because
          this  involves  making a  current  cash investment  in  leased IT
          equipment based  upon the Company's  expectation of the  value of
          such  equipment at  a time  in the  future (typically  upon lease
          expiration), if the value  of the equipment at such  point proves
          to be less than the Company's expectations, the Company would not
          be able  to recoup some or all  of its residual value investment.
          If the  Company were to  be unable to  recoup its residual  value
          investment with  respect to  a significant  portion of  its lease
          portfolio, the  Company would experience  significant and adverse
          consequences,   including   the  requirement   to   write-down  a
          substantial portion of its assets and a loss of liquidity.

               The  Company  believes  that   it  can  mitigate  the  risks
          associated  with  residual  value investments  considerably.  The
          Company intends  to make  these residual value  investments on  a
          conservative and select  basis. These investments will be made at
          accounts  where  the  Company  has  developed  a  strong  working
          relationship with the data processing and financial officers. The
          residual  value   investment  will  be  based   heavily  on  this
          relationship and the end-user's  historical tendencies to  either
          upgrade equipment  and extend leases  prior to expiration,  or to
          return equipment  at lease  expiration. In addition,  the Company
          will utilize  its experience in computer  hardware in determining
          the extent of its residual value investments. Each situation will
          be analyzed  separately regarding  the possible upgrade  paths of
          the hardware,  the potential for technological  changes which may
          reduce the  comparative efficiency of the  equipment, and lastly,
          the Company's knowledge of the end-users and their likely  growth
          plans  for the future. In addition, the Company will consult with
          published reports by independent  appraisal services to gauge its
          investments. On an  annual basis,  the Company  will compare  its
          residual  investments  to   these  published  reports   and  make
          write-downs if  a reduction in  value is deemed to  be other than
          temporary. 

               The Company's strategy is  to create a diversified portfolio
          of computer hardware at high quality end-user accounts in various
          industries. By diversifying along  product lines, expiration date
          and  end-user accounts,  the  Company believes  that it  protects
          itself against any one product, customer or industry experiencing
          a significant downturn.  In addition, the Company intends to take
          a proactive approach to managing its portfolio of IT equipment on
          lease.    This  involves  consistently  meeting  with  users  and
          understanding their particular needs.  A significant component to
          this  approach is  the  management of  information regarding  the
          portfolio.  By diligently monitoring its portfolio, keeping aware
          of new product availability and trends, and by maintaining strong
          working relationships  with its  end-user customers, the  Company
          believes that it  can minimize the  costs associated with  making
          residual value investments and maximize the profit of  owning the
          assets. 

          DISTRIBUTION AND MAINTENANCE

               The  Company  has  developed  relationships   with  numerous
          independent  warehouse  facilities throughout  the  United States
          that  specialize  in  IT  equipment to  handle  distribution  and
          warehousing.  By  using these localized centers, the  Company has
          benefitted in minimizing costs of freight and distribution. 

                                  6
     <PAGE>

               The Company, like other competing computer sales and leasing
          companies, does not grant any warranties on the products it sells
          or   leases.  However,  most  of   the  new  and   used  IBM  and
          IBM-compatible  computer  equipment which  the Company  sells and
          leases is covered under either the manufacturer's warranty or the
          manufacturer's  maintenance  program,  or  is  acceptable  to  be
          covered  under the  manufacturer's maintenance  program, and  the
          Company represents  this status  to the  buyer/lessee.  Prior  to
          buying any used  equipment, the Company obtains  a guarantee from
          the   seller  that   the  equipment   is  acceptable   under  the
          manufacturer's maintenance program.  Under each Master Lease, all
          costs  associated  with product  maintenance  must  be borne  and
          undertaken by the lessees. 

          CUSTOMER CONCENTRATION

               The  Company's typical  customers  are  large,  creditworthy
          corporations that require  several million  dollars of  equipment
          per  year  and  are repeat  customers  of  the  Company.   Repeat
          business generated through existing relationships is an important
          source  of revenue for the  Company.  While  the Company believes
          that its business  is not dependent on any single customer, as of
          December  31,  1996, the  three  largest lessees  of  the Company
          accounted  for  47%  of  the  original  acquisition  cost of  all
          equipment leases  owned and managed as of such date.  The loss of
          any of these major customers could have a material adverse effect
          on  the Company's  business, financial  condition and  results of
          operations. 

          COMPETITION

               The Company competes directly with  numerous other companies
          which buy,  sell or  lease new and  used computer and  other high
          technology equipment.    Further, the  major  computer  equipment
          manufacturers themselves directly compete with the Company.  Many
          of the Company's competitors have substantially greater financial
          resources and  larger  staffs than  the Company.   The  Company's
          principal  competitors  include   manufacturers,  such  as   IBM;
          brokers, dealers and  leasing companies, such as  Comdisco, Inc.,
          GE  Capital Corporation,  IBM  Credit Corporation  and El  Camino
          Resources; and commercial banks and other financial institutions.
          Although  the aforementioned  companies  are  competitors of  the
          Company, in  many  instances  they  also  are  customers  of  and
          suppliers to the Company. 

               The computer leasing  and trading industry is  characterized
          by intense competition. Companies  compete for accounts through a
          variety of factors. The Company believes it competes on the basis
          of  price,  responsiveness  to  customer  needs,  flexibility  in
          structuring  lease transactions, relationships with customers and
          vendors and knowledge of the equipment. Further, the  Company has
          a network  of lenders to discount the  rental streams at what the
          Company believes  are  favorable competitive  rates. Further  the
          Company believes that  it has an efficient  back office operation
          which allows it to keep its  overhead low, thus requiring a lower
          sales   threshold  on   each   transaction.   Another   important
          competitive factor is customer service. The Company has attempted
          to  take a  "hands-on" approach  with its  customers in  order to
          build  and maintain long-term, mutually beneficial relationships,
          and the Company believes that this relationship-building approach
          has  distinguished Paramount  from  some of  its competitors.  In
          addition,  as  an independent  lessor  and  trader of  equipment,
          Paramount is  able to deliver a wide  variety of equipment to its
          customers on a timely basis. 

               The Company's continued ability  to compete effectively  may
          be  affected by the policies  of IBM, Hitachi  and other computer
          manufacturers. The  Company attempts to provide  customers with a
          diverse selection of products, a high level of  customer service,
          the  knowledge and  competence of  its employees  and competitive
          pricing. The  Company believes that the  knowledge and experience

                                  7
     <PAGE>

          of its  executive officers and  the relationships that  they have
          fostered  in the industry  will continue  to provide  the Company
          with competitive advantages in the marketplace. 

               Paratech   competes against major  hardware distributors and
          national and regional consulting  and service organizations.  The
          Company believes that it is able to compete in this market due to
          the technical expertise  of its employees, its focus  on customer
          service, and  its relationship  with equipment manufacturers  and
          vendors.    In addition,  the  Company  believes its  ability  to
          structure  a  lease  financing  package  for  the  equipment  and
          services provided by Paratech represent a significant competitive
          advantage in the market place.

          EMPLOYEES

               As of December 31, 1996, the Company employed eleven persons
          full-time,   including  four   persons  devoted   exclusively  to
          Paratech.   The  Company  has experienced  no work  stoppages and
          considers its employee relations to be satisfactory.  None of the
          Company's employees are represented by a labor union. 

          GOVERNMENT REGULATION

               The  Company  has  not   been  materially  affected  by  any
          government regulations applicable to its sales, leasing,  trading
          or investment activities.

          ITEM 2 - PROPERTIES

               The Company leases approximately 2,734 square feet of office
          space for its principal  executive offices at One Jericho  Plaza,
          Jericho,  New  York 11753.  Payment  of  rent for  the  Company's
          offices is  approximately $5,400  per month through  August 1997;
          thereafter, the  rent increases  pursuant to a  schedule reaching
          approximately $5,800 in the  fourth year.  This lease  expires in
          August 1999. The Company also maintains a sales office in Boston,
          Massachusetts.

          ITEM 3 - LEGAL PROCEEDINGS

               There are no material  legal proceedings pending against the
          Company. 


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

               No  matters were  submitted  to a  vote of  security-holders
          during the  fourth quarter of the fiscal  year ended December 31,
          1996.

                                  8
     <PAGE>

                                       PART II


          ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
                   STOCKHOLDER MATTERS

               The Company's Units, Common Stock and Class A Warrants began
          trading  separately  on  the  Nasdaq SmallCap  Market  under  the
          symbols  "PARAU," "PARA"  and "PARAW,"  respectively,  on January
          22, 1996, the date  of the  Company's IPO.   The following  table
          sets forth the high  and low last sale  prices for the  Company's
          securities  for  the  periods  commencing  January  22,  1996  as
          reported  by the  Nasdaq SmallCap  Market.   These prices  do not
          reflect retail mark-ups, mark-downs or commissions.


          UNITS                                         HIGH        LOW
                                                        ----        ---

          January 22, 1996 through March 31, 1996 . .   $15 3/4     $10
          April 1, 1996 through April 15, 1996(1) . .    10 5/6       8 5/6

          COMMON STOCK

          January 22, 1996 through March 31, 1996 . .   $ 6         $ 3 3/4
          3/4
          April 1, 1996 through June 30, 1996 . . . .     4 5/8       3
          July 1, 1996 through September 30, 1996 . .     6           2 1/2
          October 1, 1996 through 
              December 31, 1996 (2) . . . . . . . . .     1 1/2         3/16
          January 1, 1997 through March 15, 1997  . .     1             15/32

          CLASS A WARRANTS

          January 22, 1996 through March 31, 1996 . .   $ 2 1/4         7/8
          April 1, 1996 through June 30, 1996 . . . .     1 1/2         19/32
          July 1, 1996 through September 30, 1996 . .     1 5/16        3/8
          October 1, 1996 through 
              December 31, 1996(2)  . . . . . . . . .       3/4         1/16
          January 1, 1997 through March 15, 1997  . .       13/16       3/97


               The closing sales prices of these securities as of March 19,
          1997,  as reported by the Nasdaq SmallCap Market, were $0.594 per
          share of Common Stock and $0.063 per Class A Warrant.

               As of March  19, 1997, there were  23 record holders  of the
          Common Stock.



          -------------------
          (1)  The  Units were  deleted  from the  Nasdaq SmallCap  Market,
               effective  April 16, 1996, due  to the fact  that the Common
               Stock and Class A Warrants predominately traded separately.
          (2)  On December  6, 1996, the  underwriter of the  Company's IPO
               ceased operations.

