UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-KSB

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

For the fiscal year ended December 31, 2005

|_|   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURTIES AND
      EXCHANGE ACT OF 1934

For the transition period from ______________________ to _______________________

Commission file number: 1-8356

                                    DVL, INC.
--------------------------------------------------------------------------------
                 (Name of small business issuer in its charter)

            Delaware                                    13-2892858
--------------------------------------------------------------------------------
(State or other jurisdiction of             (I.R.S. employer identification no.)
 Incorporation or Organization)

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

Issuer's telephone number                             (212) 350-9900

      Securities registered under Section 12(b) of the Exchange Act: None
                                                                     ----

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

      Common Stock, $0.01 par value
      -----------------------------
      (Title of Class)

Check whether the issuer is not required to file reports pursuant to Section 13
or 15(d) of the Exchange Act |_|

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes: |X| No: |_|

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

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes: |_| No: |X|

Issuer's revenues for its most recent year were $9,281,790.

The aggregate market value of the voting and non-voting Common Equity of the
Registrant held by non-affiliates as of March 15, 2006 was $3,954,977.

The number of shares outstanding of Common Stock of the Registrant as of March
27, 2006 was 38,315,466.

<PAGE>

                                    DVL, INC.

                INDEX TO ANNUAL REPORT ON FORM 10-KSB FILED WITH
                     THE SECURITIES AND EXCHANGE COMMISSION
                           YEAR END DECEMBER 31, 2005

                              ITEMS IN FORM 10-KSB
                               ------------------

                                                                            Page
                                                                            ----

                                     PART I

Item 1.   Description of Business                                            1
Item 2.   Description of Property                                            7
Item 3.   Legal Proceedings                                                  7
Item 4.   Submission of Matters to a Vote of Security Holders                7

                                     PART II

Item 5.   Market for Common Equity and Related Stockholder Matters           8
Item 6.   Management's Discussion and Analysis or Plan of Operation          9
Item 7.   Financial Statements                                               17
Item 8.   Changes In and Disagreements with Accountants on
            Accounting and Financial Disclosure                              18
Item 8A.  Controls and Procedure                                             18
Item 8B.  Other Information                                                  18

                                    PART III

Item 9.   Directors, Executive Officers, Promoters and Control Persons,
            Compliance with Section 16(a) of the Exchange Act                18
Item 10.  Executive Compensation                                             21
Item 11.  Security Ownership of Certain Beneficial Owners
            And Management and Related Stockholder Matters                   24
Item 12.  Certain Relationships and Related Transactions                     32
Item 13.  Exhibits                                                           35
Item 14.  Principal Accountant Fees and Services                             41

<PAGE>

      This 2005 Annual Report on Form 10-KSB 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 financing, the ability of the
Registrant to successfully implement its business strategy and other risks and
uncertainties that are discussed herein.

All dollar amounts presented herein are in thousands except share and per share
amounts.

ITEM 1. DESCRIPTION OF BUSINESS.

OVERVIEW

      DVL, Inc., a Delaware corporation incorporated in 1977 ("DVL" or the
"Company"), is a commercial finance company which is primarily engaged in (a)
the ownership of residual interests in securitized portfolios, (b) 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") and (c) the ownership of real estate and
performance of real estate asset management and administrative services.

(a) DVL is the 99.9% owner of two entities, which are consolidated for financial
statement purposes, 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 unrelated securitized noteholders.

(b) The mortgage loans held by the Company are primarily "wrap-around" mortgage
loans made to Affiliated Limited Partnerships 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.

(c) DVL is the general partner of approximately 47 Affiliated Limited
Partnerships which own income-producing commercial, office and industrial
properties comprising approximately 2.2 million square feet. A majority of the
properties are subject to triple net leases with various tenants. The principal
tenant is Wal-Mart Stores, Inc. The Company also performs real estate and
partnership management services for these partnerships. The Company, for
numerous reasons detailed in Critical Accounting Policies in Item 6 of this Form
10-KSB, does not consolidate any of the various Affiliated Limited Partnerships
in which it holds the general partner and in some cases limited partner
interests except where DVL has control, nor does DVL account for such interests
on the equity method.

      The Company's other principal assets include (a) real estate interests
held for development, and (b) limited partnership interests in certain
Affiliated Limited Partnerships.


                                       1
<PAGE>

      The Company derives the majority of its income from (a) the residual
interests in securitized receivables portfolios, net of interest expense on the
related notes payable, (b) the wrap-around mortgages to Affiliated Limited
Partnerships (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) fees received as
General Partner of the Affiliated Limited Partnerships (including disposition
and management fees), (f) distributions received as a limited partner in the
Affiliated Limited Partnerships, and (g) fees from management contracts.

      As of December 31, 2005, the Company had net operating loss carry-forwards
("NOLS") aggregating approximately $30,000 which expire in various years through
2019. The Company currently expects to utilize $10,000 of the $23,000 of NOLS
which will expire through 2007. NOLS benefit the Company by offsetting certain
taxable income dollar for dollar by the amount of the NOLS, thereby eliminating
substantially all of the U.S. federal corporate tax on such income. 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 in
securitized portfolios will utilize significant unexpired 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 at least March 2007.
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 or Plan of
Operation."

      Pursuant to the terms of the 1993 settlement of a class action between the
limited partners of Affiliated Limited Partnerships and DVL (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 to income were significant enough that no amounts were accrued for
2004 or 2005. However, as a result of cash flows on certain mortgages the
Company expensed for amounts due to the fund $230 and $275 in 2005 and 2004,
respectively.

      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) acquire additional mortgages
or real estate 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 borrowings or the
issuance of its common or preferred stock (though in order for the Company to
maximize the use of its NOLS the issuance of stock may be limited by the rules
affecting the use of operating loss carry-forwards. See Item 11 for a more
detailed discussion). 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.


                                       2
<PAGE>

      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 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 11 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.

BUSINESS ACTIVITIES

      Residual Interests in Securitized Portfolios

      The Company, through its wholly-owned consolidated subsidiary, S2
Holdings, Inc. ("S2"), owns 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"). The Class B member interests,
which are consolidated into S2 for financial statement reporting purposes,
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 receive all of the residual cash flow from five securitized
receivable pools after payment to the securitized noteholders. The Company
considered Financial Accounting Standards Board Interpretation No. 46R
"Consolidation of Variable Interest Entities" when consolidating S2's ownership
of its member interests. The Company determined that S2's member interests do
not meet the definition of variable interest entities.

      The purchase price for the Class B member interests was paid by the
issuance of 8% per annum limited recourse promissory notes by S2. Principal and
interest are payable from the future monthly cash flow. The notes mature from
August 15, 2020 through December 31, 2021 and are secured by a pledge of S2's
interests in Receivables II-A, Receivable 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, 2005 was
$3,260.

      In accordance with the purchase agreements entered into with respect to
the interests in Receivables II-A and Receivables II-B, from the acquisition
dates through December 31, 2005, the residual interest in securitized portfolios
and the notes payable were increased by approximately $3,772 as a result of
purchase price adjustments. Adjustments to the receivables based on the
performance of the underlying periodic payment receivables, both increases and
decreases, could be material in the future. Permanent impairments are recorded
immediately through results of operations. Favorable changes in future cash
flows are recognized through results of operations as interest over the
remaining life of the retained interest.


                                       3
<PAGE>

      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 in the Overview Section (c), above. Most of
the loans are subordinated obligations with the majority of the payments
received being utilized to amortize the related underlying mortgage loans 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, 2005, the Company had investments in 29 mortgage
loans to Affiliated Limited Partnerships with a carrying value for financial
reporting purposes of $25,455 (prior to the allowance for loan losses of
approximately $2,586). These mortgage loan receivables are subject to underlying
mortgage obligations of $11,928.

