FORM 10-K
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

(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, 2002 OR


[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934  [NO FEE REQUIRED]

For the transition period from               to
                               -------------    -------------
Commission File No. 1-8356


                                    DVL, INC.
           Exact name of Registrant as specified in its charter)


            Delaware                                    13-2892858
-------------------------------                    -------------------
(State or other jurisdiction of                     (I.R.S. Employer
incorporation or organization)                     Identification No.)


70 East 55th Street, 7th Floor, New York                  10022
------------------------------------------------------------------------------
(Address of principal executive offices)                (Zip Code)


Registrant's telephone number, including area code (212) 350-9900

         Securities registered pursuant to Section 12(b) of the Act:

                                              Name of Each Exchange
      Title of Each Class                      on Which Registered
-----------------------------                 ---------------------
 Common Stock, $.01 par value                         None


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

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  registrant's  knowledge,  in definitive  proxy  information  statements
incorporated  by reference in Part IV of this Form 10-K or any amendment to this
Form 10-K. [X]

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Exchange Act Rule 12b-2).  Yes            No   X
                                          -----         -----

The aggregate  market value of the Common Stock of the  Registrant  held by non-
affiliates as of March 25, 2003 was $2,638,140.

The number of shares  outstanding  of Common Stock of the Registrant as of March
25, 2003 was 21,713,563.

<PAGE>


                                    DVL, INC.

              INDEX TO ANNUAL REPORT ON FORM 10-K FILED WITH
                  THE SECURITIES AND EXCHANGE COMMISSION
                       YEAR ENDED DECEMBER 31, 2002

                            ITEMS IN FORM 10-K

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

                                                                       Page
                                                                       ----
                                  PART I

Item  1.  Business                                                      1
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 Consolidated Financial Data                         10
Item  7.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations                         12

Item  7A. Quantitative and Qualitative Disclosures About
           Market Risk                                                 24
Item  8.  Financial Statements and Supplementary Data                  25
Item  9.  Changes In and Disagreements with Accountants on
           Accounting and Financial Disclosure                         26


                                 PART III

Item 10.  Directors and Executive Officers of the Registrant           26
Item 11.  Executive Compensation                                       28
Item 12.  Security Ownership of Certain Beneficial Owners
            and Management and Related Stockholder Matters             31
Item 13.  Certain Relationships and Related Transactions               40
Item 14.  Controls and Procedures                                      43

                                     PART IV

Item 15.  Exhibits, Financial Statement Schedules and Reports
            on Form 8-K                                                44




<PAGE>


                                 PART I

     This 2002 Annual Report on Form 10-K contains  statements  which constitute
forward-looking  statements  within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended.  Those statements include statements regarding the intent, belief or
current expectations of the Registrant and its management team. The Registrant's
stockholders  and  prospective  investors are  cautioned  that any such forward-
looking  statements are not guarantees of future  performance  and involve risks
and  uncertainties,  and that actual  results may differ  materially  from those
projected  in the  forward-looking  statements.  Such  risks  and  uncertainties
include,  among other things,  general economic  conditions,  the ability of the
Registrant to obtain  additional  financings,  the ability of the  Registrant to
successfully  implement its business  strategy and other risks and uncertainties
that are discussed herein.

ITEM 1.  BUSINESS.

OVERVIEW

     DVL,  Inc.,  a  Delaware  corporation  incorporated  in 1977  ("DVL" or the
"Company"),  is a commercial  finance company which is primarily  engaged in the
ownership of residual interests in securitized portfolios, and the ownership and
servicing of a portfolio of secured  commercial  mortgage  loans made to limited
partnerships in which the Company serves as general partner (each an "Affiliated
Limited  Partnership").  In  addition,  the Company  performs  real estate asset
management and administrative services.

      DVL is the 99.9% owner of two entities  whose sole assets are the residual
interests in five securitized receivable pools. The securitized receivable pools
consist of receivables which are the obligations of various insurance  companies
to pay money over a term of years.  DVL receives the residual cash flow from the
five securitized receivable pools after payment to the securitized noteholders.

    DVL  is  the  general  partner  of  approximately   64  Affiliated   Limited
Partnerships  which  own  income-producing  commercial,  office  and  industrial
properties  comprising  approximately 2.5 million square feet. A majority of the
properties are subject to long-term triple net leases with various tenants.  The
principal  tenant is Wal-Mart  Stores,  Inc. The Company,  for numerous  reasons
detailed  in  Critical  Accounting  Policies,  does not  consolidate  any of the
various  Affiliated  Limited  Partnerships in which it holds the general partner
and limited  partner  interest  nor does DVL account for such  interests  on the
equity method. The Company also performs real estate and partnership  management
services for these partnerships.

     The mortgage loans held by the Company are primarily "wrap-around" mortgage
loans which are subject to non-recourse,  underlying mortgages held by unrelated
institutional lenders. These underlying loans self-liquidate from the base rents
payable by the tenants  over the primary term of their  leases.  The majority of
the mortgage payments from the Affiliated  Limited  Partnerships are used to pay
the  underlying   mortgage  holders  required  monthly  principal  and  interest
payments. In addition,  the Company receives a portion of the Affiliated Limited
Partnerships'  percentage rent income as additional debt service.  The Company's
other principal  assets include (a) real estate  interests held for development,
(b) a long term  leasehold  interest in a commercial  property,  and (c) limited
partnership interests in certain Affiliated Limited Partnerships.


                                       1
<PAGE>


     The Company derives the majority of its income from (a) residual  interests
in securitized receivables portfolios, (b) wrap-around mortgages (as a result of
the difference in the effective  interest rates between the wrap around mortgage
and the  underlying  mortgages),  (c)  percentage  rents  received  from various
tenants of the Affiliated Limited Partnerships, (d) rentals received as a result
of its real estate holdings (e) long-term leasehold interests, (f) fees received
as General Partner of the Affiliated Limited Partnerships (including disposition
and management  fees),  (g)  distributions  received as a limited partner in the
Affiliated Limited Partnerships, and (h) fees from management contracts.

     As of December 31, 2002, the Company had net operating loss  carry-forwards
("NOLS")  aggregating  approximately $52 million,  which expire in various years
through 2019,  including  $45 million which expire  through 2007. If the Company
generates  profits in the future,  the Company may be subject to  limitations on
the use of its NOLS pursuant to the Internal  Revenue  Code.  It is  anticipated
that the taxable  income  associated  with the residual  interests  will utilize
significant  NOLS.  There can be no assurance  that a significant  amount of the
Company's  existing  NOLS will be  available  to the Company at such time as the
Company desires to use them.

     DVL believes  that its  anticipated  cash flow  provided by  operations  is
sufficient to meet its current cash requirements through March 2004. The Company
has in the past and  expects in the future to  continue to augment its cash flow
with additional cash generated from either the sale or refinancing of its assets
and/or borrowings. See Management Discussion and Analysis of Financial Condition
and Results of Operations.

     The Company's  current  strategy is to (i) maximize the value of its assets
and  meet  its  short-term  working  capital  needs  by  continuing  to  manage,
administer and service its existing portfolio,(ii) obtain additional investments
and (iii) expand  through the  acquisition  of one or more companies to generate
additional  income and cash flow. The Company  anticipates that it would finance
any possible  future  acquisition  through new  borrowing or the issuance of its
common or preferred  stock.  There can be no assurance  that the Company will be
able to identify or acquire  businesses.  While the Company regularly  evaluates
and   discusses   potential   acquisitions,   the  Company   currently   has  no
understandings, committments or agreements with respect to any acquisitions.

     Each share of the stock of the Company  includes a restriction  prohibiting
sale, transfer, disposition or acquisition of any stock until September 30, 2009
without the prior consent of the Board of Directors of the Company by any person
or entity that owns or would own 5% or more of the issued and outstanding  stock
of the Company if such sale,  purchase  or transfer  would in the opinion of the
Board,   jeopardize  the  Company's  preservation  of  its  federal  income  tax
attributes  under  Section  382 of the  Internal  Revenue  Code.  See Changes in
Control in Item 12 for a more detailed discussion.

     The principal  executive offices of the Company are located at 70 East 55th
Street,  7th Floor, New York, New York 10022. The Company's  telephone number is
(212)  350-9900.  The  Company  and its  subsidiaries  have not  engaged  in any
business activity outside of the United States.


                                       2
<PAGE>


BUSINESS ACTIVITIES

    RESIDUAL INTERESTS IN SECURITIZED PORTFOLIOS

     During 2001, the Company, through its wholly-owned consolidated subsidiary,
S2 Inc. ("S2"), acquired 99.9% Class B member interests in Receivables II-A LLC,
a limited  liability  company  ("Receivables  II-A") and Receivables II-B LLC, a
limited liability company  ("Receivables II-B"), from an unrelated party engaged
in the acquisition and management of periodic payment  receivables.  The Class B
member  interests  entitle  the  Company to be  allocated  99.9% of all items of
income,  loss  and  distribution  of  Receivables  II-A  and  Receivables  II-B.
Receivables II-A and Receivables II-B solely receive the residual cash flow from
five securitized receivable pools after payment to the securitized noteholders.

     The Company  purchased  its interests  for an aggregate  purchase  price of
approximately  $35,791,000,  including costs of  approximately  $1,366,000 which
included  the issuance of  warrants,  valued at $136,000,  for the purchase of 3
million shares of the common stock of DVL,  exercisable until 2011 at a price of
$.20 per share and investment banking fees to an affiliate aggregating $900,000.
The  purchase  price was paid by the issuance of 8% per annum  limited  recourse
promissory  notes by S2 in the aggregate  amount of  $34,425,000.  Principal and
interest are payable from the future  monthly cash flow. The notes mature August
15, 2020 through December 31, 2021 and are secured by a pledge of S2's interests
in Receivables II-A, Receivables II-B and all proceeds and distributions related
to such interests.  The principal amount of the notes and the purchase price are
adjusted,  from  time to time,  based  upon the  performance  of the  underlying
receivables.  DVL also issued its guaranty of payment of up to $3,443,000 of the
purchase  price.  The amount of the guaranty is regularly  reduced by 10% of the
principal  paid. The amount of the guaranty at December 31, 2002 was $3,342,000.
Payments, if any, due under this guaranty are payable after August 15, 2020.

     In accordance  with the purchase  agreements,  from the  acquisition  dates
through December 31, 2002, the residual interests in securitized  portfolios and
the notes  payable  were  decreased  by  approximately  $532,000  as a result of
purchase price adjustments.

     The following table reconciles the initial purchase price with the carrying
value at December 31, 2002:

Initial purchase price             $ 35,791,000
Adjustments to purchase price          (532,000)
Principal payments                      (41,000)
Accretion                               893,000
                                   ------------
                                   $ 36,111,000
                                   ============

     The purchase  agreements  contain annual minimum and maximum levels of cash
flow that will be retained  by the  Company,  after the payment of interest  and
principal on the notes payable, which are as follows:

      Years                  Minimum       Maximum
      -----                  -------       -------
   2002 to 2009            $  743,000    $  880,000
   2010 to final payment   $1,050,000    $1,150,000
     on notes payable*

   * Final payment on the notes payable expected 2016 related to the Receivables
     II-A transaction and 2018 for the Receivables II-B transaction.


                                       3
<PAGE>


The Company believes it will receive  significant cash flows after final payment
of the notes payable.

     MORTGAGE LOANS

     The Company's mortgage loan portfolio consists primarily of long-term wrap-
around and other mortgage loans to Affiliated  Limited  Partnerships  secured by
the types of  properties  discussed  above.  Most of the loans are  subordinated
obligations  with the  majority  of the  payments  received  being  utilized  to
amortize  the related  underlying  mortgage  loan over the  primary  term of the
related lease.  The Company builds equity in the mortgage loans over time as the
principal balance of such underlying  mortgage loans are amortized.  At December
31, 2002, the Company had investments in 32 mortgage loans to Affiliated Limited
Partnerships  with  a  carrying  value  for  financial   reporting  purposes  of
$31,222,000   (prior  to  the  allowance   for  loan  losses  of   approximately
$2,870,000).  These mortgage loan receivables are subject to underlying mortgage
obligations of $19,391,000.

     Generally,  the tenants of the  Affiliated  Limited  Partnerships  executed
"triple-net" leases and, therefore,  the tenants are responsible for the payment
of all taxes,  insurance and other property  costs.  In certain  instances,  the
partnership is required to maintain the roof and structure of the premises.

     DVL's  mortgage  portfolio  included 22 loans with a net carrying  value of
$25,627,000  as of December  31,  2002,  which are due from  Affiliated  Limited
Partnerships that own properties leased to Wal-Mart Stores,  Inc. These mortgage
loan receivables were subject to underlying mortgage  obligations of $17,046,000
as of December 31, 2002.  Wal-Mart is a public company  subject to the reporting
requirements  of the SEC.  Wal-Mart has closed two of its stores  located on the
properties  subject to the  Company's  mortgages  with a net  carrying  value of
$2,427,000. However, Wal-Mart continues to pay the required rent with respect to
such properties.  Net carrying value refers to the unpaid principal balance less
any allowance  for reserves,  and any amount which  represents  future  interest
based upon the purchase of the loan at a discount.

     In  addition  to base rent,  most  leases  also  require  the tenant to pay
additional  rent  equal to a  percentage  of gross  receipts  from the  tenant's
operation of a property above a specified  amount  ("Percentage  Rent").  In all
cases where the  partnership  is entitled to receive  Percentage  Rent,  and the
Company holds the wrap-around mortgage, a portion of such rent is required to be
paid to the Company as additional interest and/or additional debt service on the
long-term mortgage.

     The Company  has the right to  refinance  the  outstanding  mortgage  loans
underlying  its  wrap-around  mortgage  loans provided that the debt service and
principal  amount of a refinanced  loan are no greater than that of the existing
wrap-around  loan.  The Company also has the right to arrange  senior  financing
secured  by  properties  on which it holds  first or  second  mortgage  loans by
subordinating such mortgage loans, subject to the limitations set forth above.

     During 2001,  DVL purchased two mortgage  loans from an entity that is part
of the Opportunity  Fund (see  "Opportunity  Fund",  discussed below on page 16)
which are secured by real estate owned by  Affiliated  Limited  Partnerships  in
which DVL is the general  partner.  The loans were  purchased  for an  aggregate
price of $325,000,  paid in cash. In early 2002,  DVL obtained bank financing of
$400,000, less closing costs, secured by such loans.


                                       4
<PAGE>


     All of the Company's  mortgage loans are pledged to secure the indebtedness
of the Company to NPO Management,  LLC ("NPO") and Blackacre  Capital Group, LLC
("BCG"),  which are  entities  engaged in real  estate  lending  and  management
transactions  and are affiliated with certain  stockholders  and insiders of the
Company.  See  Items  7 and  13  below  for a  description  of  certain  related
transactions involving NPO and BCG.

     LOAN PORTFOLIO

     The  following  table sets  forth the  number of various  loans owed to the
Company which are outstanding,  the aggregate loan balances,  including  accrued
interest, and the allowances for loan losses, at December 31, 2002. See Tables 1
and 2 of Appendix "A" to this Form 10-K for detailed information as to each such
loan.

<TABLE>
<CAPTION>
                                                      Number    Aggregate     Allowance
                                                        of         Loan       for Loan
              Type of Loan                            Loans       Amount        Losses
              ------------                           --------   ---------     ---------
                                                            (dollars in thousands)

<S>                                                        <C>   <C>          <C>
Long-term mortgages due from Affiliated
 Limited Partnerships                                            $ 46,801
     Less:  unearned interest (1)                                 (15,579)
                                                                 --------

      Total loans collateralized by mortgages              32      31,222     $  2,870
                                                     --------    --------     --------

Loans collateralized by limited partnership
 interests                                                 18         257          215
                                                     --------    --------     --------

Advances due from Affiliated Limited Partnerships           3         101           --
                                                     --------    --------     --------

      Total loans                                          53    $ 31,580     $  3,085
                                                     ========    ========     ========
</TABLE>

----------
(1)  Unearned  interest  represents  the  unamortized  balance of  discounts  on
     previously funded loans.


     INVESTMENTS IN AFFILIATED LIMITED PARTNERSHIPS

     The  Company  over the  years  has  acquired  various  limited  partnership
interests in Affiliated Limited Partnerships.  At December 31, 2002 and 2001 the
Company's  carrying  value  of such  limited  partnerships  was  $1,066,000  and
$1,121,000, respectively.

     PARTNERSHIP AND PROPERTY MANAGEMENT

     The Company is the general partner of approximately  64 Affiliated  Limited
Partnerships,  which the Company does not consolidate (see Overview), from which
it  receives  management,  transaction  and other  fees.  The  Company,  through
Professional  Service  Corporation  ("PSC"),  its  wholly-owned  subsidiary,  is
engaged  in the  management  of an  industrial  property  located  in New Jersey
pursuant to a master  lease.  This master  lease  permits PSC to  sub-lease  the
property  to  tenants  and  retain  profits  subject  to the  payment  by PSC of
operating expenses and rent to the entity that owns the property.

     In January 2003, the Company was advised that its largest  subtenant at the
PSC  Property  would be going out of  business.  The Company  negotiated a lease
extension with its subtenant thru June of 2003.


                                       5
<PAGE>


     In connection with the continued viability of the property,  the Company is
pursuing  two separate  strategies:  (1)  re-leasing  of the property to various
subtenants  and (2) the potential sale of the property to a third party with the
Company retaining a portion of such net sale proceeds.  The Company is currently
negotiating  subleases with several  potential  subtenants and is negotiating an
agreement with the fee owner of the property, allocating the proceeds on a sale.

Fees for Services

     In June 1998, the Company entered into a Management Services Agreement with
a limited  partnership  (in which certain of its partners are  affiliates of NPO
and Blackacre (as defined below)) under which the Company renders services for a
fee. This agreement may be terminated with 30 days prior notice by either party.
As  compensation,  the Company  received the following (a) a monthly fee through
November 2000, and (b) after all the partners of the  partnership  have earned a
20%  internal   rate  of  return,   compounded   quarterly,   on  their  capital
contributions,  an amount of cash equal to 25% of the profits, as defined in the
agreement.  The Company received  compensation under such agreement equal to $0,
$442,900, and $363,000 in 2002, 2001 and 2000, respectively.

     In addition, the Company provides services for a limited partnership (whose
general  partner  is an  affiliate  of NPO) to  render  certain  accounting  and
administrative   services.   As  compensation,   the  Company  receives  expense
reimbursements of $4,000 per month. The Company received compensation under such
agreement of $48,000 during each of 2002, 2001, and 2000.

     The Company has a property management agreement with an entity that is part
of the  Opportunity  Fund  pursuant to which DVL  provides  property  management
services.  The Company received  compensation under such agreement of $27,000 in
each of 2002, 2001, and 2000.

    In November 1999, the Company  entered into a management  service  agreement
with an entity whose partners are affiliates of NPO to render certain accounting
and administrative services. As compensation, the Company receives a monthly fee
of  $2,000,  a monthly  deferred  fee of $6,500 and an annual  incentive  fee if
certain  levels of  profitability  are  obtained.  The Company  recorded fees of
$129,000 and $152,000 in 2002 and 2001 which included  incentive fees of $53,000
and $50,000, respectively.

     REAL ESTATE HOLDINGS

     The Company currently owns the following properties:

(1) Eight  industrial  buildings  totaling  347,000 square feet on approximately
eight acres located in Kearny, NJ leased to various unrelated tenants.

(2) An 89,000 square foot building on  approximately  eight acres of land leased
to K-Mart in Kearny, NJ which adjoins the property described above.

      The  Company  is  currently   pursuing  a  redevelopement  of  the  Kearny
properties into an integrated  shopping center. In 2002, the Kearny property was
designated  as part  of the  Passaic  River  Redevelopment  Area by the  Town of
Kearny.


                                       6
<PAGE>


     As a result,  the  Company  has sued the town of Kearny  claiming  that the
redevelopment  plan is not in  conformity  with New Jersey  law.  The lawsuit is
currently  pending.  In the event the lawsuit is  unsuccessful,  the redeveloper
appointed by the Town will be required to acquire the Company's  properties  for
their fair market value.

     The Company has had its properties  appraised and such appraisal  indicated
that the value of the  Company's  properties  are in  excess  of their  carrying
value. In the interim, the Company continues to lease the properties to multiple
tenants which provides positive cash flow to the Company.

(3) A vacant 31,000 square foot former Grand Union Supermarket and approximately
six  acres of land  underlying  the  building.  The  Company  has  entered  into
agreements to sell the property for $810,000  which is being carried at $413,000
at December 31, 2002.

     OPPORTUNITY FUND

     The Company,  BCG, an affiliate of  Blackacre  (as defined  below),  P.N.M.
Capital  LLC,  an  affiliate  of NPO  ("PNM"),  and Pemmil  Management  LLC,  an
affiliate of NPO  ("Pemmil") and PNM  (collectively  the "NPO  Affiliates")  are
parties to a certain  Agreement which is called the  Opportunity  Agreement (the
"Opportunity  Agreement").  The Opportunity  Agreement had a term of three years
and expired April 2001. The  Opportunity  Agreement  provided for an arrangement
(the  "Opportunity  Fund")  whereby  the fund had the right of first  refusal to
finance the  acquisition of limited  partnership  interests or mortgage loans to
Affiliated  Limited  Partnerships  in which the Company is general  partner,  or
which the  Company  already  owns,  if the  Company  was  unable to pursue  such
business  opportunity  with its own funds from its  reserves or  available  from
operations, or by obtaining financing from a third party or issuing equity.

     All of the required capital  contributions were to be provided by the other
members. The Company was to receive up to 20% of the profits from an opportunity
after the other investors  received a return of their  investment plus preferred
annual returns ranging from 12% to 20%.

     The Opportunity Agreement has now terminated. While the Opportunity Fund no
longer has the right of first refusal with regard to opportunities,  the Company
may continue to present opportunities to the fund.

     As of March 1, 2003, the  Opportunity  Fund had purchased 15 wrap mortgages
of Affiliated  Limited  Partnerships from unaffiliated  third parties,  acquired
limited  partnership  units from  unaffiliated  individuals in three  Affiliated
Limited  Partnerships,  and acquired an  ownership  interest in a property of an
Affiliated  Limited  Partnership.  During  2000,  DVL  purchased  three  of  the
mortgages owned by the Opportunity  Fund.  During 2001, a newly formed,  wholly-
owned  subsidiary of DVL purchased two of the mortgages owned by the Opportunity
Fund. In December 2001, the Opportunity Fund also sold its ownership interest in
a property  located in Kearny,  NJ to an entity in which  certain  partners  are
affiliates of NPO. As of March 2003 the  Opportunity  Fund owns four  mortgages.
During 2001,  DVL was paid  approximately  $280,000 from the  investments by the
Opportunity  Fund, of which $189,000 was used to pay amounts owed by DVL under a
note in favor of an entity  that is part of the  Opportunity  Fund  incurred  in
connection with the acquisition of certain mortgage loans.  During 2002, DVL did
not receive any payments from the investments by the Opportunity Fund.


                                       7
<PAGE>


     EMPLOYEES

     As of March 2003,  the Company had 10 employees,  all of whom were employed
on a full-time  basis other than the  President of the Company,  who serves on a
part-time  basis.  The  Company  is not a  party  to any  collective  bargaining
agreement and the Company's  employees are not  represented  by any labor union.
The Company considers its relationship with its employees to be good.

     SEGMENTS

     The  Company  has  two  reportable  segments;   real  estate  and  residual
interests.

     You can find information  about our business  segment  information in "Note
12. Segment Information" of our Notes to Consolidated Financial Statements.

ITEM 2.  PROPERTIES.

     The Company maintains  corporate  headquarters in New York City in a leased
facility  located  at 70 E. 55th  Street,  New York,  New York,  which  occupies
approximately 5,600 square feet of office space. The lease for such office space
is due to expire on January 31,  2008.  The base rent is $215,802  per annum.  A
description  of the  other  properties  owned  by  the  Company  appears  in the
subsection  captioned  "Real  Estate  Holdings"  in Item 1  above.  The  Company
believes that its existing facilities are adequate to meet its current operating
needs and that suitable  additional  space should be available to the Company on
reasonable  terms should the Company  require  additional  space to  accommodate
future operations or expansion.

ITEM 3.  LEGAL PROCEEDINGS.

     The Company from time to time is a party in various lawsuits  incidental to
its business operations.  In the opinion of the Company, none of such litigation
in which it is currently a party, if adversely determined,  will have a material
adverse effect on the Company's financial condition or its operations.

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

None.


                                       8
<PAGE>


                                     PART II


ITEM 5. MARKET FOR DVL'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

     The  Common  Stock of DVL is traded on the  over-the-counter  market and is
quoted on the OTC Bulletin Board maintained by the NASD under the symbol "DVLN".
As of March 17, 2003,  the last reported sale price of DVL common stock was $.16
per share. The following table sets forth,  for the calendar periods  indicated,
the high and low bid prices of the Common Stock as reported by the NASD for 2002
and 2001. Such prices are inter-dealer prices without retail mark-up,  mark-down
or commission, and do not represent actual transactions.

2002                                     High         Low
----                                     ----         ---

Fourth Quarter ......................   $ .19       $ .09
Third Quarter .......................     .21         .12
Second Quarter ......................     .21         .13
First Quarter .......................     .24         .08



2001                                     High         Low
----                                     ----         ---

Fourth Quarter  .....................   $ .10       $ .07
Third Quarter .......................     .09         .05
Second Quarter ......................     .07         .05
First Quarter .......................     .06         .05

     At March 20,  2003,  there were 3,416  holders of record of Common Stock of
DVL. No dividends  have been paid since October 1990. At this time, DVL does not
anticipate paying any dividends in the foreseeable future.


                                       9
<PAGE>


ITEM 6.  SELECTED FINANCIAL DATA

     The data set forth below should be read in conjunction with other financial
information  of  DVL,  including  its  consolidated   financial  statements  and
accountants'   report  thereon  included   elsewhere  herein  and  "Management's
Discussion and Analysis of Financial Condition and Results of Operations."