                                  9
     <PAGE>

          ITEM 6 - SELECTED FINANCIAL DATA


                                      YEARS ENDED DECEMBER 31,
                              -----------------------------------------
                                  1992          1993           1994
                              ------------  ------------   ------------

      REVENUE:

      Sales . . . . . . . .    $13,277,895    $21,418,872   $25,290,524

      Lease revenue . . . .        697,241      1,647,923     2,592,531

      Fee, interest and             14,446        180,265       109,247
        other income  . . .    -----------    -----------    ----------

         Total revenues   .     13,989,582     23,247,060    27,992,302
                               -----------    -----------    ----------
      COSTS AND EXPENSES:

      Cost of sales . . . .     12,618,090     19,566,840    23,540,952

      Lease expense . . . .        375,049      1,317,497     2,091,361

      Selling, general and
        administrative
        expenses  . . . . .        911,694      1,641,602     1,680,601

      Interest expense  . .             --             --            --
                               -----------    -----------    ----------

         Total costs and        13,904,833     22,525,939    27,312,914
           expenses   . . .    -----------    -----------    ----------

      Income (loss) before
        provision for taxes         84,749        721,121       679,388

      Provision for income              --         10,153        33,706
        taxes . . . . . . .    -----------    -----------    ----------

      Net income (loss) . .    $    84,749    $   710,968    $  645,682
                               ===========    ===========    ==========

      Loss per share  . . .

      Weighted average
        common shares
        outstanding . . . .


                                YEARS ENDED DECEMBER 31,
                             -------------------------------
                                  1995            1996
                             --------------  ---------------

      REVENUE:

      Sales . . . . . . .       $30,857,949      $27,159,894

      Lease revenue . . .         2,147,358        3,680,924

      Fee, interest and             162,873          511,698
        other income  . .       -----------      -----------

         Total revenues          33,168,180       31,352,516
                                -----------      -----------

      COSTS AND EXPENSES:

      Cost of sales . . .        28,955,984       25,785,022
      
      Lease expense . . .         1,828,412        3,419,600

      Selling, general and
        administrative
        expenses  . . . .         1,805,499        2,447,884

      Interest expense  .         5,284,756            6,209
                                -----------      -----------

         Total costs and         37,874,651       31,658,715
           expenses   . .       -----------      -----------

      Income (loss) before
        provision for
        taxes . . . . . .        (4,706,471)        (306,199)

      Provision for income           21,850          498,212
        taxes . . . . . .       -----------      -----------

      Net income (loss) .       $(4,728,321)       $(804,411)
                                ===========       ========== 

      Loss per share  . .                             ($0.10)
                                                 =========== 
      Weighted average
        common shares                              7,817,973
        outstanding . . .                        ===========

                                  10
     <PAGE>
           
                                               AT DECEMBER 31,
                                 -------------------------------------------
                                       1992           1993            1994
                                       ----           ----            ----
      BALANCE SHEET DATA:

      Total assets  . . . . . .     $5,514,422     $9,798,454      $8,128,970

      Obligations for financial
        equipment --
        non-recourse  . . . . .      5,216,489      7,331,988       5,152,274

      Shareholders' (deficit)
        equity  . . . . . . . .        (56,816)       606,149         851,999

      LEASE PORTFOLIO DATA:

      Net investment in direct
        finance and sales type
        leases  . . . . . . . .      5,170,104      6,795,493       5,411,219
        
      Assets held for operating
        leases, net of accumulated
        depreciation  . . . . .             --      1,048,370         864,126


                                          AT DECEMBER 31,
                                 --------------------------------
                                       1995             1996
                                       ----             ----

      BALANCE SHEET DATA:

      Total assets  . . . . . .     $12,378,585       $51,561,520

      Obligations for financial
        equipment --
        non-recourse  . . . . .       9,337,883        23,461,175

      Shareholders' (deficit) 
        equity  . . . . . . . .         568,718         8,171,386

      LEASE PORTFOLIO DATA:

      Net investment in direct 
        finance and sales type
        leases  . . . . . . . .       6,446,063        20,942,542

      Assets held for operating
        leases, net of
        accumulated
        depreciation  . . . . .       3,976,209        21,103,033


                                  11
     <PAGE>

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

          GENERAL

             The operating  results  of    the  Company    are  subject  to
          quarterly  and annual  fluctuations resulting  from a  variety of
          factors,  including  product   announcements  by   manufacturers;
          economic conditions; interest  rate fluctuations; and  variations
          in the  mix of leases written  by the Company.   In addition, the
          Company's sales volume  can fluctuate significantly from  quarter
          to  quarter  based  on  the  closing  date  and  nature  of  each
          particular sales transaction.   The  mix of leases  written in  a
          year is a result  of a combination of factors,  including changes
          in    customer   demands   and/or   requirements;   new   product
          announcements; price changes; changes  in delivery dates; changes
          in   maintenance   policies;   pricing   policies   of  equipment
          manufacturers; and price competition from other lessors.  Leasing
          transactions (other than sales  type leases), in general, do  not
          provide  for   significant  earnings   in  the  month   of  lease
          origination.   Instead,  revenue, expense  and profit  from lease
          transactions  are recorded  over the  life of  the asset  and the
          lease.   Lease revenue and lease expense recognition is dependent
          upon a number of  factors, including the term  of the lease;  the
          accounting classification of  the lease (i.e., operating,  direct
                                                   ----
          finance, or sales type); and the commencement date of the lease 
          and the lease financing within  a particular  period.  See "Lease 
          Accounting."  Given the  possibility of such fluctuation,  the 
          Company believes that comparisons of the results of its operations 
          for preceding quarters  are not necessarily meaningful and that the 
          results for any  one particular  quarter  should not  be  relied 
          upon  as  an indication of future performance.

             The results  of operations  for  the year  ended December  31,
          1996  represent a  significant change  in focus for  Paramount as
          compared to the prior year's activity.  The Company has  begun to
          carry out its business  plan to aggressively expand  its end-user
          lease  origination  business.    Specifically,  the  Company  has
          increased its presence in end-user accounts, put greater emphasis
          on  new lease  origination  and established  a greater  marketing
          presence  in the  high-technology  community.   In addition,  the
          proceeds  of the Company's January  1996 IPO   have increased the
          Company's ability  to make  residual value investments  in leased
          equipment, thus creating new opportunities for lease origination.
          See  "Liquidity  and Capital  Resources."   As  a result  of this
          change  in focus, the Company  measures its progress  not only in
          terms of revenue and profit, but  also on the growth of its lease
          portfolio,  which generates both lease revenue during the term of
          the leases and sales or lease revenue at lease expiration through
          subsequent sales or re-leases of the equipment.

             Historically, the  Company has generated the  largest portions
          of  its  revenue  from the  wholesale  trading  of  used computer
          equipment (i.e., broker-to-broker trading). Early  during fiscal 
                     ----
          1996 management determined that as a result  of new product 
          announcements  and increased competition among  equipment  
          manufacturers,  the  market for  this  type  of activity was  
          changing and offered limited  opportunities for the current year.   
          As  a result,  the  Company made  the  strategic decision  to 
          significantly reduce its activity in this market, while continuing 
          with its  plans to both aggressively expand  its leasing operations  
          and develop the complementary systems integration business of 
          Paratech.  The Company believes that this strategy  will  result  
          in substantial future benefits.  By investing  in a growing and 
          expanding base of high quality assets on lease  to  relationship-
          based customers,  the Company believes that it will be able to 
          generate significant revenue and earnings over a continuum of time,  
          and not just in a particular  month or quarter.  In addition, the  
          Company believes  that  the system integration business of Paratech  
          should allow  the Company  to offer additional services to its 
          leasing customers over this same period.  In  addition, the Company 
          believes  that the  equipment trading business will always be an 
          important part of its business mix, more so in the future as a 
          means of equipment re-marketing. 

                                  12
     <PAGE>

             As a  key component of  its growth strategy,  during the third
          quarter of  1996, the Company commenced operations at Paratech to
          offer comprehensive information  technology solutions,  including
          network design  and integration, software  applications, training
          and  value-added support services such as Help Desk.  The Company
          believes  that the addition of  Paratech is a  major step towards
          establishing  Paramount  as  a  total  high  technology  solution
          provider.   The  Company believes  that it  is now  positioned to
          offer its customers comprehensive asset management and technology
          solutions, from the technology itself, through a plan for keeping
          that technology current and to a financial package to effectively
          acquire that  technology.   1996 was  a year  of   investment and
          groundwork for Paratech, as  the business was building its  staff
          and  establishing its  presence in  the market.   The  results of
          operations  from  Paratech   are  consolidated   with  those   of
          Paramount.  

             Paramount  has always  operated in  a  highly competitive  and
          rapidly  changing marketplace.    The Company  believes that  its
          ability to adapt  to changes,  and to evolve as a business into a
          valued business  partner for  its customers, offering  a complete
          package  of  products  in the  high  technology  area,  is a  key
          component to the Company's long term growth strategy.

          LEASE ACCOUNTING

             In accordance with Statement of  Financial Accounting Standard
          No.  13,  "Accounting for  Leases,"  the  Company classifies  its
          leases as either  direct finance leases or operating leases.  The
          allocation of income among accounting periods within a lease term
          will vary  depending upon the lease  classification, as described
          below.

             Direct  Finance   Leases:  Direct   finance  leases   transfer
          substantially all  benefits and  risks of equipment  ownership to
          the lessee.  A lease is a direct finance lease if it meets one of
          the following criteria: (1) the  lease transfers ownership of the
          equipment  to the lessee  by the end  of the lease  term; (2) the
          lease contains a bargain  purchase option; (3) the lease  term at
          inception  is at least 75% of  the estimated economic life of the
          leased equipment; or (4)  the present value of the  minimum lease
          payments  is  at  least  90% of  the  fair  value  of the  leased
          equipment at lease inception. 

             At  lease  inception, the  cost  of equipment  under  a direct
          finance lease  is recorded as  "Net investment in  direct finance
          leases".  The  difference   between  the  gross   lease  payments
          receivable, plus  the estimated residual value  of the equipment,
          and the equipment  cost is recognized as income over  the life of
          the lease using the interest method.

             A lease transaction  which meets  all of  the above  criteria,
          and in  which the Company has made a dealer's profit, is recorded
          as a  sales type lease.  A  sales type lease is  a type of direct
          finance  lease, but one in which the Company recognizes, at lease
          inception, revenue  and profit  which arises from  the difference
          between the fair  market value  of the leased  equipment and  its
          acquisition cost.

             Operating Leases: All  lease contracts which  do not meet  the
          criteria of direct finance leases are accounted for  as operating
          leases.  Monthly  lease payments are recorded as  operating lease
          revenue.   Leased equipment is recorded at the Company's cost and
          depreciated on a straight-line  basis over the lease term  to the
          estimated residual value at the expiration of the lease term. 

             The  Company's portfolio  of  equipment  on lease  is  further
          divided into  equipment owned by Paramount  and equipment managed
          by  Paramount.   As  of  December  31,  1996,  the  portfolio  of
          equipment on lease  owned by  Paramount had a  combined net  book
          value on the  balance sheet of $42.0 million and  had an original

                                  13
     <PAGE>

          cost basis of $51.4  million.  Equipment managed by  Paramount is
          equipment  on   lease  to   customers  of  Paramount   which  was
          subsequently  sold  to  investors,  but  with  respect  to  which
          Paramount  remains the  lessor  and  remarketing  agent.   As  of
          December  31,  1996,  the   portfolio  of  equipment  managed  by
          Paramount had  an original cost  of $24.1  million.  Thus,  as of
          December  31, 1996, the portfolio of equipment on lease owned and
          managed by  Paramount had an  original acquisition cost  of $75.5
          million.