      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 23 loans with a net carrying value of
$22,754 as of December 31, 2005, which are due from Affiliated Limited
Partnerships that own properties leased to Wal-Mart Stores, Inc. ("Wal-Mart").
These mortgage loan receivables were subject to underlying mortgage obligations
of $11,201 as of December 31, 2005. Wal-Mart is a public company subject to the
reporting requirements of the SEC. If Wal-Mart closes a store it remains
obligated to pay the rent with respect to such property. 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.

      All of the Company's mortgage loans are pledged to secure the indebtedness
of the Company to NPO Management, LLC ("NPO") subject to prior pledges. NPO is
engaged in real estate lending and management transactions and is affiliated
with certain stockholders and insiders of the Company. See Items 6 and 12 below
for a description of certain related transactions involving NPO.


                                       4
<PAGE>

      Loan Portfolio

      The following table sets forth the loans held by the Company, the
aggregate loan balances, including accrued interest, and the allowances for loan
losses, at December 31, 2005.

<TABLE>
<CAPTION>
                                                       Number     Aggregate    Allowance
                                                         Of         Loan       for Loan
             Type of Loan                               Loans      Amount       Losses
             ------------                            ----------  ----------   ----------
<S>                                                          <C> <C>          <C>
Long-term mortgages due from Affiliated
  Limited Partnerships                                           $   45,787
      Less: unearned interest (1)                                   (20,332)
                                                                 ----------

      Total loans collateralized by mortgages                29      25,455   $    2,586
                                                     ----------  ----------   ----------

Loans collateralized by limited partnership
  Interests                                                  17         229          195
                                                     ----------  ----------   ----------

Advances due from Affiliated Limited Partnerships             6          89           --
                                                     ----------  ----------   ----------

      Total loans                                            52  $   25,773   $    2,781
                                                     ==========  ==========   ==========
</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, 2005 and 2004, the
Company's carrying value of such limited partnership interests was $926 and
$918, respectively.

      Partnership and Property Management

      The Company is the general partner of approximately 47 Affiliated Limited
Partnerships, from which it receives management, transaction and other fees. The
Company does not consolidate any of the Affiliated Limited Partnerships, except
where the Company has control (see Overview, above). Until November 1, 2004, the
Company, through Professional Service Corporation ("PSC"), its wholly-owned
subsidiary, was engaged in the management of an industrial property located in
Bogota, New Jersey pursuant to a master lease. This master lease permitted 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 October 2004, DVL entered into an Agreement with Bogota Associates and
Industrial Associates, the owners of the land underlying the Bogota New Jersey
leasehold, pursuant to which the leasehold was cancelled in consideration of the
aforementioned partnerships agreeing to repay to DVL certain out-of-pocket
expenses including real estate taxes and environmental remediation costs as well
as $50 upon completion of a sale of the property to a third party. As of March
2006, the sale has not yet been consummated and the third party continues to
lease space in Bogota. DVL will receive a proportionate share of the net income
from such lease until such time as DVL has been paid its out-of-pocket expenses
plus $50. The total expenses to be reimbursed to DVL are approximately $626 as
of December 31, 2005 not including the $50 fee. Activity related to the real
estate lease interest is included in discontinued operations.


                                       5
<PAGE>

      Fees for Services

      The Company has provided management, accounting, and administrative
services to certain entities which are affiliated with NPO and/or, Blackacre
Capital Group, L.P. ("BCG"). The fees from management service contracts are as
follows:

                                                          2005              2004
                                                          ----              ----
Affiliate of
------------

NPO and BCG                                              $ 216             $  24
NPO                                                      $ 192             $ 223

      Real Estate Holdings

      The Company, directly and through various wholly owned subsidiaries,
currently owns (or disposed of during the current year) 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, ("DelToch").

      This site represents a portion of the Passaic River Development area
designated for redevelopment by the town of Kearny, New Jersey. The Company is
currently negotiating with the Town of Kearny to be designated as the developer
for the site as well as other sites along Passaic Avenue. There can be no
assurance that the Company will be designated as the developer for such site or
any other site along Passaic Avenue. Pending final resolution of this issue, the
Company continues to lease the property to multiple tenants and receives a
positive cash flow from the property.

(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.

(3) A vacant 31,000 square foot former Grand Union Supermarket and approximately
six acres of land underlying the building located in Fort Edward, NY. The entire
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. During 2004 the
Company reduced the carrying value by the insurance proceeds from a vandalism
claim. The property is currently being carried at $137.

      Employees

      The Company currently leases its employees under an employee "leasing"
contract with Compensation Solutions, Inc. ("CSI"). Under such agreement, all
personnel working for the Company, including the Company's executive officers,
are actually employed by CSI and "leased" to the Company. CSI provides such
employees with their medical, unemployment, workmen's compensation and
disability insurance through group insurance plans maintained by CSI for the
Company and other clients of CSI. Pursuant to the contract, the cost of such
insurance as well as the payroll obligations for the leased employees is funded
by the Company to CSI, and CSI is required to then apply such proceeds to cover
the payroll and administrative costs to the employees. Should CSI fail to meet
its obligations under the contract, the Company would be required to either
locate a substitute employee leasing firm or directly re-employ its personnel.
The contract had an initial term of one year and is now cancelable upon 30 days
written notice by either party.

      As of March 27, 2006, the Company had 10 employees leased through CSI, 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 personnel to
be good.


                                       6
<PAGE>

      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. DESCRIPTION OF PROPERTY.

      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 $216 per annum. A
description of the other properties owned by the Company appears in the
subsection captioned "Real Estate Holdings" in Item 1 above which subsection is
hereby incorporated by reference herein. 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.

No matters were submitted to a vote of security holders by the Company during
the fourth quarter of 2005.


                                       7
<PAGE>

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY 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 15, 2006, the last reported sales price of DVL common stock was $.13
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 2005
and 2004. Such prices are inter-dealer prices without retail mark-up, mark-down
or commission, and do not represent actual transactions.

2005                                                           High        Low
----                                                           ----        ---

Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . .  $  .23     $  .11
Third Quarter  . . . . . . . . . . . . . . . . . . . . . . .     .16        .12
Second Quarter . . . . . . . . . . . . . . . . . . . . . . .     .17        .12
First Quarter  . . . . . . . . . . . . . . . . . . . . . . .     .19        .10

2004
----

Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . .  $  .16     $  .10
Third Quarter  . . . . . . . . . . . . . . . . . . . . . . .     .17        .10
Second Quarter . . . . . . . . . . . . . . . . . . . . . . .     .18        .10
First Quarter  . . . . . . . . . . . . . . . . . . . . . . .     .19        .12

      At March 15, 2006, there were 3,707 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.


                                       8
<PAGE>

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

All dollar amounts presented herein are in thousands except share and per share
amounts.

INTRODUCTION

      The Company is principally a commercial finance company which owns and
services a portfolio of secured commercial mortgage loans. In addition, the
Company owns two securitized receivable portfolios, owns real estate and manages
numerous real properties and limited partnerships which own real properties.

      The Company believes that its anticipated cash flow provided by operations
is sufficient to meet its current cash requirements through at least March 2007.
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
portions of its mortgage portfolio and/or borrowings against its mortgage
portfolio and/or real properties.

      Many of the mortgages currently held by the Company have underlying loans
which are serviced by a substantial portion of the cash flow generated from the
repayment of the Company's mortgage portfolio. A significant portion of these
underlying loans will be fully paid in the years 2008 and 2009 and assuming that
the properties remain leased the mortgages will thereafter provide significant
cash flow to the Company.

      The Company continues to actively pursue additional opportunities to
purchase either mortgages and/or real estate assets. The Company anticipates
that it would finance such acquisitions principally through new borrowings and
secondarily through the issuance of its common or preferred stock (though the
issuance of stock may be limited by the rules affecting the use of operating
loss carryforwards. See Item 11 for a more detailed discussion).

      The Company's current strategy is to continue to maximize the value of its
assets and meet its short term working capital needs by servicing its existing
portfolio and, in addition, expand through the acquisition of assets or
companies that would generate additional income.