                   Consolidated Statements of Operations Data
                    (In thousands except for per share data)
                            Year Ended December 31,

<TABLE>
<CAPTION>
                                               2002          2001         2000         1999        1998
                                             --------      -------      --------     -------     --------
<S>                                          <C>           <C>           <C>         <C>         <C>
Revenues
  Affiliates                                 $  4,087      $ 5,303       $ 4,812     $ 6,360     $  5,794
  Other                                         5,007        4,252         1,251       1,375          528
                                             --------      -------      --------     -------     --------

          Total                              $  9,094      $ 9,555       $ 6,063     $ 7,735     $  6,322
                                             ========      =======      ========     =======     ========


Income (loss) before extraordinary gain      $  1,462     $  2,505      $    199     $ 1,026     $   (758)
Extraordinary (loss) gain on the
 settlement of indebtedness                       (71)         361           306       1,267          202
                                             --------     --------      --------     -------     --------

         Net Income (loss)                   $  1,391     $  2,866      $    505     $ 2,293     $   (556)
                                             ========     ========      ========     =======     ========

Basic earnings (loss) per share
  Income (loss) before extraordinary gain    $    .06     $    .15      $    .01     $   .06     $   (.04)
  Extraordinary gain                              .00          .02           .02         .08          .01
                                             --------     --------      --------     -------     --------

         Net Income (loss)                   $    .06     $    .17      $    .03     $   .14     $   (.03)
                                             ========     ========      ========     =======     ========


Diluted earnings (loss) per share
  Income (loss) before extraordinary gain    $    .03     $    .03      $    .01     $   .02     $   (.04)
  Extraordinary gain                              .00          .00           .00         .02          .01
                                             --------     --------      --------     -------     --------

         Net Income (loss)                   $    .03     $    .03      $    .01     $   .04     $   (.03)
                                             ========     ========      ========     =======     ========
</TABLE>


                                       10
<PAGE>


                         Consolidated Balance Sheet Data
                                 (In thousands)
                                As at December 31

<TABLE>
<CAPTION>
                                         2002          2001         2000           1999         1998
                                         ----          ----         ----           ----         ----
<S>                                    <C>           <C>          <C>            <C>          <C>
Total assets                           $79,584       $79,690      $45,437        $41,858      $55,635
                                       =======       =======      =======        =======      =======

Notes payable - residual interests     $33,416       $35,044      $    --        $    --      $    --
                                       =======       =======      =======        =======      =======

Underlying mortgages payable           $19,391       $22,218      $26,019        $27,692      $38,644
                                       =======       =======      =======        =======      =======

Long-term debt and notes payable       $12,720       $ 8,911      $10,781        $ 5,156      $ 9,937
                                       =======       =======      =======        =======      =======
Shareholders' equity                   $12,378       $10,955      $ 7,573        $ 7,068      $ 4,775
                                       =======       =======      =======        =======      =======
</TABLE>


                                       11
<PAGE>


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

INTRODUCTION

     The  Company  is a  commercial  finance  company  which has been  primarily
engaged in the  ownership  and  servicing of a portfolio  of secured  commercial
mortgage  loans,  as well  as  managing  numerous  properties  and  the  limited
partnerships  which own such  properties.  During  2001,  the Company  purchased
ownership interests in residual interests in securitized receivables portfolios,
which should provide significant cash flow and income for the Company.

     DVL believes  that its  anticipated  cash flow  provided by  operations  is
sufficient to meet its current cash requirements through March 2004. The Company
has in the past and  expects in the future to  continue to augment its cash flow
with additional cash generated from either the sale or refinancing of its assets
and/or borrowings.

     The Company's  current  strategy is to (i) maximize the value of its assets
and  meet  its  short-term  working  capital  needs  by  continuing  to  manage,
administer  and  service  its  existing   portfolio,   (ii)  obtain   additional
investments,  and (iii) expand through the  acquisition of one or more companies
to generate  additional income.  There can be no assurance that the Company will
be able to identify or acquire businesses. While the Company regularly evaluates
and   discusses   potential   acquisitions,   the  Company   currently   has  no
understandings,  commitments or agreements with respect to any acquisitions. The
Company  anticipates  that it would  finance  any  possible  future  acquisition
through new borrowings or the issuance of its common or preferred stock.

     At December  31, 2002,  the Company had net  operating  loss  carryforwards
("NOLS")  aggregating  approximately $52 million,  which expire in various years
through 2019,  including  $45 million which expire  through 2007. If the Company
generates  taxable  income  in  the  future,  the  Company  may  be  subject  to
limitations on the use of its NOLS pursuant to the Internal  Revenue Code. It is
anticipated that the taxable income associated with the residual  interests will
utilize significant NOLS. There can be no assurance that a significant amount of
the Company's existing NOLS will be available to the Company at such time as the
Company desires to use them.


                                       12
<PAGE>


SIGNIFICANT EVENTS

ACQUISITION OF RESIDUAL INTERESTS IN SECURITIZED PORTFOLIOS

     During 2001, the Company, through its wholly-owned consolidated subsidiary,
acquired 99.9% Class B member interests in Receivables II-A and Receivables II-B
from an unrelated  party engaged in the  acquisition  and management of periodic
payment  receivables.  The Class B member  interests  entitle  the Company to be
allocated  99.9% of all items of income,  loss and  distribution  of Receivables
II-A and Receivables II-B.  Receivables II-A and Receivables II-B solely receive
the residual cash flow from five  securitized  receivable pools after payment to
the securitized noteholders.

     The Company  purchased  its interests  for an aggregate  purchase  price of
approximately  $35,791,000,  including costs of  approximately  $1,366,000 which
included  the issuance of  warrants,  valued at $136,000,  for the purchase of 3
million shares of the common stock of DVL,  exercisable until 2011 at a price of
$.20 per share and investment banking fees to an affiliate aggregating $900,000.
The  purchase  price was paid by the issuance of 8% per annum  limited  recourse
promissory  notes by S2 in the aggregate  amount of  $34,425,000.  Principal and
interest are payable from the future  monthly cash flow. The notes mature August
15, 2020 through December 31, 2021 and are secured by a pledge of S2's interests
in Receivables II-A, Receivables II-B and all proceeds and distributions related
to such interests.  The principal amount of the notes and the purchase price are
adjusted,  from  time to time,  based  upon the  performance  of the  underlying
receivables.  DVL also issued its guaranty of payment of up to $3,443,000 of the
purchase  price.  The amount of the guaranty is regularly  reduced by 10% of the
principal  paid. The amount of the guaranty at December 31, 2002 was $3,342,000.
Payments, if any, due under this guaranty are payable after August 15, 2020.

     In accordance  with the purchase  agreements,  from the  acquisition  dates
through December 31, 2002, the residual interests in securitized  portfolios and
the notes  payable were  decreased  by  approximately  $532,000,  as a result of
purchase price adjustments.

     The following table reconciles the initial purchase price with the carrying
value at December 31, 2002:

Initial purchase price             $ 35,791,000
Adjustments to purchase price          (532,000)
Principal payments                      (41,000)
Accretion                               893,000
                                   ------------
                                   $ 36,111,000
                                   ============

     The purchase  agreements  contain annual minimum and maximum levels of cash
flow that will be retained  by the  Company,  after the payment of interest  and
principal on the notes payable, which are as follows:

      Years                  Minimum       Maximum
      -----                  -------       -------
   2002 to 2009            $  743,000    $  880,000
   2010 to final payment   $1,050,000    $1,150,000
     on notes payable*

   * Final payment on the notes payable expected 2016 related to the Receivables
     II-A transaction and 2018 for the Receivables II-B transaction.


                                       13
<PAGE>


The Company believes it will receive  significant cash flows after final payment
of the notes payable.

     RECENT DEBT REDEMPTIONS

     To date,  the  Company has  redeemed  an  aggregate  of  $1,145,000  of the
Company's 10%  redeemable  promissory  notes due December 31, 2005 (the "Notes")
for cash at the face value plus accrued interest of approximately $49,000. As of
December 31, 2002,  $384,000 has been paid and the remaining $810,000 payable is
reflected as a non-interest bearing liability.

     The  Company  has the  option to redeem  the  outstanding  Notes by issuing
additional  shares of common stock with a then current market value  (determined
based on a formula set forth in the  Notes),  equal to 110% of the face value of
the Notes plus any accrued and unpaid interest  thereon.  Because the applicable
market value of the common stock will be determined  at the time of  redemption,
it is not possible currently to ascertain the precise number of shares of common
stock that may have to be issued to redeem the outstanding Notes. The redemption
of the Notes may cause significant dilution for current shareholders. The actual
dilutive effect cannot be currently  ascertained  since it depends on the number
of shares to be  actually  issued to satisfy the Notes.  The  Company  currently
intends to  exercise  at some point in the future its  redemption  option to the
extent it does not buy back the outstanding Notes by means of cash tender offers
or cash redemptions.

     Notes with an aggregate principal amount of approximately $1,951,000 remain
outstanding as of December 31, 2002. The  redemptions  and the exchange of Notes
for common stock by  Blackacre  (as defined  below) have  reduced the  potential
dilutive effective on the Company's current  stockholders that would result from
redemption of the notes for shares of common stock. However, given the aggregate
principal  amount of Notes which remains  outstanding,  the  potential  dilutive
effect of such a redemption is still significant.

     BLACKACRE TRANSACTION

The Company had  outstanding  as of December 31, 2002  approximately  $1,951,000
aggregate  principal  amount of 10% redeemable  notes due December 31, 2005. The
notes are  redeemable  in cash,  or at the option of DVL,  for common stock at a
formula based upon the market price of the DVL common stock.

In an effort to reduce the potential  future  dilution to existing  shareholders
resulting from a redemption of the notes for stock, in December 2001 the Company
entered into an agreement with Blackacre Bridge Capital,  LLC ("Blackacre"),  an
affiliate  of  BCG  and  Stephen  Feinberg,   under  which  Blackacre  exchanged
$1,188,278  principal amount of notes for 4,753,113 shares of DVL's common stock
(the "Exchange Agreement"). This represents a conversion rate of $.25 per share.

The Exchange  Agreement  includes a provision  which states that Blackacre shall
not sell or acquire any shares of the Company without the written consent of the
Board of  Directors  of the Company.  The Board may  withhold  consent  prior to
December 31, 2005,  only if such transfer  would,  in the sole discretion of the
Board of Directors,  jeopardize the Company's preservation of its Federal Income
Tax attributes  under Section 382 of the Internal Revenue Code or in the case of
a transfer after  December 31, 2005 would be materially  adverse to the interest
of the Company.


                                       14
<PAGE>


If at any time after December 31, 2005, Blackacre is prevented from disposing of
any of its shares as a result of the Board of Directors  determination  that the
transfer  would be  materially  adverse to the  interest  of the  Company,  then
Blackacre  shall have the right to sell to the Company and the Company  shall be
obligated  to  purchase  up to the number of shares of common  stock  which when
added to all prior shares of common stock sold to the Company by Blackacre would
have an aggregate market value of not more than $1 million dollars.

The  transaction  resulted in an  extraordinary  gain of $482,000 in 2001.  As a
result of the exchange,  Blackacre and its affiliates now own  approximately 25%
of DVL's issued and outstanding common stock.

     NPM AND NPO TRANSACTIONS

     In September of 1996, in an effort to alleviate liquidity problems and meet
certain mandatory debt repayment  requirements,  the Company entered into a loan
transaction  with NPM  Capital,  LLC  ("NPM")  pursuant  to which NPM  purchased
certain loans from creditors of the Company.  The original principal loan amount
from NPM was $8,382,000 (the "Original Loan").

     Under the terms of the Original  Loan,  the  principal  balance was payable
over six years with  interest  accruing at the rate of 10.25% per annum.  In May
1999, DVL repaid all amounts due under the NPM loan.

     In connection with the  transactions  contemplated by the Original Loan, in
March 1996,  the Company and NPO, an  affiliate  of certain  principals  of NPM,
entered into an Asset  Servicing  Agreement (the "Asset  Servicing  Agreement"),
pursuant to which NPO is providing the Company with  administrative and advisory
services  relating  to the  assets of the  Company  and its  Affiliated  Limited
Partnerships.  In consideration for such services, the Company pays NPO $600,000
per  year  (with  cost of  living  increases)  over the  seven-year  term of the
original  agreement,  subject to early  termination  under  certain  conditions.
During 2001 the agreement was extended  under the same terms and  conditions for
another  five years to March  2008.  The  current  annual fee is  $654,000.  The
Company recorded fees to NPO of $652,000, $640,000, and $623,000 under the Asset
Servicing  Agreement for 2002, 2001 and 2000,  respectively.  As of December 31,
2002  and  2001 the  Company  owed NPO  accrued  fees of  $33,000  and  $28,000,
respectively plus other expenses of $10,000 in each year.

     In connection with the Original Loan, certain affiliates of NPM acquired an
aggregate of 1,000,000  shares (the "Base Shares") of the Company's Common Stock
for $200,000.  The Base Shares  currently  represent  approximately  4.6% of the
outstanding  Common Stock of the Company.  An affiliate of NPM also acquired 100
shares of  preferred  stock of the  Company for  $1,000.  The Company  issued to
affiliates of NPM, warrants (the "Warrants"), exercisable as of January 1999, to
purchase  such  number  of shares of  Common  Stock as,  when  added to the Base
Shares, adjusted for shares of common stock subsequently issued to, or purchased
in the open market by affiliates of NPM and NPO represent an aggregate of 49% of
the  outstanding  Common  Stock of the  Company on a  fully-diluted  basis.  The
original  exercise  price  of the  Warrants  was  $.16  per  share,  subject  to
applicable anti- dilution provisions and subject to a maximum aggregate exercise
price of approximately $1,900,000. The Warrants expire on December 31, 2007. The
Warrants were valued for financial statement purposes at $516,000 at the date of
issuance and such value  resulted in a debt discount  which was amortized  using
the effective  interest  rate method.  Through March 2003, no Warrants have been
exercised.


                                       15
<PAGE>


     The possibility  that some or all of the Warrants may be exercised  creates
the potential for significant dilution of the current  stockholders.  The actual
dilutive  effect cannot be currently  ascertained,  since it depends on whether,
and if so to what extent, the Warrants are exercised.

OPPORTUNITY FUND

     In April 1998, DVL, an affiliate of Blackacre and affiliates of NPO entered
into an Opportunity  Agreement  providing for the Opportunity Fund,  pursuant to
which  entities  would be  formed,  from  time to time,  to enter  into  certain
transactions  involving the acquisition of limited partnership  interests in the
assets of, or mortgage loans to, Affiliated Limited Partnerships or other assets
in which the Company has an interest.  These investment opportunities were to be
presented to the Opportunity Fund on a first-refusal  basis, if the Company, due
to financial constraints,  was unable to pursue such business opportunities with
its own funds.

     All of the  required  capital  contributions  were  to be  provided  by the
members  other than the  Company.  The  Company  was to receive up to 20% of the
profits from an opportunity after the other investors received a return of their
investment plus preferred annual returns ranging from 12% to 20%.

     The Opportunity Agreement has now terminated.  While the fund no longer has
the  right of first  refusal  with  regard to  opportunities,  the  Company  may
continue to present opportunities to the fund.

     As of March 1, 2003, the  Opportunity  Fund had purchased 15 wrap mortgages
of Affiliated  Limited  Partnerships from unaffiliated  third parties,  acquired
limited  partnership  units from  unaffiliated  individuals in three  Affiliated
Limited  Partnerships,  and acquired an  ownership  interest in a property of an
Affiliated Limited Partnership.

     During 2000, DVL purchased  three of the mortgages owned by the Opportunity
Fund. During 2001, a newly formed,  wholly-owned subsidiary of DVL purchased two
of  the  mortgages  owned  by  the  Opportunity  Fund.  In  December  2001,  the
Opportunity Fund sold its ownership  interest in a property in Kearny,  NJ to an
entity in which certain  partners are  affiliates of NPO. As of March 2003,  the
Opportunity  Fund owns four mortgages.  During 2001, DVL was paid  approximately
$280,000 from the  investments  by the  Opportunity  Fund, of which $189,000 was
used to pay amounts  owed by DVL under a note in favor of an entity that is part
of the  Opportunity  Fund incurred in connection with the acquisition of certain
mortgage  loans.  During  2002,  DVL did  not  receive  any  payments  from  the
investments by the Opportunity Fund.

RESULTS OF OPERATIONS

     DVL had income before  extraordinary  items, net income after extraordinary
items, and extraordinary (losses) gains, as follows:

                                      2002             2001         2000
                                      ----             ----         ----
Income before extraordinary items  $1,462,000     $ 2,505,000    $  199,000
Extraordinary (losses) gains       $  (71,000)    $   361,000    $  306,000
Net income                         $1,391,000     $ 2,866,000    $  505,000


                                       16
<PAGE>


     Interest  income  on  mortgage  loans  from  affiliates   decreased  (2002-
$2,903,000,  2001 -  $3,118,000,  2000 -  $3,436,000)  and  interest  expense on
underlying  mortgages  decreased (2002 - $1,648,000,  2001 - $2,029,000,  2000 -
$2,329,000), as a result of a reduction in the size of DVL's mortgage portfolio.

         Gains on satisfaction of mortgage loans were as follows:

                                2002            2001           2000
                                ----            ----           ----
                            $ 252,000      $   615,000     $  256,000

These  gains   resulted  from  the  Company   collecting  net  proceeds  on  the
satisfaction  of mortgage  loans that were greater than the  Company's  carrying
value.

     Management  fees  decreased  (2002  -  $239,000,  2001 -  $804,000,  2000 -
$500,000)  in 2002 from 2001 and  increased  in 2001  from 2000  primarily  as a
result of the Company earning a $442,900 incentive fee during 2001.

     Included  in  management  fees  were  incentive  management  fees of  $-0-,
$442,900, and $312,500 received during 2002, 2001, and 2000, respectively,  from
PBD Holdings, Inc. an entity that is owned by affiliates of NPO and BCG ("PBD").
Incentive  management  fees are earned  when  properties  owned by PBD are sold;
therefore,  the fees earned by the Company vary based on the sales proceeds. PBD
currently has one parcel of land remaining.

     The Company also provided property  management and administrative  services
for which it received  fees of $239,000,  $361,000 and $138,000 for 2002,  2001,
and 2000, respectively,  which are included in management fees. The increases in
property management and administrative  services from 2000 to 2001 were a result
of the Company obtaining new property  management  contracts.  The fees for 2001
included non recurring fees of $174,000.

Transaction and other fees from Affiliated Limited Partnerships were as follows:

                                2002            2001           2000
                                ----            ----           ----
                            $  293,000      $ 260,000      $  413,000

Transaction  and  other  fees  were  earned  in  connection  with  the  sales of
partnership  properties and refinancings of underlying mortgages.  The amount of
fees vary from year to year depending on the size and number of transactions.

     Interest  income  on  residual   interests  (2002  -  $4,373,000,   2001  -
$2,802,000, 2000 - $0) and interest expense on the related notes payable (2002 -
$2,771,000;   2001  -  $1,840,000,  2000  -  $0)  arose  as  DVL  completed  the
acquisitions of residual interests in March 2001 and August 2001.

Rental income from others was as follows:

                                      2002            2001            2000
                                      ----            ----            ----
Net rental income from others     $  561,000      $  720,000      $  523,000
Gross rental income from others   $2,441,000      $2,122,000      $1,899,000


                                       17
<PAGE>


     The  decrease  in net  rental  income in 2002 from 2001 was  primarily  the
result  of an  increase  in bad  debts of  $334,000  relating  to  write  off of
receivables from a major tenant.  The increase in bad debts was partially offset
by higher gross  rents.  The tenant has notified the Company that they have sold
their  assets.  The purchaser of the inventory has agreed to the pay the Company
$94,000 in rent per month plus real estate taxes and insurance from January 2003
through June 2003. The Company is seeking replacement tenants for the space that
will become vacant.

     The primary  reason for the increase in net rental income from 2000 to 2001
was the result of lower costs.  The reduction in costs was due to a reduction in
lease  obligations  resulting from the purchase in December 2000 of certain real
estate  which the  Company had  previously  leased.  The  increase in net rental
income was partially offset by a rent reduction  granted to a tenant and greater
depreciation  expense due to the purchase of the real estate assets,  as well as
higher insurance costs.

     Distributions  from  investments  from others  decreased  in 2002 from 2001
(2002 -  $35,000,  2001 -  $667,000)  and  increased  in 2001 from 2000  (2001 -
$667,000;  2000 -  $149,000)  primarily  as a result of  receiving  $280,000  in
distributions  from  investments  in  the  Opportunity  Funds  and  $348,000  in
distributions above the carrying value of other investments in 2001.

     General and  administrative  expenses  decreased  in 2002 from 2001 (2002 -
$1,478,000,  2001 - $1,743,000)  primarily due to decreases in consulting  costs
and state tax expense. Included in consulting costs in 2001 were fees related to
a refinancing of certain assets.  State tax expenses decreased in 2002 from 2001
due to a decrease in the Company's Delaware franchise tax, as well as a one time
tax payment in 2001 of $52,000.  These decreases were partially offset by higher
salary and employee benefit costs.

     General and  administrative  expenses  increased  in 2001 from 2000 (2001 -
$1,743,000, 2000 - $1,353,000). The primary reason for the increase in 2001 from
2000 was  increased  salaries  and  hiring  costs as well as rent  costs for the
Company's  office  headquarters  due to  escalation  charges  and  lower  rental
reimbursements.

     The asset  servicing  fee paid to NPO  increased  (2002 - $652,000,  2001 -
$640,000,  2000 -  $623,000)  pursuant  to the  terms  of  the  Asset  Servicing
Agreement, due to an increase in the consumer price index.

     Legal and  professional  fees increased in 2002 from 2001 (2002 - $371,000,
2001 -  $344,000)  as a result  of  $32,000  paid by the  Company  for  services
rendered to the Company  outside the scope of the Asset  Servicing  Agreement by
affiliates  of  NPO,  and  legal  fees  relating  to the  preparation  of  proxy
materials.

     Legal and  professional  fees increased in 2001 from 2000 (2001 - $344,000,
2000 - $312,000)  primarily  due to expenses  incurred in evaluating a potential
acquisition  that was not  completed.  The Company has not  employed an in-house
legal counsel since 1998; consequently,  legal fees vary depending on the number
and sophistication of transactions that are executed.

     Interest  expense to  affiliates  consists  primarily  of  interest  on the
accrued  NPO asset  servicing  fees and  interest  on the loan  from  Blackacre.
Interest expense to affiliates decreased (2002 - $286,000, 2001 - $389,000, 2000
- $434,000) because the interest bearing amount due to affiliates was reduced.


                                       18
<PAGE>


    Interest  expense on litigation  settlement  Notes (2002 - $299,000,  2001 -
$484,000,  2000 - $502,000)  would have increased in each year from 2000 through
2002 because of  compounding  of interest;  however,  the  Company's  efforts to
reduce  the  principal  amount  of  Notes  outstanding  through  tender  offers,
redemptions  and the  exchange  of Notes  for  common  stock by  Blackacre  have
resulted in a decrease in the interest expense.

     Interest  expense relating to other debts increased in 2002 from 2001 (2002
-  $610,000,  2001  -  $551,000)  due  to the  Company  borrowing  approximately
$3,968,000 in August,  2002 to finance the purchase of real estate. The increase
in  interest  expense  created by the new  borrowings  was  partially  offset by
decreases in interest rates on floating rate loans and repayments of principal.

    Interest  expense relating to other debts increased in 2001 from 2000. (2001
- $551,000, 2000 - $311,000).  During 2000, the Company borrowed an aggregate of
$6,425,000 to fund the acquisition of eight new mortgage loans,  the purchase of
all the land, buildings, and improvements from a limited partnership which owned
seven  buildings  in an  industrial  park in New Jersey,  and  refinanced  three
existing  mortgage  receivables.  Also,  during the first  quarter of 2001,  the
Company borrowed $200,000 to purchase a parcel of land.

     In 2001 the Company acccrued  $80,000 for alternative  minimum taxes and in
2002  recognized  $86,000 in tax  benefits  relating to the  elimination  of the
alernative minimum tax for 2001. The Company recognized  $397,000 and $1,050,000
of income tax benefit in 2002 and 2001, respectively, as a result of a reduction
in the  valuation  allowance on deferred tax assets.  In 2000 the  provision for
income taxes was completely  offset by the reduction in the valuation  allowance
on deferred tax assets utilized.

     Extraordinary   gains  in  2001  and  2000  of   $525,000   and   $306,000,
respectively,  were the result of tender offers and redemptions of Notes at less
than book value of such Notes. The Company also realized extraordinary losses in
2002  and  2001 of  $71,000  and  $164,000,  respectfully,  resulting  from  the
redemption  of  Notes at face  value.  The net  extraordinary  gain for 2001 was
$361,000.

LIQUIDITY AND CAPITAL RESOURCES

    The Company's  cash balance was  $2,373,000  at December 31, 2002,  compared
with $2,987,000 at December 31, 2001.

    The Company's cash flow from operations is generated principally from rental
income from its leasehold interests and ownership of real estate,  distributions
in connection with residual interests in securitized portfolios, interest on its
mortgage portfolio, management fees and transaction and other fees received as a
result of the sale and/or refinancing of partnership properties and mortgages.

   The Company believes that its anticipated cash flow provided by operations is
sufficient  to meet its current cash  requirements  through at least March 2004.
The Company believes that its current liquid assets and credit resources will be
sufficient to fund  operations  on a short-term  basis as well as on a long-term
basis.

     The Company  obtained an unsecured  line of credit on December 15, 2002 for
$500,000  with an  interest  rate of prime  plus one  percent  per  annum  which
terminates  December 15, 2003.  To date the Company has not drawn on the line of
credit.  The terms of the line of credit  provide that interest shall be payable
on the first day of each month.


                                       19
<PAGE>


   The Company's  acquisition in 2001 of its member interest in Receivables II-A
and Receivables II-B should provide significant liquidity to the Company.

    The purchase  agreements  contain  annual minimum and maximum levels of cash
flow that will be retained  by the  Company,  after the payment of interest  and
principal on the notes payable, which are as follows:


      Years                  Minimum       Maximum
      -----                  -------       -------
   2001 to 2009            $  743,000    $  880,000
   2010 to final payment    1,050,000     1,150,000
     on the notes*

   * Final payment on the notes payable expected 2016 related to the Receivables
     II-A transaction and 2018 for the Receivables II-B transaction.

The Company  believes it will receive  significant cash flow after final payment
of the notes payable.


                                       20
<PAGE>


ACQUISITIONS AND FINANCINGS

Loans payable which are scheduled to become due through 2008 are as follows:

<TABLE>
<CAPTION>
                                                                  Outstanding
                                                   Original        Principal
                                                     Loan          Balance at      Due
Purpose                         Creditor            Amount       Dec. 31, 2002     Date
-------                         --------        -------------   --------------     ----

<S>                      <C>                      <C>             <C>            <C>
Repurchase of Notes
Issued by the Company          Blackacre(1)       $ 1,560,000     $ 2,084,053    09/30/03

Purchase of Mortgages    Unaffiliated Bank(2)(3)  $ 1,000,000     $   604,136    05/01/06

Purchase of a Mortgage
and Refinancing of
Existing Mortgages       Unaffiliated Bank(2)(3)  $ 1,450,000     $   742,363    11/30/06

Purchase of Real Estate
Assets                   Unaffiliated Bank(4)     $ 4,500,000     $ 4,500,000    09/01/04

Purchase of Mortgages    Unaffiliated Bank(5)(2)  $   400,000     $   344,266    06/01/06

Purchase of Mortgages    Unaffiliated Bank(6)(7)  $ 2,667,542     $ 2,650,110    06/30/08
</TABLE>

(1)  Interest rate is 12% per annum,  compounded  monthly.  Interest is added to
     principal  and is paid from a portion of cash received in  satisfaction  of
     certain mortgage loans.
(2)  This loan self-amortizes.
(3)  Interest rate is prime plus 1.5% per annum payable monthly.
(4)  Interest rate is 8.5% per annum. Monthly payments are interest only.
(5)  Interest rate is 8.25% per annum payable monthly.
(6)  Interest rate is 7.5% per annum with a balloon payment due June 30, 2008 of
     $2,284,542.
(7)  The Company through its  wholly-owned  subsidiary,  Delbrook  Holding,  LLC
     purchased an 89,000 square foot building in Kearny, NJ, currently leased to
     K-Mart  Stores,  Inc.  ("K-Mart") for  $4,404,000  including  costs and the
     assumption of $2,668,000 in debt. The lease requires  K-Mart to pay $30,000
     per month plus all operating and structural costs of the building.


                                       21
<PAGE>


     During 2001,  DVL purchased two mortgage  loans from an entity that is part
of the  Opportunity  Fund which are secured by real estate  owned by  Affiliated
Limited  Partnerships  in which  DVL is the  general  partner.  The  loans  were
purchased  for an  aggregate  price of  $400,000,  paid in cash.  The loans were
subsequently refinanced in 2002 and DVL realized approximately $380,000 from the
refinancing after closing costs.