          RESULTS OF OPERATIONS

          YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31,
          1995

             The Company recorded a pre-tax  loss of $306,200 for  the year
          ended December  31, 1996 as compared  to a pre-tax loss  of  $4.7
          million  for  the  comparable  period ended  December  31,  1995.
          During the  year ended  December 31,  1995, the Company  expensed
          $5.3 million of deferred financing  costs related to the issuance
          of   1.5  million  shares   of  Common   Stock     as  additional
          consideration under   certain Bridge Units  which were originally
          issued  in connection with a  Bridge Loan to  the Company entered
          into in July  and August of 1995.   This amount was  based on the
          estimated value of the Company's Common Stock at the consummation
          of the IPO.   The expense recorded did  not affect the  Company's
          cash  position or  net equity  as a  result of  the corresponding
          credit  made to additional paid-in capital.  The pre-tax loss for
          the year ended December  31, 1996 is largely attributable  to the
          increased  emphasis on new  lease origination, the  timing of the
          associated revenue recognition, and the  creation and development
          of Paratech.  See "General." 

             In   accordance   with  Statement   of   Financial  Accounting
          Standards No.  109, "Accounting for  Income Taxes,"   the Company
          recorded a  one  time, non-cash  adjustment  of $430,400  to  its
          Provision For  Income Taxes  during the  year ended December  31,
          1996.   This  adjustment was  necessitated by  the change  of the
          Company's tax status from an S-Corporation to  a C-Corporation in
          connection with the Company's January 1996 IPO. The amount of the
          adjustment  represents  the  cumulative deferred  tax  liability,
          which arose primarily from temporary tax differences with respect
          to depreciation,  generated by  the S-Corporation and  payable in
          the future by the C-Corporation.  This adjustment does not affect
          the   Company's  current  cash  position,  as  a  result  of  the
          corresponding credit  made to  a deferred tax  liability account,
          but did cause the Company to report an after tax loss of $804,400
          for the  year ended December 31, 1996 as compared to an after tax
          loss of $4.7 million for the comparable period ended December 31,
          1995.

             During the year ended  December 31, 1996, the Company  entered
          into new  lease transactions totaling $53.7  million of equipment
          cost.  This represents an increase of $46.0 million over the cost
          of equipment leased during the year ended  December 31, 1995.  Of
          the total cost of equipment leased during the year ended December
          31,  1996, $12.4 million  was subsequently  sold to  an equipment
          investor.  Of the balance  of new lease origination for  the year
          ended  December 31,  1996, $21.8  million was recorded  as direct
          finance  leases  or  sales-type  leases, and  $19.5  million  was
          recorded as operating leases,  compared to $3.7 million  and $3.9
          million, respectively, for the year ended December 31, 1995.  The
          increase  in  new lease  origination is  a  direct result  of the
          Company's  efforts  to  expand  its  end-user  lease  origination
          business.  See  "General."   During the year  ended December  31,
          1996,  the Company  entered  into $21.6  million of  non-recourse
          lease financing arrangements, net  of terminations resulting from
          lease sales and lease  extensions, as compared with $6.8  million
          for the year ended December 31, 1995.  See "Liquidity and Capital
          Resources."   Non-recourse  debt  entered during  the year  ended
          December  31,  1996 increased  at a  slower  rate than  new lease
          origination as  a result of the timing  of the closing of certain
          large  lease  transactions.   Of the  total  amount of  new lease
          business,  $18.2 million  was  related to  leases  for which  the

                                  14 
     <PAGE>                               
     
          Company was not required  to pay for the equipment  until January
          1997.  The  Company had  commitments from lenders  for both  non-
          recourse lease  financing, and  in certain cases,  residual value
          financing,  for  these  leases as  of  December  31,  1996.   See
          "Liquidity."  This amount was recorded as accounts payable-leases
          on the Company's December 31, 1996 balance sheet.

             Consistent with  the growth  in new  lease origination,  lease
          revenue,  comprised of  rental income  from operating  leases and
          interest  income  from  direct  finance and  sales  type  leases,
          increased  by 71.4% to $3.7  million for the  year ended December
          31,  1996  from  $2.1 million  for  the  comparable  period ended
          December 31,  1995.   Lease expense, which  includes depreciation
          expense on operating leases,  interest expense on lease financing
          and sublease rent expense, increased by 87.0% to $3.4 million for
          the year ended December 31,  1996 from $1.8 million for  the year
          ended December 31, 1995.  See  "General."

             For the  year ended  December 31,  1996, the  Company recorded
          sales revenue  of  $27.2 million.   Of this amount, $11.3 million
          was from sales type  leases, and $12.5 million was  from the sale
          of leased  equipment to  an equipment  investor. Subsequent  to a
          sale  of this variety, the Company generally  is a party to a re-
          marketing  agreement under  which it  may earn  additional income
          from the  asset's  future re-lease  or  sale value.  The  Company
          includes these leases  within the aggregate  value of its  active
          portfolio of owned and managed  leases.  See "General."   For the
          year ended December 31, 1995, the Company  recorded sales revenue
          of   $30.9  million  which included  $16.4  million of  sales  of
          equipment  leases   to  equipment  investors.  The   decrease  in
          equipment sales revenue is a result of the Company's expansion of
          its  leasing  operations  and  the increased  emphasis  on  lease
          origination and  portfolio development. Management  believes that
          as  the  Company's base  of  end-user  lease  and sale  customers
          continues to  grow and  expand, the  Company should experience  a
          matching growth in sales revenue and profits.  See "General."

             During  the  year   ended  December  31,  1996,   the  Company
          generated $186,300 in fee  and other income, compared to  $97,800
          for the comparable period last year.  This revenue is principally
          derived from the Company's involvement in certain transactions in
          which it  acts  as  an  arranger of  financing  for  transactions
          originated by third parties.   The Company does not  recognize as
          revenue the  gross amount  of the  lease financing arranged,  but
          rather records the net profit generated from the transaction.

             Selling, general  and administrative expenses ("SG&A") totaled
          $2.4 million for the  year ended December 31, 1996,  representing
          an  increase of 35.6% over  the $1.8 million  recorded during the
          year  ended December 31, 1995.  The  increase in SG&A is a result
          of the increased sales and  support staff at the Company as  well
          as the  increased compliance costs associated with being a public
          company.    In  addition,  SG&A  expenses  incurred  at  Paratech
          significantly contributed to this increase.

             During  the year ended December 31, 1996, the Company recorded
          $325,400  of interest  income, an  increase of $260,400  over the
          year ended  December  31, 1995.    This increase  is  due to  the
          investment of the IPO proceeds in interest bearing cash accounts,
          cash equivalents and marketable  securities during the year ended
          December 31, 1996.

             The tax  provision of $498,200 for the year ended December 31,
          1996 represents the  cumulative adjustment of  $430,400 described
          above,  plus  a provision  for state,  local  and other  taxes of
          $67,800.  Prior to 1996, the Company was an S-Corporation and not
          subject to a corporate federal income tax.

                                  15
     <PAGE>

          YEAR  ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31,
          1994

             The Company  recorded a pre-tax  loss of $4.7  million for the
          year ended December  31, 1995  as compared to  pre-tax income  of
          $679,000  for  the comparable  period  ended  December 31,  1994.
          During  the year  ended December  31, 1995, the  Company expensed
          $5.25 million of deferred financing costs related to the issuance
          of  1.5  million shares  of Common  Stock issuable  as additional
          consideration under   certain Bridge Units  which were originally
          issued  in connection with a  Bridge Loan to  the Company entered
          into in July and  August of 1995.  This  amount was based on  the
          estimated value of the Company's Common Stock at the consummation
          of the IPO.   The expense recorded did  not affect the  Company's
          cash  position or  net equity  as a  result of  the corresponding
          credit made to additional paid-in capital. 

             During the year ended  December 31, 1995, the Company  entered
          into new  lease transactions  totaling $7.7 million  of equipment
          cost. Of  this  amount, $3.7  million  was classified  as  direct
          finance  leases  and $4.0  million  was  classified as  operating
          leases. For the year ended December 31, 1994, the Company entered
          into  $1.7 million of direct  finance leases and  $1.2 million of
          operating  leases. This  growth reflects the  Company's increased
          marketing  presence  in end-user  leasing  accounts  and expanded
          banking relationships.  During the  year ended December 31, 1995,
          the  Company  entered into  $7.6  million  of non-recourse  lease
          financing arrangements, net of  terminations resulting from lease
          sales and lease extensions, as compared with $2.1 million for the
          year  ended December  31,  1994.     See "Liquidity  and  Capital
          Resources." 

             Lease revenue for  the year ended  December 31, 1995 was  $2.1
          million, representing  a decrease of 17.17% over the $2.6 million
          recorded  during the year ended December 31, 1994.  Lease expense
          decreased for the  year ended December 31, 1995 by  14.9% to $1.8
          million  from $2.1 million for the  year ended December 31, 1994.
          The reduction in  both lease revenue  and expense is a  result of
          the maturation of the Company's lease portfolio and the Company's
          success in  re-marketing (through lease extensions  and renewals)
          equipment  that  came off  lease to  some  of its  end-user lease
          customers.  These  extensions and  renewals  are  typically at  a
          reduced rate  from the original lease (resulting in the reduction
          in lease revenue) but generate higher gross profit margins to the
          Company,  since  in most  cases the  Company has  depreciated the
          equipment below its current fair market value.

             For the  year ended  December 31, 1995,  the Company  recorded
          sales revenue  of  $30.9 million.   Of this amount, $16.4 million
          was from the sale  of leased equipment to an  equipment investor.
          Subsequent to a  sale of this variety, the Company generally is a
          party  to a  re-marketing  agreement  under  which  it  may  earn
          additional income from the asset's future re-lease or sale value.
          The Company includes these  leases within the aggregate  value of
          its active portfolio  of owned and managed leases.   For the year
          ended  December 31, 1994,  the Company recorded  sales revenue of
          $25.3 million. This increase reflects the continued growth in the
          end-user sector of the Company's business, as the year ended 1995
          saw the Company successfully close  a number of transactions  for
          large computer systems to end-user customers.

             During  the  year   ended  December  31,  1995,   the  Company
          generated $97,800 in fee  and other income, compared  to $101,400
          for  the comparable period ended December 31, 1994.  This revenue
          is principally derived from  the Company's involvement in certain
          transactions in which  it acts  as an arranger  of financing  for
          transactions originated by  third parties.  The  Company does not
          recognize as  revenue  the gross  amount of  the lease  financing
          arranged, but rather  records the net  profit generated from  the
          transaction.