      There can be no assurance that the Company will be able to identify or
acquire such assets or businesses. While the Company regularly evaluates and
discusses potential acquisitions, the Company currently has no understandings,
commitments or agreements with respect to any acquisitions.

      At December 31, 2005, the Company had NOLS aggregating approximately
$30,000 which will expire in various years through 2019. The Company expects to
utilize $10,000 of the $23,000 of NOLS which will expire through 2007.

      If the Company generates taxable income in the future, it may be subject
to limitations on the use of its NOLS pursuant to the provisions of the Internal
Revenue Code. It is currently anticipated that the taxable income associated
with the Company's residual interests in securitized receivable portfolios will
continue to utilize significant portions of the Company's 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.


                                       9
<PAGE>

SIGNIFICANT EVENTS

      Recent Debt Redemptions

      In December 2004, in accordance with the formula set forth in the
Company's 10% redeemable promissory notes due December 31, 2005 (the "Notes"),
the Company redeemed approximately $1,171 face value of Notes by issuing
10,577,064 shares of Common Stock.

      As a result of such redemptions, all of the obligations under the Notes
have been satisfied.

RESULTS OF OPERATIONS

      Comparison of the year ended December 31, 2005 to the year ended December
31, 2004.

DVL had income from continuing operations as follows:

                                                           2005            2004
                                                           ----            ----
Income from continuing operations                         $1,813          $1,828

      Interest income on mortgage loans from affiliates increased to $2,847
(before the recognition of a contingent liability of $158) and interest expense
on underlying mortgages decreased. The Company purchased various mortgages in
December of 2004 and the income from these mortgages increased interest income.
As the result of the satisfaction of a loan, the Company recognized a contingent
liability to the Limited Partnership Settlement Fund of $158 which reduced
interest income on mortgage loans.

                                                            2005           2004
                                                            ----           ----
Interest on mortgage loans                                 $2,689         $2,399
Interest expense on underlying mortgages                   $  963         $  993

      Gains on satisfaction of mortgage loans were as follows:

                                                              2005         2004
                                                              ----         ----
                                                            $   --        $  517

The gains in 2004 were a result of the Company collecting net proceeds on the
satisfaction of mortgage loans that were greater than their carrying values.

      Management fees increased as a result of a fee earned for the Company's
role in completing the sale of land by an affiliate of NPO and Blackacre.

                                                              2005         2004
                                                              ----         ----
Management fees                                             $  408        $  247

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

                                                              2005         2004
                                                              ----         ----
                                                            $   34        $  229

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.


                                       10
<PAGE>

      Interest income on residual interest and interest expense on the related
notes payable increased in 2005 vs. 2004 as a result of purchase price
adjustments pursuant to the Purchase Agreements entered into by the Company with
respect to Receivables II-A and Receivables II-B.

                                                             2005          2004
                                                             ----          ----
Interest income on residual interests                       $4,857        $4,360
Interest expense on related notes payable                   $2,792        $2,542

Rental income from others was as follows:

                                                             2005          2004
                                                             ----          ----
Net rental income from others                               $  723        $  640

Gross rental income from others                             $1,440        $1,472

      The increase in net rental income in 2005 from 2004 was the result of
decreased operating costs at the properties. Gross rental income in 2005 was
consistent with 2004.

      Distributions from investments from others decreased in 2005 from 2004
primarily as a result of the Company receiving $84 in distributions from
investments in the Opportunity Fund in 2004. See "Certain Relationships and
Related Transactions" for a discussion of the Opportunity Fund.

                                                             2005          2004
                                                             ----          ----
Distributions from investments - others                     $   46        $  143

      General and administrative expenses increased in 2005 from 2004 primarily
because of an increase in employee costs.

                                                             2005          2004
                                                             ----          ----
General and administrative                                  $1,549        $1,465

      The asset servicing fee paid to NPO increased pursuant to the terms of the
Asset Servicing Agreement, which calls for an adjustment to reflect changes in
the consumer price index.

                                                             2005          2004
                                                             ----          ----
Asset servicing fee                                         $  702        $  683

      Legal and professional fees decreased as a result of a decrease in the
number of property sales by the Company.

                                                             2005          2004
                                                             ----          ----
Legal and professional                                      $  223        $  254


                                       11
<PAGE>

      The Company recorded an additional provision for losses on its mortgage
portfolio of $200 in 2005. The Company also recorded a recovery of provision for
losses of $30 in 2005 which represented monies received that had previously been
written off as uncollectible.

                                                             2005          2004
                                                             ----          ----
Provision for losses                                        $  170        $   --

      Loss on redemption of Notes payable resulted from the exchange of Notes
for common stock, in December 2004, with a market value greater than carrying
value of the Notes.

                                                             2005          2004
                                                             ----          ----
Loss on redemption of Notes payable                         $   --        $  114

      Interest expense to affiliates increased. The interest bearing amount due
to affiliates was greater in 2005 than 2004.

                                                             2005          2004
                                                             ----          ----
Interest expense to affiliates                              $  333        $  317

      Interest expense on litigation settlement Notes decreased as a result of
the Notes being fully redeemed in 2004.

                                                             2005          2004
                                                             ----          ----
Interest expense - Litigation Settlement
                                Notes                       $   --        $  186

      Interest expense relating to other debts increased primarily due to the
Company borrowing an additional $2,349 in 2004 and an increase in interest rates
on variable rate bank loans. The increase from the additional borrowing was
partially offset by reductions in interest expense as a result of the Company
making additional principal payments.

                                                             2005          2004
                                                             ----          ----
Interest expense - others                                   $  819        $  795

      The Company accrued $100 and $100 for alternative minimum taxes in 2005
and 2004 respectively and recognized $115 in tax expense and $80 in tax benefits
resulting from an under-accrual in 2004 and an over-accrual in 2003,
respectively. The Company recognized $297 and $184 of deferred tax benefit in
2005 and 2004, respectively. The deferred tax benefit of $297 in 2005 resulted
primarily from the deferred benefit related to the retained interests net of
deferred tax expense relating to the utilization of net operation loss
carryforwards.

      The deferred tax benefit of $184 in 2004 resulted primarily from a
reduction in the valuation allowance on deferred tax assets.

                                                             2005          2004
                                                             ----          ----
Income tax benefit                                          $   82        $  164


                                       12
<PAGE>

      Discontinued Operations:

      During the years ended December 31, 2005 and 2004 the Company disposed of
certain real estate properties. The sale and operation of these properties for
all periods presented have been recorded as discontinued operations in
compliance with the provisions of statement of Financial Accounting Standards
("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long Lived
Assets."

      The Company also sold its defibrillator business to a non-affiliated
purchaser. The operation of the defibrillator business for all periods presented
have been recorded as discontinued operations.

                                                             2005          2004
                                                             ----          ----
Loss from discontinued operations                           $   83        $  350

LIQUIDITY AND CAPITAL RESOURCES

      The Company's cash balance was $1,863 at December 31, 2005, compared with
$2,768 at December 31, 2004.

      The Company's cash flow from operations is generated principally from
rental income from its 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 2007.
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'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
          -----                  -------        -------
      2005 to 2009               $  743         $  880
      2010 to final payment       1,050          1,150

      *     Final payment on the notes payable expected 2015 related to the
            Receivables II-A transaction and 2017 for the Receivables II-B
            Transaction.