     The amounts  obtained from the  refinancings  were  primarily  based on the
value of the base  rents due from  tenants  during  the period of the base lease
term  subsequent to the payoff of the existing first  mortgages.  As a result of
the refinancings, the Company's asset base available for future refinancings has
diminished.

IMPACT OF INFLATION AND CHANGES IN INTEREST RATES

     The  Company's  portfolio  of  mortgage  loans made to  Affiliated  Limited
Partnerships  consists  primarily  of  loans  made at fixed  rates of  interest.
Therefore,  increases or decreases in market  interest  rates are  generally not
expected to have an effect on the Company's earnings.  Other than as a factor in
determining market interest rates, inflation has not had a significant effect on
the Company's net income.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     The  discussion  and  analysis of our  financial  condition  and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance  with  accounting  principals  generally  accepted in the
United States of America. The preparation of these financial statements requires
us to make estimates and judgments  that affect the reported  amounts of assets,
liabilities,  revenues and expenses, and related disclosure of contingent assets
and  liabilities.  On an on-going  basis,  we evaluate our estimates,  including
those  related to residual  interests  and  allowance  for  losses.  We base our
estimates on historical  experience  and on various other  assumptions  that are
believed to be reasonable under the circumstances, the results of which form the
basis for making  judgments  about the carrying  values of assets and liabilties
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.

     We believe  the  following  critical  accounting  policies  affect our more
significant  judgments and estimates used in the preparation of our consolidated
financial statements.

     RESIDUAL INTERESTS:  Residual interests represent the estimated  discounted
cash  flow  of the  differential  of the  total  interest  to be  earned  on the
securitized  receivables  and  the  sum  of  the  interest  to be  paid  to  the
noteholders  and the contractual  servicing fee. Since these residual  interests
are not  subject  to  prepayment  risk  they are  accounted  for as  investments
held-to-maturity  and are carried at amortized  cost using the  effective  yield
method.   Permanent  impairments  are  recorded  immediately  through  earnings.
Favorable  changes  in future  cash flows are  recognized  through  earnings  as
interest over the remaining life of the retained interest.

     INCOME RECOGNITION: Interest income is recognized on the effective interest
method for the residual  interest and all  performing  loans.  The Company stops
accruing interest once a loan becomes non-performing.  A loan is considered non-
performing when scheduled  interest or principal  payments are not received on a
timely basis and in the opinion of  management,  the collection of such payments
in the  future  appears  doubtful.  Interest  income on  restructured  loans are
recorded as the payments are received.


                                       22
<PAGE>


     ALLOWANCE  FOR  LOSSES:  The  adequacy  of  the  allowance  for  losses  is
determined through a quarterly review of the portfolios.  Specific loss reserves
are provided as required  based on  management's  evaluation  of the  underlying
collateral on each loan or investment.

DVL's  allowance  for  loan  losses  generally  is based  upon the  value of the
collateral underlying each loan and its carrying value.  Management's evaluation
considers the magnitude of DVL's  non-performing  loan  portfolio and internally
generated appraisals of certain properties.

   For the Company's  mortgage loan portfolio,  the  partnership  properties are
valued  based  upon  the cash  flow  generated  by base  rents  and  anticipated
percentage rents or base rent escalations to be received by the partnership. The
value of partnership  properties  which are not subject to percentage  rents was
based upon historial appraisals. Management believes, that generally, the values
of such  properties  have not  changed as the  tenants,  lease  terms and timely
payment  of rent  have  not  changed.  When  any  such  changes  have  occurred,
management  revalues  the  property as  appropriate.  Management  evaluates  and
updates such appraisals,  periodically,  and considers  changes in the status of
the existing tenancy in such  evaluations.  Certain other properties were valued
based upon  management's  estimate of the current market value for each specific
property using similar procedures.

     DVL does not consolidate any of the various Affiliated Limited Partnerships
in which it holds the general partner and limited partner interests nor does DVL
account for such interests on the equity method due to the following:  (i) DVL's
interest in the  partnerships  as the  general  partner is a 1%  interest,  (the
proceeds of such 1% interest  is payable to the limited  partnership  settlement
fund  pursuant to the 1993  settlement  of the class action  between the limited
partners and DVL) the ("Limited Partnership  Settlement");  (ii) under the terms
of such  settlement,  the limited  partners  have the right to remove DVL as the
general partner upon the vote of 70% or more of the limited partners;  (iii) all
major decisions must be approved by a limited partnership Oversight Committee in
which DVL is not a member,  (iv) there are no  operating  policies or  decisions
made  by  the  Affiliated  Limited  Partnership,  due to the  triple  net  lease
arrangements for the Affiliated Limited Partnership properties and (v) there are
no financing  policies  determined by the  partnerships as all mortgages were in
place prior to DVL's obtaining its interest and all potential  refinancings  are
reviewed  by  the  Oversight  Committee.   Accordingly,  DVL  accounts  for  its
investments in the  Affiliated  Limited  Partnerships,  on a cost basis with the
cost basis adjusted for impairments which took place in prior years.


                                       23
<PAGE>


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     DVL has no substantial  cash flow exposure due to interest rate changes for
long-term debt obligations, because a majority of the long-term debt is at fixed
rates. DVL primarily enters into long-term debt for specific  business  purposes
such as the repurchase of debt at a discount,  acquisition of mortgage loans, or
the purchase of real estate assets.

    DVL's  ability to realize on its mortgage  holdings is sensitive to interest
rate  fluctuations  in that the sales prices of real property and mortgages vary
with interest rates.

     The table set forth below presents  principal  amounts and related weighted
average  interest rates by year of maturity for DVL's  investment  portfolio and
debt obligations.

<TABLE>
<CAPTION>
                                                                     There-
In Thousands             2003    2004      2005      2006    2007    after     Total
------------------------------------------------------------------------------------
<S>                     <C>     <C>       <C>      <C>      <C>     <C>      <C>
ASSETS
Cash equivalents        $2,373                                               $ 2,373
  Variable rate
  Average interest rate   0.8%                                                  0.8%

LONG TERM DEBT
Fixed rate              $4,684  $6,772    $2,235   $2,754   $2,962  $ 9,616  $29,023
Average interest rate    8.97%   8.71%     7.97%    7.35%     7.35%   7.41%    9.10%

Variable rate            $ 519  $ 707      $ 127   $  -0-   $  -0-  $  -0-   $ 1,353
Average interest rate       6%      6%        6%      -0-      -0-     -0-
</TABLE>


                                       24
<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         SUPPLEMENTARY DATA

                           Quarterly Data (Unaudited)
                      For the Year Ended December 31, 2002
                 (In Thousands Except Share and Per Share Data)

<TABLE>
<CAPTION>
                                 1st          2nd            3rd            4th          Full
                               Quarter      Quarter        Quarter        Quarter        Year

<S>                         <C>           <C>            <C>            <C>           <C>
Total Revenue               $     2,238   $     2,494    $     2,239    $     2,123   $     9,094
Total Expenses                    2,088         2,031          1,937          2,059         8,115
Income before extra-
 ordinary gain                      150           843            388             81         1,462
Extraordinary gain (loss)            --           (60)           (11)            --           (71)
Net income (loss)                   150           783            377             81         1,391
Basic earnings (loss)
  per share:
  Income (loss) before
  extraordinary gain        $       .01   $       .04    $       .02    $       .00   $       .06
  Extraordinary gain        $       .00   $       .00    $       .00    $       .00   $       .00
  Net income (loss)         $       .01   $       .04    $       .02    $       .00   $       .06
Diluted earnings (loss)
  per share:
  Income (loss) before
  extraordinary gain        $       .00   $       .02    $       .01    $       .00   $       .03
  Extraordinary gain        $       .00   $       .00    $       .00    $       .00   $       .00
  Net income (loss)         $       .00   $       .02    $       .01    $       .00   $       .03
Weighted average
  shares outstanding:
  Basic                      21,713,563    21,713,563     21,713,563     21,713,563    21,713,563
  Diluted                    65,378,189    55,873,784     57,028,078     60,149,306    58,776,493
</TABLE>


                           Quarterly Data (Unaudited)
                      For the Year Ended December 31, 2001
                 (In Thousands Except Share and Per Share Data)

<TABLE>
<CAPTION>
                              1st            2nd            3rd           4th           Full
                            Quarter        Quarter        Quarter       Quarter         Year

<S>                      <C>            <C>            <C>            <C>           <C>
Total Revenue            $      1,546   $      2,401   $      2,436   $     3,172   $      9,555
Total Expenses                  1,474          1,985          2,082         2,479          8,020
  Income before
  extraordinary gain               72            416            354         1,663          2,505
Extraordinary gain                 14             --             --           347            361
Net income                         86            416            354         2,010          2,866
Basic earnings per
  share:
  Income before extra-
  ordinary gain          $        .01   $        .03   $        .02   $       .10   $        .15
  Extraordinary gain     $        .00   $        .00   $        .00   $       .02   $        .02
  Net income             $        .01   $        .03   $        .02   $       .12   $        .17
Diluted earnings per
  share:
  Income before extra-
  ordinary gain          $        .00   $        .00   $        .00   $       .02   $        .03
  Extraordinary gain     $        .00   $        .00   $        .00   $       .01   $        .00
  Net income             $        .00   $        .00   $        .00   $       .03   $        .03
Weighted average
  shares outstanding:
  Basic                    16,560,450     16,560,450     16,560,450    17,020,429     16,599,517
  Diluted                 163,631,850    142,389,554    107,856,352    72,820,396    124,772,115
</TABLE>

Basic and diluted earnings per share are computed  independently for each of the
periods.  Accordingly,  the sum of the quarterly  earnings per share amounts may
not agree to the total for the year. The financial statements and notes thereto,
together with the accountants'  report thereon of Eisner,  LLP, are set forth on
pages F-1 through F-31,  which follow.  The financial  statements  are listed in
Item 15(a)(1) hereof.


                                       25
<PAGE>


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

         None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF DVL

     A. The  following  table sets forth the name of each director and executive
officer of the  Company,  and the nature of all  positions  and offices with the
Company  held by him at  present.  The  term of all  directors  (other  than the
special  purpose  director)  expires at the  Company's  next  annual  meeting of
stockholders,  which  will be held on a date to be  scheduled.  The  term of all
executive  officers expires at the next annual meeting of directors,  to be held
immediately thereafter.

           NAME                             POSITION

  Frederick E. Smithline     Chairman of the Board
  Myron Rosenberg            Director
  Alan E. Casnoff            Director, President and Chief Executive Officer
  Jay Thailer                Executive Vice President and Chief Financial
                               Officer
  Keith B. Stein             Special Purpose Director

     In addition to three directors, who have all of the powers normally granted
to corporate  directors,  the Company has one special purpose director,  who was
elected in 1996 by the holder of the  Company's  Class A  Preferred  Stock.  The
special purpose  director has no right to vote at meetings of the Board,  except
as to Bankruptcy  Matters (as such term is defined in the Company's  Certificate
of Incorporation).

     B. The  following is a brief account of the recent  business  experience of
each director and executive officer and directorships  held with other companies
which file reports with the Securities and Exchange Commission:

      FREDERICK E. SMITHLINE (age 71) has served as Chairman of the Board of the
Company  since 1990 and as a director  since 1982.  From  September  1989 to May
1996, Mr.  Smithline was of counsel to the law firm of Epstein,  Becker & Green,
P.C., New York,  New York. Mr.  Smithline has been of counsel to the law firm of
Fischbein, Badillo, Wagner and Harding from September 2002 to present.

     MYRON  ROSENBERG  (age 74) has served as a director  of the  Company  since
1973. Through December 1996, Mr. Rosenberg served as Executive Vice President of
Rosenthal & Rosenthal,  Inc., New York, New York, a commercial  finance concern,
where he had been employed  since 1961.  Mr.  Rosenberg is currently  associated
with the investment banking firm of Taurus Global, LLC.


                                       26
<PAGE>


     ALAN E.  CASNOFF  (age 59) has served as  President  of the  Company  since
November  1994,  and was appointed as a director in November  2001.  Mr. Casnoff
served as Executive  Vice President of the Company from October 1991 to November
1994. Mr. Casnoff has maintained his other business interests during this period
and thus has devoted  less than full time to the business  affairs of DVL.  From
November 1990 to October 1991, Mr. Casnoff served as a consultant to the Company
and from 1971 to October 1991, as Secretary of the Company.  Since May 1991, Mr.
Casnoff has also served as a director of Kenbee Management,  Inc. ("Kenbee"), an
affiliate of the Company,  and as President of Kenbee since November 1994. Since
1977,  Mr.  Casnoff has also been a partner of P&A  Associates,  a private  real
estate development firm headquartered in Philadelphia, Pennsylvania. Since 1969,
Mr. Casnoff was associated  with various  Philadelphia,  Pennsylvania  law firms
which have been legal counsel to the Company and Kenbee. Since July 1999, he has
been of counsel to Klehr, Harrision, Harvey, Brazenburg & Ellers ("Klehr").

     JAY THAILER (age 34) has served as Chief  Financial  Officer and  Executive
Vice  President  since  November  2001.  From August 1998 to November  2001, Mr.
Thailer served as Vice President and Secretary of the Company.  Mr. Thailer is a
Certified Public  Accountant.  Prior to joining the Company in 1997, Mr. Thailer
was associated with the accounting firm of Sobel & Company,  C.P.A.'s, where his
clients included real estate development companies.

     KEITH B. STEIN (age 45) has been a special purpose  director of the Company
since September 1996. Mr. Stein is the Chairman,  Chief Executive Officer, and a
director of National Auto  Receivables  Liquidation,  Inc., a specialty  finance
company. Mr. Stein is also Managing Partner of Crestwalk Capital Advisors,  LLC,
a  privately  held  boutique   Investment  banking  firm  focused  on  corporate
restructuring and reorganization,  mergers and acquisitions advisory, as well as
principal activities,  in the lower end of the middle market. From March 1993 to
September  1994,  he served as Senior  Vice  President,  Secretary  and  General
Counsel of WestPoint Stevens,  Inc., a textile company,  after having served the
same  company  from  October  1992 to  February  1993 in the  capacity of Acting
General  Counsel and  Secretary.  From May 1989 to February  1993, Mr. Stein was
associated  with the law firm of Weil,  Gotshal & Manges  LLP.  Mr.  Stein is an
affiliate of NPM.

(c)  Compliance with Section 16 (a) Beneficial Ownership Reporting Compliance

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors,  and persons who are beneficial owners of more
than 10% of a  registered  class of the  Company's  equity  securities,  to file
reports of ownership  and changes in ownership  with the  Commission.  Officers,
directors,  and greater than 10%  beneficial  owners are required by  Commission
regulations  to furnish the Company with copies of all Section  16(a) forms they
file.  To the  Company's  knowledge,  based  solely on  review  of such  reports
furnished to the Company, and written representations that no other reports were
required  during or with respect to the fiscal year ended December 31, 2002, all
Section 16(a) filing requirements applicable to such persons were satisfied.


                                       27
<PAGE>


ITEM 11.    EXECUTIVE COMPENSATION

     A. SUMMARY COMPENSATION TABLE

     The following  table sets forth all  compensation  awarded to, earned by or
paid to the following  persons for services  rendered to the Company in 2002 and
(if  applicable) in 2001 and 2000: (1) the person serving as the Company's chief
executive  officer  during  2002;  (2) those other  persons who were  serving as
executive  officers as of the end of 2002 whose  compensation  exceeded $100,000
during 2002:

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                        Annual Compensation                Long-Term
Compensation Awards                     -------------------                ---------
-------------------
                                                                           Securities
          LTIP                                         Other Annual        Underlying
    Name              Year     Salary      Bonus       Compensation        Options/SAR
    ----              ----     ------      -----       ------------        -----------
       Payouts
       -------
<S>                   <C>    <C>         <C>                <C>           <C>
Alan E. Casnoff       2002   $120,000    $      --          --                 --
President and         2001    120,000       10,000          --            100,000(2)
Chief Executive       2000    120,000           --          --                 --
Officer

Jay Thailer           2002   $110,000    $  15,000          --
Executive Vice        2001    110,000       15,000          --             15,000(2)
President and Chief

Financial Officer (1)
</TABLE>

 (1) Mr. Thailer became Executive Vice President and Chief Financial  Officer of
     the Company on
     November 8, 2001.
 (2) Consists of options to purchase shares of Common Stock under the 1996 Stock
     Options Plan.


                                       28
<PAGE>


     B. OPTION GRANTS IN LAST FISCAL YEAR

     No options  were  granted by the Company in 2002 under the DVL,  Inc.  1996
Stock Option Plan (the "Plan") to the  executive  officers  named in the Summary
Compensation Table. The Plan provides for the grant of options to purchase up to
2,500,000  shares of Common Stock to Employees  and  Non-Employee  Directors (in
each case as defined in the Plan).

     The Plan provides that any one employee  wishing to exercise an option must
give  prior  notice to the Board.  If the Board  determines,  in its  reasonable
discretion,  that such exercise will cause an "ownership  change" (as defined in
Section 382 of the  Internal  Revenue  Code of 1986,  as amended) in the Company
which would have an adverse  effect on the Company's use of its NOLS (as defined
in Section 382) (an "Adverse Ownership  Change"),  the Board shall deny approval
of the exercise.  If the Board  determines that such exercise would not cause an
Adverse  Ownership  Change,  it  shall  approve  the  exercise.  The  conditions
described  in  this  paragraph  are  referred  to  below  as  the  "Section  382
Restrictions".

     As of  December  31,  2002,  options  to  purchase  1,503,131  shares  were
outstanding  under the Plan and 996,869  shares were available for issuance upon
exercise of options which may be granted in the future.


                                       29
<PAGE>


     C.  FISCAL YEAR-END OPTION VALUES

     The following table sets forth information as to options held as of the end
of 2002 by the executive  officers named in the Summary  Compensation  Table. No
options  were  exercised  by said  officers in 2002.  All  options  held by said
officers at fiscal year-end were immediately exercisable.

                   Number of Securities Underlying    Value of Unexercised
                    Unexercised Options At Fiscal     In-The-Money Options
     Name                      Year End                At Fiscal Year End
     ----          -------------------------------    --------------------
Alan E.  Casnoff               475,000                     $ 13,000
Jay Thailer                     42,000                     $  3,065


     D.  COMPENSATION OF DIRECTORS

     Regular  directors  who  are  not  officers  or  employees  of the  Company
("Non-Employee  Directors")  presently  receive a  director's  fee of $1,500 per
month,  plus $500 for each Audit  Committee  meeting  of the Board of  Directors
attended.  Directors  who are officers or  employees  of the Company  receive no
compensation  for their  services as  directors  or  attendance  at any Board of
Directors  or  committee  meetings.  Mr.  Casnoff,  who is a  director,  is also
President  and Chief  Executive  Officer of the  Company.  The  special  purpose
director receives no compensation for his service as a director or attendance at
any Board of Directors or committee meetings.

     On each of  September  17, 2000,  2001 and 2002 options to purchase  15,000
shares of Common  Stock at an exercise  price equal to the then market price per
share were granted to each of the non-employee directors (Messrs.  Rosenberg and
Smithline).  The  options  were  granted  under the  Plan,  which  provides  for
automatic grants of options for 15,000 shares to each incumbent regular director
on each anniversary of the adoption of the Plan. The options vested  immediately
and are  exercisable  for a term of ten (10) years  from the date of grant.  The
exercise price is equal to the fair market value on the date of grant.

     E.  EMPLOYMENT CONTRACTS AND ARRANGEMENTS

     The Company entered into  Indemnification  Agreements with all officers and
directors  effective  upon  their  election  as an officer  or  director  of the
Company,  contractually  obligating the Company to indemnify them to the fullest
extent permitted by applicable law, in connection with claims arising from their
service to, and activities on behalf of, the Company.

     The Company does not currently have any employment contracts in force.


     F.  BOARD OF DIRECTORS INTERLOCKS AND INSIDER PARTICIPATION

     During 2002, no executive officer of the Company served as a director of or
a member of a compensation  committee of any entity for which any of the persons
serving on the Board of Directors of the Company is an executive officer.


                                       30
<PAGE>


ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
            MANAGEMENT

     A. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

     The  following  table sets forth certain  information  as of March 25, 2003
regarding  the  ownership  of common  stock of the Company by each person who is
known to the management of the Company to have been the beneficial owner of more
than 5% of the outstanding shares of the Company's common stock.


  Name and Address of          Amount and Nature of
   Beneficial Owner            Beneficial Ownership     Percent of Class*
  ------------------           --------------------     -----------------

Lawrence J.  Cohen               5,520,707 (1)(4)               20.8%

Milton Neustadter                3,069,222 (1)(5)               12.4%

Jay Chazanoff                    4,979,221 (2)(6)               18.8%

Ron Jacobs                       4,679,735 (2)(7)               17.9%

Stephen Simms                    4,679,735 (2)(8)               17.9%

Keith B.  Stein                  4,715,853 (3)(9)               17.9%

Robert W.  Barron                4,321,030 (3)(10)              16.6%

Adam Frieman                     4,160,517 (3)(11)              16.1%

Peter Offerman                   4,040,502 (3)(12)              15.7%

Joseph Huston                    3,997,770 (3)(13)              15.6%

Jan Sirota                       4,040,502 (3)(14)              15.7%

Neal Polan                       4,040,502 (3)(15)              15.7%

Michael Zarriello                4,040,502 (3)(16)              15.7%

Mark Mahoney                     4,028,860 (3)(17)              15.7%

The SIII Associates Limited      6,015,281 (3)(18)              21.9%
Partnership Third Addison
Park Corporation and
Gary L.  Shapiro

J.G. Wentworth, S.S.C.
   Limited Partnership           3,000,000 (19)                 12.1%
10 Presidential Boulevard
Suite 250
Bala Cynwyd, PA 19004

Stephen Feinberg                 5,406,113 (20)                 24.9%
450 Park Avenue
28th Floor
New York, NY 10022


                                       31
<PAGE>


NOTES TO TABLE

          In each instance where a named individual is listed as the holder of a
currently  exercisable option or Warrant,  the shares which may be acquired upon
exercise  thereof have been deemed  outstanding for the purpose of computing the
percentage  owned by such  person,  but not for the  purpose  of  computing  the
percentage owned by any other person, except with respect to options or Warrants
held by other members of a Holder's Holder Group (as defined  below).  An option
or Warrant is deemed to be currently  exercisable if it may be exercised  within
60 days.  The number of Warrants  attributed to each Holder herein is based upon
the number of warrants that would be issued as of the date of this document, and
is subject to  adjustment to eliminate  any possible  dilution,  as described in
"Changes of Control" below.

(1) As  described  in detail  below in "Changes of  Control",  such  persons are
members of the Pembroke  Group (as defined in "Changes of Control"  below),  and
said persons share  dispositive  power with each other as to 2,645,735 shares of
the Company's  Common Stock  issuable to the members of the Pembroke  Group upon
the exercise of Warrants by such members,  which shares  constitute 50.1% of all
of the shares issuable to the members of the Pembroke Group upon the exercise of
Warrants.  The address of each member of the  Pembroke  Group is c/o Lawrence J.
Cohen, 70 East 55th Street,  Seventh Floor,  New York, NY 10022.  The members of
the Pembroke Group explicitly disclaim beneficial ownership of all of the shares
of Common Stock and Warrants (and shares of Common Stock  issuable upon exercise
of Warrants) owned by the other members of the Pembroke Group.

(2) As  described  in detail  below in "Changes of  Control",  such  persons are
members of the Millennium Group (as defined in "Changes of Control" below),  and
said persons share  dispositive  power with each other as to 3,401,495 shares of
the Company's  Common Stock issuable to the members of the Millennium Group upon
the exercise of Warrants by such members,  which shares  constitute 50.1% of all
of the shares issuable to the members of the Millennium  Group upon the exercise
of  Warrants.  The  address of each  member of the  Millennium  Group is c/o Jay
Chazanoff,  70 East 55th Street,  Seventh Floor, New York, NY 10022. The members
of the Millennium Group explicitly disclaim  beneficial  ownership of all of the
shares of Common Stock and Warrants  (and shares of Common Stock  issuable  upon
exercise of Warrants) owned by the other members of the Millennium Group.

(3) As  described  in detail  below in "Changes of  Control",  such  persons are
members of the Florida  Group (as defined in  "Changes in Control"  below),  and
said persons share  dispositive  power with each other as to 3,912,317 shares of
the Company's Common Stock issuable to the members of the Florida Group upon the
exercise of Warrants (as defined in "Changes in Control" below) by such members,
which shares  constitute  50.1% of all of the shares  issuable to the members of
the Florida  Group upon the exercise of Warrants.  The address of each member of
the Florida Group is c/o Keith Stein,  70 East 55th Street,  Seventh Floor,  New
York, NY 10022.

(4) Based upon a Schedule  13D, as  amended,  as filed with the  Securities  and
Exchange   Commission  (the  "Commission")  on  November  18,  1999,  Mr.  Cohen
possesses:  (i) the sole power to vote 5,134,177  shares of Common Stock,  which
includes  4,509,389  shares of Common Stock  issuable upon exercise of Warrants;
(ii)  shared  power to vote 0 shares of Common  Stock;  (iii) the sole  power to
dispose of 2,874,973 shares of Common Stock,  which includes 2,250,185 shares of
Common Stock issuable upon exercise of Warrants;  and (iv) shared power with the
other  member of the  Pembroke  Group to dispose of  2,645,735  shares of Common
Stock,  which  includes  2,259,204  shares of  Common  Stock  issuable  upon the
exercise  of  Warrants  held by Mr.  Cohen and  386,531  shares of Common  Stock
issuable  upon  exercise of Warrants  held by the other  member of the  Pembroke
Group. Mr. Cohen explicitly  disclaims beneficial ownership of all of the shares
of Common Stock and Warrants (and shares of Common Stock  issuable upon exercise
of Warrants) owned by the other member of the Pembroke Group.


                                       32
<PAGE>


(5) Based upon a Schedule  13D,  as  amended,  as filed with the  Commission  on
November 18, 1999, Mr. Neustadter possesses:  (i) the sole power to vote 810,019
shares of Common Stock,  which includes  771,519 shares of Common Stock issuable
upon  exercise of Warrants;  (ii) shared power to vote 0 shares of Common Stock;
(iii) the sole  power to  dispose  of  423,488  shares of  Common  Stock,  which
includes 384,988 shares of Common Stock issuable upon exercise of Warrants;  and
(iv)  shared  power with the other  member of the  Pembroke  Group to dispose of
2,645,735 shares of Common Stock,  which includes 386,531 shares of Common Stock
issuable  upon the exercise of Warrants  held by Mr.  Neustadter  and  2,259,204
shares of Common  Stock  issuable  upon  exercise of Warrants  held by the other
member of the Pembroke Group. Mr.  Neustadter  explicitly  disclaims  beneficial
ownership  of all of the  shares of Common  Stock and  Warrants  (and  shares of
Common Stock  issuable upon  exercise of Warrants)  owned by the other member of
the Pembroke Group.