                                  16
     <PAGE>

             SG&A  expenses    totaled  $1.8 million  for  the  year  ended
          December 31, 1995, representing an increase of 7.4% over the $1.7
          million  recorded during the year  ended December 31,  1995.  The
          increase in SG&A is  a result of the increased sales  and support
          staff at the Company.

          LIQUIDITY AND CAPITAL RESOURCES

             On  January  22,  1996, the  Company  consummated  an  initial
          public offering of its  securities.  In connection with  the IPO,
          the Company issued a  total of 1,495,000 units, inclusive  of the
          underwriter's over-allotment option which was exercised in  full,
          at  a price  of $7.00  per unit,  generating net proceeds  to the
          Company of approximately $8.4 million.   Concurrent with the IPO,
          the  Company  repaid  the  $1.0 million  owed  to  certain bridge
          lenders plus the related interest accrued that was outstanding as
          of December 31, 1995.

             As  of  December 31,  1996, the  Company  had $6.8  million in
          cash,  cash  equivalents  and  investments  available  for  sale.
          Substantially all of this amount was invested in interest-bearing
          savings accounts,  money  market accounts  established  by  major
          commercial  banks, or  in United  States Government  or other  AA
          rated obligations.  Since inception, the Company has been able to
          cover its  SG&A expenses from internally generated  cash flow and
          has  never had to borrow funds  to cover such expenses.  Although
          the  Company's  business  is  subject to  monthly  and  quarterly
          fluctuations  that  may  require  the  Company to  use  its  cash
          balances  to cover such expenses  for short periods  of time, the
          Company  does not anticipate having to use significant amounts of
          its cash balances to cover such expenses.  

             During the  year  ended December  31,  1996, the  Company  had
          three  lines of credit available.   These credit  lines allow the
          Company,  subject   to  the  satisfaction  of  certain  financial
          covenants with respect to one of such facilities, to borrow up to
          $2,750,000  in  the aggregate  and are  secured by  equipment and
          contracts  to sell  or  lease that  equipment.   Borrowings under
          these lines bear interest at 1% to 1 1/2% above the prime rate.  In
          addition,  one of these lines  offers the Company  the ability to
          borrow up  to $100,000  on an  unsecured basis.   The  purpose of
          these credit lines is to  allow the Company to pay its  suppliers
          on a  timely basis while waiting  for the customer to  pay or for
          the  non-recourse financing to occur.   As of  December 31, 1995,
          the  Company had borrowed $495,000 from one of these bank lenders
          in connection with the  acquisition of equipment on lease.   This
          amount was paid in full in  March  1996 and no additional amounts
          were  borrowed during  the year.   Two  of these  lines, totaling
          $1.25  million, expire on June 30, 1997.   The third line, in the
          amount of $1.5 million, expired on June 30, 1996.  The Company is
          in the process of  reinstating this line under similar  terms and
          conditions.

             The  Company  finances  substantially all  of  its  leases  by
          discounting the  payment streams on a  non-recourse basis through
          various  banks and  financial institutions.  Thus, the  only cash
          required  in  these  lease  transactions is  the  residual  value
          investment by  the Company.  See  "General."  As a  result of the
          Company's  IPO,  management  believes  that  it  has   sufficient
          resources to make the residual value investments required to grow
          its  lease  portfolio.   In  addition, the  Company  has numerous
          options  available to  it  for the  financing  of residual  value
          investments, including  sales of equipment on  lease to equipment
          investors,  residual value  sharing arrangements,  recourse loans
          and  non-recourse loans.    The Company  intends  to use,  on  an
          opportunistic  basis, all  such available  resources in  order to
          maximize  its portfolio of equipment  on lease.   During the year
          ended  December  31,  1996,  the  Company  entered  into  several
          residual   value  sharing  arrangements,   whereby  an  equipment
          investor purchased  a portion of the Company's  residual value in
          exchange for the right to share in remarketing proceeds generated
          from the equipment  upon lease expiration.   The Company received
          $500,000 from these transactions, and used  this amount to reduce

                                  17
     <PAGE>

          the cost  basis  and residual  value  of the  leased asset.    In
          January 1997, the Company entered into an additional $2.3 million
          of residual sharing arrangements  regarding equipment on lease of
          December 31, 1996.  In addition, the Company has commitments from
          this same finance company to  finance Paramount's portion of  the
          residual  value of  certain  leased assets.   These  commitments,
          which total $1.2 million, were used by the Company  in January of
          1997.   In June  1996, in connection  with an  extension and  re-
          financing of a lease transaction, the Company repaid $60,500 of a
          residual  value loan  that was  outstanding as  of   December 31,
          1995.    As of  December 31,  1996, the  Company  had a  total of
          $18,400 of residual value loans outstanding.

          FORWARD LOOKING STATEMENTS AND ASSOCIATED RISK

             Statements  contained  in   this  Form  10-K  which   are  not
          historical  facts are forward-looking  statements.   The forward-
          looking statements in  this Form  10-K are made  pursuant to  the
          safe  harbor  provisions  of  the  Private  Securities Litigation
          Reform  Act  of 1995.    Forward-looking  statements made  herein
          contain  a number  of risks  and uncertainties  that  could cause
          actual   results  to   differ  materially.     These   risks  and
          uncertainties  include,  but are  not  limited  to, the  specific
          factors impacting  the  Company's business  discussed  under  the
          caption  "General,"   as  well  as  increased   competition;  the
          availability of computer equipment; the ability of the Company to
          expand  its operations  and  attract and  retain qualified  sales
          representatives experienced  in the  purchase, sale and  lease of
          new and used  computer equipment;  technological obsolescence  of
          the  Company's portfolio  of computer  equipment; the  success of
          Paratech  in establishing  the Company  as a  comprehensive asset
          management  and information  technology solution   provider;  and
          general economic conditions.

          EFFECT OF NEW ACCOUNTING STANDARDS

             In June 1996, the Financial  Accounting Standards Board (FASB)
          issued  Statement  of  Financial  Accounting  Standards No.  125,
          "Accounting for  Transfers and Servicing of  Financial Assets and
          Extinguishment of Liabilities."   This statement is effective for
          transfers and servicing of financial assets and extinguishment of
          liabilities occurring  after December 31, 1996.   In management's
          opinion, when adopted, the aforementioned  pronouncement will not
          have a  material effect  on the  Company's financial  position or
          results of operation.

             The  FASB recently  issued  Statement of  Financial Accounting
          Standards  No. 123,  "Accounting  for  Stock-Based  Compensation"
          ("SFAS  123").    This  new standard  encourages,  but  does  not
          require, companies to  recognize compensation expense for  grants
          of stock, stock options  and other equity instruments based  on a
          fair-value method of accounting.

             Companies  that  do  not  choose  to  adopt  the  new  expense
          recognition rules of SFAS 123 will continue to apply the existing
          accounting rules contained in Accounting Principles Board Opinion
          (APBO)  No. 25,  but  will  be  required  to  provide  pro  forma
          disclosures  of the  compensation  expense  determined under  the
          fair-value  provisions of  SFAS 123,  if material.   APBO  No. 25
          requires no  recognition of compensation expense for  most of the
          stock-based  compensation arrangements  provided by  the Company,
          namely,  broad-based  employee stock  purchase  plans  and option
          grants where the exercise price  is equal to the market  price at
          the  date of  grant.   The  Company  has adopted  the  disclosure
          provisions  of  SFAS 123  which had  no  impact on  the financial
          statements or the notes thereto.

             In  1996,   the  Company   adopted   Statement  of   Financial
          Accounting Standards  No. 121  "Accounting for  the Impairment of
          Long-Lived Assets  and for Long-Lived  Assets to be  Disposed Of"

                                  18  
     <PAGE>                               
     
          ("SFAS 121").  Long-lived assets to be held and used are recorded
          at  cost.  SFAS 121  requires that long-lived  assets and certain
          identifiable  intangibles to  be  held and  used be  reviewed for
          impairment whenever  events or changes in  circumstances indicate
          that the carrying amount of an asset may not be recoverable.  The
          effect of adopting  SFAS 121  was not material  to the  Company's
          financial  statements since there  were no  events or  changes in
          circumstances for the year ended December 31, 1996 that indicated
          that the carrying amount of long-lived assets had been impaired.

          INFLATION

             Inflation  has not had  a significant impact  on the Company's
          operations.


          ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

             The  audited  financial  statements of  the  Company  for  the
          fiscal year ended December 31, 1996 are located beginning at page
          F-1 of this Annual Report on Form 10-K.


          ITEM 9 - CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON
                   ACCOUNTING AND FINANCIAL DISCLOSURE

             None.

                                       PART III

     ITEM 10 - ITEM 13 - DOCUMENTS INCORPORATED BY REFERENCE

          Information with respect to Items 10, 11, 12 and 13 of Form 10-K is
     hereby incorporated by reference  into this Part III of Form 10-K  from the
     Registrant's Definitive  Proxy Statement relating to  the Registrant's 1997
     Annual  Meeting of  Stockholders to  be  filed by  the Registrant  with the
     Securities and Exchange Commission on or before April 30, 1997.

                                       PART IV

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

          The exhibits listed in the  Index to Exhibits below  are filed as 
     part  of this Annual Report on Form 10-K.

          (A)  EXHIBITS: 

               3.1* - Restated and Amended Certificate of Incorporation
                      of the Registrant
               3.2* - Amended on Restated By-laws of the Registrant
               4.1* - Specimen Common Stock Certificate
               4.2* - Form of Underwriter's Unit Purchase Option, as
                      amended
               4.3* - Form of Class A and Class B Warrant Agreement, as
                      amended

                                  19  
     <PAGE>                             
     
               4.4* - Specimen Class A Warrant Certificate
               4.5* - Specimen Class B Warrant Certificate
              10.1* - Employment Agreement between Registrant and
                      Jeffrey Nortman dated as of  January 22, 1996
              10.2* - Employment Agreement between Registrant and Glenn
                      Nortman dated as of  January 22, 1996
              10.3* - Employment Agreement between the Registrant and
                      Paul Vecker dated as of  January 22, 1996
              10.4* - Form of Master Lease Agreement relating to
                      Computer Equipment Leases
              10.5* - 1995 Stock Option Plan
              10.6* - Operating Agreement of KRh Financial, LLC, dated
                      June 1995, between the Company and KRh Thermal
                      Systems
              10.7* - Lease Origination and Service Agreement, dated
                      June 1995, between the Company and KRh Financial,
                      LLC.
              10.8* - Form of Indemnification Agreement
              10.9* - Sublease Agreement, dated September 15, 1995,
                      between the Company and Lehman Brothers Inc.
             10.10* - Consent to Sublease, dated September 15, 1995,
                      among Chasco Company, Lehman Brothers Inc. and the
                      Company
             10.11* - 1995 Director Option Plan

     -----------

     *    Incorporated by Reference from the Registrant's Registration 
          Statement on Form S-1, Registration No. 33-96382.

               FINANCIAL STATEMENTS:  See Index to Consolidated Financial
          Statements on page F-1.

          (B)  REPORTS ON FORM 8-K

          The Company did  not file any  reports on Form  8-K during the  
          fourth quarter of the fiscal year ended December 31, 1996.