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


                                       13
<PAGE>

Acquisitions and Financings

Loans payable which are scheduled to become due through 2010 are as follows:

<TABLE>
<CAPTION>
                                                                                              Outstanding
                                                                           Original            Principal
                                                                             Loan              Balance at                     Due
         Purpose                            Creditor                        Amount          December 31, 2005                Date
         -------                            --------                        ------          -----------------                ----
<S>                                <C>                                     <C>                <C>                          <C>
Repurchase of Notes
Issued by the Company              Pemmil (1)                              $  2,500           $        2,503               12/27/08

Purchase of Mortgages,
and Refinancing of
Existing Mortgages                 Unaffiliated Bank (2)(3)                $  1,450           $          826               05/01/09

Purchase of Real Estate
Assets                             Unaffiliated Bank (4)                   $  4,500           $        4,529               09/01/06

Purchase of Real Estate Assets
                                   Unaffiliated Bank (5)                   $  2,668           $        2,470               06/30/08

Purchase of Mortgages              Unaffiliated Bank (6)                   $  1,400           $        1,350               01/31/09
</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. This loan is held by affiliates including Messrs.
      Casnoff, Chazanoff and Cohen. (See Item 12)
(2)   This loan self-amortizes.
(3)   Interest rate is prime plus 1.5% per annum payable monthly.
(4)   Interest rate is prime plus 2% per annum. Monthly payments are interest
      only. The due date was extended from March 1, 2006 to September 1, 2006.
      The Company intends to either refinance the outstanding principal amount
      prior to the due date or again extend the due date. There can be no
      assurance that the Company will be able to refinance or extend such loan
      on acceptable terms or at all. The inability of the Company to refinance
      or extend such loan would have a material adverse effect on the Company's
      financial condition.
(5)   Interest rate is 7.5% per annum payable monthly with a balloon payment due
      June 30, 2008 of $2,285.
(6)   Interest rate is prime plus .5% per annum payable monthly. Monthly
      payments are interest only. Annual principal payments of $50 are required.

Contractual Obligations

                                            Payments due by period
                                         Less than   1 - 3     3 - 5   More than
                                 Total     1 Year    Years     Years    5 Years
                                -------   -------   -------   -------   -------
Debt Obligations:
  Debt                          $11,678   $ 4,948   $ 5,530   $ 1,200   $    --

  Underlying mortgages
    Payable                      11,928     2,749     5,161     1,884     2,134
Capital Lease Obligations
Purchase obligations:
  Asset servicing
    agreement(1)                  2,828       707     1,414       707        --
Operating Lease Obligations         450       216       234        --        --
                                -------   -------   -------   -------   -------

                Total:          $26,884   $ 8,620   $12,339   $ 3,791   $ 2,134
                                =======   =======   =======   =======   =======

(1)   Subject to annual cost of living increases - See Item 12. Certain
      Relationships and Related Transactions.


                                       14
<PAGE>

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 liabilities
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 interests 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.

      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.


                                       15
<PAGE>

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 plus a residual
value at the end of the primary term of the lease. The value of the partnership
properties which are not subject to percentage rents was based upon historical
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.

      IMPAIRMENT OF REAL ESTATE INVESTMENTS AND REAL ESTATE LEASE INTERESTS: A
write-down for impairment is recorded based upon a periodic review of the real
estate and real estate lease interests owned by the Company. Real estate and
real estate lease interests are carried at the lower of depreciated cost or
estimated fair value. In performing this review, management considers the
estimated fair value of the property based upon cash flows, as well as other
factors, such as the current occupancy, the prospects for the property and the
economic situation in the region where the property is located. Because this
determination of estimated fair value is based upon future economic events, the
amounts ultimately reflected in an appraisal or realized upon a disposition may
differ materially from the carrying value.

      A write-down is inherently subjective and is based upon management's best
estimate of current conditions and assumptions about expected future conditions.
The Company may provide for write-downs in the future and such write-downs could
be material.

      LIMITED PARTNERSHIPS: DVL does not consolidate any of the various
Affiliated Limited Partnerships in which it holds the general partner and
limited partner interests, except where DVL has control, 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 of which DVL is not a member,

      (iv)  there are no operating policies or decisions made by 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.


                                       16
<PAGE>

ITEM 7. FINANCIAL STATEMENTS

      See "Index to Consolidated Financial Statements" below.

                               Supplementary Data
                               ------------------

                           Quarterly Data (Unaudited)
                      For the Year Ended December 31, 2005

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

<S>                                  <C>                 <C>                 <C>                  <C>                 <C>
Total Revenue                        $     2,150         $     2,660         $     2,109          $     2,363         $     9,282
Net income (loss)                            357                 818                 269                  286               1,730
  Basic earnings per
     share:
Net income                           $       .01         $       .02         $       .01                  .01         $       .05
Diluted earnings per
   Share:
   Net income                        $       .01         $       .01         $       .01          $       .00         $       .03
Weighted average
  Shares outstanding:
  Basic                               38,315,466          38,315,466          38,315,466           38,315,466          38,315,466
  Diluted                             58,666,027          58,939,678          59,112,816           57,931,945          58,668,186
</TABLE>

                           Quarterly Data (Unaudited)
                      For the Year Ended December 31, 2004

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

<S>                                  <C>                 <C>                 <C>                  <C>                 <C>
Total Revenue                        $     2,204         $     2,625         $     2,030          $     2,154         $     9,013
Net income (loss)                            129                 735                 461                  153               1,478
  Basic earnings per
     share:
Net income                           $       .00         $       .03         $       .02                  .00         $       .05
Diluted earnings per
   Share:
   Net income                        $       .00         $       .01         $       .01          $       .00         $       .03
Weighted average
  Shares outstanding:
  Basic                               27,738,402          27,738,402          27,738,402           27,825,337          27,825,337
  Diluted                             55,032,127          55,609,814          56,606,345           56,162,056          57,032,237
</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 report of independent registered public accounting firm of
Imowitz Koenig & Co., LLP, are set forth on pages F-1 through F-32, which
follow. The financial statements are listed in Item 13 hereof.


                                       17
<PAGE>

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

      None

ITEM 8A. CONTROLS AND PROCEDURES

      In designing and evaluating the disclosure controls and procedures, the
Company's management recognized that any controls and procedures, no matter how
well designed and operated, can provide only reasonable assurances of achieving
the desired control objectives, as ours are designed to do, and management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.

      As of the end of the period covered by this report the Company 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, as of December 31, 2005, our disclosure controls and procedures
are effective.

      No change occurred in the Company's internal controls concerning financial
reporting during the Company's fourth quarter that has materially affected, or
is reasonably likely to materially affect, the Company's internal controls over
financial reporting.

ITEM 8B. OTHER INFORMATION

      None

                                    PART III

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

      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, or until their
successors are duly elected and qualified. The term of all executive officers
expires at the next annual meeting of directors, to be held immediately
thereafter. There are no family relationships among the directors or executive
officers of the registrant.

     NAME                          POSITION

Myron Rosenberg           Chairman of the Board
Gary Flicker              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


                                       18
<PAGE>

      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:

      GARY FLICKER (age 47) has served as a director of the Company since
January 2004. Mr. Flicker was Chief Financial Officer and Executive Vice
President of DVL, Inc. from April 1997 to November 2001 and remained employed by
the Company until May 2002. Mr. Flicker is currently President and Chief
Executive Officer of Flick Financial, an accounting/financial consulting firm
headquartered in Atlanta, Georgia. Mr. Flicker is a Certified Public Accountant.

      MYRON ROSENBERG (age 77) has served as a director of the Company since
1977. 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 merchant banking firm of Taurus Global, LLC.

      ALAN E. CASNOFF (age 62) 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 1977 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 November, 2004,
he has been of counsel to Zarwin, Baum, Devito ("Zarwin").

      JAY THAILER (age 37) 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 48) has been a special purpose director of the Company
since September 1996. Mr. Stein is currently a Managing Director of Kimco Realty
Corporation (NYSE: KIM), specializing in investments in real estate and related
securities. Mr. Stein is the Chairman, Chief Executive Officer, and a director
of National Auto Receivables Liquidation, Inc., a position he has held since
1998. From October 1994 to May 1998, Mr. Stein was Managing Director of several
privately held investment and financial advisory firms specializing in real
estate and specialty finance companies. 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 1989 to February 1993, Mr. Stein was associated with the law
firm of Weil, Gotshal & Manges LLP.