(6) Based upon a Schedule  13D,  as  amended,  as filed with the  Commission  on
November 18, 1999, Mr. Chazanoff possesses: (i) the sole power to vote 2,893,810
shares of Common Stock, which includes 2,662,915 shares of Common Stock issuable
upon  exercise of Warrants;  (ii) shared power to vote 0 shares of Common Stock;
(iii) the sole power to  dispose  of  1,577,726  shares of Common  Stock,  which
includes  1,310,831  shares of Common Stock  issuable upon exercise of Warrants;
and (iv) shared power with the other members of the Millennium  Group to dispose
of 3,401,495 shares of Common Stock,  which includes  1,316,084 shares of Common
Stock issuable upon the exercise of Warrants held by Mr. Chazanoff and 2,085,410
shares of Common  Stock  issuable  upon  exercise of Warrants  held by the other
members of the Millennium Group. Mr. Chazanoff  explicitly  disclaims beneficial
ownership  of all of the  shares of Common  Stock and  Warrants  (and  shares of
Common Stock  issuable upon exercise of Warrants)  owned by the other members of
the Millennium Group.

(7) Based upon a Schedule  13D,  as  amended,  as filed with the  Commission  on
November 18, 1999,  Mr. Jacobs  possesses:  (i) the sole power to vote 2,320,945
shares of Common Stock, which includes 2,018,248 shares of Common Stock issuable
upon  exercise of Warrants;  (ii) shared power to vote 0 shares of Common Stock;
(iii) the sole power to  dispose  of  1,278,240  shares of Common  Stock,  which
includes  1,038,543  shares of Common Stock  issuable upon exercise of Warrants;
and (iv) shared power with the other members of the Millennium  Group to dispose
of 3,401,495 shares of Common Stock,  which includes  1,042,705 shares of Common
Stock  issuable  upon the exercise of Warrants  held by Mr. Jacobs and 2,358,790
shares of common  stock  issuable  upon  exercise of Warrants  held by the other
members of the Millennium  Group.  Mr. Jacobs  explicitly  disclaims  beneficial
ownership  of all of the  shares of Common  Stock and  Warrants  (and  shares of
Common Stock  issuable upon exercise of Warrants)  owned by the other members of
the Millenium Group.

(8) Based upon a Schedule  13D,  as  amended,  as filed with the  Commission  on
November 18, 1999,  Mr. Simms  possesses:  (i) the sole power to vote  2,320,945
shares of Common Stock, which includes 2,081,248 shares of Common Stock issuable
upon  exercise of Warrants;  (ii) shared power to vote 0 shares of Common Stock;
(iii) the sole power to  dispose  of  1,278,240  shares of Common  Stock,  which
includes  1,038,543  shares of Common Stock  issuable upon exercise of Warrants;
and (iv) shared power with the other members of the Millennium  Group to dispose
of 3,401,495 shares of Common Stock,  which includes  1,042,705 shares of Common
Stock  issuable  upon the exercise of Warrants  held by Mr. Simms and  2,358,790
shares of Common  Stock  issuable  upon  exercise of Warrants  held by the other
members of the  Millennium  Group.  Mr. Simms  explicitly  disclaims  beneficial
ownership  of all of the  shares of Common  Stock and  Warrants  (and  shares of
Common Stock  issuable upon exercise of Warrants)  owned by the other members of
the Millennium Group.


                                       33
<PAGE>


(9) Based upon a Schedule  13D,  as  amended,  as filed with the  Commission  on
November 18, 1999,  Mr. Stein  possesses:  (i) the sole power to vote  1,533,478
shares of Common Stock, which includes 1,456,971 shares of Common Stock issuable
upon  exercise of Warrants;  (ii) shared power to vote 0 shares of Common Stock;
(iii) the sole  power to  dispose  of  803,535  shares of  Common  Stock,  which
includes 727,029 shares of Common Stock issuable upon exercise of Warrants;  and
(iv)  shared  power with the other  members of the  Florida  Group to dispose of
3,912,317 shares of Common Stock,  which includes 729,942 shares of Common Stock
issuable upon the exercise of Warrants held by Mr. Stein and 3,182,375 shares of
Common Stock issuable upon exercise of Warrants held by the other members of the
Florida Group. Mr. Stein explicitly disclaims beneficial ownership of all of the
shares of Common Stock and Warrants  (and shares of Common Stock  issuable  upon
exercise of Warrants) owned by the other members of the Florida Group.

(10) To the Company's  knowledge,  Mr. Barron  possesses:  (i) the sole power to
vote 781,795  shares of Common Stock,  which  includes  744,675 shares of Common
Stock issuable upon exercise of Warrants;  (ii) shared power to vote 0 shares of
Common Stock; (iii) the sole power to dispose of 408,713 shares of Common Stock,
which  includes  371,593  shares of  Common  Stock  issuable  upon  exercise  of
Warrants;  and (iv) shared power with the other  members of the Florida Group to
dispose of 3,912,317  shares of Common Stock,  which includes  373,082 shares of
Common  Stock  issuable  upon the  exercise of Warrants  held by Mr.  Barron and
3,539,235  shares of Common Stock issuable upon exercise of Warrants held by the
other members of the Florida Group.

(11) To the Company's  knowledge,  Mr. Frieman possesses:  (i) the sole power to
vote 485,707  shares of Common Stock,  which  includes  474,065 shares of Common
Stock issuable upon exercise of Warrants;  (ii) shared power to vote 0 shares of
Common Stock; (iii) the sole power to dispose of 248,200 shares of Common Stock,
which  includes  236,558  shares of  Common  Stock  issuable  upon  exercise  of
Warrants;  and (iv) shared power with the other  members of the Florida Group to
dispose of 3,912,317  shares of Common Stock,  which includes  237,507 shares of
Common  Stock  issuable  upon the exercise of Warrants  held by Mr.  Frieman and
3,674,810  shares of Common Stock issuable upon exercise of Warrants held by the
other members of the Florida Group.

(12) To the Company's knowledge,  Mr. Offerman possesses:  (i) the sole power to
vote 245,196  shares of Common Stock,  which  includes  233,554 shares of Common
Stock issuable upon exercise of Warrants;  (ii) shared power to vote 0 shares of
Common Stock; (iii) the sole power to dispose of 128,185 shares of Common Stock,
which  includes  116,543  shares of  Common  Stock  issuable  upon  exercise  of
Warrants;  and (iv) shared power with the other  members of the Florida Group to
dispose of 3,912,317  shares of Common Stock,  which includes  117,011 shares of
Common Stock  issuable  upon the exercise of Warrants  held by Mr.  Offerman and
3,795,306  shares of Common Stock issuable upon exercise of Warrants held by the
other members of the Florida Group.

(13) To the Company's  knowledge,  Mr. Huston  possesses:  (i) the sole power to
vote 163,457  shares of Common Stock,  which  includes  155,696 shares of Common
Stock issuable upon exercise of Warrants;  (ii) shared power to vote 0 shares of
Common Stock;  (iii) the sole power to dispose of 85,453 shares of Common Stock,
which includes 77,692 shares of Common Stock issuable upon exercise of Warrants;
and (iv) shared power with the other  members of the Florida Group to dispose of
3,912,317  shares of Common Stock,  which includes 78,004 shares of Common Stock
issuable upon the exercise of Warrants  held by Mr. Huston and 3,834,313  shares
of Common Stock  issuable upon exercise of Warrants held by the other members of
the Florida Group.


                                       34
<PAGE>


(14) To the Company's  knowledge,  Mr. Sirota  possesses:  (i) the sole power to
vote 245,196  shares of Common Stock,  which  includes  233,554 shares of Common
Stock issuable upon exercise of Warrants;  (ii) shared power to vote 0 shares of
Common Stock; (iii) the sole power to dispose of 128,185 shares of Common Stock,
which  includes  116,543  shares of  Common  Stock  issuable  upon  exercise  of
Warrants;  and (iv) shared power with the other  members of the Florida Group to
dispose of 3,912,317  shares of Common Stock,  which includes  117,011 shares of
Common  Stock  issuable  upon the  exercise of Warrants  held by Mr.  Sirota and
3,795,306  shares of Common Stock issuable upon exercise of Warrants held by the
other members of the Florida Group.

(15) To the Company's knowledge, Mr. Polan possesses: (i) the sole power to vote
245,196 shares of Common Stock,  which  includes  233,554 shares of Common Stock
issuable upon exercise of Warrants; (ii) shared power to vote 0 shares of Common
Stock;  (iii) the sole power to dispose of 128,185 shares of Common Stock, which
includes 116,543 shares of Common Stock issuable upon exercise of Warrants;  and
(iv)  shared  power with the other  members of the  Florida  Group to dispose of
3,912,317 shares of Common Stock,  which includes 117,011 shares of Common Stock
issuable upon the exercise of Warrants held by Mr. Polan and 3,795,306 shares of
Common Stock issuable upon exercise of Warrants held by the other members of the
Florida Group.

(16) To the Company's knowledge,  Mr. Zarriello possesses: (i) the sole power to
vote 245,196  shares of Common Stock,  which  includes  233,554 shares of Common
Stock issuable upon exercise of Warrants;  (ii) shared power to vote 0 shares of
Common Stock; (iii) the sole power to dispose of 128,185 shares of Common Stock,
which  includes  116,543  shares of  Common  Stock  issuable  upon  exercise  of
Warrants;  and (iv) shared power with the other  members of the Florida Group to
dispose of 3,912,317  shares of Common Stock,  which includes  117,011 shares of
Common Stock  issuable upon the exercise of Warrants  held by Mr.  Zarriello and
3,795,306  shares of Common Stock issuable upon exercise of Warrants held by the
other members of the Florida Group.

(17) To the Company's  knowledge,  Mr. Mahoney possesses:  (i) the sole power to
vote 233,554  shares of Common Stock,  which  includes  233,554 shares of Common
Stock issuable upon exercise of Warrants;  (ii) shared power to vote 0 shares of
Common Stock; (iii) the sole power to dispose of 116,543 shares of Common Stock,
which  includes  116,543  shares of  Common  Stock  issuable  upon  exercise  of
Warrants;  and (iv) shared power with the other  members of the Florida Group to
dispose of 3,912,317  shares of Common Stock,  which includes  116,543 shares of
Common  Stock  issuable  upon the exercise of Warrants  held by Mr.  Mahoney and
3,795,774  shares of Common Stock issuable upon exercise of Warrants held by the
other members of the Florida Group.

(18)  To the  Company's  knowledge,  the  SIII  Associates  Limited  Partnership
possesses:  (i) the sole power to vote 4,011,694  shares of Common Stock,  which
includes  3,809,840  shares of Common Stock  issuable upon exercise of Warrants;
(ii)  shared  power to vote 0 shares of Common  Stock;  (iii) the sole  power to
dispose of 2,102,964 shares of Common Stock,  which includes 1,901,110 shares of
Common Stock issuable upon exercise of Warrants;  and (iv) shared power with the
other  members of the  Florida  Group to dispose of  3,912,317  shares of Common
Stock,  which  includes  1,908,730  shares of  Common  Stock  issuable  upon the
exercise  of  Warrants  held by the  SIII  Associates  Limited  Partnership  and
2,003,587  shares of Common Stock issuable upon exercise of Warrants held by the
other  members of the Florida  Group.  Third  Addison  Park  Corporation  is the
general partner of the SIII Associates Limited Partnership,  and Gary L. Shapiro
is the chief executive officer of Third Addison Park Corporation.


                                       35
<PAGE>


(19) To the Company's  knowledge,  J.G.  Wentworth,  S.S.C.  Limited Partnership
possesses:  (i) the sole power to vote 3,000,000  shares of Common Stock,  which
includes  3,000,000  shares of Common Stock  issuable upon exercise of Warrants;
(ii)  shared  power to vote 0 shares of Common  Stock;  (iii) the sole  power to
dispose of 3,000,000 shares of Common Stock,  which includes 3,000,000 shares of
Common Stock issuable upon exercise of Warrants.

(20) Based upon a Schedule  13D,  as filed with the  Commission  on January  20,
2002,  Mr.  Feinberg  possesses:  (i) the  sole  power to vote  and  direct  the
disposition of the 4,753,113  shares of Common Stock,  held by Blackacre  Bridge
Capital,  L.L.C.  and the sole power to vote and direct the  disposition  of the
653,000 shares of Common Stock held by Blackacre Capital Group, L.P.


                                       36
<PAGE>


B.  SECURITY OWNERSHIP OF MANAGEMENT

         The following  table sets forth certain  information as of December 31,
2002  regarding  ownership of Common Stock by (i) each  director and nominee for
director,  (ii) each of the executive officers named in the Summary Compensation
Table  contained  herein,  and (iii) all  executive  officers and directors as a
group (5 persons). Unless otherwise indicated, each stockholder listed below has
sole voting and  investment  power with respect to the shares set forth opposite
such  stockholder's  name.  All  persons  listed  below have an address  c/o the
Company's principal executive offices in New York.

    Name of                  Amount and Nature of          Percentage
Beneficial Owner             Beneficial Ownership           of Class
----------------             --------------------          -----------
Alan E.  Casnoff                   685,000 (2)                 3.1%
Jay Thailer                         64,000 (3)                   **
Myron Rosenberg                    378,854 (4)                 1.7%
Frederick E.  Smithline            191,550 (5)                   **
Keith B.  Stein                  4,715,853 (6)                17.9%
All current directors
and executive officers
as a group (5 persons)           6,035,257 (7)                25.3%

         * In each instance where a named  individual is listed as the holder of
a currently exercisable option or warrant, the shares which may be acquired upon
exercise  thereof have been deemed  outstanding for the purpose of computing the
percentage  owned by such  person,  but not for the  purpose  of  computing  the
percentage owned by any other person, except the group referred to in note 7. An
option or warrant is deemed to be currently  exercisable  if it may be exercised
within 60 days.

         ** Less than 1%

(1) Messrs.  Casnoff and Thailer are executive officers of the Company.  Messrs.
Rosenberg,  and Smithline are the regular directors Mr. Casnoff was appointed as
a director in 2001 and Mr. Stein is the special purpose director.

(2) Excludes 480 shares held by Mr.  Casnoff's adult son, as to which shares Mr.
Casnoff  disclaims  beneficial  ownership.  Includes  26,000  shares  owned by a
corporation  partially owned and controlled by Mr.  Casnoff,  and 475,000 shares
which may be acquired upon the exercise of currently exercisable options.

(3)  Represents  42,000  shares  which  may be  acquired  upon the  exercise  of
currently exercisable options and 22,000 shares held by Mr. Thailer and his wife
as joint tenants.

(4) Includes  4,300 shares held by Mr.  Rosenberg's  wife, as to which shares he
disclaims beneficial ownership, and 90,000 shares which may be acquired upon the
exercise of currently exercisable options.

(5)   Includes   550  shares   held  by  Mr.   Smithline   and  his  brother  as
tenants-in-common as to which Mr. Smithline disclaims beneficial ownership. Also
includes  90,000  shares  which may be acquired  upon the  exercise of currently
exercisable options.


                                       37
<PAGE>


(6) Based upon a Schedule  13D,  as  amended,  as filed with the  Commission  on
November 18, 1999,  Mr. Stein  possesses:  (i) the sole power to vote  1,533,478
shares of Common Stock, which includes 1,456,971 shares of Common Stock issuable
upon  exercise of Warrants;  (ii) shared power to vote 0 shares of Common Stock;
(iii) the sole  power to  dispose  of  803,535  shares of  Common  Stock,  which
includes 727,029 shares of Common Stock issuable upon exercise of Warrants;  and
(iv)  shared  power with the other  members of the  Florida  Group to dispose of
3,912,317 shares of Common Stock,  which includes 729,942 shares of Common Stock
issuable upon the exercise of Warrants held by Mr. Stein and 3,182,375 shares of
Common Stock issuable upon exercise of Warrants held by the other members of the
Florida Group. Mr. Stein explicitly disclaims beneficial ownership of all of the
shares of Common Stock and Warrants  (and shares of Common Stock  issuable  upon
exercise of Warrants) owned by the other members of the Florida Group.

(7) Number of shares and percentage owned includes 2,136,483 shares which may be
acquired through exercise of currently  exercisable options and Warrants held by
certain of the named persons.  The number of outstanding  shares for the purpose
of computation of percentage of ownership by the group includes such shares.

     C. CHANGES IN CONTROL

     Each  of the  Certificate  of  Incorporation  (the  "Certificate")  and the
By-laws (the  "By-laws") of the Company  contains  restrictions  prohibiting the
sale, transfer, disposition,  purchase or acquisition of any capital stock until
September 30, 2009, without the prior authorization of the Board of Directors of
the Company,  by or to any holder (a) who beneficially  owns directly or through
attribution (as generally  determined  under Section 382 of the Internal Revenue
Code of 1986, as amended (the "Code")) five percent (5%) or more of the value of
the then issued and  outstanding  shares of capital  stock of the Company or (b)
who, upon the sale, transfer  disposition purchase or acquisition of any capital
stock of the Company would beneficially own directly or through  attribution (as
generally determined under Section 382 of the Code) five percent (5%) or more of
the value of the then issued and  outstanding  capital stock of the Company,  if
that sale,  transfer,  disposition,  purchase or acquisition  would, in the sole
discretion and judgment of the Board of Directors of the Company  jeopardize the
Company's  preservation of its federal income tax attributes pursuant to Section
382 of the  Code.  The  Board  of  Directors  has the  right  to void  any  such
transaction.

     In connection  with the Original Loan by NPM in September 1996, the Company
issued to, or for the  benefit  of, the  members of the  Florida  Group (who are
affiliates of NPM) and the Pembroke and Millennium Groups (who are affiliates of
NPM and NPO),  Warrants  to purchase  such number of shares of Common  Stock as,
when added to the  1,000,000  shares  issued to the members of the Holder Groups
contemporaneously  with the Warrants,  represent  rights to acquire up to 49% of
the outstanding  Common Stock on a fully diluted basis. In accordance with their
terms,  the Warrants were  originally  exercisable  commencing  January 1999 and
expire after  December  31,  2007.  Pursuant to a  stockholders  agreement  (the
"Agreement")  entered into among each of the parties that  acquired the Warrants
(each, a "Holder"),  such parties agreed,  among other things, that the Warrants
could not be exercised  until  September 27, 1999. If and at such time as any or
all of the Warrants are exercised,  it is possible that a "change in control" of
the Company,  within the meaning of applicable  rules and regulations  under the
Securities  and Exchange Act of 1934, as amended (the  "Exchange  Act"),  may be
deemed to occur, depending upon the extent of exercise.


                                       38
<PAGE>


     Pursuant to the Agreement,  the Holders have agreed to certain  limitations
on the disposition of Common Stock and Warrants owned or held by them, which are
described below. The Holders presently have rights of first  refusal/first offer
with respect to the  disposition  of shares of Common Stock and Warrants held by
other Holders (unless the disposition is made to certain specified affiliates of
a Holder).  Subject to the  above-mentioned  rights of first refusal/first offer
and certain  other  limitations,  (i) through  September  27, 1999, a Holder may
dispose of up to one-half  (or more  subject to the consent of a majority of the
Holders in such  Holder's  Holder  Group) of his shares of Common Stock and (ii)
after  September  27,  1999, a Holder may dispose of all of his or its shares of
Common Stock (excluding shares issuable upon exercise of Warrants). A Holder may
not  dispose of his  Warrants  (except to  another  Holder or certain  specified
affiliates  of a Holder) or convert,  exercise or exchange any of such  Warrants
until after  September  27,  1999.  After  September  27,  1999,  subject to the
above-mentioned   rights  of  first   refusal/first   offer  and  certain  other
limitations,  a Holder  may  dispose  of up to an  aggregate  of 49.9% (or more,
subject  to the  consent  of a majority  of the other  Holders in such  Holder's
Holder  Group) of his  shares of Common  Stock  issuable  upon  exercise  of his
Warrants  after  giving  effect to  conversion,  exercise  or  exchange  of such
Warrants.  The "Holder Groups" consist of the "Millennium  Group", the "Pembroke
Group" and the  "Florida  Group".  The members of the  Millennium  Group are Jay
Chazanoff,  Ron Jacobs and Stephen Simms.  The members of the Pembroke Group are
Lawrence J. Cohen and Milton  Neustadter.  The members of the Florida  Group are
Stephen L. Gurba,  Peter  Offermann,  Joseph  Huston,  Jan  Sirota,  Neal Polan,
Michael Zarriello,  Adam Frieman, Mark Mahoney, Keith B. Stein, Robert W. Barron
and  Gary  Shapiro  (through  his  holdings  in  The  SIII  Associates   Limited
Partnership  and  Third  Addison  Park  Corporation).  For  further  information
regarding the foregoing,  see "Certain  Relationships and Related  Transactions"
below.

                      Equity Compensation Plan Information

                        Number of securities    Weighted average     Number of
                          to be issued upon    exercise price of     remaining
                        exercise of outstand-   outstanding op-      available
                        ing options warrants     tions warrants      for future
    Plan Category            and rights            and rights         issuance
    -------------       ---------------------  -----------------     ----------
                                (a) (b) (c)

Equity compensation
approved by security
holders                      1,503,131               $.17             996,869

Equity compensation
plans not approved by
security holders                 -0-                  -0-               -0-
                             ---------               ----             -------

Total                        1,503,131               $.17             996,869
                             =========               ====             =======



                                       39
<PAGE>


ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     BLACKACRE TRANSACTION

In an effort to reduce the potential  future  dilution to existing  shareholders
resulting  from a  redemption  of the Notes for stock,  in  December  2001,  the
Company entered into the Exchange Agreement with Blackacre,  an affiliate of BCG
and Stephen Feinberg under which Blackacre exchanged $1,188,278 principal amount
of notes  for  4,753,113  shares  of  DVL's  common  stock.  This  represents  a
conversion rate of $.25 per share.

The Exchange  Agreement  includes a provision  which states that Blackacre shall
not sell or acquire any shares of the Company without the written consent of the
Board of  Directors  of the Company.  The Board may  withhold  consent  prior to
December 31, 2005,  only if such transfer  would,  in the sole discretion of the
Board of Directors,  jeopardize the Company's preservation of its Federal Income
Tax attributes  under Section 382 of the Internal Revenue Code or in the case of
a transfer after  December 31, 2005 would be materially  adverse to the interest
of the Company.

If at any time after December 31, 2005, Blackacre is prevented from disposing of
any of its shares as a result of the Board of Directors  determination  that the
transfer  would be  materially  adverse to the  interest  of the  Company,  then
Blackacre  shall have the right to sell to the Company and the Company  shall be
obligated  to  purchase  up to the number of shares of common  stock  which when
added to all prior shares of common stock sold to the Company by Blackacre would
have an aggregate market value of not more than $1 million dollars.

After the  transaction,  DVL had  21,313,563  shares of common  stock issued and
outstanding.

The transaction  resulted in an extraordinary  gain of $482,000.  As a result of
the exchange,  Blackacre and its affiliates  beneficially now own  approximately
25% of DVL's issued and outstanding common stock.

            NPM AND NPO TRANSACTIONS

     The Company consummated a multi-faceted  transaction on September 27, 1996,
pursuant to which: (i) certain existing indebtedness of the Company was acquired
by NPM, under an Amended and Restated Loan Agreement  dated as of March 27, 1996
pursuant to which the Company became  indebted to NPM in the original  principal
amount of $8,382,000;  (ii) 1,000,000 shares of Common Stock  (representing 4.6%
of the Common  Stock now  outstanding)  were  issued to, and  purchased  by, the
Holders (see Item 12(C) above);  (iii) the Certificate of  Incorporation  of the
Company  was  amended to permit the  issuance of  warrants,  to limit  change of
ownership  of capital  stock of the Company  and to  designate  Preferred  Stock
together with rights,  powers and  preferences  (including the  appointment of a
special purpose director); (iv) Warrants to purchase additional shares of Common
Stock (which,  when added to the 1,000,000 shares acquired,  represent rights to
acquire up to 49% of the  outstanding  Common Stock,  on a fully diluted  basis)
were issued to, or for the benefit of, the Holders;  (v) 100 shares of Preferred
Stock were issued to an affiliate of NPM;  (vi) most,  but not all,  convertible
securities and warrants  existing and outstanding  prior to the transaction were
converted into Common Stock;  and (vii) the Company  continued the engagement of
NPO to perform  administrative  and advisory  services relating to the assets of
the  Company and its  affiliated  partnerships,  pursuant to an Asset  Servicing
Agreement dated March 27, 1996. In consideration for such services,  the Company
pays NPO $600,000 per year (with cost of living  increases)  over the seven-year
term of the  original  agreement,  subject to early  termination  under  certain
conditions.


                                       40
<PAGE>


During 2001 the agreement was extended  under the same terms and  conditions for
another  five years to March  2008.  The  current  annual fee is  $654,000.  The
Company paid to NPO $652,000 and  $1,038,000  plus other  expenses of $10,000 in
2002 and 2001  respectively.  As of  December  31, 2002 and 2001 the Company had
accrued service fees payable to NPO of $33,000 and $28,000 respectively.  During
2002, 2001 and 2000 the Company  provided office space under the Asset Servicing
Agreement  to NPO,  consisting  of 228  square  feet of the  Company's  New York
location.  The  allocated  cost for such  space was  $9,000,  10,000  and 9,000,
respectively.

     The members of the Millenium  Group,  the Pembroke  Group,  and the Florida
Group are  affiliates  of NPM,  and  therefore  have a material  interest in the
transactions between the Company and NPM, described in the preceding paragraphs.
Keith B. Stein,  the special purpose  director of the Company is an affiliate of
NPM, and therefore has a material  interest in said  transactions.  Mr. Stein is
also a  beneficial  owner  of more  than  5% of the  outstanding  shares  of the
Company's  Common  Stock.  The members of the  Millenium  Group and the Pembroke
Group are  affiliates  of NPO. The Pembroke  Group is  controlled by Lawrence J.
Cohen,  who is a beneficial  owner of more than 5% of the outstanding  shares of
the Company's  Common Stock. The Millienium Group is owned and controlled by Jay
Chazanoff, Stephen Simms, and Ron Jacobs, each beneficial owners of more than 5%
of the outstanding shares of the Company's Common Stock.

     Since June 1998,  the Company has received fees from a limited  partnership
(in which  certain of its partners are  affiliates of NPO and  Blackacre).  This
agreement  may be terminated  with 30 days notice by either  party.  The Company
receives the following (a) a monthly fee through  November  2000,  and (b) after
all the partners of the  partnership  have earned a 20% internal rate of return,
compounded quarterly, on their capital contributions, an amount of cash equal to
25% of the profits,  as defined in the agreement.  For 2002 and 2001 the Company
received   compensation  under  such  agreement  equal  to  $-0-  and  $442,900,
respectively.

     The Company has received fees pursuant to a service  agreement with another
limited  partnership  whose  general  partner is an  affiliate of NPO, to render
certain accounting and  administrative  services.  As compensation,  the Company
receives  expense  reimbursements  of $4,000 per  month.  The  Company  received
aggregate compensation under such agreement of $48,000 for 2002 and 2001.

     The Company  received  fees from an entity that is part of the  Opportunity
Fund in consideration for the Company providing  property  management  services.
For 2002 and 2001,  the  Company  received  compensation  equal to  $27,000  and
$27,000, respectively, under such arrangement.

    The Company has received fees from an entity whose partners,  Messrs. Cohen,
Chazanoff,  Simms and Jacobs,  are  affiliates of NPO in  consideration  for the
Company   providing  certain   accounting  and   administrative   services.   As
compensation,  the Company  receives a monthly fee of $2,000, a monthly deferred
fee of $6,500 and an annual incentive fee if certain levels of profitability are
obtained.  The Company  recorded fees of $154,000 and $152,000 in 2002 and 2001,
respectively,   which   included   incentive   fees  of  $52,000  and   $50,000,
respectively.