          (C)  EXHIBITS

          The Exhibits set forth in (a) above are filed as part of this 
          Annual Report on Form 10-K. 

          (D)  FINANCIAL STATEMENT SCHEDULES

          Information required by schedules called for unde  Regulation 
          S-X is either not applicable or is included in the financial 
          statements or notes thereto.

                                  20
     <PAGE>

                                   SIGNATURES


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


                                           PARAMOUNT FINANCIAL CORPORATION
          

     Dated:  March 21, 1997                By: /s/ JEFFREY NORTMAN
                                              ------------------------------
                                                  Jeffrey Nortman,
                                                  Co-Chief Executive Officer


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


      Signature                  Title                                Date
      ---------                  -----                                ----


      /s/JEFFREY NORTMAN         Co-Chief Executive Officer      March 21, 1997
      -----------------------    and Director (Co-Principal
      Jeffrey Nortman            Executive Officer)

      /s/ GLENN NORTMAN          Co-Chief Executive Officer      March 21, 1997
      -----------------------    and Director (Co-Principal
      Glenn Nortman              Executive Officer)


      /s/PAUL VECKER             Senior Vice President, Chief    March 21, 1997
      -----------------------    Financial Officer, Treasurer
      Paul Vecker                and Director (Principal 
                                 Financial Officer and 
                                 Principal Accounting
                                 Officer)



                                  21

     <PAGE>

                    PARAMOUNT FINANCIAL CORPORATION AND SUBSIDIARY
                    ----------------------------------------------

                      INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                      ------------------------------------------

                                  DECEMBER 31, 1996
                                  -----------------



                                                                       Page     
                                                                       ----     

     Report of Independent Public Accountants                           F-2     

     Consolidated Balance Sheets as of December 31, 1995 and 1996       F-3     

     Consolidated Statements of Operations for each of the three
          years ended December 31, 1996                                 F-4     

     Consolidated Statements of Shareholders' Equity for each of the
          three years ended December 31, 1996                           F-5     

     Consolidated Statements of Cash Flows for each of the three
          years ended December 31, 1996                                 F-6     

     Notes to Consolidated Financial Statements                      F-7 - F-20




     Information required by schedules called for under Regulation S-X is 
     either not applicable or is included in the financial statements or 
     notes thereto.

                                  F-1

     <PAGE>



                       REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
                       ----------------------------------------



     To Paramount Financial Corporation:


     We have  audited the accompanying consolidated balance  sheets of Paramount
     Financial Corporation and subsidiary  as of December 31, 1995 and 1996, and
     the related consolidated statements of operations, shareholders' equity and
     cash flows  for each of  the three years  in the period ended  December 31,
     1996.  These financial  statements are the responsibility of  the Company's
     management.  Our responsibility is to express an opinion on these financial
     statements based on our audits.

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

     In  our opinion, the financial statements referred to above present fairly,
     in  all material  respects, the  financial position of  Paramount Financial
     Corporation and  subsidiary  as of  December  31, 1995  and  1996, and  the
     results  of their  operations and their  cash flows  for each  of the three
     years  in the period ended December 31,  1996, in conformity with generally
     accepted accounting principles.





     Melville, New York
     February 18, 1997

                                              ARTHUR ANDERSEN LLP



                                  F-2
     <PAGE>

                    PARAMOUNT FINANCIAL CORPORATION AND SUBSIDIARY
                    ----------------------------------------------

                             CONSOLIDATED BALANCE SHEETS
                             ---------------------------

                                                           December 31,
                                                      ------------------------
        ASSETS                                           1995         1996
        ------                                        ----------   -----------
        Cash and cash equivalents                    $ 1,153,476   $ 3,700,774
        Investments available for sale                        --     3,163,841
        Accounts receivable                              106,794     2,260,013
        Net investment in direct finance and sales-
          type leases                                  6,446,063    20,942,542
        Assets held under operating leases, net of
          accumulated depreciation                     3,976,209    21,103,033
        Other assets                                     696,043       391,317
                                                     -----------   -----------

           Total assets                              $12,378,585   $51,561,520
                                                     ===========   ===========

        LIABILITIES AND SHAREHOLDERS' EQUITY
        ------------------------------------

      LIABILITIES:
        Notes payable                                $ 1,611,697   $    18,384
        Accounts payable                                 419,624     1,062,226
        Accounts payable - leases                        126,990    18,234,518
        Accrued expenses                                 313,673       188,169
        Obligations for financed equipment-non
          recourse                                     9,337,883    23,461,175
        Deferred income taxes                                 --       425,662
                                                     -----------   -----------

           Total liabilities                          11,809,867    43,390,134
                                                     -----------   -----------

      COMMITMENTS (Note 15)


      SHAREHOLDERS' EQUITY:
        Preferred stock, $.01 par value; 5,000,000
          shares authorized, none outstanding                 --            --
        Common stock, $.01 par value; 35,000,000
          shares authorized, 3,500,000 and 7,990,000
          shares issued and outstanding,
          respectively                                    35,000        79,900
        Additional paid-in capital                     5,282,049    13,644,228
        Accumulated deficit                           (4,748,331)   (5,552,742)
                                                     -----------   ----------- 

           Total shareholders' equity                    568,718     8,171,386
                                                     -----------   -----------

           Total liabilities and shareholders'       $12,378,585   $51,561,520
             equity                                  ===========   ===========



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

                                       F-3

     <PAGE>


                    PARAMOUNT FINANCIAL CORPORATION AND SUBSIDIARY
                    ----------------------------------------------

                        CONSOLIDATED STATEMENTS OF OPERATIONS
                        -------------------------------------


                                                Years Ended December 31,
                                          ------------------------------------
                                             1994        1995          1996
                                         -----------  -----------   -----------


      REVENUES:
        Sales                            $25,290,524   $30,857,949   $27,159,894
        Lease revenue                      2,592,531     2,147,358     3,680,924
        Fee and other income                 101,358        97,802       186,264
        Interest income                        7,889        65,071       325,434
                                         -----------   -----------   -----------

           Total revenues                 27,992,302    33,168,180    31,352,516
                                         -----------   -----------   -----------
      COSTS AND EXPENSES:
        Cost of sales                     23,540,952    28,955,984    25,785,022
        Lease expense                      2,091,361     1,828,412     3,419,600
        Selling, general and
          administrative expenses          1,680,601     1,805,499     2,447,884
        Interest expense (Note 7)                 --     5,284,756         6,209
                                         -----------   -----------   -----------

           Total costs and expenses       27,312,914    37,874,651    31,658,715
                                         -----------   -----------   -----------

           Income (loss) before
             provision for income taxes      679,388    (4,706,471)    (306,199)


      PROVISION FOR INCOME TAXES (Note 9)     33,706        21,850       498,212
                                         -----------   -----------    ----------

           Net income (loss)             $   645,682   $(4,728,321)  $ (804,411)
                                         ===========   ===========   ===========

           Loss per share                                                $(0.10)
                                                                      ==========

      Weighted average common shares                                   7,817,973
        outstanding                                                   ==========



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

                                       F-4
     <PAGE>

                    PARAMOUNT FINANCIAL CORPORATION AND SUBSIDIARY
                    ----------------------------------------------

                   CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                   -----------------------------------------------

                 FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
                 ----------------------------------------------------




                                   Common Stock          Additional
                             -----------------------      Paid-In
                                Shares      Amount        Capital
                             ----------- -----------  ----------------

      BALANCE, December 31,
        1993                   3,301,886     $33,018       $    32,049

        Current year
          distributions                -           -                 -

        Current year net               -           -                 -
          income               ---------     -------       -----------

      BALANCE, December 31,
        1994                   3,301,886      33,018            32,049

        Issuances of common
          stock                  198,114       1,982         5,250,000

        Current year
          distributions                -           -                 -

        Current year net               -           -                 -
          loss                 ---------     -------       -----------

      BALANCE, December 31,
        1995                   3,500,000      35,000         5,282,049
        Issuance of common
          stock in the
          initial public
          offering, net of
          offering costs of
          $2,057,921           2,990,000      29,900         8,377,179

        Issuance of common
          stock to bridge
          lenders              1,500,000      15,000           (15,000)

        Current year net               -           -                 -
          loss                 ---------     -------       -----------

      BALANCE, December 31,    7,990,000     $79,900       $13,644,228
        1996                   =========     =======       ===========


                               Retained
                               Earnings       Total
                             -----------    ----------

      BALANCE,December 31,
        1993                 $   541,082    $  606,149

        Current year
          distributions         (399,832)     (399,832)

        Current year net         645,682       645,682
          income             -----------    ----------

      BALANCE, December 31,
        1994                     786,932       851,999

        Issuances of common
          stock                        -     5,251,982

        Current year
          distributions         (806,942)     (806,942)

        Current year net      (4,728,321)   (4,728,321)
          loss                ----------    ---------- 

      BALANCE, December 31,
        1995                  (4,748,331)      568,718

        Issuance of common
          stock in the
          initial public
          offering, net of
          offering costs of
          $2,057,921                   -     8,407,079

        Issuance of common
          stock to bridge
          lenders                      -             -

        Current year net        (804,411)     (804,411)
          loss               -----------     --------- 

      BALANCE, December 31,  ($5,552,742)   $8,171,386
        1996                 ===========    ==========



                                       F-5
     <PAGE>

                    PARAMOUNT FINANCIAL CORPORATION AND SUBSIDIARY
                    ----------------------------------------------
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                        -------------------------------------

                                                  Years Ended December 31,
                                           -------------------------------------
                                               1994        1995         1996
                                           -----------  -----------  -----------

     CASH FLOWS FROM OPERATING 
     ACTIVITIES:

      Net income (loss)                    $  645,682   $(4,728,321)  $(804,411)

      Adjustments to reconcile net income
        (loss) to net cash provided
        by (used in) operating
        activities:

        Amortization of deferred
          financing costs                           -     5,250,000            -

        Deferred income taxes                       -             -      425,662

        Depreciation                          990,638       814,218    2,037,472

        Amortization of discounts on
          investments                               -             -    (162,296)

        Amortization of unearned
          operating lease revenue from
          sublease transactions              (114,405)     (104,073)    (19,928)

        Amortization of prepaid operating
          lease expense from sublease
          transactions                         97,899        92,376       25,067

        Net proceeds from prepaid
          sublease transaction                  6,000             -            -

        Changes in operating assets and
          liabilities:

         Accounts receivable                 (130,811)       56,032  (2,153,219)

         Inventory of equipment             1,563,966        65,725            -

         Other assets                        (141,018)     (453,749)     279,659

         Unearned sales revenue               825,000      (825,000)           -

         Accounts payable                    (151,510)     (323,933)     642,602

         Accounts payable - leases                  -      (126,990)  18,107,528

         Accrued expenses                       3,294       179,586    (105,576)
                                           ----------    ----------   ----------