                                       19
<PAGE>

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
from the Company's officers and directors that no other reports were required
during or with respect to the fiscal year ended December 31, 2005, all Section
16(a) filing requirements applicable to such persons were satisfied. None of the
shareholders listed as beneficially owning greater than 10% of the Company's
Common Stock in the "Security Ownership of Certain Beneficial Owners" chart in
Item 11 filed a Form 5 for the year ending December 31, 2005. The Company is not
aware whether any of such shareholders had a Form 5 obligation.

D. Code of Ethics

      The Company has adopted a code of ethics that applies to its chief
executive officer and chief financial officer, its principal executive officer
and principal financial officer, respectively, and all of the Company's other
financial executives. The code of ethics is filed as Exhibit 14 of this Form
10-KSB.

E. The Audit Committee consists of Gary Flicker and Myron Rosenberg. DVL's board
of directors has determined that Gary Flicker is an audit committee financial
expert, as defined in Item 401(e)(2) of Regulation S-B.


                                       20
<PAGE>

ITEM 10. 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 2005 and
(if applicable) in 2004 and 2003: (1) the person serving as the Company's chief
executive officer during 2005; (2) those other persons who were serving as
executive officers as of the end of 2005 whose compensation exceeded $100 during
2005:

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                                 Long-Term
                                                         Annual Compensation                Compensation Awards
                                                         -------------------                -------------------

                                                                                                Securities
                                                                                                Underlying
    Name and Principal Position                    Year       Salary            Bonus          Options/SAR
    ---------------------------                    ----       ------            -----          -----------
<S>                                                <C>      <C>               <C>                   <C>
Alan E. Casnoff                                    2005     $      138        $       --                --
President and Chief Executive Officer              2004            132                25                --
                     `                             2003            132                --            100,000 (1)

Jay Thailer                                        2005     $      122        $       13                --
Executive Vice President and                       2004            118                20                --
  Chief Financial Officer                          2003            114                12                --
</TABLE>

(1) Consists of options to purchase shares of Common Stock under the 1996 Stock
Option Plan.


                                       21
<PAGE>

B. OPTION GRANTS IN LAST FISCAL YEAR

      No options were granted by the Company in 2005 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" (a 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, 2005, options to purchase 1,633,131 shares were
outstanding under the Plan and 866,869 shares were available for issuance upon
exercise of options which may be granted in the future.


                                       22
<PAGE>

      C. FISCAL YEAR-END OPTION VALUES

      The following table sets forth information as to options held as of the
end of 2005 by the executive officers named in the Summary Compensation Table.
No options were exercised by said officers in 2005. 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                       $    11
Jay Thailer                       42,000                       $     2

      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 twelve hundred
dollars per month, plus five hundred dollars for each Audit Committee meeting of
the Board of Directors attended. Directors who are officers 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, 2003, 2004 and 2005, 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. The options were
granted under the Plan, which provides for automatic grants of options to
individuals upon their becoming non-employee directors, as well as, 15,000
shares to each incumbent regular director on each anniversary of the adoption of
the Plan. The options vest immediately and are exercisable for a term of ten
(10) years from 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

      The Board of Directors acts in the place of a formal compensation
committee. During 2005, 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.


                                       23
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

      A. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

      The following table sets forth certain information as of March 27, 2006
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                    9,759,872 (1)(4)               20.6%

Milton Neustadter                    5,642,169 (1)(5)               12.8%

Jay Chazanoff                        9,016,647 (2)(6)               19.2%

Ron Jacobs                           8,486,001 (2)(7)               18.2%

Stephen Simms                        8,458,126 (2)(8)               18.2%

Keith B. Stein                       8,654,448 (3)(9)               18.4%

Robert W. Barron                     7,957,876 (3)(10)              17.2%

Adam Frieman                         7,682,726 (3)(11)              16.7%

Peter Offerman                       7,460,823 (3)(12)              16.3%

Joseph Huston                        7,385,108 (3)(13)              16.2%

Jan Sirota                           7,460,823 (3)(14)              16.3%

Neal Polan                           7,460,823 (3)(15)              16.3%

Michael Zarriello                    7,460,823 (3)(16)              16.3%

Mark Mahoney                         7,449,181 (3)(17)              16.3%

The SIII Associates Limited         10,950,619 (3)(18)              22.3%
Partnership Third Addison
Park Corporation and
Gary L. Shapiro

J.G. Wentworth, S.S.C.
   Limited Partnership               3,000,000 (19)                  7.3%
40 Morris Avenue
Bala Cynwyd, PA 19004

Stephen Feinberg                     5,406,113 (20)                 14.1%
299 Park Avenue
22nd Floor
New York, NY  10171


                                       24
<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 beneficially owned 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 4,891,844 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 is c/o Lawrence J.
Cohen, 70 East 55th Street, Seventh Floor, New York, NY 10022.

(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 6,289,211 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 7,233,698 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 Company has not had any
contact with the members of the Florida Group, except Mr. Stein, for a number of
years and the Company is not aware if a group still exists. The address of each
member of the Florida Group is c/o Keith Stein, 280 Park Avenue, 11th Floor,
West, New York, NY 10017.

(4) To the Company's knowledge, Mr. Cohen possesses: (i) the sole power to vote
9,045,194 shares of Common Stock, which includes 8,337,656 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 4,868,028 shares of Common
Stock, which includes 4,160,490 shares of Common Stock issuable upon exercise of
Warrants; and (iv) shared power with the other member of the Pembroke Group to
dispose of 4,891,844 shares of Common Stock, which includes 4,177,166 share of
Common Stock issuable upon the exercise of Warrants held by Mr. Cohen and
714,678 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.


                                       25
<PAGE>

(5) To the Company's knowledge, Mr. Neustadter possesses: (i) the sole power to
vote 1,465,003 shares of Common Stock, which includes 1,426,503 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 750,325 shares of Common Stock,
which includes 711,825 shares of Common Stock issuable upon exercise of
Warrants; and (iv) shared power with the other member of the Pembroke Group to
dispose of 4,891,844 shares of Common stock, which includes 714,678 shares of
Common Stock issuable upon the exercise of Warrants held by Mr. Neustadter and
4,177,166 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) To the Company's knowledge, Mr. Chazanoff possesses: (i) the sole power to
vote 5,160,818 shares of Common Stock, which includes 4,857,048 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 2,727,437 shares of Common
Stock, which includes 2,423,667 shares of Common stock issuable upon exercise of
Warrants; and (iv) shared power with the other members of the Milllennium Group
to dispose of 6,289,211 shares of Common stock, which includes 2,433,381 shares
of Common stock issuable upon the exercise of Warrants held by Mr. Chazanoff and
3,855,830 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) To the Company's knowledge, Mr. Jacobs possesses: (i) the sole power to vote
4,124,705 share of Common Stock, which includes 3,848,133 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 2,196,791 shares of Common Stock,
which includes 1,920,219 shares of Common Stock, issuable upon exercise of
Warrants; and (iv) shared power with the other members of the Millennium Group
to dispose of 6,289,211 shares of Common Stock, which includes 1,927,915 shares
of Common Stock issuable upon the exercise of Warrants held by Mr. Jacobs and
4,361,296 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 Millennium Group.

(8) To the Company's knowledge, Mr. Simms possesses: (i) the sole power to vote
4,096,830 shares of Common Stock, which includes 3,848,133 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 2,168,916 shares of Common
Stock issuable upon the exercise of Warrants which includes 1,920,219 shares of
Common Stock issuable upon exercise of Warrants; and (iv) shared power with the
other members of the Millennium Group to dispose of 6,289,211 shares of Common
Stock, which includes 1,927,915 shares of Common Stock issuable upon the
exercise of Warrants held by Mr. Simms and 4,361,296 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.