      The Millenium Group, an affiliate of NPO, received  approximately  $37,000
and  $67,000  for 2002 and 2001,  respectively,  representing  compensation  and
reimbursement  of  expenses  for  collection  services  on notes  payable to the
Company.  In  addition,  in 2002 and 2001 the  Company  paid or accrued  fees of
$108,000  and  $150,000  to the  Millenium  Group and $-0- and  $205,000  to the
Pembroke Group (another  affiliate of NPO),  respectively,  and in 2002 issued a
total of 400,000  shares of Common  Stock,  valued at $32,000,  to the  Pembroke
Group and the Millenium  Group for additional  services  rendered to the Company
outside the scope of the Asset Servicing Agreement.

     In  connection   with  sales  of  property  owned  by  Affiliated   Limited
Partnerships  a licensed real estate  brokerage  affiliate of the Pembroke Group
was paid brokerage fees of $37,376 and $86,453 from various  Affiliated  Limited
Partnerships in 2002 and 2001, respectively.


                                       41
<PAGE>


     The law firm of Klehr, Harrison,  Harvey,  Brazenburg,  & Ellers ("Klehr"),
Philadelphia, Pennsylvania, of which Alan E. Casnoff, a director of the Company,
is of counsel,  has acted as counsel to the Company since July, 1999. Legal fees
for services  rendered by Klehr to the Company  during the fiscal year ended did
not exceed 5% of the revenues of such firm for its most recent fiscal year.

     In connection with the  acquisitions of residual  interests,  affiliates of
NPO and the special director of the Company will be paid investment banking fees
of $900,000  for their  services  including  the  origination,  negotiation  and
structuring of the transactions.  As of December 31, 2002 $540,000 of the fee is
outstanding.  The fee was  calculated as  approximately  2% of the expected cash
flow to be received over the life of the assets.  The total fees will be payable
without interest,  over a period of 30 months,  which commenced January 1, 2002,
from a portion of the  monthly  cash flow  generated  by the  acquisitions.  The
affiliates  of NPO are  Lawrence  J. Cohen and Jay  Chazanoff,  each  beneficial
owners of more than 5% of the outstanding  shares of the Company's  Common Stock
and Keith B. Stein who is a beneficial  owner of more than 5% of the outstanding
shares of the  Company's  Common Stock and the special  purpose  director of the
Company.

     OPPORTUNITY FUND

     The Company,  Blackacre,  PNM,  and Pemmil were parties to the  Opportunity
Agreement.  The  Opportunity  Agreement  had a term of three  years,  subject to
earlier termination if certain maximum capital  contributions have been reached.
The Opportunity  Agreement  provided for an Opportunity  Fund  whereunder,  with
respect to certain transactions involving the acquisition of limited partnership
interests of, or mortgage loans to, Affiliated Limited Partnerships in which the
Company is general  partner,  or which the Company already owns, if the Company,
due to financial constraints, is unable to pursue such business opportunity with
its own funds from its reserves or available  from  operations,  or by obtaining
financing  from a third  party or  issuing  equity  (each such  opportunity,  an
"Opportunity"),  then the  Opportunity  Fund has a right  of  first  refusal  to
finance such Opportunity.

     PNM and Pemmil are owned and  controlled  by members of the Pembroke  Group
and the Millenium Group.

     All of the required capital  contributions were to be provided by the other
members. The Company was to receive up to 20% of the profits from an opportunity
after the other investors  received a return of their  investment plus preferred
annual returns ranging from 12% to 20%.

     The Opportunity Agreement has now terminated. While the Opportunity Fund no
longer has the right of first refusal with regard to opportunities,  the Company
may continue to present opportunities to the fund.

     As of March 2003, the  Opportunity  Fund had purchased 15 wrap mortgages of
Affiliated  Limited  Partnerships  from  unaffiliated  third  parties,  acquired
limited  partnership  units from  unaffiliated  individuals in three  Affiliated
Limited  Partnerships,  and  acquired  the  property  of an  Affiliated  Limited
Partnership.  During 2000,  DVL purchased  three of the  mortgages  owned by the
Opportunity  Fund. In December 2001, the Opportunity Fund also sold its property
located in Kearny,  NJ to an entity in which certain  partners are affiliates of
NPO. During 2001, a newly formed,  wholly- owned subsidiary of DVL purchased two
of  the  mortgages  owned  by  the  Opportunity  Fund.  As of  March  2003,  the
Opportunity  Fund owns four mortgages.  During 2001, DVL was paid  approximately
$280,000 from the  investments  by the  Opportunity  Fund, of which $189,000 was
used to pay amounts  owed by DVL under a note in favor of an entity that is part
of the  Opportunity  Fund incurred in connection with the acquisition of certain
mortgage  loans.  During  2002,  DVL did  not  receive  any  payments  from  the
investments by the Opportunity Fund.


                                       42
<PAGE>


ITEM 14.  CONTROLS AND PROCEDURES

     Within  90 days  prior  to the  date  of this  report,  we  carried  out an
evaluation,  under the supervision and with the  participation  of our principal
executive officer and principal  financial officer,  of the effectiveness of the
design and operation of our disclosure  controls and  procedures.  Based on this
evaluation,  our principal  executive  officer and principal  financial  officer
concluded  that our  disclosure  controls and procedures are effective in timely
alerting  them to material  information  required to be included in our periodic
SEC  reports.  It should be noted that the design of any system of  controls  is
based in part upon certain  assumptions  about the  likelihood of future events,
and there can be no  assurance  that any design will  succeed in  achieving  its
stated goals under all potential future conditions, regardless of how remote.

     In  addition,  we reviewed our  internal  controls,  and there have been no
significant  changes in our  internal  controls or in other  factors  that could
significantly  affect  those  controls  subsequent  to the  date of  their  last
evaluation.


                                       43
<PAGE>


                                 PART IV


ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
          FORM 8-K

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

     (1)  The Financial  Statements required by Item 8 of this report are listed
          below:

                                 Item 8

                                                               Page No.
                                                               --------

          Independent Auditors' Report                          F - 1

          Consolidated Balance Sheets -
          December 31, 2002 and 2001                            F - 2

          Consolidated Statements of Operations
          for each of the years in the three year period
          ended December 31, 2002                               F - 4

          Consolidated Statements of Shareholders'
          Equity for each of the years in the three
          year period ended December 31, 2002                   F - 6

          Consolidated Statements of Cash Flows for
          each of the years in the three year period
          ended December 31, 2002                               F - 7

          Notes to Consolidated Financial Statements            F - 10

     (2)  The Financial Statement Schedules required
          by Item 8 of this report are listed below:

          Schedule III - Real Estate and Accumulated
          Depreciation

Other  schedules are omitted  because of the absence of  conditions  under which
they are required or because the required  information is given in the financial
statements or notes thereto.


                                       44
<PAGE>


     (3)  INDEX OF EXHIBITS

     The  following  is a list of the  Exhibits  filed as a part of this  report
     (those marked * are filed herewith):

     3.   ARTICLES OF INCORPORATION AND BY-LAWS.

     (a)  DVL's  Certificate  of  Incorporation,  filed March 28, 1977 (Incorpo-
          rated by reference to Exhibit  6(d) to DVL's Form S-1  Registra-  tion
          Statement No. 2-58847 dated April 28, l977.)

     (b)  DVL's Certificate of Amendment to Certificate of Incorporation,  filed
          July 13, 1977  (Incorporated by reference to Exhibit 6(e) to Amendment
          No. 1. to DVL's Form S-1  Registration  Statement  No.  2-58847  dated
          August 25, l977.)

     (c)  DVL's Certificate of Amendment to Certificate of Incorporation,  filed
          August 3, 1982.  (Incorporated  by  reference to Exhibit 3(c) to DVL's
          Form 10-K for the fiscal year ended December 31, 1982.)

     (d)  DVL's Certificate of Amendment to Certificate of Incorporation,  filed
          May 27, 1983. (Incorporated by reference to Exhibit 3(d) to DVL's Form
          10-K for the fiscal year ended December 31, 1983.)

     (e)  DVL's Certificate of Amendment to Certificate of Incorporation,  filed
          July 24,  1987.  (Incorporated  by  reference to Exhibit 3(e) to DVL's
          Form 10-K for the fiscal year ended December 31, 1987.)

     (f)  DVL's Certificate of Amendment to Certificate of Incorporation,  filed
          December 20, 1993.  (Incorporated  by reference to DVL's Form 10-K for
          fiscal year ended December 31, 1993.)

     (g)  DVL's Certificate of Amendment to Certificate of Incorporation,  filed
          December 4, 1995  (Incorporated  by reference to DVL's proxy statement
          dated October 13, 1995 - Exhibit A.)

     (h)  DVL's  Certificate of Amendment to Certificate of Incorporation  filed
          September  17,  1996.   (Incorporated  by  reference  to  DVL's  proxy
          statement dated July 31, 1996 - Exhibit I.)

     (i)  DVL's  Certificate of Amendment of Certificate of Incorporation  filed
          February 7, 2000.  (Incorporated  by  reference to DVL's Form 10-K for
          the fiscal year ended December 31, 1999.)

     (j)  DVL's  By-Laws,  as in full force and effect at all times  since March
          28,  l977.  (Incorporated  by  reference to Exhibit 3(c) to DVL's Form
          10-K for the fiscal year ended December 31, 1980.)

     (k)  DVL's  First  Amendment  to  By-Laws  dated  as of  January  1,  1994.
          (Incorporated  by reference to Exhibit 3(d) to DVL's Form 10-K for the
          fiscal year ended December 31, 1995.)

     (l)  DVL's  Second  Amendment  to By-Laws,  effective  September  17, 1996.
          (Incorporated  by  reference to DVL's proxy  statement  dated July 31,
          1996 - Exhibit J.)

     (m)  DVL's Third  Amendment  to the  By-Laws,  effective  February 1, 2000.
          (Incorporated  by  reference  to DVL's Form 10-K for the  fiscal  year
          ended December 31, 1999.)


                                       45
<PAGE>


    10.   MATERIAL CONTRACTS.


    10.1  Stipulation  of  Settlement  of  IN  RE  KENBEE  LIMITED   PARTNERSHIP
          LITIGATION  dated  August 12,  1992.  (Incorporated  by  reference  to
          Exhibit  10(b)(25)  to DVL's  Form  10-K  for the  fiscal  year  ended
          December 31, 1995.)

    10.2  Stipulation of Partial Settlement and Order in IN RE DEL-VAL FINANCIAL
          CORPORATION  SECURITIES LITIGATION Master File #MDL872.  (Incorporated
          by  reference  to Exhibit  10(b)(28) to DVL's Form 10-K for the fiscal
          year ended December 31, 1995.)

    10.3  Asset  Servicing  Agreement  between DVL,  PSC,  Kenbee Realty and NPO
          dated as of March 27,  1996.  (Incorporated  by  reference  to Exhibit
          10(b)(34)  to DVL's Form 10-K for the fiscal year ended  December  31,
          1995.)

    10.4  Asset  Servicing  Agreement  between  DVL and  NPO.  (Incorporated  by
          Reference to DVL's Proxy Statement dated July 31, 1996 - Exhibit C.)

    10.5  Stock  Purchase  Agreement  between  DVL  and  NPM.  (Incorporated  by
          Reference to DVL's Proxy Statement dated July 31, 1996 - Exhibit D.)

    10.6  Securities  Purchase  Agreement between DVL and NPM.  (Incorporated by
          Reference to DVL's Proxy Statement dated July 31, 1996 - Exhibit E.)

    10.7  Common Stock Warrant issued by DVL to NPO.  (Incorporated by Reference
          to DVL's Proxy Statement dated July 31, 1996 - Exhibit F.)

 +  10.8  DVL 1996 Stock Option Plan.  (Incorporated by Reference to DVL's Proxy
          Statement dated July 31, 1996 - Exhibit K.)

 +  10.9  Amendment  to DVL 1996 Stock Option Plan  effective  February 1, 2000.
          (Incorporated  by  reference  to DVL's Form 10-K for fiscal year ended
          December 31, 1999.)

    10.10 Promissory  Note  dated  as of  October  20,  1997,  in  the  original
          principal amount of $1,760,000 from DVL to Blackacre.  (Incorpo- rated
          by reference to Exhibit 10.2 to DVL's Form 10-Q for the quarter  ended
          September 30, 1997.)

    10.11 Subordination  Agreement,  dated as of October  20,  1997,  among DVL,
          Blackacre,  NPM and NPO. (Incorporated by reference to Exhibit 10.3 to
          DVL's Form 10-Q for the quarter ended September 30, 1997.)

    10.12 Agreement  Among  Members  dated April 10,  1998,  by and among Black-
          acre, PNM, Pem Mil, and DVL.  (Incorporated by reference to DVL's Form
          10-K for the fiscal year ended December 31, 1998.)

    10.13 Management  Services  Agreement dated June 1, 1998, by and between DVL
          and PBD Holdings, LP ("PBD"). (Incorporated by reference to DVL's Form
          10-K for the fiscal year ended December 31, 1998.)


                                       46
<PAGE>


    10.14  Loan Agreement, Promissory Note and Pledge, Collateral Assignment and
           Security Agreement,  each dated as of March, 2000, each relat- ing to
           a loan  from  Pennsylvania  Business  Bank to DVL in the  orig-  inal
           principal  amount of $1,000,000.  (Incorporated by reference to DVL's
           Form 10-Q for the quarter ended June 30, 2000.)

    10.15  Term Loan Note and Term Loan Agreement, each dated as of March, 2000,
           each relating to a loan from  Bankphiladelphia to DVL in the original
           principal amount of $1,450,000. (Incorpor- ated by reference to DVL's
           Form 10-Q for the quarter ended
           June 30, 2000.)

    10.16  First Amendment to Loan Agreement, Pledge Agreement,  Promissory Note
           and  Other  Documents  dated  August  2000,  relating  to a loan from
           Pennsylvania  Business  Bank to DVL,  Inc. in the original  principal
           amount of $1,000,000.  (Incorporated  by reference to DVL's Form 10-Q
           for the quarter ended September 30, 2000.)

    10.17  Mortgage  Assignment  Agreement  dated  August  2000,  relating to an
           assignment  and  sale of two  mortgage  loans  from  Rumson  Mortgage
           Holdings,  LLC to DVL,  Inc.  for a total  sale  price  of  $900,000.
           (Incorporated  by reference to DVL's Form 10-Q for the quarter  ended
           September 30, 2000.)

    10.18  Note in the original principal amount of $200,000, dated August 2000,
           relating  to the sale of two  mortgage  loans  from  Rumson  Mortgage
           Holdings,  LLC to DVL, Inc.  (Incorporated by reference to DVL's Form
           10-Q for the quarter ended
           September 30, 2000.)

    10.19  Agreement of Purchase and Sale, dated as of October 2, 2000, relating
           to the purchase of real estate  assets by Del Toch,  LLC from Passaic
           Avenue  South  Associates.  (Incorporated  by reference to DVL's Form
           10-K filed for the fiscal year ended
           December 31, 2000.)

    10.20  Agreement  of  Purchase  and  Sale,  dated as of  October  12,  2000,
           relating to the purchase of land by Delborne Land  Company,  LLC from
           Mcany of Kearny,  Inc.  (Incorporated by reference to DVL's Form 10-K
           filed for the fiscal year ended December 31, 2000.)

  * 10.21  Waiver of Event of Default and Agreement regarding demand and payment
           of fees dated March 2001 by NPO.

    10.22  Purchase Agreement, dated April 27, 2001, by and among J.G. Wentworth
           Receivables II LLC,  Receivables  II-A LLC,  Receivables II-A Holding
           Company,  LLC,  J.G.  Wentworth  S.S.C.,  Limited  Partnership,  J.G.
           Wentworth Management Company, Inc., S2 Holdings,  Inc., and DVL, Inc.
           for the  purchase of residual  interests in  securitized  portfolios.
           (Incorporated by reference to DVL's Form 8-K dated May 9, 2001.)

    10.23  Non-negotiable,  Secured  Purchase Money  Promissory Note dated April
           27, 2001 in the original  principal amount of $22,073,270  payable to
           the  order of J.G.  Wentworth  S.S.C.,  Limited  Partnership  from S2
           Holdings, Inc. (Incorporated by reference to DVL's Form 8-K dated May
           9, 2001.)


                                       47
<PAGE>


    10.24  Non-negotiable,  Secured  Purchase Money  Promissory Note dated April
           27, 2001 in the original  principal  amount of $3,252,730  payable to
           the  order of J.G.  Wentworth  S.S.C.,  Limited  Partnership  from S2
           Holdings, Inc. (Incorporated by reference to DVL's Form 8-K dated May
           9, 2001.)

    10.25  Guaranty and Surety  Agreement  dated April 27, 2001 by and from DVL,
           Inc.  in  favor  or  J.G.  Wentworth  S.S.C.,   Limited  Partnership.
           (Incorporated by reference to DVL's Form 8-K dated May 9, 2001.)

    10.26  Common Stock Warrant dated April 27, 2001. (Incorporated by reference
           to DVL's Form 8-K dated May 9, 2001.)

    10.27  Purchase  Agreement,  dated as of August 20, 2001,  by and among J.G.
           Wentworth  Receivables II LLC, Receivables II-B LLC, Receivables II-B
           Holding Company LLC, J.G. Wentworth S.S.C. Limited Partnership,  J.G.
           Wentworth  Management Company,  Inc., S2 Holding,  Inc. and DVL, Inc.
           for the  purchase of residual  interests in  securitized  portfolios.
           (Incorporated by reference to DVL's Form 8-K dated August 28, 2001.)

    10.28  Non-Negotiable,  Secured  Purchase Money  Promissory Note dated as of
           August 15, 2001 in the  original  principal  amount of  $7,931,560.00
           payable to the order of J.G.  Wentworth  S.S.C.  Limited  Partnership
           from S2 Holdings,  Inc.  (Incorporated by reference to DVL's Form 8-K
           dated August 28, 2001.)

    10.29  Non-Negotiable,  Secured  Purchase Money  Promissary Note dated as of
           August 15, 2001 in the  original  principal  amount of  $1,168,440.00
           payable to the order of J.G.  Wentworth  S.S.C.  Limited  Partnership
           from S2 Holdings,  Inc.  (Incorporated by reference to DVL's Form 8-K
           dated August 28, 2001.)

    10.30  Guaranty & Surety  Agreement  dated as of August 20, 2001 by and from
           DVL,  Inc. in favor of J.G.  Wentworth  S.S.C.  Limited  Partnership.
           (Incorporated by reference to DVL's Form 8-K dated August 28, 2001.)

    10.31  Pledge  Agreement,  dated as of August 20, 2001 by S2 Holdings,  Inc.
           for  the  benefit  of  J.G.  Wentworth  S.S.C.  Limited  Partnership.
           (Incorporated by reference to DVL's Form 8-K dated August 28, 2001.)

    10.32  Common Stock  Warrant dated as of August 15, 2001.  (Incorporated  by
           reference to DVL's Form 8-K dated August 28, 2001.)

    10.33  Exchange  Agreement,  dated as of December 28,  2001,  by and between
           DVL, Inc. and  Blackacre  Bridge  Capital,  L.L.C.  (Incorporated  by
           reference to DVL's Form 8-K dated January 11, 2002.)


                                       48
<PAGE>


     21.  SUBSIDIARIES OF DVL.

          The Company's only significant  subsidiaries are Professional  Service
          Corporation  (a  Delaware  Corporation),  Del  Toch,  LLC (a  Delaware
          Limited Liability Corporation), Delborne Land Company, LLC (a Delaware
          Limited Liability Corporation),  S2 Holdings, Inc. (a Delaware Holding
          Company),  DVL Mortgage  Holdings,  LLC (a Delaware Limited  Liability
          Corporation),  Receivables  II-A,  LLC  (a  Nevada  Limited  Liability
          Corporation),   Receivables   II-B,LLC  (a  Nevada  Limited  Liability
          Corporation),  Delbrook  Holdings,  LLC (a Delaware Limited  Liability
          Corporation)

    99.1  Chief  Executive  Officer  and  Chief  Financial  Officer  Certificate
          pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
          of Sarbanes-Oxley Act of 2002.

       +  Management Compensatory plan or arrangement required to be filed
          as an exhibit pursuant to Item 15C of Form-10K


(b)  No reports on Form 8-K were filed  during the quarter  ended  December  31,
     2002.


                                       49
<PAGE>


                                      SIGNATURES

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


                                    DVL, INC.



Date: March 27, 2003                By: /s/ Alan E. Casnoff
                                        ---------------------------
                                        Alan E. Casnoff, President
                                        and Chief Executive Officer


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

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


/s/ Jay Thailer
--------------------------
Jay Thailer                  Executive Vice President and     March 27, 2003
                             Chief Financial Officer
                             (Principal Financial and
                             Accounting Officer)


/s/ Alan E. Casnoff
--------------------------
Alan E. Casnoff              Director, President and Chief    March  27, 2003
                             Executive Officer (Principal
                             Executive Officer)


/s/ Frederick E. Smithline
--------------------------
Frederick E. Smithline       Director                         March  27, 2003


/s/ Myron Rosenberg
--------------------------
Myron Rosenberg              Director                         March 27, 2003




                                       50
<PAGE>


                                    CERTIFICATIONS

I, Alan E. Casnoff, certify that:

1. I have reviewed this annual report on Form 10-K of DVL, Inc.;

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed  such  disclosure  controls and  procedures  to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this annual report is being prepared;

b) evaluated  the  effectiveness  of the  registrant's  disclosure  controls and
procedures  as of a date  within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) presented in this annual report our conclusions  about the  effectiveness  of
the  disclosure  controls  and  procedures  based  on our  evaluation  as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant  deficiencies in the design or operation of internal controls
which  could  adversely  affect the  registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  registrant's
auditors any material weaknesses in internal controls; and

b) any  fraud,  whether  or not  material,  that  involves  management  or other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.



/s/ Alan E.Casnoff
-----------------------
Alan E. Casnoff
Chief Executive Officer



March 27, 2003





                                       51
<PAGE>


                                    CERTIFICATIONS

I, Jay Thailer, certify that:

1. I have reviewed this annual report on Form 10-K of DVL, Inc.;

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed  such  disclosure  controls and  procedures  to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this annual report is being prepared;

b) evaluated  the  effectiveness  of the  registrant's  disclosure  controls and
procedures  as of a date  within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) presented in this annual report our conclusions  about the  effectiveness  of
the  disclosure  controls  and  procedures  based  on our  evaluation  as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant  deficiencies in the design or operation of internal controls
which  could  adversely  affect the  registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  registrant's
auditors any material weaknesses in internal controls; and

b) any  fraud,  whether  or not  material,  that  involves  management  or other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.



/s/ Jay Thailer
------------------------
Jay Thailer
Chief Financial Officer
March 27, 2003





                                       52
<PAGE>


               INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



            Consolidated Financial Statements of DVL, Inc.
           and Subsidiaries and Independent Auditors Report



                                                                  Page
                                                                  ----

Independent Auditors' Report                                      F - 1

Consolidated Balance Sheets-December 31, 2002 and 2001            F - 2

Consolidated Statements of Operations for each of the
  years in the three year period ended December 31, 2002          F - 4

Consolidated Statements of Shareholders' Equity
 for each of the years in the three year period
  ended December 31, 2002                                         F - 6

Consolidated Statements of Cash Flows for each of the
  years in the three year period ended December 31, 2002          F - 7

Notes to Consolidated Financial Statements                        F - 10

Schedule III - Real Estate and Accumulated Depreciation









<PAGE>


Eisner, LLP
100 Campus Drive
Florham Park, New Jersey  07932



INDEPENDENT AUDITORS' REPORT



Board of Directors and Shareholders
DVL, Inc.
New York, New York


     We have audited the accompanying  consolidated  balance sheets of DVL, Inc.
and subsidiaries as of December 31, 2002 and 2001, and the related  consolidated
statements of operations,  shareholders'  equity, and cash flows for each of the
years in the three- year period  ended  December 31,  2002.  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

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

     In our opinion,  the  consolidated  financial  statements  enumerated above
present fairly, in all material respects, the consolidated financial position of
DVL,  Inc.  and  subsidiaries  as  at  December  31,  2002  and  2001,  and  the
consolidated  results of their operations and their  consolidated cash flows for
each of the years in the three-year period ended December 31, 2002 in conformity
with accounting principles generally accepted in the United States of America.

     In  connection  with our audits of the  consolidated  financial  statements
referred to above, we audited the  accompanying  financial  schedule III. In our
opinion,   this  financial   schedule,   when  considered  in  relation  to  the
consolidated  financial  statements taken as a whole,  presents  fairly,  in all
material respects, the information stated therein.

EISNER, LLP

Florham Park, New Jersey
March 6, 2003


With respect to
Note 5 Item (2)
March 12, 2003



With respect to
Note 13
March 14, 2003




                                       F-1
<PAGE>


                           DVL, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)


                                                                December 31,
                                                           ---------------------
                                                              2002        2001
                                                           --------     --------
ASSETS

Residual interests in securitized portfolios               $ 36,111     $ 36,906
                                                           --------     --------

Mortgage loans receivable from affiliated limited
 partnerships (net of unearned interest of $15,579
 for 2002 and $15,908 for 2001)                              31,222       35,567

  Allowance for loan losses                                   2,870        4,095
                                                           --------     --------

  Net mortgage loans receivable                              28,352       31,472
                                                           --------     --------


Cash (including restricted cash of $177 and $215
  for 2002 and 2001 respectively)                             2,373        2,987

Investments
  Real estate at cost (net of accumulated deprecia-
    tion of $226 for 2002 and $104 for 2001)                  8,490        4,142

  Real estate lease interests                                   945        1,080

  Affiliated limited partnerships (net of allow-
   ance for losses of $538 and $540 for 2002 and
    2001 respectively)                                        1,066        1,121

Deferred income tax benefits                                  1,447        1,050

Other assets                                                    800          932
                                                           --------     --------

    Total assets                                           $ 79,584     $ 79,690
                                                           ========     ========


See notes to consolidated financial statements.








                                   (continued)



                                       F-2

<PAGE>


                           DVL, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                        (in thousands except share data)
                                   (continued)



                                                               December 31,
                                                           --------------------
                                                            2002         2001
                                                           --------    --------
LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:

  Notes Payable - residual interests                       $ 33,416    $ 35,044
  Underlying mortgages payable                               19,391      22,218
  Long-term debt - affiliates                                 2,084       1,942
  Long-term debt - other                                      8,901       5,067
  Notes payable - litigation settlement                       1,735       1,902
  Redeemed notes payable - litigation settlement                810         596
  Fees due to affiliates                                        573         928
  Security deposits, accounts payable, and accrued
    liabilities (including deferred income of $18
    for 2002 and $17 for 2001)                                  296       1,038
                                                           --------    --------

     Total liabilities                                       67,206      68,735
                                                           --------    --------

Commitments and contingencies

Shareholders' equity:

  Preferred stock $10.00 par value, authorized -
    100 shares for 2002 and 2001, issued - 100 shares
    for 2002 and 2001                                             1           1
  Preferred stock, $.01 par value, authorized 5,000,000
    shares for 2002 and 2001, issued - 0 shares for 2002
    and 2001                                                     --          --
  Common stock, $.01 par value, authorized -
   90,000,000 shares, issued - 21,713,563 shares for
   2002 and 21,313,563 shares for 2001                          217         213
  Additional paid-in capital                                 95,785      95,757
  Deficit                                                   (83,625)    (85,016)
                                                           --------    --------

     Total shareholders' equity                              12,378      10,955
                                                           --------    --------

     Total liabilities and shareholders' equity            $ 79,584    $ 79,690
                                                           ========    ========

See notes to consolidated financial statements.