     Net cash provided by (used in)         3,594,735      (104,129)  18,272,560
       operating activities                ----------    ----------   ----------


     CASH FLOWS FROM INVESTING
       ACTIVITIES:

       Purchase of equipment for direct
         finance leases and sales-type
         leases                            (1,653,729)   (3,707,954)(21,773,460)

        Termination of direct finance
          leases                              429,226       729,330    1,591,822

        Proceeds applied to direct
          finance leases and sales-type
          leases                            2,608,777     1,943,781    5,685,159

        Purchase of equipment for
          operating leases                 (1,229,847)   (3,950,717)(31,913,845)

        Termination of operating leases       428,814        30,200   12,749,549

        Purchase of investments                     -             - (19,495,594)

        Proceeds from sale/maturity of
          investments                               -             -   16,494,049
                                           
                                           ----------    ----------   ----------
     Net cash provided by (used in)           583,241    (4,955,360)(36,662,320)
       investing activities                ----------    ----------   ----------


     CASH FLOWS FROM FINANCING
       ACTIVITIES:

      Net proceeds from sale of common
        stock in an initial public
        offering                                    -             -    8,407,079

      Distributions to shareholders in
        cash                                 (332,940)     (806,942)           -

      Proceeds from notes payable              64,000     1,611,697            -

      Repayment of notes payable             (460,000)      (64,000) (1,593,313)

      Increase in non-recourse lease
        financing                           2,100,085     7,562,494   31,559,769

      Termination of non-recourse lease
        financing                            (615,801)     (782,362) (9,978,194)

      Repayments and interest
        amortization applied to            (3,663,998)   (2,594,523) (7,458,283)
        non-recourse lease financing       ----------    ----------   ----------

     Net cash (used in) provided by        (2,908,654)    4,926,364   20,937,058
       financing activities                ----------    ----------   ----------

     Net increase (decrease) in cash and
       cash equivalents                     1,269,322      (133,125)   2,547,298


     CASH AND CASH EQUIVALENTS, beginning
       of period                               17,279     1,286,601    1,153,476
                                           ----------    ----------   ----------

     CASH AND CASH EQUIVALENTS, end of     $1,286,601    $1,153,476   $3,700,774
       period                              ==========    ==========   ==========


     SUPPLEMENTAL CASH FLOW INFORMATION:

       Cash paid for income taxes          $   33,706    $   21,850   $   24,437
                                           ==========    ==========   ==========

       Cash paid for interest              $  440,500    $  521,483   $1,358,538
                                           ==========    ==========   ==========


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


                                       F-6
     <PAGE>

                    PARAMOUNT FINANCIAL CORPORATION AND SUBSIDIARY
                    ----------------------------------------------

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      ------------------------------------------


     1.   COMPANY BACKGROUND:
          -------------------

     Paramount  Financial  Corporation  ("Paramount"   or  the  "Company")   was
     incorporated in the state of  Delaware in July 1991.  The  Company's former
     legal  name,  Paramount  Computer   Leasing  Corporation,  was  changed  to
     Paramount Financial Corporation  subsequent to the year  ended December 31,
     1994.    Paramount  is  a comprehensive  asset  management  and information
     technology solution provider offering customers a wide range of  integrated
     services including lease finance,  network design and implementation.   The
     Company is  not tied to any one manufacturer and thus can provide customers
     with  available  technical and  financial  alternatives  regardless of  the
     specific hardware platform.  Paramount's customer base is  mostly comprised
     of  large, domestic,  creditworthy customers  in  a variety  of industries.
     Prior to  1996, the  Company generated most  of its revenue  from wholesale
     trading  of  new  and  used  equipment.   However,  in  1996,  the  Company
     aggressively expanded its leasing operations which now accounts for most of
     its revenue.  In July 1996, Paramount formed a new wholly owned subsidiary,
     Paratech Resources Inc., which offers comprehensive information  technology
     solutions including network design  and integration, software applications,
     training and value added support services.

     On  January 22, 1996 ("Effective Date"), the Company consummated an initial
     public  offering of its securities.   In connection  with the offering, the
     Company  issued a total of  1,495,000 units inclusive  of the underwriter's
     over-allotment option  which was exercised in full, at a price of $7.00 per
     unit.   Each unit sold  in the  offering consists of  two shares of  common
     stock and  two redeemable class A  warrants.  The common stock  and class A
     warrants are detachable and can trade separately.  The class A warrants are
     exercisable commencing  one year  from the  Effective Date.   Each class  A
     warrant entitles the holder to purchase  one share of common stock at $4.00
     per  share (subject to adjustment  for anti-dilution) during  the four year
     period  commencing one year from the Effective  Date.  The class A warrants
     are redeemable by the Company for $0.05 per warrant, in the event that  the
     closing bid price of the Company's common stock exceeds $9.00 per share for
     twenty consecutive  trading days  ending within ten  days of the  notice of
     redemption.  With the prior written consent of the underwriter, upon thirty
     days  written notice to  all holders of  the class A  warrants, the Company
     shall have the right to reduce the exercise price and/or extend the term of
     the class A warrants.  None of  the class A warrants issued  in  connection
     with the initial public offering have been exercised to date.  

     In connection  with the offering, 300,000  shares of common stock  owned by
     the  Company's two  original shareholders  (the  "Selling Securityholders")
     were also  offered and  sold  to the  public.   Additionally,  there was  a
     secondary offering of securities  by certain non-affiliated lenders of  the
     Company (the  "Selling Lenders").   The Selling Lenders  registered 750,000
     units, identical to the  initial public offering units described  above, as
     well as an  additional 1,500,000 shares of  common stock issuable upon  the
     exercise of class B warrants (Note 7).   The class B warrants are identical
     to  class A warrants, except that their  exercise price is $4.20 per share,
     they are not included for listing on any public trading market and there is
     no solicitation fee payable in connection with their exercise.  None of the
     aforementioned class A or class B warrants have been exercised to date.

                                       F-7

     <PAGE>

     2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
          -------------------------------------------

     Principles of Consolidation
     ---------------------------

     The consolidated financial statements as of and for the year ended December
     31,  1996 include  the  accounts  of  the  Company  and  its  wholly  owned
     subsidiary,  Paratech  Resources Inc.,  after  elimination  of intercompany
     balances and transactions.

     Cash Equivalents
     ----------------

     The Company considers all highly liquid  debt and equity instruments with a
     maturity  of three months  or less  from the  date of  purchase to  be cash
     equivalents.  Cash  equivalents include investments  in money market  funds
     and are stated at cost, which approximates market value.

     Investments Available for Sale
     ------------------------------

     Statement  of   Financial  Accounting  Standards  No.   115  ("SFAS  115"),
     "Accounting  for  Certain  Investments   in  Debt  and  Equity  Securities"
     addresses the accounting and  reporting for investments in debt  and equity
     securities.   Securities classified as  available for sale  are reported at
     fair value, with  unrealized gains  and losses excluded  from earnings  and
     reported in a  separate component of stockholders' equity  (on an after tax
     basis).  Gains and losses  on the disposition of securities  are recognized
     on the specific identification method in the period in which they occur.  

     At  December 31,  1996, investments  available for  sale consist  of United
     States government and agency bonds with original maturities of one  year or
     less. The  cost of debt securities is adjusted for accretion of discount to
     maturity  which is recorded as interest income.   At December 31, 1996, the
     cost basis of these securities approximates market value.

     Net Investment in Direct Finance and Sales-Type Leases
     ------------------------------------------------------

     The  net investment in direct finance and sales-type leased assets consists
     of the present value of the  future minimum lease payments plus the present
     value of the residual value,  if any (collectively referred to as  the "net
     investment").  The residual value is the estimated fair market value of the
     leased assets at lease expiration.  

     Completed lease contracts  which qualify as  direct finance and  sales-type
     leases, as defined by  Statement of Financial Accounting Standards  No. 13,
     "Accounting for Leases" ("SFAS 13"), are accounted for on the balance sheet
     by recording  the total  minimum lease  payments receivable, the  estimated
     residual value  of the  leased  equipment and  the  unearned income.    The
     unearned  lease income  represents the  excess of  the total  minimum lease
     payments and the estimated residual value expected to be realized, over the
     cost of  the  related equipment.    The unearned  income is  recognized  as
     revenue over the term of each lease by applying a constant periodic rate of
     return to the declining net investment in each lease.

     Lease revenue  includes  that portion  of  unearned income  amortized  into
     income during the current period.  Revenue recognized at the inception of a
     sales-type lease is recorded in sales.

     Assets Held Under Operating Leases
     ----------------------------------

                                       F-8

     <PAGE>

     Assets held under operating leases consist of the equipment at cost, net of
     accumulated depreciation.   Depreciation  is recognized on  a straight-line
     basis over the lease term  up to the Company's estimate of  the equipment's
     residual  value   at  lease  expiration.     Accumulated  depreciation  was
     approximately  $770,000  and $2,315,000  at  December  31, 1995  and  1996,
     respectively.

     Lease  revenue includes the contractual lease payments and is recognized on
     a straight-line basis over the lease term.

     Residual Values
     ---------------

     The  Company's  residual  value  estimates  are  based  on  current  market
     conditions and published residual value projections, as determined at lease
     inception.   On an ongoing basis,  the Company compares its  residual value
     estimates against  currently published  independent forecasts  of equipment
     values at  lease expiration as well  as other known market  conditions.  If
     the  residual  value  is determined  to  be excessive  and  the  decline in
     residual value  is judged to be  other than temporary,  the Company revises
     its residual  values accordingly  with corresponding adjustments  to income
     and unearned  income.  During the year ended December 31, 1996, the Company
     entered  into  residual  value  sharing  agreements  whereby  an  equipment
     investor or a  financial institution  purchased a portion  of the  residual
     value  of the  equipment on lease  in exchange  for the  right to  share in
     remarketing proceeds received upon lease expiration.  The proceeds received
     were used to  reduce the cost  basis and the residual  value in the  leased
     assets.

     Use of Estimates
     ----------------

     The  preparation  of  financial  statements in  conformity  with  generally
     accepted accounting  principles requires  management to make  estimates and
     assumptions that affect the  reported amounts of assets and  liabilities 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.

     Revenue Recognition
     -------------------

     The Company records revenues  from equipment sales upon the shipment of the
     equipment and transfer of title to the customer.  When equipment is sold to
     another  computer leasing and trading company (a "broker"), the transfer of
     title  and recognition  of  revenue generally  occur  upon the  receipt  of
     payment from the broker.

     From time to time, the  Company will receive payment prior to  the transfer
     of title  or purchase of the  related inventory.  The  Company records such
     amounts as unearned sales revenue on  the balance sheet.  Upon shipment and
     transfer  of  title, unearned  sales revenue  is  reversed and  recorded as
     equipment sales.

     The  Company records  revenue  from  the sale  of  leased  equipment to  an
     equipment investor upon transfer of title to the  equipment.  Subsequent to
     a sale  of this variety, the Company generally is a party to a re-marketing
     agreement under which it may earn additional income from the asset's future
     re-lease or sale value upon lease termination or expiration.