                                       26
<PAGE>

(9) To the Company's knowledge, Mr. Stein possesses: (i) the sole power to vote
2,770,381 shares of Common Stock, which includes 2,693,874 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 1,420,750 shares of Common
Stock; which includes 1,344,243 shares of Common stock issuable upon exercise of
Warrants; and (iv) shares power with the other members of the Florida Group to
dispose of 7,233,698 shares of Common Stock, which includes 1,349,631 shares of
Common stock issuable upon the exercise of Warrants held by Mr. Stein and
5,884,067 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 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 1,413,990 shares of Common Stock, which includes 1,376,870 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 724,178 shares of Common Stock,
which includes 687,058 shares of Common Stock issuable upon exercise of
Warrants; and (iv) shared power with the other members of the Florida Group to
dispose of 7,233,698 shares of Common Stock, which includes 689,812 shares of
Common Stock issuable upon the exercise of Warrants held by Mr. Barron and
6,543,886 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 888,167 shares of Common Stock, which includes 876,525 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 449,028 shares of Common Stock,
which includes 437,386 shares of Common Stock issuable upon exercise of
Warrants; and (iv) shared power with the other members of the Florida Group to
dispose 7,233,698 shares of Common Stock, which includes 439,139 shares of
Common Stock issuable upon exercise of Warrants held by Mr. Frieman and
6,794,559 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 443,473 shares of Common Stock, which includes 431,831 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 227,125 shares of Common Stock,
which includes 215,483 shares of Common Stock issuable upon exercise of
Warrants; and (iv) shared power with the other members of the Florida Group to
dispose of 7,233,698 shares of Common Stock, which includes 216,347 shares of
Common stock issuable upon the exercise of Warrants held by Mr. Offerman and
7,017,351 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 295,635 shares of Common Stock, which includes 287,874 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 151,410 shares of Common Stock,
which includes 143,649 shares of Common Stock issuable upon exercise of
Warrants; and (iv) shared power with the other members of the Florida Group to
dispose of 7,233,698 shares of Common Stock, which includes 144,225 shares of
Common Stock issuable upon the exercise of Warrants held by Mr. Huston and
7,089,473 shares of Common Stock issuable upon exercise of Warrants held by the
other members of the Florida Group.


                                       27
<PAGE>

(14) To the Company's knowledge, Mr. Sirota possesses: (i) the sole power to
vote 443,473 shares of Common Stock, which includes 431,831 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 227,125 shares of Common Stock,
which includes 215,483 shares of Common Stock issuable upon exercise of
Warrants; and (iv) shared power with the other members of the Florida Group to
dispose of 7,233,698 shares of Common Stock, which includes 216,347 shares of
Common Stock issuable upon the exercise of Warrants held by Mr. Sirota and
7,017,351 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
443,473 shares of Common Stock, which includes 431,831 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 227,125 shares of Common Stock, which
includes 215,483 shares of Common Stock issuable upon exercise of Warrants; and
(iv) shared power with the other members of the Florida Group to dispose of
7,233,698 shares of Common Stock, which includes 216,347 shares of Common Stock
issuable upon the exercise of Warrants held by Mr. Polan and 7,017,351 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 443,473 shares of Common Stock, which includes 431,831 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 227,125 shares of Common Stock,
which includes 215,483 shares of Common Stock issuable upon exercise of
Warrants; and (iv) shared power with the other members of the Florida Group to
dispose of 7,233,698 shares of Common Stock, which includes 216,347 shares of
Common Stock issuable upon the exercise of Warrants held by Mr. Zarriello and
7,017,351 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 431,831 shares of Common Stock, which includes 431,831 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 215,483 shares of Common Stock,
which includes 215,483 shares of Common Stock issuable upon exercise of
Warrants; and (iv) shared power with the other members of the Florida Group to
dispose of 7,233,698 shares of Common Stock, which includes 216,347 shares of
Common Stock issuable upon the exercise of Warrants held by Mr. Mahoney and
7,017,351 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 7,246,077 shares of Common Stock, which
includes 7,044,223 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 3,716,921 shares of Common Stock, which includes 3,515,067 shares of
Common Stock issuable upon exercise of Warrants; and (iv) shared power with the
other members of the Florida Group to dispose of 7,233,698 shares of Common
Stock, which includes 3,529,156 shares of Common Stock issuable upon the
exercise of Warrants held by the SIII Associates Limited Partnership and
3,704,542 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.


                                       28
<PAGE>

(19) To the Company's knowledge, J.G. Wentworth, S.S.C. Limited Partnership
possesses: (i) the sole power to vote and direct the disposition of 3,000,000
shares of Common Stock, which consists of 3,000,000 shares of Common Stock
issuable upon exercise of Warrants.

(20) Based upon a Schedule 13D, filed with the Commission on January 22, 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 653,000 shares of Common Stock held by Blackacre Capital Group, L.P.


                                       29
<PAGE>

B. SECURITY OWNERSHIP OF MANAGEMENT

      The following table sets forth certain information as of March 27, 2006
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(1)                 Beneficial Ownership             of Class
---------------------               --------------------            ----------
Alan E. Casnoff                         685,000 (2)                    1.8%
Jay Thailer                              64,000 (3)                      *
Myron Rosenberg                         423,854 (4)                    1.1%
Gary Flicker                            195,000 (5)                      *
Keith B. Stein                        8,654,448 (6)                   18.4%
All current directors
and executive officers
as a group (5 persons)               10,022,302 (7)                   21.5%

      o     Less than 1%

(1) Messrs. Casnoff and Thailer are executive officers of the Company. Messrs.
Casnoff, Rosenberg and Flicker are the regular directors. 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 options exercisable within 60 days.

(3) Represents 42,000 shares which may be acquired upon the exercise of options
exercisable within 60 days 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 135,000 shares which may be acquired upon
the exercise of options exercisable within 60 days.

(5) Consists of shares which may be acquired upon the exercise of options
exercisable within 60 days.

(6) To the Company's knowledge, Mr. Stein possesses: (i) the sole power to vote
2,770,381 shares of Common Stock, which includes 2,693,874 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 1,420,750 shares of Common
Stock, which includes 1,344,243 shares of Common Stock issuable upon exercise of
Warrants; and (iv) shared power with the other members of the Florida Group to
dispose of 7,233,698 shares of Common Stock, which consists of 1,349,631 shares
of Common Stock issuable upon the exercise of Warrants held by Mr. Stein and
5,884,067 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 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.


                                       30
<PAGE>

(7) Number of shares and percentage owned includes 3,540,874 shares which may be
acquired through exercise of options and Warrants held by certain of the named
persons, which options and Warrants are exercisable within 60 days. The number
of outstanding shares of 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 beneficially
would directly or through attribution own 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 loan by NPM Capital, LLC ("NPM") in September 1996,
(see "NPM and NPO Transactions" in Item 12, below) 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
Warrants, represent right 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. 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.

      Pursuant to a Stockholder's Agreement entered into among the parties that
acquired the Warrants (each, a "Holder"), 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 currently 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, a Holder may dispose of
all of his or its shares of Common Stock (excluding shares issuable upon
exercise of Warrants). 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.


                                       31
<PAGE>

                      Equity Compensation Plan Information

<TABLE>
<CAPTION>
                                               Number of securities                                                   Number of
                                                 to be issued upon          Weighted average exercise price     securities remaining
                                              exercise of outstanding       of outstanding options warrants         available for
         Plan Category                      options warrants and rights                and rights                  future issuance
         -------------                      ---------------------------     -------------------------------     --------------------
                                                       (a)                                 (b)                           (c)

<S>                                                 <C>                                   <C>                          <C>
Equity compensation approved by
security holders
                                                    1,633,131                             $.16                         866,869
Equity compensation plans not approved
by security holders
                                                       -0-                                 -0-                           -0-
                                                    ---------                             ----                         -------

Total                                               1,633,131                             $.16                         866,869
                                                    =========                             ====                         =======
</TABLE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Pemmil Transaction

To repay the Company's existing obligation to Blackacre in the amount of $2,553,
on December 27, 2005 the Company entered into a Loan and Security Agreement (the
"Pemmil Loan Agreement") with Pemmil Funding, LLC ("Pemmil"), pursuant to which
the Company borrowed from Pemmil $2,500. The Pemmil Loan Agreement provides that
principal and unpaid interest are due December 27, 2008 and provides for
interest at a rate of 12% per annum, compounded monthly. Interest is payable
monthly on the loan, but the Company may elect not to make any such interest
payment when due, and such amount of unpaid monthly interest shall be added to
principal. The Company is required to prepay the loan (plus any accrued and
unpaid interest) to the extent that the Company consummates certain capital
transactions (as defined in the Loan Agreement) that result in net proceeds (as
defined in the Loan Agreement) to the Company. The obligations under the Pemmil
Loan Agreement are secured by a pledge of the Company's equity interest in S2.
The Company may prepay all or a portion of the loan at any time prior to
maturity without penalty or premium.