                                       F-3
<PAGE>


                           DVL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  (in thousands except share and per share data)


                                                 Year Ended December 31,
                                           ----------------------------------
                                              2002        2001        2000
                                           ----------  ----------  ----------
Income from affiliates:

  Interest on mortgage loans               $    2,903  $    3,118  $    3,436
  Gain on satisfaction of mortgage loans          252         615         256
  Partnership management fees                     316         368         454
  Management fees                                 239         804         500
  Transaction and other fees from
   partnerships                                   293         260         413
  Distributions from investments                   84         138         253

Income from others:

  Interest income - residual interests          4,373       2,802          --
  Net rental income (including depreciation
   and amortization of $104 for 2002 and
   $140 for 2001, and $10 for 2000)               561         720         523
  Distributions from investments                   35         667         149
  Other income and interest                        38          63          79
                                           ----------  ----------  ----------

                                                9,094       9,555       6,063
                                           ----------  ----------  ----------

Operating expenses:

  General and administrative                    1,478       1,743       1,353
  Asset Servicing Fee - NPO Management LLC        652         640         623
  Legal and professional fees                     371         344         312
Interest expense:

  Underlying mortgages                          1,648       2,029       2,329
  Notes payable - residual interests            2,771       1,840          --
  Affiliates                                      286         389         434
  Litigation Settlement Notes                     299         484         502
  Others                                          610         551         311
                                           ----------  ----------  ----------

                                                8,115       8,020       5,864
                                           ----------  ----------  ----------

Income before income tax benefit
  and extraordinary (loss) gain                   979       1,535         199

Income tax (benefit)                             (483)       (970)         --
                                           ----------  ----------  ----------


Income before extraordinary (loss) gain         1,462       2,505         199

Extraordinary (loss) gains on the
 settlements of indebtedness                      (71)        361         306
                                           ----------  ----------  ----------

Net income                                 $    1,391  $    2,866  $      505
                                           ==========  ==========  ==========


See notes to consolidated financial statements


                                      (continued)


                                           F-4
<PAGE>


                           DVL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  (in thousands except share and per share data)
                                   (continued)


                                                 Year Ended December 31,
                                       -----------------------------------------
                                           2002           2001          2000
                                       -----------   ------------   ------------
Basic earnings per share:
  Income before extraordinary (loss)
    gain                               $       .06   $        .15   $       .01
    Extraordinary (loss) gains                 .00            .02           .02
                                       -----------   ------------   -----------

      Net income                       $       .06   $        .17   $       .03
                                       ===========   ============   ===========


Diluted earnings per share:
  Income before extraordinary (loss)
    gain                               $       .03   $        .03   $       .01
  Extraordinary (loss) gain                    .00            .00           .00
                                       -----------   ------------   -----------

  Net income                           $       .03   $        .03   $       .01
                                       ===========   ============   ===========

Weighted average shares outstanding -
  basic                                 21,713,563     16,599,517    16,560,450
Effect of dilutive securities           37,062,930    108,172,598    79,777,136
                                       -----------    -----------    ----------

Weighted average shares outstanding -
  diluted                               58,776,493    124,772,115    96,337,586
                                       ===========   ============   ===========




See notes to consolidated financial statements.





                                       F-5
<PAGE>


                           DVL, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                        (in thousands except share data)

<TABLE>
<CAPTION>
                                                                                     Additional
                                                                                      paid-in
                                               Shares  Amount     Shares    Amount    capital     Deficit     Total
                                               ------  ------   ----------  ------   ----------  ---------   -------
<S>                                              <C>   <C>      <C>          <C>       <C>       <C>         <C>
Balance - January 1, 2000                        100   $    1   16,560,450   $ 166     $95,288   $ (88,387)  $ 7,068

Net income                                        --       --           --      --          --         505       505
                                                ----   ------   ----------   -----     -------   ---------   -------

Balance - December 31, 2000                      100        1   16,560,450     166      95,288     (87,882)    7,573
                                                ----   ------   ----------   -----     -------   ---------   -------

Issuance of warrants in connection with
  the purchase of residual interests in
  securitized portfolios                          --       --           --      --         136          --       136

Issuance of common stock in connection with
  exchange of notes payable for stock             --       --    4,753,113      47         333          --       380

Net income                                        --       --           --      --          --       2,866     2,866
                                                ----   ------   ----------   -----     -------   ---------   -------

Balance - December 31, 2001                      100        1   21,313,563     213      95,757     (85,016)   10,955
                                                ----   ------   ----------   -----     -------   ---------   -------

Issuance of common stock as compensation
  for services received                           --       --      400,000       4          28          --        32

Net income                                        --       --           --      --          --       1,391     1,391
                                                ----   ------   ----------   -----     -------   ---------   -------

Balance - December 31, 2002                      100   $    1   21,713,563   $ 217     $95,785   $ (83,625)  $12,378
                                                ====   ======   ==========   =====     =======   =========   =======
</TABLE>


See notes to consolidated financial statements.



                                       F-6
<PAGE>


                           DVL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                         Year Ended December 31,
                                                     ------------------------------
                                                       2002       2001       2000
                                                     --------   --------   --------
<S>                                                  <C>       <C>       <C>
Cash flows from operating activities:

 Income before extraordinary items                   $ 1,462   $  2,505  $    199
  Adjustments to reconcile income before extra-
   ordinary items to net cash provided by (used in)
   operating activities
   Interest income accreted on residual interests       (477)      (381)       --
   Accrued interest added to indebtedness                242        294       273
   Gain on satisfactions of mortgage loans              (252)      (615)     (256)
   Depreciation                                          127         80        10
   Amortization of unearned interest on loans
     receivable                                         (257)      (115)      (62)
   Amortization of real estate lease interests           135        135       136
   Imputed interest on notes                             300        484       502
   Stock issued for services received                     32         --        --
   Net increase in deferred income tax benefits         (397)    (1,050)       --
   Net decrease (increase) in prepaid financing
     and other assets                                    382        303      (390)
   Net (decrease) increase in accounts payable,
     security deposits and accrued liabilities          (743)       444        95
    Net (decrease) in fees due to affiliates            (355)      (345)   (1,094)
    Net increase (decrease) in deferred income             1          4       (22)
                                                     -------     ------   -------

      Net cash provided by (used in) operating
       activities                                        200      1,743      (609)
                                                     -------     ------   -------

Cash flows from investing activities:

Collections on residual interests                         41         --        --
Collections on loans receivable                        3,255      7,872     4,949
Investments in loans receivable                            -       (325)   (2,426)
Real estate acquisitions and capital improvements       (341)      (610)   (3,391)
Net decrease in affiliated limited partnership
  interests and other investments                         13        684       169
                                                     -------    -------   -------

      Net cash provided by (used in) investing
        activities                                     2,968      7,621      (699)
                                                     -------    -------   -------
</TABLE>




See notes to consolidated financial statements


                                      (continued)



                                          F-7
<PAGE>


                           DVL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (continued)

<TABLE>
<CAPTION>
                                                         Year Ended December 31,
                                                     ------------------------------
                                                       2002       2001       2000
                                                     --------   --------   --------
<S>                                                  <C>        <C>        <C>
Cash flows from financing activities:

  Proceeds from new borrowings                       $    400   $    200   $ 6,425
  Repayment of indebtedness                              (736)    (1,288)     (992)
  Payments on underlying mortgages payable             (2,827)    (5,701)   (4,040)
  Payments on notes payable - residual interests         (397)      (105)       --
  Payments related to debt tender offers and
    redemptions                                          (222)      (667)     (171)
                                                     --------   --------   -------

     Net cash (used in) provided by financing
       activities                                      (3,782)    (7,561)    1,222
                                                     --------   --------   -------

Net (decrease) increase in cash                          (614)     1,803       (86)
Cash, beginning of year                                 2,987      1,184     1,270
                                                     --------   --------   -------

Cash, end of year                                    $  2,373      2,987     1,184
                                                     ========   ========   =======

Supplemental disclosure of cash flow
 information:

  Cash paid during the year for interest             $  5,174   $  4,601   $ 2,499
                                                     ========   ========   =======

  Cash paid for income taxes                         $     --   $     44   $    35
                                                     ========   ========   =======
</TABLE>




See notes to consolidated financial statements



                                      (continued)



                                          F-8
<PAGE>


                           DVL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (continued)


                                                   Year Ended December 31,
                                                 ---------------------------
                                                   2002      2001      2000
                                                 -------   -------   -------
Supplemental disclosure of non-cash investing
 and financing activities:

  Net reduction of notes payable - debt
   tender offers and redemptions                 $   436   $   945   $   306
                                                 =======   =======   =======

  Residual interests in securitized portfolios  ($ 1,231)  $36,525   $     -
                                                 =======   =======   =======

  Notes payable - residual interests            ($ 1,231)  $35,124   $     -
                                                 =======   =======   =======

  Foreclosure on mortgage loan receivable
   collateralized by real estate                 $   416   $     -   $     -
                                                 =======   =======   =======

  Purchase of real estate with debt
   financing                                     $ 3,968   $     -   $     -
                                                 =======   =======   =======




See notes to consolidated financial statements.




                                       F-9
<PAGE>


                           DVL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   Dollars in thousands unless otherwise noted
                      (except share and per share amounts)


1.   Summary of Significant Accounting Policies

a. THE COMPANY:  DVL, Inc.  ("DVL or the  "Company")  is a Delaware  corporation
headquartered  in New York, New York.  DVL's common stock is traded on the over-
the-counter  market and is quoted on the OTC Bulletin  Board  maintained  by the
NASD under the symbol "DVLN".  DVL is a commercial finance company which manages
numerous  real  estate  properties  and  partnerships,  and holds  and  services
commercial  mortgage  loans.  DVL's  investments  consist  primarily of residual
interests  in  securitized  portfolios,   commercial  mortgage  loans  due  from
affiliated   partnerships,   limited   partnership   investments  in  affiliated
partnerships  and other real  estate  interests.  DVL has six 100% owned  active
subsidiaries:  Professional  Service  Corporation  ("PSC"),  Del Toch, LLC ("Del
Toch"),  Delborne Land Company, LLC ("Delborne"),  S2 Holdings, Inc. ("S2"), DVL
Mortgage Holdings,  LLC ("DMH") and Delbrook  Holdings,  LLC ("Delbrook") all of
which are consolidated for accounting purposes.  DVL does not consolidate any of
the various  partnerships  (the "Affiliated  Limited  Partnerships") in which it
holds the general partner and limited partner interests nor does DVL account for
such interests on the equity method due to the following:  (i) DVL's interest in
the partnerships as the general partner is a 1% interest,  (the proceeds of such
1% interest is payable to the limited  partnership  settlement  fund pursuant to
the 1993  settlement of the class action  between the limited  partners and DVL)
the ("Limited Partnership Settlement"); (ii) under the terms of such settlement,
the limited  partners  have the right to remove DVL as the general  partner upon
the vote of 70% or more of the limited partners;  (iii) all major decisions must
be approved by a limited  partnership  Oversight Committee in which DVL is not a
member, (iv) there are no operating policies or decisions made by the Affiliated
Limited Partnership, due to the triple net lease arrangements for the Affiliated
Limited  Partnership   properties  and  (v)  there  are  no  financing  policies
determined by the  partnerships  as all  mortgages  were in place prior to DVL's
obtaining  its  interest  and all  potential  refinancings  are  reviewed by the
Oversight  Committee.  Accordingly,  DVL  accounts  for its  investments  in the
Affiliated  Limited  Partnerships,  on a cost basis with the cost basis adjusted
for impairments which took place in prior years. Accounting for such investments
on the equity  method would not result in any material  change to the  Company's
financial position or results of operations.

     Also, DVL has two inactive subsidiaries: Del-Val Capital Corp. ("DVCC") and
RH  Interests,  Inc.  ("RH")  which have been  consolidated  in these  financial
statements.  Additionally, S2 owns 99.9% Class B member interests in Receivables
II-A, LLC and Receivables II-B, LLC which are passive entities created solely to
receive the residual cash flow from the securitized  receivable  pools that each
entity owns. All material intercompany  transactions and accounts are eliminated
in consolidation.

b. RESIDUAL  INTERESTS:  Residual interests  represent the estimated  discounted
cash  flow  of the  differential  of the  total  interest  to be  earned  on the
securitized  receivables  and  the  sum  of  the  interest  to be  paid  to  the
noteholders  and the contractual  servicing fee. Since these residual  interests
are not subject to prepayment  risk they are accounted for as investments  held-
to-maturity  and are carried at amortized cost using the effective yield method.
Permanent  impairments  are recorded  immediately  through  earnings.  Favorable
changes in future cash flows are  recognized  through  earnings as interest over
the remaining life of the retained interest.


                                      F-10
<PAGE>


c. INCOME  RECOGNITION:  Interest income is recognized on the effective interest
method for the residual  interest and all  performing  loans.  The Company stops
accruing interest once a loan becomes non-performing.  A loan is considered non-
performing when scheduled  interest or principal  payments are not received on a
timely basis and in the opinion of  management,  the collection of such payments
in the  future  appears  doubtful.  Interest  income on  restructured  loans are
recorded as the payments are received.  The following table presents  details of
the impared loan portfolio at December 31, 2002 and 2000.

                                             2002                2001
                                             ----                ----

      Mortgage loans receivable            $  2,305            $ 2,247
      Underlying loans                         (622)                --
      Allowance for loan losses                (468)              (945)
      Unearned interest                        (899)              (886)
                                            -------            -------
         Net realizable value              $    316            $   416
                                           ========            =======

      Average impaired loan portfolio      $  1,384            $   681
                                           ========            =======


The Company  recognized no interest income on its impaired loan portfolio during
the years ended December 31, 2002, 2001 and 2000.

Rental income is recognized in income as rent under the related  leases  becomes
due.  DVL records  contingent  rents in the period in which the  contingency  is
resolved.   Management   and   transaction   fees  are   recognized  as  earned.
Distributions  from  investments  are  recorded  as income when the amount to be
received can be estimated and collection is probable.

d. ALLOWANCE FOR LOSSES:  The adequacy of the allowance for losses is determined
through a  quarterly  review  of the  portfolios.  Specific  loss  reserves  are
provided  as  required  based  on  management's  evaluation  of  the  underlying
collateral on each loan or investment.

DVL's  allowance  for  loan  losses  generally  is based  upon the  value of the
collateral underlying each loan and its carrying value.  Management's evaluation
considers the magnitude of DVL's  non-performing  loan  portfolio and internally
generated appraisals of certain properties.

   For the Company's  mortgage loan portfolio,  the  partnership  properties are
valued  based  upon  the cash  flow  generated  by base  rents  and  anticipated
percentage rents or base rent escalations to be received by the partnership. The
value of partnership  properties  which are not subject to percentage  rents was
based upon historial appraisals. Management believes, that generally, the values
of such  properties  have not  changed as the  tenants,  lease  terms and timely
payment  of rent  have  not  changed.  When  any  such  changes  have  occurred,
management  revalues  the  property as  appropriate.  Management  evaluates  and
updates such appraisals,  periodically,  and considers  changes in the status of
the existing tenancy in such  evaluations.  Certain other properties were valued
based upon  management's  estimate of the current market value for each specific
property using similar procedures.

    Allowances  related  to the  Company's  investments  in  Affiliated  Limited
Partnerships  are  adjusted  quarterly  in  order to value  the  investments  at
approximately 14% of the original investment amount due to potential anticipated
losses upon liquidation of these investments.



                                      F-11
<PAGE>


e. LAND,  BULDINGS AND  EQUIPMENT:  Land,  buildings and equipment are stated at
cost.  Depreciation  is provided by charges to  operations on either a straight-
line  basis or  accelerated  basis over their  estimated  useful  lives (5 to 40
years).

f. PREPAID  FINANCING:  Prepaid  financing costs are deferred and amortized over
the term of the  respective  debt  using the  effective  interest  rate  method.
Prepaid financing costs on interest only loans are amortized using the straight-
line method over the term of the financing.

g. IMPAIRMENT OF REAL ESTATE  INVESTMENTS AND REAL ESTATE LEASE  INTERESTS:  DVL
does not have any  impaired  real estate  investments  and/or real estate  lease
interests  at December 31, 2002.  All assets are  analyzed  annually  based upon
prior  appraised  values,  which  are  adjusted  every  year  based on cash flow
assumptions set forth in such appraisals.

h. RESTRICTED CASH: As of December 31, 2002 and 2001, DVL had restricted cash of
$177, and $215, respectively. The restricted cash at December 31, 2002 and 2001,
represents monies owed to the Settlement Fund.

i. FEDERAL INCOME TAXES: DVCC, PSC, RH, Del Toch, S2, DMH, Delbrook and Delborne
are included in DVL's consolidated federal income tax return.

    The Company  accounts for income taxes under the  provisions of Statement of
Financial  Accounting  Standards No. 109 ("FAS 109"), which requires the Company
to recognize deferred tax assets and liabilities for the future tax consequences
attributable to differences  between  financial  statement  carrying  amounts of
existing assets and liabilities and their respective tax bases. In addition, FAS
109 requires the  recognition  of future tax benefits such as net operating loss
carryforwards,  to the extent that  realization  of such benefits is more likely
than not.

j. EARNINGS PER SHARE: Basic per share data is determined by dividing net income
by the weighted average shares outstanding during the period.  Diluted per share
data  is  computed  by  dividing  net  income  by the  weighted  average  shares
outstanding,  assuming all dilutive  potential  common shares were issued.  With
respect to the assumed  proceeds  from the  exercise of  dilutive  options,  the
treasury  stock  method is  calculated  using the average  market  price for the
period.



                                      F-12
<PAGE>


The following table presents the computation of basic and diluted per share data
for the years ended December 31, 2002, 2001 and 2000:

<TABLE>
<CAPTION>
                                       2002                              2001                             2000
                          -------------------------------   ------------------------------    -------------------------------
                                     Weighted                          Weighted                          Weighted
                            Net      Average    Per Share     Net      Average    Per Share     Net      Average    Per Share
                          Income      Shares     Amount     Income      Shares     Amount     Income      Shares     Amount
                          -------   ----------  ---------   -------   ----------  ---------   ------    ----------  ---------
<S>                       <C>       <C>           <C>       <C>       <C>           <C>       <C>       <C>          <C>
Basic EPS, Income
 before extraordinary
 items available to
 common stockholders      $ 1,462   21,713,563    $ .06     $ 2,505   16,599,517    $ .15     $ 199     16,560,450   $ .01
                          =======   ==========    =====     =======   ==========    =====     =====     ==========   =====

Effect of litigation
 settlement notes             299   15,478,297                  484   62,289,639                502     42,047,571

Effective of dilutive
 stock options and
  warrants                     --   21,584,633                   --   45,882,959                 --     37,729,565
                          -------   ----------              -------   ----------              -----     ==========

Diluted EPS, Income
 available to common
 stockholders             $ 1,761   58,776,493    $ .03     $ 2,989  124,772,115    $ .03     $ 701     96,337,586   $ .01
                          =======   ==========    =====     =======  ===========    =====     =====     ==========   =====
</TABLE>

   At December 31, 2002, 2001 and 2000, stock options and warrants excluded from
the computation of Diluted EPS,  because the exercise price was greater than the
average market price of the Common Stock, aggregated 3,983,131,  4,473,131,  and
1,130,131 respectively, thereby resulting in an anti-dilutive effect.

Stock-based  compensation:  Statement of Financial Accounting Standards No. 123,
"Accounting  for  Stock-Based  Compensation"  ("SFAS 123")  allows  companies to
either  expense  the  estimated  fair  value of stock  options  or to follow the
intrinsic value method set forth in APB Opinion 25, "Accounting for Stock Issued
to  Employees"  ("APB 25") but disclose the pro forma  effects on net income had
the fair value of the options been expensed. The Company has elected to continue
to apply APB 25 in accounting for its stock option incentive plans.

Pro forma information regarding net income and earnings per share is required by
Statement of Financial  Accounting Standards No. 123 "Accounting for Stock-Based
Compensation"  ("SFAS No. 123").  Such information has been determined as if DVL
has accounted for its employee stock options under the fair value method of that
statement.  The effect of applying SFAS No. 123 on 2000, 2001 and 2002 pro forma
net income is not  necessarily  representative  of the effects on  reported  net
income for future years due to, among other  things:  (1) vesting  period of the
stock options and(2) the fair value of additional stock options in future years.
Had  compensation  cost for DVL's stock option plans been determined  based upon
the fair value at the grant date for awards under the plans  consistent with the
methodology  prescribed  under SFAS No. 123, DVL's net income in 2002, 2001, and
2000 would have been approximately as follows:

                                                       December 31,
                                            ----------------------------------
                                             2002          2001          2000
                                            ------        ------        ------
Net income                                  $1,391        $2,866        $  505
                                            ======        ======        ======
Earnings per share
  Basic                                     $ 0.06        $ 0.17        $ 0.03
                                            ======        ======        ======
  Diluted                                   $ 0.03        $ 0.03        $ 0.01
                                            ======        ======        ======

Proforma charge for stock options           $    4        $   12        $   --
                                            ======        ======        ======

Proforma net income                         $1,387        $2,854        $  505
                                            ======        ======        ======
Proforma earnings per share
  Basic                                     $ 0.06        $ 0.17        $ 0.03
                                            ======        ======        ======
  Diluted                                   $ 0.03        $ 0.03        $ 0.01
                                            ======        ======        ======


                                      F-13
<PAGE>


k. FAIR  VALUE OF  FINANCIAL  INSTRUMENTS:  As  disclosed  in Note 3, DVL's loan
portfolio  is valued  based on the value of the  underlying  collateral.  As all
loans  are  either  receivables  from  Affiliated  Limited  Partnerships  or are
collateralized  by  interests  in  Affiliated  Limited  Partnerships,  it is not
practical  to  estimate  fair  value  of the  loans.  Due to the  nature  of the
relationship  between the  Alliliated  Limited  Partnerships  and DVL's  general
partner interest in the Affiliated Limited Partnerships and the authority of the
Oversight Committee, the amount at which the loans could be exchanged with third
parties  is not  reasonably  determinable,  as any such  estimate  would have to
consider the intention of the Oversight Committee,  the amounts owed, if any, to
DVL for its interests in the Affiliated Limited Partnerships and any transaction
fees to which DVL  might be  entitled.  See Note 2 for  discussion  on  residual
interests.

l. USE OF ESTIMATES:  The preparation of financial statements in conformity with
accounting  principles  generally  accepted  in the  United  States  of  America
requires  management to make estimates and assumptions  that affect the reported
amounts  of assets and  liabilities  and  disclosure  of  contingent  assets and
liabilities at the date of the financial  statements and the reported amounts of
revenues and expenses during the reporting  period.  Actual results could differ
from those estimates.

m. RECENTLY ISSUED ACCOUNTING STANDARDS: In May 2002, the FASB issued "Statement
of Financial  Accounting  Standards No. 145,  Rescission of FAS Statements 4, 44
and 64, Amendment of FAS Statement 13 and Technical  Corrections"  ("SFAS 145").
SFAS 145 eliminates  Statement 4 (and  Statement 64, as it amends  Statement 4),
which  requires  gains and losses from  extinguishment  of debt to be aggregated
and, if  material,  classified  as an  extraordinary  item,  and thus,  also the
exception  to applying  Opinion 30 is  eliminated  as well.  This  statement  is
effective for fiscal years beginning  after May 2002 for the provisions  related
to the rescission of Statements 4 and 64 and for all  transactions  entered into
beginning May 2002 for the  provision  related to the amendment of Statement 13.
The  Company  does not  expect  that  adoption  of SFAS 145 will have a material
impact on its  operations or financial  position.  However,  as a result of this
pronouncement,  gains  and  losses  from  the  extinguishment  of  debt  will be
classified  as  part  of  operations  rather  than  as  an  extraordinary  item.
Additionally,  upon the Company  adopting this  pronouncement,  the prior years'
financial statements will be restated to conform to the new classification.

In June 2002, the FASB issued "Statement of Financial  Accounting  Standards No.
146,  Accounting for Costs Associated with Exit or Disposal  Activities"  ("SFAS
146").  SFAS 146  requires  recording  costs  associated  with exit or  disposal
activities  at their fair  values  when a  liability  has been  incurred.  Under
previous guidance,  certain exit costs were accrued upon management's commitment
to an exit plan.  We are  required  to adopt  SFAS 146 on  January 1, 2003.  The
Company has not yet determined what impact the adoption of SFAS 146 will have on
its operations and financial positions.


                                      F-14
<PAGE>


2.   Residual Interests In Securitized Portfolios

     During 2001, the Company, through its wholly-owned consolidated subsidiary,
S2 Holdings Inc. ("S2"),  acquired 99.9% Class B member interests in Receivables
II-A LLC, a limited liability company  ("Receivables II-A") and Receivables II-B
LLC, a limited liability company  ("Receivables  II-B"), from an unrelated party
engaged in the acquisition and management of periodic payment  receivables.  The
Class B member interests  entitle the Company to be allocated 99.9% of all items
of income,  loss and  distribution  of Receivables  II-A and  Receivables  II-B.
Receivables II-A and Receivables II-B solely receive the residual cash flow from
five securitized receivable pools after payment to the securitized noteholders.

     The Company  purchased  its interests  for an aggregate  purchase  price of
$35,791,  including  costs of $1,366,  which  included the issuance of warrants,
valued at $136, for the purchase of 3 million shares of the common stock of DVL,
exercisable until 2011 at a price of $.20 per share and investment  banking fees
to an affiliate aggregating $900. The purchase price was paid by the issuance of
8% per annum limited recourse  promissory notes by S2 in the aggregate amount of
$34,425.  Principal and interest are payable from the future  monthly cash flow.
The notes mature August 15, 2020 through  December 31, 2021 and are secured by a
pledge of S2's interests in Receivables II-A,  Receivables II-B and all proceeds
and distributions  related to such interests.  The principal amount of the notes
and the  purchase  price  are  adjusted,  from  time to  time,  based  upon  the
performance  of the  underlying  receivables.  DVL also  issued its  guaranty of
payment of up to $3,443 of the  purchase  price.  The amount of the  guaranty is
regularly  reduced by 10% of the principal  paid.  The amount of the guaranty at
December  31, 2002 was $3,342.  Payments,  if any,  due under this  guaranty are
payable after August 15, 2020.

     In accordance  with the purchase  agreements,  from the  acquisition  dates
through December 31, 2002, the residual interests in securitized  portfolios and
the notes payable were decreased by  approximately  $532 as a result of purchase
price adjustments.

     The following table reconciles the initial purchase price with the carrying
value at December 31, 2002:

Initial purchase price             $ 35,791
Adjustments to purchase price          (532)
Principal payments                      (41)
Accretion                               893
                                    -------
                                   $ 36,111

     The purchase  agreements  contain annual minimum and maximum levels of cash
flow that will be retained  by the  Company,  after the payment of interest  and
principal on the notes payable, which are as follows:

      Years                  Minimum       Maximum
      -----                  -------       -------
   2002 to 2009              $  743        $  880
   2010 to final payment     $1,050        $1,150
     on notes payable*

   * Final payment on the notes payable expected 2016 related to the Receivables
     II-A transaction and 2018 for the Receivables II-B transaction.

The Company believes it will receive  significant cash flows after final payment
of the notes payable.