                                       F-9

     <PAGE>

     See Net Investment in Direct Finance and  Sales-Type Leases and Assets Held
     Under  Operating Leases for a  discussion of revenues  earned under leasing
     transactions.

     Lease Expense
     -------------

     Lease expense includes  depreciation on assets held under operating leases,
     interest expense on obligations for  financed equipment and sublease rental
     expense.  The cost of equipment recognized at the inception of a sales-type
     lease is reflected in cost of sales.

     Income Taxes
     ------------

     At  its inception,  the Company  elected status  as an  S corporation  and,
     therefore, through December 31, 1995 was not subject  to federal income tax
     as  a separate  entity.    Instead,  the shareholders  were  taxed  on  the
     Company's income, whether  or not  distributed, and they  were entitled  to
     deduct  Company  losses, if  any,  to  the extent  of  the  tax basis  each
     shareholder  had in  the  Company's common  stock.   The  Company had  been
     subject to  certain corporate taxes on the state level.  In connection with
     its initial public offering  described above, the Company terminated  its S
     election and  is currently taxable as  a C corporation.   The adjustment to
     record deferred income taxes  upon termination of the Company's  S election
     was  to record  a  net  deferred  income  tax  liability  of  approximately
     $430,000.

     Deferred income taxes  are provided for  temporary differences between  the
     carrying values of assets  and liabilities for financial reporting  and tax
     purposes at  the enacted rate for  the year in which  these differences are
     expected to reverse  in accordance with  Statement of Financial  Accounting
     Standards No. 109, "Accounting for Income Taxes". 

     Loss Per Share Information
     --------------------------

     Net  loss per  share is based  upon the  weighted average  number of common
     shares  outstanding during the year.  Common stock equivalents are excluded
     from the  computation as  they  would have  an anti-dilutive  effect.   Any
     shares issued, or deemed to have been issued in the case of the Bridge Loan
     shares,  within a  one  year period  prior  to the  initial  filing of  the
     registration statement,  have been  considered outstanding for  all periods
     presented.

     New Accounting Pronouncements
     -----------------------------

     In  June  1996, the  Financial  Accounting  Standards Board  (FASB)  issued
     Statement  of  Financial  Accounting  Standards No.  125,  "Accounting  for
     Transfers  and   Servicing  of  Financial  Assets   and  Extinguishment  of
     Liabilities."  This statement  is effective for transfers and  servicing of
     financial assets and extinguishment of liabilities occurring after December
     31,  1996.   In  management's  opinion,  when adopted,  the  aforementioned
     pronouncement  will not have a  material effect on  the Company's financial
     position or results of operation.

     The FASB  recently issued Statement  of Financial Accounting  Standards No.
     123,  "Accounting  for Stock-Based  Compensation" ("SFAS  123").   This new
     standard  encourages,   but  does  not  require,   companies  to  recognize
     compensation  expense for grants of  stock, stock options  and other equity
     instruments based on a fair-value method of accounting.

                                       F-10

     <PAGE>

     Companies that  do not choose to adopt the new expense recognition rules of
     SFAS 123 will continue to apply the  existing accounting rules contained in
     Accounting Principles Board Opinion (APBO) No. 25, but will  be required to
     provide pro forma disclosures of  the compensation expense determined under
     the  fair-value provisions of SFAS 123, if  material.  APBO No. 25 requires
     no  recognition  of  compensation  expense  for  most  of  the  stock-based
     compensation  arrangements provided  by  the  Company, namely,  broad-based
     employee stock purchase plans and option grants where the exercise price is
     equal to the  market price at the  date of grant.  The  Company has adopted
     the disclosure  provisions of SFAS 123 which had no impact on the financial
     statements or the notes thereto.

     In 1996,  the Company adopted  Statement of Financial  Accounting Standards
     No. 121  "Accounting for the Impairment of Long-Lived Assets  and for Long-
     Lived Assets to be Disposed Of" ("SFAS 121").  Long-lived assets to be held
     and used  are recorded at cost.   SFAS 121 requires  that long-lived assets
     and certain identifiable intangibles  to be held and  used be reviewed  for
     impairment whenever  events or changes  in circumstances indicate  that the
     carrying amount of an asset may not be recoverable.  The effect of adopting
     SFAS 121 was not material to the Company's financial statements since there
     were no events or changes in  circumstances for the year ended December 31,
     1996 that indicated  that the carrying amount of long-lived assets had been
     impaired.

     Reclassification
     ----------------

     Certain prior year amounts  have been reclassified to conform with the 1996
     presentation.

     3.   DIRECT FINANCE AND SALES-TYPE LEASES:
          -------------------------------------

     The net investment in direct finance  and sales-type leases at December 31,
     1995 and 1996, respectively, is comprised of the following:

                                                 1995              1996
                                           ----------------  ----------------
      Total minimum lease payments             $7,269,564       $22,668,923
        receivable

      Estimated residual value of                 252,475           541,947
        equipment                              ----------       -----------

                                                7,522,039        23,210,870

      Less:  Unearned income                    1,075,976         2,268,328
                                               ----------       -----------

      Net investment in direct finance and     $6,446,063       $20,942,542
        sales-type leases                      ==========       ===========


     4.   FUTURE MINIMUM LEASE PAYMENTS:
          ------------------------------

     Future minimum  lease rentals  to be  received by  the  Company under  non-
     cancelable direct finance, sales-type and operating leases expiring through
     the year 2002 are as follows:

          Year Ending        Direct Finance and          Operating
          -----------        ------------------          ---------
          December 31,       Sales-Type Leases            Leases
          ------------       -----------------            ------
              1997               $9,013,117            $8,433,412
              1998                8,505,942             7,820,517
              1999                3,634,276             1,526,448
              2000                1,225,104               149,860


                                       F-11

     <PAGE>

              2001                  212,857                13,710
              2002                   77,627                    --

     5.   SUBLEASE TRANSACTIONS:
          ----------------------

     The  Company enters  into  certain transactions  in which  it acts  as both
     lessee and sublessor  of equipment.  Since both the  lease and sublease are
     operating  leases, no  related assets  or liabilities  are recorded  on the
     Company's balance  sheet, other than  transactions that  are prepaid.   The
     Company recognized  approximately $693,800, $523,000 and  $38,700 in rental
     income  and approximately $665,500,  $533,200 and  $40,300 in  rent expense
     from  sublease transactions during the years  ended December 31, 1994, 1995
     and 1996, respectively.

     In certain  cases both the Company  and the sublessee have  made discounted
     payments  at  the  lease  inception  in  full  satisfaction  of  the  lease
     obligations.   Payments received by  the Company  are recorded as  unearned
     operating lease revenue,  and amortized into lease  revenue on a  straight-
     line basis over the life of the sublease.  Payments made by the Company are
     recorded  as prepaid  lease expense,  included within  other assets  on the
     accompanying  balance  sheets,  and  amortized  into  lease  expense  on  a
     straight-line basis over the life of the lease.

     6.   OBLIGATIONS FOR FINANCED EQUIPMENT - NON-RECOURSE:
          --------------------------------------------------

     Under  various  arrangements with  banks  and  financial institutions,  the
     Company  finances  substantially all  of  its  equipment leases  with  non-
     recourse notes.   These  notes provide for  an assignment  of future  lease
     rentals to these  institutions at fixed interest rates (which range between
     6.2%  and  10.8%).   In  exchange  for  these future  rentals,  the Company
     receives a discounted cash payment.  In the event of a default by a lessee,
     the financial  institution has a  first lien  on the underlying  equipment,
     with no  further recourse against  the Company.   The underlying  equipment
     securing  these non-recourse  notes represents  the Company's  assets under
     direct finance, sales-type and  operating leases, which total approximately
     $10.4  million in  book value  at December  31, 1995  and $24.9  million at
     December 31, 1996.

     Future maturities through the year 2002 on the non-recourse notes described
     above are as follows:

         Year Ending December 31,              Lease Payments
         ------------------------              --------------
                   1997                          $17,085,847
                   1998                           16,162,727
                   1999                            5,101,581
                   2000                            1,369,772
                   2001                              257,415
            2002 and thereafter                       77,677
                                                  40,055,019
                                                 -----------
              Less:  Interest                     16,593,844
                                                 $23,461,175
                                                 -----------

                                                 ===========

                                       F-12

     <PAGE>

     Through February 18, 1997, the Company entered into additional non-recourse
     loan  transactions  providing  for  additional  obligations   for  financed
     equipment  of approximately  $13,172,000 for leases  entered into  prior to
     December 31, 1996.

     7.   NOTES PAYABLE:
          --------------

     Notes  payable were  comprised of  the following  at December 31,  1995 and
     1996:

                                    1995                 1996
                            -------------------- --------------------
      Bridge loans (a)        $1,034,756              $     -

      Note payable under
        secured line of
        credit (b)               495,000                    -

      Note payable to bank        81,941               18,384
                              ----------              -------

                              $1,611,697              $18,384
                              ==========              =======

     (a)  In July 1995, the Company completed agreements with a group of lenders
          for an aggregate  of $1,000,000 in  bridge loans, with interest  at 8%
          per  annum.    In  accordance  with  the  terms  of  the  loans,  upon
          consummation  of the  Company's initial  public offering  these loans,
          plus accrued interest to date, were paid in full.

          As additional  compensation for  making the bridge  loans, the  bridge
          lenders received the right  to acquire 750,000 units of  the Company's
          securities  (the "Bridge Units") and an aggregate of 1,500,000 class B
          warrants to  purchase 1,500,000 shares  of common stock  commencing on
          the Effective Date.  Each unit consists of two shares of the Company's
          common  stock and  two redeemable  class A  warrants.   The terms  and
          conditions  of the shares  of common  stock and  the class  A warrants
          included in the Bridge Units are identical to the terms and conditions
          of the common  stock and class  A warrants sold to  the public in  the
          Company's  initial public offering.   The terms and  conditions of the
          class B  warrants are identical to  the class A warrants,  except that
          each  class B  warrant will  be exercisable  at a  price of  $4.20 per
          share.  The Company has recorded an expense of  $5,250,000 during 1995
          in connection with the issuance  of these units based on the  value of
          the Company's common stock at the time of the initial public offering.

     (b)  In October 1995, the Company borrowed $495,000 under a secured line of
          credit (Note 8) to finance the purchase of a lease.  The note was paid
          in full in March 1996.

     Subsequent Financing
     --------------------

     On January 17, 1997, the Company entered into a note  payable in the amount
     of $1,007,000 with a financial institution to finance the residual value of
     certain  equipment  on lease,  at an  interest  rate of  prime  plus 0.25%.
     Interest  is  payable  quarterly  commencing  April  1,  1997.  The  entire
     principal  amount is due  60 days after  lease expiration  (March 1, 1999).
     The  equipment on lease and the related  lease serve as collateral for this
     note payable.  