Certain members of Pemmil are insiders and/or affiliates of the Company,
including Alan Casnoff, the Company's President and a Director of the Company,
and Lawrence J. Cohen, Steve Simms, Ron Jacobs, Keith Stein and Jay Chazanoff,
each of whom is a beneficial owner of greater than 10% of the Company's common
stock. NPO, an affiliate of Messrs. Cohen, Jacobs and Chazanoff is a party to an
asset services agreement with the Company, pursuant to which the Company paid
approximately $702 in 2005. Mr. Stein is a special purpose director of the
Company.

DVL, believes that the rate being charged and the terms obtained are equal to or
better than that which could be obtained in the market place.

      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, principal amount of
Notes for 4,753,113 shares of DVL's common stock. This represents a conversion
rate of $.25 per share.


                                       32
<PAGE>

The Exchange Agreement includes a provision of 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.

      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 (such amounts were fully repaid and satisfied on May 10, 1999);
(ii) 1,000,000 shares of Common Stock (representing 2.6% of the Common Stock now
outstanding) were issued to, and purchase 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 agreement dated March 27, 1996 (the
"Asset Servicing Agreement"). In consideration for such services, the Company
paid NPO $600 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 Asset Servicing Agreement was extended under the same terms and
conditions for another five years to March 2008. The current annual fee is $707.
The Company paid to NPO $702, and $683 in 2005 and 2004, respectively. As of
December 31, 2005 and 2004 the Company had accrued service fees payable to NPO
of $-0- and $44 respectively. During 2005 and 2004 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
during each of 2005 and 2004.

      The members of the Millennium 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 Millennium 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 Millennium Group is comprised of 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.


                                       33
<PAGE>

      Since June 1998, the Company has received fees from a limited partnership
(in which certain of its partners are affiliates of NPO and Blackacre). For 2005
and 2004 the Company received $192 and $-0-, respectively under such agreement.
The limited partnership dissolved as of the end of 2005.

      The Company received fees from an entity whose partners are Lawrence J.
Cohen and Blackacre in consideration for the Company providing property
management services. The Company received aggregate compensation of $24 in each
of the years 2005 and 2004.

      The Company received fees from a company (in which certain of its partners
are affiliates of NPO) in consideration for the Company providing property
management services. During 2005, and 2004, the Company received compensation
equal to $31, and $27, 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, a monthly deferred fee
of approximately $7 and an annual incentive fee if certain levels of
profitability are obtained. The Company recorded fees of $162, and $196, in 2005
and 2004, respectively, which included incentive fees of $60, and $94,
respectively.

      The Millennium Group, an affiliate of NPO, received approximately $18 and
$23 for 2005, and 2004, respectively, representing compensation and
reimbursement of expenses for collection services on notes payable to the
Company. In addition, in 2005 and 2004 the Company paid or accrued fees of $108
and $108, respectively, to the Millennium Group.

      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 $-0-, and $13, from various Affiliated Limited
Partnerships in 2005 and 2004, respectively.

      The Philadelphia, Pennsylvania, law firm of Zarwin, Baum, DeVito,
("Zarwin") of which Alan E. Casnoff, the President and CEO and a director of the
Company is of counsel, has acted as counsel to the Company since November, 2004.
Legal fees for services rendered by Zarwin to the Company during 2005 did not
exceed 5% of the revenues of such firm for its most recent fiscal year.

      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") were
parties to a certain Agreement which is called the Opportunity Agreement (the
"Opportunity Agreement").

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

      During 2004, DVL purchased the remaining assets of the Opportunity Fund
for $2,000 and DVL was paid approximately $484 from the investments by the
Opportunity Fund. The Opportunity Fund was dissolved at the end of 2004.


                                       34
<PAGE>

ITEM 13. EXHIBITS

      The following documents are filed as part of this report:

      The Financial Statements required by Item 7 of this report are listed
      below:

                                     Item 7

                                                                        Page No.
                                                                        --------

      Report of Independent Registered Public Accounting Firm            F - 1

      Consolidated Balance Sheets - December 31, 2005 and 2004           F - 2

      Consolidated Statements of Operations for the years ended
      December 31, 2005 and 2004                                         F - 4

      Consolidated Statements of Shareholders' Equity for the years
      ended December 31, 2005 and 2004                                   F - 6

      Consolidated Statements of Cash Flows for the years ended
      December 31, 2005 and 2004                                         F - 7

      Notes to Consolidated Financial Statements                         F - 10


                                       35
<PAGE>

      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 (Incorporated by
      reference to Exhibit 6(d) to DVL's Form S-1 Registration Statement No.
      2-58847 dated April 28, 1977).

(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, 1977.)

(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, 1983. (Incorporated by reference to DVL's Form 10-K for the
      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 to 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,
      1977. (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.)


                                       36
<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 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  Common Stock Warrant issued by DVL to NPO. (Incorporated by reference to
      DVL's Proxy Statement dated July 31, 1996 - Exhibit F.)

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

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

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

10.9  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.)

10.10 Agreement among Members dated April 10, 1998, by and among Blackacre, PNM,
      Pemmil and DVL. (Incorporated by reference to DVL's Form 10-K for the
      fiscal year ended December 31, 1998.)

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


                                       37
<PAGE>

10.12 Loan Agreement, Promissory Note and Pledge, Collateral Agree- ment and
      Security Agreement, each dated as of March, 2000, each relating to a loan
      from Pennsylvania Business Bank to DVL in the original principal amount of
      $1,000,000. (Incorporated by ref- rence to DVL's Form 10-K for the quarter
      ended June 30, 2000.)

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

10.14 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.)

10.15 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
      refer- ence to DVL's Form 8-K dated May 9, 2001.)

10.16 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 Partner- ship from S2 Holdings, Inc.
      (Incorporated by reference to DVL's Form 8-K dated May 9, 2001.)

10.17 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 Partner- ship from S2 Holdings, Inc.
      (Incorporated by reference to DVL's Form 8-K dated May 9, 2001.)

10.18 Guaranty and Surety Agreement dated April 27, 2001 by and from DVL, Inc.
      in favor 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.)

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

10.20 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 in- terests in securitized portfolios. (Incorporated
      by reference to DVL's Form 8-K dated August 28, 2001.)

10.21 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.)


                                       38
<PAGE>

10.22 Non-Negotiable, Secured Purchase Money Promissory 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.)

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

10.24 Pledge Agreement, dated as of August 20, 2001 by S2 Holdings, Inc. 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.)

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

10.26 Client Service Agreement between the Company and Compensation Solutions,
      Inc. dated March 28, 2003 (Incorporated by reference to DVL's Form 10-Q
      for the quarter ended March 31, 2003.)

10.27 $1,450,000 Promissory Note issued by DVL, Inc. in favor of Pennsylvania
      Business Bank, dated April 28, 2004 (Incorporated by reference to Exhibit
      10.1 to DVL's Form 10-Q for the quarter ended June 30, 2004.)