                                  F-15
<PAGE>


The following  table presents the key economic  assumptions at December 31, 2002
and the  sensitivity  of the  current  fair  value  of  residual  cash  flows to
immediate 10 percent and 20 percent adverse changes in those assumptions:

      Carrying value of residual interests                  $ 36,111
      Fair value of residual interests                      $ 37,481
      Weighted-average life (in years)                          10.5
      Expected credit losses                                    5.41%
        Impact on fair value of 10% adverse change          $    995
        Impact on fair value of 20% adverse change          $  1,982
      Discount rate                                            11.90%
        Impact on fair value of 10% adverse change          $  2,823
        Impact on fair value of 20% adverse change          $  5,317

Those  sensitivities are hypothetical and should be used with caution.  Also, in
this table,  the effect of a variation  in a particular  assumption  on the fair
value  of the  residual  interest  is  calculated  without  changing  any  other
assumption;  in reality,  changes in one factor may result in changes in another
which might magnify or counteract the sensitivities.

3. Mortgage Loans Receivable and Underlying Mortgages Payable

     Virtually all of DVL's loans  receivable arose out of transactions in which
Affiliated  Limited  Partnerships  purchased  commercial,  office and industrial
properties  typically leased on a long-term basis to unaffiliated,  creditworthy
tenants.  Each mortgage loan is collateralized by a lien, primarily  subordinate
to senior  liens,  on real estate owned by an  Affiliated  Limited  Partnership.
DVL's loan  portfolio is comprised of long-term  wrap-around  and other mortgage
loans due from  Affiliated  Limited  Partnerships;  and  loans due from  limited
partners  collateralized by their interests in Affiliated  Limited  Partnerships
("Partners' Notes").

         DVL's  mortgage  portfolio  included 22 and 23 mortgage  loans with net
carrying  values of  $25,677  and  $28,377  as of  December  31,  2002 and 2001,
respectively,  which  are due  from  Affiliated  Limited  Partnerships  that own
properties leased to Wal-Mart Stores,  Inc. Wal-Mart is a public company subject
to the reporting  requirements  of the SEC.  Wal-Mart has closed  certain of its
stores located on the properties  subject to the Company's  mortgages.  However,
Wal-Mart  continues  to pay the required  rent with respect to such leases.  Net
carrying  value refers to the unpaid  principal  balance less any  allowance for
reserves,  and any  amount  which  represents  future  interest  based  upon the
purchase of the loan at a discount.

     DVL is liable for underlying  non-recourse first mortgages on a substantial
portion of its  mortgage  portfolio.  The  underlying  mortgages  are payable to
unrelated  financial  institutions  and bear interest at rates of 6.66% to 14.0%
and require principal and interest payments solely from the proceeds of the wrap
mortgages receivable.



                                      F-16
<PAGE>


     The  Limited  Partner  Settlement,  as well as the  settlements  with other
limited  partnerships,   resulted  in  the  modification  of  terms  of  certain
performing mortgage loans receivable from Affiliated Limited  Partnerships which
bore  interest  at  effective  rates  of up to 15% per  annum,  aggregating  net
carrying  values of $4,914,  and  $5,101,  subject to  underlying  mortgages  of
$2,659,  and $3,087,  at December  31, 2002 and 2001,  respectively,  and mature
through 2027.

     In  addition,  at the time of the  settlement,  the  terms of the  loans to
Kenbee  collateralized  by similar loans were  restructured  and  modified.  The
restructured and modified loans due directly from the partnerships bear interest
at stated rates of up to 15.5% and mature  through 2030. As of December 31, 2002
and  2001  the  modified  loans  due  directly  from  the   Affiliated   Limited
Partnerships aggregated net carrying values of $17,004, and $19,160, and subject
to underlying  mortgages of $12,699, and $14,594,  respectively.  DVL recognized
interest  income on these  restructured  mortgage loans of  approximately  $329,
$352, and $309, for 2002, 2001, and 2000, respectively.




                                      F-17
<PAGE>


     DVL's mortgage and other loans due from Affiliated Limited Partnerships, an
unaffiliated entity and limited partners are as follows:

<TABLE>
<CAPTION>
                                                                   2002                                      2001
                                                  --------------------------------------     --------------------------------------
                                                                    Interest   Allowance                       Interest   Allowance
                                                  Number            Included   For Loan      Number            Included   For Loan
                                                   of       Loan    In Loan     Losses        of       Loan    In Loan     Losses
             Mortgage Loan                        Loans    Balance  Balance    (Note 4)      Loans    Balance  Balance    (Note 4)
----------------------------------------------    ------   -------  --------   ---------     ------  --------  --------   ---------
                                                                               (Dollar amounts in thousands)
<S>                                                 <C>    <C>        <C>      <C>             <C>   <C>         <C>      <C>
Long-term wrap-around mortgage loans ranging
  from $358 to $3,387 in 2002 and from $376 to
  $3,107 in 2001 maturing at various dates
  through May 2029 (a)                              16     $ 26,516   $ 45     $    468        16    $ 27,264    $  21    $    --

Other long-term mortgage loans of $1,292 in
  2002 and ranging from $1,329 to $1,433 in
  2001 maturing at various dates through
  December 2029 (b)                                  1        1,292     --           --         2       2,762       --        945

Long-term  wrap-around and other mortgage
  loans acquired from Kenbee pursuant to the
  Limited Partner  Settlement  ranging from
  $285 and $2,363 in 2002 and from $285 to
  $2,438 in 2001 maturing at various dates
  through June 2031 (c)                             15       18,993     --        1,989        16      21,449       --      2,289

General allowance                                   --           --     --          413        --          --       --        861
                                                  ----     --------  -----     --------      ----    --------     ----    -------

Total mortgage loans                                32       46,801     45        2,870        34      51,475       21      4,095

LOANS COLLATERALIZED BY LIMITED PARTNERSHIP
INTERESTS

Loans ranging from $1 to $54 in 2002 and from
  $1 to $58 in 2001 in default (d) Included
  in pre-paid financing and other assets            18          257     --          215        21         355       --        278

DUE FROM AFFILIATED PARTNERSHIPS

Advances and Other                                   3          101     --           --         5          14       --         --
                                                  ----     --------  -----     --------      ----    --------     ----    -------

Total loans receivable                              53       47,159  $  45     $  3,085        60      51,844     $ 21    $ 4,373
                                                  ====               =====     ========      ====                         =======
Less unearned interest on partnership
  mortgage loans                                             15,579                                    15,908
                                                           --------                                  ========

Net loans receivable                                       $ 31,580                                  $ 35,936
                                                           ========                                  ========

Underlying  mortgages  ranging  from  $105 and
  $2,349  in 2002 and from $197 to $2,424 in
  2001 maturing at various dates through 2011              $ 19,391                                  $ 22,218
                                                           ========                                  ========
</TABLE>


                                      F-18
<PAGE>


Activity on all collateralized loans is as follows:

                                            2002       2001       2000
                                          --------   --------   --------
                                                  (in thousands)

Balance, beginning of year                $ 51,830   $ 54,368   $ 48,802
Investments in loans receivables                --      6,109     13,584
Collections on loans to affiliates          (3,255)    (7,872)    (4,949)
Unearned interest offset against loans
 satisfied, sold and written off                --       (775)    (2,199)
Loans written-off and written down          (1,517)        --       (870)
                                          --------   --------   --------

Balance, end of year                      $ 47,058   $ 51,830   $ 54,368
                                          ========   ========   ========


Unearned interest activity is as follows:
                                            2002       2001       2000
                                          --------   --------   --------

                                                   (in thousands)

Balance, beginning of year                $ 15,908   $ 12,340   $ 5,810
Additional unearned interest in
  connection with new loans receivable          --      4,458     8,791
Amortization to income                        (257)      (115)      (62)
Decrease in connection with the
  satisfaction or write-off of loans           (72)      (775)   (2,199)
                                          --------   --------   -------

Balance, end of year                      $ 15,579   $ 15,908   $ 12,340
                                          ========   ========   ========


     (a) DVL previously funded certain wrap-around mortgages due from Affiliated
Limited  Partnerships,  whereby the  original  principal of the wrap equaled the
outstanding  balance of an  underlying  first  mortgage  loan plus the amount of
funds advanced by DVL to the  partnership.  These loans mature through May 2029,
bear   interest  at  effective   rates  from  10%  to  51%  per  annum  and  are
collateralized  primarily  by second  mortgages  on  commercial  and  industrial
properties  located in various states.  DVL is responsible to make principal and
interest  payments on the first  mortgage  loan to the extent  received from the
borrower  and, in certain  instances,  has the right to refinance or pay off the
first mortgage loan and succeed to its seniority. Currently, the partnerships or
the tenants are making the  underlying  mortgage  payments  directly  and DVL is
applying such payments to its wrap-around mortgage loans. To the extent that the
underlying mortgage payment is less than the wrap- around mortgage payment,  the
partnership  is obligated  to pay DVL the balance.  These wrap- around loans are
subject to underlying mortgage loans of $6,691 in 2002 and $7,624 in 2001, which
bear  interest at rates  ranging from 6.66% to 13.00% per annum,  are payable to
unaffiliated  lenders in monthly  installments,  mature on various dates through
January 2019 and are  collateralized  by liens senior to DVL's liens. See Note 6
for the five year maturities of such underlying loans.

     (b) DVL's other  long-term  mortgage  loans,  exclusive of its  wrap-around
mortgages,  are  collateralized  by one  first  mortgage  aggregating  $1,292 at
December  31, 2002 and two first  mortgages  aggregating  $2,762 at December 31,
2001,  respectively.  These loans mature through December 2029, bear interest at
effective rates of up to 15% per annum and are collateralized by first mortgages
on commercial and industrial  properties.  The scheduled principal maturities of
DVL's commercial mortgage loan portfolio,  excluding wrap-around  mortgages,  in
each of the next five years are $39 in 2003,  $41 in 2004,  $44 in 2005,  $46 in
2006 and $49 in 2007.


                                      F-19
<PAGE>


     (c)  DVL  acquired  long-term  wrap-around  and  other  mortgage  loans  to
Affiliated Limited Partnerships pursuant to the Limited Partner Settlement.  The
principal  balance  of such  loans  when  acquired  in 1992  equaled  DVL's  net
investment  in the  related  loan  previously  due  from  Kenbee  less  specific
write-downs of $18,223 on certain of these loans based upon the anticipated cash
flow to be  generated  by each loan (Note 4).  Although  these loans have stated
interest rates of up to 15.5% per annum, interest, if any, is imputed based upon
the  anticipated  cash  flow  to be  generated  by  each  loan.  The  loans  are
collateralized by first, second and third mortgages on commercial and industrial
properties  located  in  various  states  and  mature  through  June  2031.  The
wrap-around  loans are subject to senior liens of $12,700 in 2002 and $14,594 in
2001,  which bear  interest at rates  ranging  from 6.69% to 14% per annum,  are
payable to unaffiliated  lenders,  mature on various dates through December 2019
and are  collateralized  by liens  senior to DVL's  liens.  The  payment  of the
underlying first mortgages are also being made by the partnerships or tenants as
discussed  in (a)  above.  See  Note 6 for  the  five  year  maturities  of such
underlying loans.

     (d)  DVL  made  loans  directly  to  limited   partners  to  finance  their
partnership  investments.  As a result of the Limited  Partner  Settlement,  DVL
received  loans due from limited  partners in 1992 in  replacement  of loans due
from Kenbee  collateralized by such Partners' Notes. The majority of these loans
were  non-performing at December 31, 2002 and 2001. These assets are included in
other assets on the Balance Sheet.

4.   Allowance for Losses and Other Reserves

Allowance for loan loss activity is as follows:

                                                  2002       2001
                                               ---------   -------
                                                   (in thousands)

Balance, beginning of year                     $   4,373   $ 5,534
Loans satisfied, written-off or written-down      (1,288)   (1,161)
                                               ---------   -------

Balance, end of year                           $   3,085   $ 4,373
                                               =========   =======

5.   Investments

     REAL ESTATE

     The Company currently owns the following properties:

(1) Eight  buildings  totaling  347,000 square feet on eight acres located in an
industrial park in Kearny, NJ leased to various unrelated tenants.

(2) The Company  through its  wholly-owned  subsidiary,  Delbrook  Holding,  LLC
purchased  an 89,000  square foot  building  in Kearny,  NJ,  which  adjoins the
property described above currently leased to K-Mart Stores,  Inc. ("K-Mart") for
$4,016 including costs and the assumption of $2,668, in debt.

(3) A vacant 31,000 square foot former Grand Union Supermarket and approximately
six acres of land  underlying  the building.  On March 12, 2003, the Company has
entered into  agreements to sell the property for $810. The property,  which was
acquired through foreclosure on a mortgage,  was recorded at $416, which was the
net carrying value of the mortgage at the date of foreclosure  and was less than
the fair value at that date.



                                      F-20
<PAGE>


     Affiliated Limited Partnerships

     DVL acquired various interests in Affiliated Limited Partnerships  pursuant
to the terms of certain settlement agreements and through purchases.  Management
valued all of these investments at approximately 14% of the original  investment
amount  due  to  potential   anticipated   losses  upon   liquidation  of  these
investments.  During 2002,  2001 and 2000, DVL recorded income of $84, $138, and
$253, respectively, from distributions received from these investments.

The activity on DVL's  investments  in  Affiliated  Limited  Partnerships  is as
follows:

                                                      2002       2001
                                                     ------     ------
                                                       (in thousands)

Balance, beginning of year                           $1,121     $1,157
Various interests acquired through
 purchases and foreclosed partner notes                  24         94
Distributions received from partnerships                (96)      (328)
Income from partnerships                                 84        138
Change in reserves, net of write-offs                   (67)        60
                                                      -----     ------

Balance, end of year                                 $1,066     $1,121
                                                     ======     ======


     At December  31,  2002,  all of DVL's  investments  in  Affiliated  Limited
Partnerships are pledged to collateralize its indebtedness (Note 6).

     OTHER INVESTMENTS

     In  connection  with  a  1993  litigation  settlement  with  three  related
partnerships  that did not  participate in the Limited Partner  Settlement,  DVL
received   limited   partnership   interests   in  three   partnerships.   These
partnerships' sole assets are the restructured partnership mortgage loans on the
properties  leased to Wal-Mart Stores,  Inc. by the three related  partnerships.
These investments, which are carried on the equity basis, were valued based upon
the anticipated  cash flow to be generated by the  restructured  mortgage loans.
Management  had provided an allowance for losses of $400 as of December 31, 2000
primarily  resulting  from  a  decrease  in  the  estimated  fair  value  of the
underlying  collateral  of one of  the  three  partnership  mortgage  loans.  In
December 2001, the partnerships  refinanced the underlying loans  collateralized
by  the   restructured   mortgage   loans  and  DVL  received  net  proceeds  of
approximately  $1,400,  which was  approximately  $348 in excess of the carrying
value.  The $348 was recorded as income from  distributions  from  investments -
others.



                                      F-21
<PAGE>


6.   Long-Term Debt and Loans Payable Underlying Wrap-around Mortgages

     DVL's long-term debt is comprised of the following loans payable:

                                                      2002       2001
                                                    -------    -------
                                                       (in thousands)

   Loan collateralized by real estate bearing
    interest at 8.50% per annum.  Monthly
    payments are interest only, maturing
    September, 2004                                 $ 4,534    $    --
   Loan collateralized by real estate bearing
    interest at 7.50% per annum with a balloon
    payment due June, 2008 of $2,285                  2,667         --
   Loan to purchase existing mortgages, self-
    amortizing and bearing interest at 8.25% per
    annum, maturing September 2005                      347         --
   Loan collateralized by commercial mortgage
    loans and real estate bearing interest at
    prime plus 1.5% per annum maturing May, 2006        607        824
   Loan collateralized by commercial mortgage
    loans and real estate bearing interest at
    prime plus 1.5% per annum maturing April, 2005      746      1,041
   Loan collateralized by real estate bearing
    interest at 9.5% per annum, maturing June, 2002      --        202
   Loan collateralized by real estate bearing
    interest at 10% per annum, maturing
    December, 2001                                       --      3,000
                                                     ------    -------

                                                      8,901      5,067

   Loan collateralized by commercial mortgages
   and real estate bearing interest at 12% per
   annum, maturing September 2003 (a)                 2,084      1,942
                                                     ------    -------

   Total long-term debt                             $10,985    $ 7,009
                                                    =======    =======

   (a) See Debt Tender Offer (Note 7) for  description  of  financing  agreement
       with Blackacre Bridge Capital, LLC.

     The  aggregate  amount  of  long-term  debt and  loans  payable  underlying
wrap-around  mortgages  (Note  3)  maturing  during  the next  five  years is as
follows:

                                                         Loans Payable
                                          Long-term     Underlying Wrap
                                            Debt        Around Mortgages
                                          ---------     ----------------
                                                  (in thousands)

        2003                              $   2,787         $ 2,416
        2004                                  5,418           2,061
        2005                                    310           2,052
        2006                                     70           2,684
        2007                                     75           2,887
     Thereafter                               2,325           7,291
                                          ---------         -------

                                          $  10,985         $19,391
                                          =========         =======



                                      F-22
<PAGE>


The Company  obtained an unsecured  line of credit on December 15, 2002 for $500
with an  interest  rate of prime plus one  percent  per annum  which  terminates
December 15, 2003.  The terms of the line of credit  provide that interest shall
be payable on the first day of each month.  To date the Company has not drawn on
the line of credit.

     7. Notes Payable - Litigation Settlement/Debt Tender Offers and Redemptions

     In December 1995, DVL completed its obligations  under a 1993 settlement of
its class  action  litigation  by,  among  other  things,  issuing  notes to the
plaintiffs  (the  "Notes") in the  aggregate  principal  amount of $10,387.  The
Notes,  which are general  unsecured  obligations of DVL, accrue interest at the
rate of ten (10%) percent per annum,  with principal  under the Notes,  together
with all accrued and unpaid  interest  thereunder,  due on  December  31,  2005.
Pursuant to the terms of the Notes,  through  December  31,  2000,  DVL paid the
accrued  interest by the issuance of additional  Notes with the principal amount
equal to the accrued interest at each interest due date.

     To date, the Company has sent redemption  letters  ("Redemptions")  to note
holders who held Notes that aggregated  approximately $1,145 offering to pay the
Notes in cash at the face value plus accrued interest of  approximately  $49. As
of December  31,  2002,  $384 has been paid and the  remaining  $810  payable is
reflected as a non-interest bearing liability.

     Additionally,  the Company  entered into an agreement in December 2001 with
Blackacre Bridge Capital, LLC ("BBC") under which BBC exchanged $1,188 principal
amount of Notes ($862 carrying value) for 4,753,113 shares of DVL's common stock
valued at $380.

      Since October 1997,  the Company  conducted  three cash tender offers (the
"Offers") at a Tender Offer price of $0.12 per $1.00 principal amount of Notes.

     Notes with an aggregate  principal  amount of  approximately  $1,951 remain
outstanding as of December 31, 2002 (carrying value $1,735).

     In order to fund the  acquisition  of the  Notes in the  first  and  second
offers,  the Company borrowed from Blackacre Capital Group, LLC ("BCG") (the "BC
Loan"). The BC Loan matures on September 30, 2003 and bears interest at the rate
of 12% per annum compounded monthly, payable at maturity. Total borrowings under
the BC Loan including  accrued  interest were $2,084 as of December 31, 2002. In
addition,  BCG was entitled to acquire 15% of all Notes  acquired by the Company
in excess of $3,998 in  connection  with the first and second  Offers  under the
same terms and conditions as the Company.  BCG acquired Notes  aggregating  $816
under these terms.  The Notes  acquired by BCG accrued  interest of $372 through
December 28, 2001 when the aggregate amount of $1,188 of Notes was exchanged for
Stock.

     The Company's  obligations  under the BC Loan are secured by  substantially
all of the assets of the Company.  The BC Loan is senior to all  indebtedness of
the Company  other than  indebtedness  to NPO and,  with  respect to  individual
assets,  the related secured lender.  The effective interest rate to the Company
for financial reporting purposes,  including the Company's costs associated with
the BC  Loan,  and the  value of the  653,000  shares  issued  to  Blackacre  in
connection  therewith,  is  approximately  14% per  annum.  Interest  payable in
connection with the BC Loan will be deferred until the Company  satisfies all of
its obligations owing to NPO. However,  the Company is required to pay principal
payments  of 15% of all  proceeds  that would  otherwise  be remitted to NPO, to
Blackacre.  Thereafter,  interest  and  principal  will be paid from 100% of the
proceeds  then  available to the Company from the  mortgage  collateral  held as
security for the BC Loan.



                                      F-23
<PAGE>


8.  Transactions with Affiliates

     The members of the Millenium  Group  (defined  below),  the Pembroke  Group
(defined  below),  and the Florida Group are  affiliates of NPM. Keith B. Stein,
the  special  purpose  director  of the  Company  is an  affiliate  of NPM and a
beneficial  owner of more than 5% of the  outstanding  shares  of the  Company's
Common  Stock.  The members of the  Millenium  Group and the Pembroke  Group are
affiliates of NPO. The Pembroke Group ("Pembroke Group") is owned and controlled
by  Lawrence  J.  Cohen,  who is a  beneficial  owner  of  more  than  5% of the
outstanding   shares  of  the  Company's  Common  Stock.  The  Millienium  Group
("Millenium Group") is owned and controlled by Jay Chazanoff, Stephen Simms, and
Ron Jacobs,  each beneficial owners of more than 5% of the outstanding shares of
the Company's Common Stock.  Blackacre and its affiliates are beneficial  owners
of more than 5% of the outstanding shares of the Company's Common Stock.

    A.  OPPORTUNITY FUND

     In April 1998, DVL, an affiliate of Blackacre and affiliates of NPO entered
into a certain Agreement Among Members (the "Opportunity Agreement"),  providing
for an arrangement (the "Opportunity Fund"), pursuant to which entities would be
formed,  from time to time,  to enter into certain  transactions  involving  the
acquisition of limited partnership interests in the assets of, or mortgage loans
to, affiliated limited  partnerships or other assets in which the Company has an
interest.

     As of March 1, 2002, the  Opportunity  Fund had purchased 15 wrap mortgages
of Affiliated  Limited  Partnerships from unaffiliated  third parties,  acquired
limited  partnership  units from  unaffiliated  individuals in three  Affiliated
Limited  Partnerships,  and acquired an  ownership  interest in a property of an
Affiliated  Limited  Partnership.  During  2000,  DVL  purchased  three  of  the
mortgages  owned  by  the  Opportunity   Fund.  During  2001,  a  newly  formed,
wholly-owned  subsidiary  of DVL  purchased  two of the  mortgages  owned by the
Opportunity Fund. As of March 2003, the Opportunity Fund owns four mortgages. In
December 2001, the Opportunity Fund sold its ownership interest in a property in
Kearny,  NJ to an entity in which certain partners are affiliates of NPO. During
2001, DVL was paid  approximately  $280 from the  investments by the Opportunity
Fund, of which $189 was used to pay amounts owed by DVL under a note in favor of
an entity that is part of the  Opportunity  Fund incurred in connection with the
acquisition  of certain  mortgage  loans.  During 2002,  DVL did not receive any
payments from the investments by the Opportunity Fund.

B. Since June 1998, the Company has received fees from a limited partnership (in
which  certain  of its  partners  are  affiliates  of NPO and  Blackacre).  This
agreement  may be terminated  with 30 days notice by either  party.  The Company
receives the following (a) a monthly fee through  November  2000,  and (b) after
all the partners of the partnership have earned a specified return, an incentive
fee of 25% of the profits, as defined in the agreement. For 2002, 2001, and 2000
the Company received  compensation under such agreement equal to $-0-, $443, and
$363, respectively.

C. The Company has received  fees pursuant to a service  agreement  with another
limited  partnership  whose  general  partner is Lawrence  J.  Cohen,  to render
certain accounting and  administrative  services.  As compensation,  the Company
receives  expense  reimbursements  of $4 per month. For 2002, 2001, and 2000 the
Company received aggregate annual compensation under such agreement of $48.

D. The Company received fees from an entity that is part of the Opportunity Fund
in consideration for the Company providing  property  management  services.  For
2002,  2001 and 2000,  the  Company  received  annual  compensation,  under such
agreement equal to $27, $27, and $27, respectively, under such arrangement.



                                      F-24
<PAGE>


E. The Company has received fees from an entity whose partners are affiliates of
NPO,  Messrs.  Cohen,  Chazanoff,  Simms and Jacobs,  in  consideration  for the
Company   providing  certain   accounting  and   administrative   services.   As
compensation, the Company receives a monthly fee of $2 a monthly deferred fee of
approximately  $7 and an annual incentive fee if certain levels of profitability
are attained. The Company recorded fees of $154, $152 and $102 in 2002, 2001 and
2000 which included incentive fees of $52, $50 and $-0-, respectively.

F. The Millenium Group, an affiliate of NPO,  received  approximately  $37, $67,
and $90 for 2002, 2001, and 2000,  respectively,  representing  compensation and
reimbursement  of  expenses  for  collection  services  on notes  payable to the
Company.  In addition,  in 2002, 2001, and 2000 the Company paid or accrued fees
of $108,  $150,  and $25, to the Millenium  Group and $-0-,  $205 and $55 to the
Pembroke Group (another  affiliate of NPO),  respectively,  and in 2002 issued a
total of 400,000  shares of Common Stock,  valued at $32, to the Pembroke  Group
and the Millenium Group for additional  services rendered to the Company outside
the scope of the Asset Servicing  Agreement.  The additional  services  included
advice relating to the redemption and exchange of Notes.

In  connection   with  the  sales  of  property  owned  by  Affiliated   Limited
Partnerships,  a licensed real estate brokerage  affiliate of the Pembroke Group
was paid brokerage fees of $37, $86, and $107, from various  Affiliated  Limited
Partnerships in 2002, 2001 and 2000, respectively.

G. Interest expense on amounts due to affiliates was as follows:

                                        2002      2001       2000
                                        ----      ----       ----

     Blackacre Capital Group, LLC      $ 281     $ 319     $  275
     NPO                                   5        53        149
     Opportunity Fund                      -        17         10
                                       -----     -----     ------

                                       $ 286     $ 389     $  434
                                       =====     =====     ======


H. In connection with the acquisitions of residual interests,  affiliates of NPO
and the special director of the Company will be paid investment  banking fees of
$900 for their services  including the origination,  negotiation and structuring
of the transactions. As of December 31, 2002 $540 of the fee is outstanding. The
fee was calculated as  approximately 2% of the expected cash flow to be received
over the life of the assets.  The total fees will be payable  without  interest,
over a period of 30 months,  which commenced  January 1, 2002, from a portion of
the monthly cash flow generated by the  acquisitions.  The affiliates of NPO are
Lawrence J. Cohen and Jay Chazanoff,  each beneficial  owners of more than 5% of
the outstanding shares of the Company's Common Stock and Keith B. Stein who is a
beneficial  owner of more than 5% of the  outstanding  shares  of the  Company's
Common Stock and the special purpose director of the Company.

I. The law firm of Klehr,  Harrison,  Harvey,  Brazenburg,  & Ellers  ("Klehr"),
Philadelphia, Pennsylvania, of which Alan E. Casnoff, a director of the Company,
is of counsel,  has acted as counsel to the Company since July, 1999. Legal fees
for services  rendered by Klehr to the Company  during the fiscal year ended did
not exceed 5% of the  revenues  of such firm for its most  recent  fiscal  year.
During 2002, 2001, and 2000, the Company and the Affiliated Limited Partnerships
paid Klehr $36, $17 and $19, respectively, for legal services.