     The Company  also entered into  a similar  arrangement on January  17, 1997
     with  the same institution for $238,000 of residual value financing bearing
     interest at prime plus 0.50% payable semi-annually commencing July 1, 1997.
     The entire principal amount is due 60 days after lease expiration (November

                                       F-13

     <PAGE>

     30,  1999).    The equipment  on  lease  and  the  related lease  serve  as
     collateral for this note payable.

     Also on  January  17, 1997,  the Company  entered into  two residual  value
     sharing agreements whereby the above mentioned financial institution agreed
     to purchase a portion  of the residual values of the equipment on lease for
     $2,296,000  in  exchange for  the right  to  share in  remarketing proceeds
     received upon lease expiration.  The  proceeds received were used to reduce
     the Company's cost basis and residual value in the leased assets. 

     8.   LINES OF CREDIT:
          ----------------

     These facilities have been arranged with three banks in the total amount of
     $1,250,000,  for the purpose of  financing the cost  of equipment purchased
     for sale or lease,  on a short-term  basis, generally payable  in 30 to  90
     days.  The  lending banks are given  a first security interest  in both the
     equipment and the contract for sale or lease.  The above secured lines also
     include  a  $100,000 unsecured  working capital  line.   The  interest rate
     charged for  these borrowings is a  floating 1% 1.5% over  the banks' prime
     lending rate,  8.25% at December 31,  1995 and 1996, respectively.   Two of
     the lines, totaling $1,250,000, expire on June 30, 1997.  The third line of
     credit in  the amount of  $1,500,000 expired  as of June  30, 1996.   As of
     December  31, 1995,  $495,000  was outstanding  under a  facility.   As  of
     December 31, 1996, no amounts were outstanding under these facilities.  The
     Company's  principal  shareholders  have personally  guaranteed  the entire
     amount of the lines with all banks.  

     9.   INCOME TAXES:
          -------------

     The provision for income taxes is comprised of the following:

                                          Year Ended December 31,
                                      -------------------------------
                                          1994       1995       1996
                                          ----       ----       ----
      Current:
         Federal                        $     -    $     -    $      -
         State                           33,706     21,850      72,550
                                        -------    -------    --------
                                         33,706     21,850      72,550
                                        -------    -------    --------

      Deferred:
         Federal                              -          -    (82,583)
         State                                -          -    (12,145)
                                        -------    -------   -------- 
                                              -          -    (94,728)
                                        -------    -------   -------- 
      Valuation allowance                     -          -      90,000
                                        -------    -------    --------
      Termination of Subchapter "S"           
      election                                -          -     430,390
                                        -------    -------    --------
         Total                          $33,706    $21,850    $498,212
                                        =======    =======    ========

                                       F-14

     <PAGE>

     Significant components of deferred income tax assets and liabilities are as
     follows: 

                                             December 31, 1996
                                      -------------------------------

      Deferred tax liabilities:
         Depreciation                             $(984,844)

      Deferred tax assets:
         Lease transactions treated
           differently for tax and
           financial reporting
           purposes                                 447,006
         Net operating loss
           carryforward                             190,844
         Valuation allowance                        (90,000)
         Other                                       11,332
                                                   --------
                                                    559,182
                                                   --------
      Net deferred income tax                      $425,662
        liability                                  ========

     The  following  reconciliation  presents  the  principal  reasons  for  the
     difference between income taxes calculated at the  federal statutory income
     tax rate (34%) and the provision for income taxes:

                                                   Year Ended
                                               December 31, 1996
                                               -----------------

      Federal income tax benefit at U.S.
        statutory rate                              $(104,108)
      Subchapter "C" impact of SFAS 109               430,390
      Valuation allowance                              90,000
      Franchise taxes                                  36,583
      All other, net                                   45,347
                                                    ---------

      Provision for income taxes                    $ 498,212
                                                    =========

     For the years ended  December 31, 1994 and 1995, income was  taxable at the
     shareholder level since the Company had made a Subchapter "S" election.

     The  Company has net operating loss  carryforwards for income tax reporting
     purposes  of  approximately  $490,000  expiring  in  2011.   The  valuation
     allowance  represents that portion of the  deferred income tax benefit that
     the Company may not be able to realize.

     10.  SHAREHOLDERS' EQUITY:
          ---------------------

     In connection with  the recapitalization of the Company in contemplation of
     its initial  public  offering,  in  August 1995,  the  Company's  Board  of
     Directors approved  a stock split of  approximately 33,018.86792-to-one, in
     the form of  a stock dividend  to the Company's  common shareholders.   Par
     value changed  to .01 per share from  $1.00 per share.   The stock dividend
     resulted in the  issuance of 3,499,894 additional  shares of Common  Stock,
     for a total of 3,500,000 shares outstanding subsequent to the  split.  This
     action required  an amendment to  the Company's articles  of incorporation,

                                       F-14 
                                       
     <PAGE>

     which increased the number of authorized shares of Common Stock  from 1,000
     to  35,000,000 and  authorized 5,000,000  shares of  preferred stock.   All
     shareholders' equity  accounts and per  share data have  been retroactively
     adjusted to reflect such recapitalization.

     Pursuant to  a 1993  agreement, in April  1995, the  Company issued  common
     shares  representing  6% of  the previous  total  outstanding shares  to an
     officer.

     See Note  1 for a description  of the Company's initial  public offering of
     its securities.

     11.  STOCK OPTION PLANS:
          -------------------

     Employee Stock Option Plan
     --------------------------

     On  August  28, 1995,  the Board  of  Directors adopted  and  the Company's
     shareholders  approved  the Stock  Option  Plan  for  all senior  executive
     officers,  key employees and consultants  of the Company  pursuant to which
     750,000 shares of common stock were reserved for issuance.  No options have
     been  granted to date.  Options granted under  the Stock Option Plan may be
     either  incentive stock options ("ISO's"),  which are intended  to meet the
     requirements  of Section  422  of the  Internal Revenue  Code  of 1986,  as
     amended,  or non-qualified stock options ("NSO's").  Under the Stock Option
     Plan, the  Board of Directors may grant (i)  ISO's at an exercise price per
     share which  is not less  than the fair market  value of a  share of Common
     Stock on the date  on which such ISO's are granted (and  not less than 110%
     of the fair market value in the  case of any optionee who beneficially owns
     more than 10% of the total combined voting power of the Company),  and (ii)
     NSO's at an exercise  price per share which  is determined by the Board  of
     Directors (and which may be less  than the fair market value of a  share of
     Common Stock  on the  date on  which such NSO's  are granted).   The  Stock
     Option Plan further provides that the  maximum period in which options  may
     be exercised  will be  determined by  the Board  of Directors,  except that
     ISO's may not  be exercised after the expiration of ten years from the date
     the ISO was initially granted  (and five years in the case  of any optionee
     who  beneficially owns more than 10% of  the total combined voting power of
     the  Company).   Any option  granted under  the Stock  Option Plan  will be
     nontransferable  and may be  exercised upon payment of the option  price in
     cash, a  cash equivalent, Common Stock  or any other form  of consideration
     which is acceptable to the Board of Directors. 

     Director Option Plan
     --------------------

     On October 1, 1995, the Board of  Directors of the Company adopted, and the
     Company's shareholders  approved, the  Director Option Plan  (the "Director
     Plan") pursuant  to which 50,000 shares of Common Stock of the Company were
     reserved  for issuance upon the exercise of options granted to non-employee
     directors of the Company.  Under the Director Plan, an eligible director of
     the  Company  will,  after  having  served as  a  director  for  one  year,
     automatically receive non-qualified stock  options to purchase 2,000 shares
     of Common Stock per  annum at an  exercise price equal  to the fair  market
     value of such shares  at the time of grant of such options.  Each option is
     immediately exercisable  for a period of  ten years from the  date of grant
     but  generally may not  be exercised more  than 90  days after the  date an
     optionee  ceases to serve as a director of the Company.  As of December 31,
     1996, there were no options granted to directors.

     12.  EMPLOYEE SAVINGS PLAN
          ---------------------

                                       F-16

     <PAGE>

     During 1996, the Company adopted an employee savings plan which  covers all
     employees who have completed at least one year of service  with the Company
     and permits participants to make contributions by salary reduction pursuant
     to section 401(k) of the Internal  Revenue Code.  Company contributions are
     discretionary.   As  of December  31, 1996,  the Company  did not  make any
     contributions to the plan.

     13.  JOINT VENTURES:
          ---------------

     In June  1995,  the Company  and  KRh Thermal  Systems ("KRh")  formed  KRh
     Financial LLC  ("KRhF") to lease to food  service operators the Hot Choice 
     Vending   Machine,  a  fully-integrated   freezer-to-oven  vending  machine
     designed to deliver fully-cooked, high quality fast food in about a minute.
     KRh  is a California general partnership managed by Kaiser Thermal Systems,
     Inc., a  wholly-owned subsidiary of  Kaiser Aerospace and  Electronics, and
     Thermaltech  Development, LP.  The Company owns  20% of KRhF.  In addition,
     under a related service agreement, the Company provides leasing services to
     KRhF for which the Company is paid a prescribed fee. Under the terms of the
     joint venture, the Company  made no initial capital investment, nor does it
     have any obligation  to make future capital investments.   KRhf is still in
     the early stages of  its business and the results of KRhF are immaterial to
     the overall financial position of Paramount.

     14.  SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT:
          --------------------------------------------------

     For  the years  ended  December 31,  1994,  1995  and 1996,  the  following
     customers represented in excess of 10% of total revenues for the respective
     years:

       Customer      1994         1995        1996
       --------      ----         ----        ----

           A          27%         10%          -
           B           -          58%          -
           C           -          13%          -
           D           -           -          40%
           E           -           -          25%

     The  Company's net  investment in direct  finance and  sales-type leases is
     concentrated primarily  with end  users  of the  computer equipment.    The
     Company has various  arrangements with banks and financial  institutions in
     which lease receivables are assigned to the institutions in exchange for  a
     discounted  cash payment.   This financing  is in the  form of non-recourse
     notes,  in  which  the financial  institution  has  a  first  lien  on  the
     underlying  equipment  with  no   further  recourse  against  the  Company.
     Therefore, the Company has no credit exposure from these assigned leases.

     15.  COMMITMENTS:
          ------------

     Operating Leases
     ----------------

     The  Company leases office facilities  and office equipment under operating
     leases  expiring through  August  1999.   Total  rent expense  amounted  to

                                       F-17

     <PAGE>

     approximately  $90,000,  $45,000  and  $45,000  in  1996,  1995  and  1994,
     respectively.  Total  minimum  lease   payments  due  under  non-cancelable
     operating leases as of December 31, 1996, are as follows: 

                Year Ending
               December 31,                  Office Facilities
               ------------                  -----------------
                   1997                           $67,326
                   1998                            68,694
                   1999                            46,480

     Employment Agreements
     ---------------------

     The  Company  has entered  into  employment  agreements with  3  executives
     expiring through the end of  1998 with aggregate minimum payments  required
     as follows:

                   1997                           $863,500
                   1998                           $863,500




                                       F-18