                                      F-25
<PAGE>


J. The  Company  recorded  fees to NPO of $652,  $640,  and $623 under the Asset
Servicing Agreement for 2002, 2001 and 2000, respectively plus other expenses of
$10 in each year.  During 2002, 2001 and 2000 the Company  provided office space
under the Asset Servicing  Agreement to NPO consisting of 228 square feet of the
Company's New York location.  The allocated cost for such space was $9, $10, and
$9,  respectively.  The  Company  also paid to NPO $10 during  each of the years
2002, 2001, and 2000 for other expenses.

9.  Commitments, Contingent Liabilities and Legal Proceedings

COMMITMENTS AND CONTINGENT LIABILITIES

     Pursuant to the terms of the Limited  Partner  Settlement,  a fund has been
established  into which DVL is required to deposit 20% of the cash flow received
on certain of its mortgage  loans from  Affiliated  Limited  Partnerships  after
repayment of certain creditors, 50% of DVL's receipts from certain loans to, and
general  partnership  investments  in,  Affiliated  Limited  Partnerships  and a
contribution of 5% of DVL's net income (based on accounting principles generally
accepted in the United States of America) subject to certain  adjustments in the
years 2001 through 2012. The adjustments are significant  enough that no amounts
were accrued for 2001 and 2002.

     During  2000,  the  Company  paid $117 to the fund  which  represented  all
amounts due to/from the fund as of December 31,  2000.  During 2002 and 2001 the
Company expensed approximately $217 and $551,  respectively,  for amounts due to
the fund of which  approximately  $-0-, and $149,  respectively,  was accrued at
year end and paid in January 2002. These costs have been netted against the gain
on  satisfaction  of  mortgages   and/or  interest  on  mortgage  loans,   where
appropriate.

     DVL leases premises  comprising  approximately 5,600 square feet. The lease
for such  office  space is due to expire on January 31,  2008.  The base rent is
$216 per annum, plus real estate and operating expense escalation  clauses.  Net
rent expense was $221, $236, and $189 in 2002, 2001, and 2000, respectively.

     The future minimum rentals during the next five years is as follows:

                  2003                 $   216
                  2004                     216
                  2005                     216
                  2006                     216
                  2007                     216
                  Thereafter                18
                                       -------
                                       $ 1,098
                                       =======

      The real estate lease interest held by the Company's  subsidiary,  PSC, is
subject to a master lease  agreement  through June 2010 which  requires  monthly
payments of  approximately  $39.  The master lease  payments are netted  against
rental income in the Company's financial statements.

     The Asset  Servicing  Agreement,  pursuant  to which NPO is  providing  the
Company with administrative and advisory services,  requires monthly payments of
approximately $55 through May 2008 with cost of living increases.

     In connection  with the Exchange  Agreement  with BBC, if at any time after
December 31, 2005,  BBC is  prevented  from  disposing of any of its shares as a
result  of the  Board of  Directors  determination  that the  transfer  would be
materially adverse to the interest of the Company, then BBC shall have the right
to sell to the Company and the Company  shall be obligated to purchase up to the
number of shares of common  stock which when added to all prior shares of common
stock sold to the  Company by BBC would have an  aggregate  market  value of not
more than $1 million.



                                      F-26
<PAGE>


10.  Shareholders' Equity

Preferred and Common Stock

      The 100 shares of issued  preferred stock carry no specified  dividend but
do receive any  dividend  approved by the Board.  To date,  no dividend has been
authorized  by the Board.  On  liquidation,  the preferred is paid at face value
before the common stock.

      The Company's  By-laws and Certificate of  Incorporation  restrict certain
transfers of the  Company's  capital  stock in order to preserve  certain of the
Company's  federal  income tax  attributes  which could be  jeopardized  through
certain changes in the stock ownership of the Company.

Stock Option Plans

     Pro forma  information  regarding  net  income  and  earnings  per share is
required by Statement of Financial  Accounting Standards No. 123 "Accounting for
Stock-Based Compensation" ("SFAS No. 123"). Such information has been determined
as if DVL has  accounted  for its employee  stock  options  under the fair value
method of that statement.  The effect of applying SFAS No. 123 on 2000, 2001 and
2002 pro forma net income is not  necessarily  representative  of the effects on
reported  net income for future years due to,  among other  things:  (1) vesting
period of the stock options and(2) the fair value of additional stock options in
future years. Had compensation cost for DVL's stock option plans been determined
based  upon the  fair  value  at the  grant  date for  awards  under  the  plans
consistent with the methodology  prescribed under SFAS No. 123, DVL's net income
in 2002, 2001, and 2000 would have been approximately $1,387,  $2,854, and $505,
basic earnings per share would have been $.06, $.17, and $.03,  respectively and
diluted earnings per share would have been $.03, $.03, and $.01, respectively.

     The weighted-average fair value at date of grant for options granted during
the years ended December 31, 2002,  2001, and 2000 was $.12,  $.07, and $.09 per
option,  respectively.  The fair value of options at date of grant was estimated
using the Black-Scholes option price model utilizing the following assumptions:

                                                  December 31,
                                 ----------------------------------------------
                                      2002            2001             2000
                                 -------------   -------------   --------------
Risk-free interest rates         3.87% - 3.87%   4.98% - 4.98%    5.83% - 6.56%
Expected option life in years         10              10                10
Expected stock price volatility       85%             85%               85%
Expected divided yield                 0%              0%                0%

     DVL's 1996 Stock  Option Plan,  as amended  (the  "Plan")  provides for the
grant  of  options  to  purchase  up to  2,500,000  shares  of  Common  Stock to
directors,  officers and key employees of DVL. It includes  automatic  grants of
15,000 options to individuals  upon their becoming  non-employee  directors,  as
well as  automatic  annual  grants  of  15,000  options  to each  non-  employee
director.

     All options are non-qualified stock options.




                                      F-27
<PAGE>


     As of December  31, 2002 and 2001,  there were  outstanding  1,503,131  and
1,473,131  ten year  options,  respectively.  Under the Plan,  the  Company  had
996,869 and 1,026,869 shares of common stock remaining under the Plan for future
grants of stock options as of December 31, 2002 and 2001, respectively.

     The following table summarizes the activity under the Plan:

<TABLE>
<CAPTION>
                                              Year Ended December 31,
                          ----------------------------------------------------------------
                                  2002                 2001                 2000
                          ------------------   -------------------  ----------------------

                                    Weighted              Weighted                Weighted
                                     Average              Average                  Average
                                    Exercise              Exercise                Exercise
                           Shares     Price      Shares    Price      Shares        Price
                          --------- --------   ---------  --------  ---------     --------
<S>                       <C>         <C>      <C>         <C>      <C>            <C>
Options Outstanding at
 Beginning of Year        1,473,131   $0.17    1,278,131   $0.18    1,175,131      $0.19
Granted                      30,000    0.14      195,000    0.07      120,000       0.10
Cancelled                        --      --           --      --      (17,000)      0.21
                          ---------   -----    ---------   -----    ---------      -----

Options Outstanding at
 End of Year              1,503,131   $0.17    1,473,131   $0.17    1,278,131      $0.18
                          =========   =====    =========   =====    =========      =====

Options Exercisable at
 End of Year              1,503,131   $0.17    1,473,131   $0.17    1,278,131      $0.18
                          =========   =====    =========   =====    =========      =====
</TABLE>


                         Year Ended December 31, 2002
---------------------------------------------------------------------------
               Options Outstanding                     Options Exercisable
--------------------------------------------------   ----------------------
                                         Weighted
                            Weighted      Average                  Weighted
  Range of                  Average      Remaining                 Average
  Exercise                  Exercise      Life In                  Exercise
   Price        Shares       Price         Years       Shares       Price
-----------   ---------     --------     ---------   ---------    ---------

$.08   0.12     420,000      $0.09         7.36        420,000      $0.09
 .13 - 0.19     235,000       0.16         5.72        235,000       0.16
 .20 - 0.22     848,131       0.21         4.13        848,131       0.21
-----------   ---------     --------     ---------   ---------    --------

      TOTAL   1,503,131      $0.17         5.28      1,503,131      $0.17
              =========     ========     =========   =========    ========


Warrants and Notes Redeemable in Stock

     During 2001, the Company,  in connection  with the purchase of the residual
interests  issued  warrants to purchase 3 million shares of common stock with an
excercise  price of $0.20  per share  which  expire as  follows:  warrant  for 2
million shares - February 2011; warrant for 1 million shares - August 2011.




                                      F-28
<PAGE>


     In 1996,  the  affiliates  of NPM  acquired  1,000,000  shares  (the  "Base
Shares")  of DVL  Common  Stock  and DVL  issued  to  affiliates  of NPM and NPO
warrants (the  "Warrants") to purchase shares of Common Stock which,  when added
to the Base  Shares,  aggregates  49% of the  outstanding  Common  Stock of DVL,
adjusted  for shares of common  stock  subsequently  issued to and  purchased by
affiliates of NPM and NPO, on a diluted basis  expiring  December 31, 2007.  The
original  exercise  price  of the  Warrants  was  $.16  per  share,  subject  to
applicable anti- dilution provisions and subject to a maximum aggregate exercise
price of $1,900 (the exercise price as of December 31, 2002 is $0.09 per share).
At December  31,  2002,  shares  underlying  the  Warrants  and  exercise  price
aggregated 20,217,900 and $0.09,  respectively.  No warrants have been exercised
through December 31, 2002.

The Company has the option to redeem the outstanding Notes (approximately $1,951
at December 31, 2002) by issuing  additional  shares of Common Stock with a then
current  market  value  (determined  based on a formula set forth in the Notes),
equal to 110% of the face  value  of the  Notes  plus  any  accrued  and  unpaid
interest  thereon.  Because the applicable market value of the Common Stock will
be  determined  at the  time of  redemption,  it is not  possible  currently  to
ascertain  the  precise  number of shares  of Common  Stock  that may have to be
issued to redeem the  outstanding  Notes.  The redemption of the notes may cause
significant dilution for current shareholders. The actual dilutive effect cannot
be currently ascertained since it depends on the number of shares to be actually
issued to satisfy the Notes. The Company  currently  intends to exercise at some
point in the future its redemption option to the extent it does not buy back the
outstanding Notes by means of cash tender offers or cash redemptions.



                                      F-29
<PAGE>


11.  Income Taxes

     The provision for income taxes was as follows (in thousands):

                                              2002           2001          2000
                                              ----           ----          ----
Currently Payable
   Federal                               $     (86)      $     80       $    --
   State                                        --             --            --
                                         --------------------------------------
   Total Current Provision                     (86)            80            --
                                         --------------------------------------
Deferred Provision
   Federal                                    (397)        (1,050)           --
   State                                        --             --            --
                                         --------------------------------------
   Total Deferred (Benefit)                   (397)        (1,050)           --
                                         --------------------------------------
   Total (Benefit)                       $    (483)      $   (970)      $    --
                                         ======================================


The Company's  effective income tax rate as a percentage of income differed from
the U.S. federal statutory rate as shown below:

U.S. Federal Statutory Rate                   34.0%         34.0%         34.0%

Change in Valuation Allowance and            -83.3%        -85.1%        -34.0%
  Utilization of Unrecognized Deferred
  Tax Assets
                                         --------------------------------------
Effective Income Tax Rate                    -49.3%        -51.1%          0.0%
                                         ======================================

Deferred taxes result from timing  differences in the recognition of revenue and
expense  for  tax  and  financial  reporting  purposes.  The  components  of the
provision for deferred taxes were as follows:

Allowance for Losses                     $     585       $    497       $   324
Notes Payable Litigation Settlement            (19)           206           (10)
Other                                           18             41           222
Carrying Value of LP Investments               (44)          (391)         (971)
NOL Carryforwards                            2,086          1,686           216
Retained Interests                          (1,364)          (909)           --
Mortgage Loans                                 141            (69)           87
Change in Valuation Allowance               (1,800)        (2,111)          132
                                         --------------------------------------
Total Deferred (Benefit)                 $    (397)      $ (1,050)      $     0
                                         ======================================


The  significant  components  of  deferred  tax assets and  liabilities  were as
follows:

                                              2002           2001
                                              ----           ----

Allowance for Losses                     $   1,117       $  1,701
Notes Payable Litigation Settlement
  Redeemed Notes                               990            972
Other                                          209            227
Carrying Value of LP Investments            (1,980)        (2,025)
NOL Carryforwards                           20,228         22,314
Retained Interests                           2,273            909
Mortgage Loans                               2,608          2,750
Deferred Tax Asset                          25,445         26,848
Valuation Allowance                        (23,998)       (25,798)
                                         ------------------------
Net Deferred Tax Asset                   $   1,447       $  1,050
                                         ========================



                                      F-30
<PAGE>


Current  taxes  payable  for 2002 have been  reduced by $2,086  relating  to the
utilization  of net  operating  loss  carryforwards.  At December 31, 2002,  the
Company had aggregate  unused net operating loss  carryforwards of approximately
$52 million,  which may be available to reduce future taxable  income,  expiring
through 2019, with approximately $45 million expiring through 2007. The deferred
tax benefit of $1,447 resulted from a reduction in the valuation  allowance,  as
the  Company's   ability  to  utilize  a  portion  of  its  net  operation  loss
carryforwards is more likely than not.

12.  Segment Information

The Company has two reportable segments; real estate and residual interests. The
real estate business is comprised of real estate assets,  mortgage loans on real
estate,   real  estate   management  and   investments  in  Affiliated   Limited
Partnerships which own real estate. The residual interests business is comprised
of investments in residual interests in securitized receivables portfolios.  The
Corporate/Other  net  income  of $472 and $927 in 2002  and  2001,  respectively
include $397 and $1,050 of deferred income tax benefit, respectively.

                                             2002        2001        2000
                                             ----        ----        ----

            Revenues
                    Real estate          $  4,683    $  6,690    $  6,063
              Residual interests            4,373       2,802          --
              Corporate/Other                  38          63          --
                                         --------    --------    --------

       Total consolidated revenues       $  9,094    $  9,555    $  6,063
                                         ========    ========    ========


            Net income (loss)
              Real estate                $   (677)   $    983    $    505
              Residual interests            1,596         956          --
              Corporate/Other                 472         927          --
                                         --------    --------    --------

       Total consolidated net income     $  1,391    $  2,866    $    505
                                         ========    ========    ========


            Assets
              Real estate                $ 42,026    $ 41,734    $ 45,437
              Residual interests           36,111      36,906          --
              Corporate/Other               1,447       1,050          --
                                         --------    --------    --------

        Total consolidated assets        $ 79,584    $ 79,690    $ 45,437
                                         ========    ========    ========


13.  Subsequent Events

     In December 2002 the wrap mortgage  receivable  from an Affiliated  Limited
Partnership  in the amount of $634,  net of unearned  interest  of $650,  became
delinquent.  The mortgage receivable had a specific allowance for loan losses of
$334  associated  with it. The Company does not expect to record a loss when the
collateral is foreclosed on.

     On March 14, 2003 the property collateralizing the wrap mortgage receivable
from an Affiliated  Limited  Partnership  was sold and the Company  received net
proceeds of  approximately  $160 which  should  result in an  estimated  gain of
approximately $86 to be recorded in 2003.



                                      F-31
<PAGE>


DVL, INC.  AND SUBSIDIARIES
Schedule III- REAL ESTATE AND ACCUMULATED DEPRECIATION
IN THOUSANDS

<TABLE>
<CAPTION>
                                                                      Costs Capitalized
                                                                        Subsequent to         Gross Amount of Which Carried
                                                INITIAL COST            Acquisition                 At  Close of Period
                                           -----------------------      ------------      ---------------------------------
                                                      Building and      Building and                 Building and
Description                Encumbrances     Land      improvements      improvements       Land      improvement     Total
-----------                ------------    ------     ------------      ------------      ------     -----------    -------
<S>                          <C>           <C>          <C>               <C>             <C>           <C>          <C>
Supermarket & Land
Fort Edwards, NY             $    --       $   100      $   316                --         $   100       $   316      $   416

Warehouse
 Manufacturing
Kearny, New Jersey           $    --       $    80      $   426           $   127         $    80       $   553      $   633

Warehouse Manu-
facturing & Retail
Kearny, New Jersey           $ 3,000       $   648      $ 2,590           $    --         $   648       $ 2,590      $ 3,238

Leasehold Improve-
ments
Bogota, New Jersey           $    --       $    --      $    19           $     7         $    --       $    26      $    26

Retail Store & Land
Kearny, New Jersey           $ 4,150       $   388      $ 4,016           $    --         $   388       $ 4,016      $ 4,404

                             -------       -------      -------           -------         -------       -------      -------
                             $ 7,150       $ 1,216      $ 7,367           $   134         $ 1,216       $ 7,501      $ 8,717
                             =======       =======      =======           =======         =======       =======      =======
</TABLE>




                                               Life on Which Depreciation
   Accumulated         Date  of          Date        in Latest Income Statement
  Depreciation      Construction       Acquired             is Computed
  ------------      ------------       --------      --------------------------

    $     4            1982              06/02          Straight-line method
                                                              40 years


    $    47            1977              11/98          Straight-line method
                                                              40 years


    $   136            1977              12/00          Straight-line method
                                                              40 years


    $     1            2000              12/00          Straight-line method


    $    38            1987              08/02          Straight-line method
                                                              40 years
    -------
    $   226
    =======

<PAGE>


DVL, INC.  AND SUBSIDIARIES
Schedule III- REAL ESTATE AND ACCUMULATED DEPRECIATION
IN THOUSANDS


                                                       Year ended December 31,
                                                     2002       2001       2000
                                                    ------     ------     ------
(A) Reconciliation of Real Estate Owned
Balance at beginning of year                        $4,246     $3,763     $  506
Additions during the year                            4,471        483      3,257
                                                    ------     ------     ------
Balance at end of year                              $8,717     $4,246     $3,763
                                                    ======     ======     ======


                                                       Year ended December 31,
                                                     2002       2001       2000
                                                    ------     ------     ------
(A) Reconciliation of Accumulated Depreciation
Balance at beginning of year                        $  104     $   26     $   13
Additions during the year:  Depreciation               122         78         13
                                                    ------     ------     ------
Balance at end of year                              $  226     $  104     $   26
                                                    ======     ======     ======


                 See notes to consolidated financial statements


<PAGE>


                              DVL, INC. -- TABLE 1
            LONG TERM MORTGAGES DUE FROM AFFILIATED PARTNERSHIPS (4)

                        DECEMBER 31, 2002 (In Thousands)

<TABLE>
<CAPTION>
                                                         Net      Under-
Security         Location of                             Mtg.     lying
Affiliated        Property       Mortgage   Unearned    Loan      Loan             Monthly  [mortgage(s)
Partnership     Securing Loan    Balance    Interest   Receiv.   Balance    Yield   Amort.    Maturity      upon]        Tenant(s)
-----------------------------------------------------------------------------------------------------------------------------------

<S>             <C>               <C>       <C>        <C>        <C>       <C>      <C>      <C>         <C>            <C>
Alexandria      Wellsville, NY    $  830    $  620     $  210     $  --     51%      $ 1      February    Land and       Eckerd
Associates                                                                                    2027        a commercial   Stores,
                                                                                                          building (1)   Inc.

Alma            Alma, AR           1,803       718      1,085       591     15%      $12      March       Land and       Wal-Mart
Associates (2)                                                                                2027        a commercial   Stores,
                                                                                                          building (1)   Inc.

Ava Associates  Ossipee, NH          808       547        261        --     16%      $--      February    Land and       Hannaford
Associates (2)                                                                                2027        a commercial   Bros. Co.
                                                                                                          building (1)

Brent           Brent, AL          1,349       512        837       448     15%      $ 9      February    Land and       Wal-Mart
Associates (2)                                                                                2027        a commercial   Stores,
                                                                                                          building (1)   Inc.

Champlain       Champlain, NY      1,284       650        634        --     21%      $--      January     Land and       Ames Dept.
Associates                                                                                    2020        a commercial   Stores,
                                                                                                          building (1)   Inc.

Checotah        Checotah, OK       1,404       586        818       455     15%      $ 9      February    Land and       Wal-Mart
Associates (2)                                                                                2027        a commercial   Stores,
                                                                                                          building       Inc. (1)

Edna            Edna, TX           3,079     2,245        834       611     23%      $--      January     Land and       Wal-Mart
Associates                                                                                    2028        a commercial   Stores,
                                                                                                          building       Inc. (1)

Fairbury        Fairbury, NE       1,655       712        943       521     15%      $10      August      Land and       Wal-Mart
Associates (2)                                                                                2027        a commercial   Stores,
                                                                                                          building (1)   Inc.

FYS             Yakima, WA           358        71        287        --     10%      $ 1      August      Land and a     Kroger
Associates                                                                                    2021        supermarket    Co.

Hoosick Falls   Hoosick Falls,     1,292       622        670        --     15%      $10      August      Land and a     GU Markets,
Associates      NY                                                                            2021        supermarket    Inc.
</TABLE>
<PAGE>


                         DVL, INC. -- TABLE 1: CONTINUED
            LONG TERM MORTGAGES DUE FROM AFFILIATED PARTNERSHIPS (4)

                        DECEMBER 31, 2002 (In Thousands)

<TABLE>
<CAPTION>
                                                        Net      Under-
                Location of                             Mtg.     lying                                 Security
Affiliated       Property      Mortgage    Unearned    Loan      Loan             Monthly              [mortgage(s)
Partnership    Securing Loan   Balance     Interest   Receiv.   Balance    Yield  Amort.    Maturity   upon]          Tenant(s)
-------------------------------------------------------------------------------------------------------------------------------

<S>            <C>             <C>       <C>         <C>       <C>         <C>     <C>      <C>        <C>            <C>
Jena           Jena, LA        $ 2,568   $ 1,948     $   620   $   545     35%     $ 1      February   Land and       Wal-Mart
Associates                                                                                  2027       a commercial   Stores, Inc.
                                                                                                       building (1)

Orange Park    Jacksonville,     1,381       534         847       795     12%     $9 with  January    Land and       Toys "R" Us,
Associates     FL                                                                  a final  2020       a commercial   Inc.
                                                                                   pmt. of             building (1)
                                                                                   $672

Port Isabel    Port Isabel,      1,976       745       1,231       644     15%     $12      February   Land and       Wal-Mart
Associates(2)  TX                                                                           2027       a commercial   Stores, Inc.
                                                                                                       building (1)

Stigler        Stigler, OK       2,480     1,899         581       460     28%     $ 2      August     Land and       Wal-Mart
Associates                                                                                  2027       a commercial   Stores, Inc.
                                                                                                       building (1)

St.  Albans    St.  Albans,      1,566       703         863       403     30%     $15      May        Land and a     Fonda Group
Associates     VT                                                                           2029       commercial
                                                                                                       building (1)

Waldron        Waldron, AR       2,953     2,218         735       592     22%     $ --     December   Land and a     Wal-Mart
Associates                                                                                  2031       commercial     Stores, Inc.
                                                                                                       building (1)

Watseka        Watseka, IL       1,022       249         773       627     12%     Varying  December   Land and a     K-Mart
Associates                                                                                  2015       commercial     Corporation(3)
                                                                                                       building (1)
                               -------   -------     -------   -------
                               $27,808   $15,579     $12,229   $ 6,692
</TABLE>


----------
(1)  These loans are wrap-around loans.
(2)  These loans were  restructured as part of the Limited  Partner  Settlement.
     The  settlement  may have the effect of reducing DVL's yield in the future,
     which  reduced  yield is  dependent on the actual  additional  debt service
     received on these mortgages in the future.
(3)  Building  is  currently  vacant,   tenant  has  filed  for  bankruptcy  and
     dissaffirmed  its lease.  (4) DVL's net  investment in these  mortgages was
     $5,537, and $6,494, at December 31, 2002 and 2001, respectively.

<PAGE>


                              DVL, INC. -- TABLE 2
               LONG TERM MORTGAGES, ACQUIRED FROM KENBEE, DUE FROM
                         AFFILIATED PARTNERSHIPS (1)(5)

                        DECEMBER 31, 2002 (In Thousands)

<TABLE>
<CAPTION>
                                                 Partner-   Under-    Net Amt.   Net
                            Location             ship       lying     of Col-    Mtg.
                            of Property          Mortgage   Loan      lateral    Loans
Affiliated Partnership      Securing Loan        Balance    Balance   Pledged    Recvable   Maturity        Tenant
-----------------------------------------------------------------------------------------------------------------------------------
<S>                         <C>                  <C>        <C>       <C>        <C>        <C>             <C>
Aledo Associates LP         Aledo, IL (2)        $ 1,755    $   901   $   854    $ 1,144    November 2018   Wal-Mart Stores, Inc.
Caldwell Associates         Caldwell, TX (2)       1,545        741       804      1,007    May 2019        Wal-Mart Stores, Inc.
Cherokee Associates         Woodstock, GA (2)      2,803      2,349       454      2,363    July 2023       Wal-Mart Stores, Inc.
Clinton Associates          Clinton, IL (2)        3,305        695     2,610      1,789    June 2029       Wal-Mart Stores, Inc.
Columbus Associates         Columbus, TX (2)       3,788        802     2,986      1,724    December 2029   Wal-Mart Stores, Inc.
Covington Associates        Covington, GA (2)      4,691      1,183     3,508      1,797    January 2030    Wal-Mart Stores, Inc.(4)
Douglas Associates          Douglas, GA (2)        2,070        866     1,204      2,047    December 2023   Wal-Mart Stores, Inc.
                                                                                                             operating as - Buds
Elmira Associates           Elmira, NY (2)           704         --       704        285    November 2021   Fays Drug Company, Inc.
Iowa Park Associates LP     Iowa Park, TX (2)      1,659        568     1,091        849    March 2021      Wal-Mart Stores, Inc.
Lawrenceburg Associates     Lawrenceburg, KY (2)   2,924        638     2,286        942    December 2029   Wal-Mart Stores, Inc.
Marshall Associates LP      Marshall, IL (2)       1,503        804       699      1,015    November 2018   Wal-Mart Stores, Inc.
Mt. Pleasant Associates LP  Mt. Pleasant, IA (2)   2,185      1,073     1,112      1,381    November 2019   Wal-Mart Stores, Inc.
Robstown Associates LP      Robstown, TX (2)       1,828        715     1,113        789    October 2020    Wal-Mart Stores, Inc.(4)
Sonya Associates LP         Booneville, MO (2)     1,480        844       636      1,096    June 2018       Wal-Mart Stores, Inc.
Southfield Associates       Southfield, MI (3)     3,583        520     3,063        765    July 2026       Pitney-Bowes, Inc.
                                                 -------    -------   -------    -------

                                                 $35,823    $12,699   $23,124    $18,993
</TABLE>


(1)  These loans were acquired  pursuant to the Limited Partner  Settlement from
     Kenbee.  DVL's loan balance  equals it's net investment in the related loan
     due  previously  from Kenbee,  less specific  write-downs  on certain loans
     based upon the anticipated cash flow to be generated by each loan.
(2)  The loans due from these  partnerships  are secured by mortgages  upon land
     and commercial  buildings.
(3)  The loans due from these  partnerships  are secured by mortgages  upon land
     and office buildings.
(4)  Building is currently vacant,  however, tenant is obligated under the terms
     of the lease to continue to pay rent.
(5)  DVL's total loan balances of these mortgages were $18,993,  and $21,449, at
     December 31, 2002 and 2001,  respectively.  The decrease  resulted from the
     satisfaction of certain mortgage  indebtedness (eg. Winder) and collections
     on certain mortgages.