10.28 Loan Agreement between DVL, Inc. and Pennsylvania Business Bank dated
      April 28, 2004. (Incorporated by reference to Exhibit 10.2 to DVL's Form
      10-Q for the quarter ended June 30, 2004.)

10.29 Promissory Note, dated December 28, 2004, issued by DVL Mortgage Holdings,
      LLC and DVL, Inc. in favor of Harleysville National Bank and Trust
      Company.

10.30 Assignment Agreement, dated as of December 28, 2004, between Rumson
      Mortgage Holdings LLC and DVL Mortgage Holdings LLC, Inc.

10.31 Loan Agreement, dated December 28, 2004, by and among Harleysville
      National Bank and Trust Company and DVL Mortgage Holdings LLC.

*10.32 Loan and Security Agreement, dated December 27, 2005, by and between DVL,
       Inc. and Pemmil Funding, LLC.

14.   Code of Ethics for Senior Financial Officers and Principal Executive
      Officer. (Incorporated by reference to Exhibit 14 to DVL's Form 10-K for
      the year ended December 31, 2003.)

*21.  SUBSIDIARIES OF DVL.


                                       39
<PAGE>

31.1  Chief Executive Officer's Certificate, pursuant to Section 302 of The
      Sarbanes-Oxley Act of 2002.

31.2  Chief Financial Officer's Certificate, pursuant to Section 302 of The
      Sarbanes-Oxley Act of 2002.

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

+     Management Compensatory Plan or arrangement required to be filed as an
      exhibit pursuant to Item 13 of Form 10-KSB.


                                       40
<PAGE>

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

      Audit Fees: The aggregate fees billed or to be billed by the Company's
auditors, Imowitz, Koenig & Co., LLP, for each of the last two fiscal years for
professional services rendered for the audit of the Company's annual financial
statements, review of financial statements included in the Company's quarterly
reports on Form 10-QSB and services that were provided in connection with
statutory and regulatory filings or engagements were $99 for 2005 and $77 for
2004.

      Tax Fees: The aggregate fees billed by Imowitz Koenig & Co., LLP in each
of the last two fiscal years for professional services rendered for tax
compliance, tax advice and tax planning were $28 for 2005, and $20 for 2004.

      All other fees: There were no other services performed for 2005 or 2004.

      Pursuant to the requirements of the Sarbanes-Oxley Act of 2002, the terms
of the engagement of Imowitz Koenig & Co., LLP are subject to the specific
pre-approval of the Audit Committee. All audit and permitted non-audit services
to be performed by Imowitz Koenig & Co., LLP require pre-approval by the Audit
Committee. The procedures require all proposed engagements of Imowitz Koenig &
Co., LLP for services of any kind to be submitted for approval to the Audit
Committee prior to the beginning of any services. The Company's audit and tax
services proposed for 2005 along with the proposed fees for such services were
reviewed and approved by the Company's Audit Committee.


                                       41
<PAGE>

                                   SIGNATURES

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

                                               DVL, INC.


Dated: March 27, 2006                          By: /s/ Alan E. Casnoff
                                                   -----------------------------
                                                   Alan E. Casnoff, President
                                                   and Chief Executive Officer

            Pursuant to the requirements of the Securities and Exchange Act of
1934, this report to be 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, 2006
                            Chief Financial Officer
                            (Principal Financial and
                            Accounting Officer)


/s/ Alan E. Casnoff
----------------------
Alan E. Casnoff             Director, President and Chief        March 27, 2006
                            Executive Officer (Principal
                            Executive Officer)


/s/ Gary Flicker
----------------------
Gary Flicker                Director                             March 27, 2006


/s/ Myron Rosenberg
----------------------
Myron Rosenberg             Director                             March 27, 2006


                                       42
<PAGE>

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                 Consolidated Financial Statements of DVL, Inc.
  And Subsidiaries and Report of Independent Registered Public Accounting Firm

                                                                          Page
                                                                          ----

Report of Independent Registered Public Accounting Firm                   F - 1

Consolidated Balance Sheets - December 31, 2005 and 2004                  F - 2

Consolidated Statements of Operations for the years ended
  December 31, 2005 and 2004                                              F - 4

Consolidated Statements of Shareholders' Equity for the
  years ended December 31, 2005 and 2004                                  F - 6

Consolidated Statements of Cash Flows for the years ended
  December 31, 2005 and 2004                                              F - 7

Notes to Consolidated Financial Statements                                F - 10

<PAGE>

             Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders
DVL, Inc.

We have audited the accompanying consolidated balance sheets of DVL, Inc. and
subsidiaries (the "Company") as of December 31, 2005 and 2004 and the related
consolidated statements of operations, shareholders' equity and cash flows for
the years then ended. 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of the
Company's internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the consolidated financial statements. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall consolidated financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of DVL, Inc. and
subsidiaries as of December 31, 2005, and 2004 and the results of their
operations and their cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.


                                              /s/Imowitz Koenig & Co., LLP

New York, New York
March 2, 2006


                                      F - 1
<PAGE>

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

<TABLE>
<CAPTION>
                                                                    December 31,
                                                                 -----------------
ASSETS                                                             2005      2004
------                                                           -------   -------

<S>                                                              <C>       <C>
Residual interests in securitized portfolios                     $42,198   $37,334
                                                                 -------   -------

Mortgage loans receivable from affiliated partnerships (net
of unearned interest of $20,332 for 2005 and $21,397 for 2004)
                                                                  25,455    27,151

    Allowance for loan losses                                      2,586     2,386
                                                                 -------   -------

    Net mortgage loans receivable                                 22,869    24,765
                                                                 -------   -------

Cash and cash equivalents (including restricted cash of
    $24 and $176 for 2005 and 2004 respectively)                   1,863     2,768

Investments
  Real estate at cost (net of accumulated depreciation and
    amortization of $778 for 2005 and $589 for 2004)               7,805     7,928

  Affiliated limited partnerships (net of allowance for
    losses of $448 for 2005 and 2004 respectively)                   926       918

Net Deferred tax asset                                             2,295     1,998

Other assets                                                         765     1,053
Other assets of discontinued operations                              626       598
                                                                 -------   -------

Total assets                                                     $79,347   $77,362
                                                                 =======   =======
</TABLE>

                                   (continued)

See notes to consolidated financial statements.


                                       F-2
<PAGE>

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

<TABLE>
<CAPTION>
                                                                 December 31,
                                                             --------------------
                                                               2005        2004
                                                             --------    --------

LIABILITIES AND SHAREHOLDERS' EQUITY

<S>                                                          <C>         <C>
Liabilities:

    Notes Payable - residual interests                       $ 36,227    $ 32,648

    Underlying mortgages payable                               11,928      14,485
    Debt - other                                                9,175       9,921
    Debt - affiliates                                           2,503       2,456
    Redeemed notes payable - litigation settlement                789         790
    Fees due to affiliates                                         --          44
    Security deposits, accounts payable and accrued
      liabilities (including deferred income of $18 for
      2005 and $16 for 2004)                                      485         486
    Liabilities of discontinued operations                         90         115
                                                             --------    --------

  Total liabilities                                            61,197      60,945
                                                             --------    --------

  Commitments and contingencies

  Shareholders' equity:
     Preferred stock $10.00 par value, authorized -
       100 shares for 2005 and 2004 issued and outstanding
       100 shares for 2005 and 2004                                 1           1
     Preferred stock, $.01 par value, authorized 5,000,000
       shares for 2005 and 2004, issued and outstanding -
       0 shares for 2005 and 2004                                  --          --
     Common stock, $.01 par value, authorized -
       90,000,000 shares, issued and outstanding -
       38,315,466 shares for 2005 and 38,315,466 shares
       for 2004                                                   383         383
     Additional paid-in capital                                97,635      97,632
     Deficit                                                  (79,869)    (81,599)
                                                             --------    --------

     Total shareholders' equity                                18,150      16,417
                                                             --------    --------

     Total liabilities and shareholders' equity              $ 79,347    $ 77,362
                                                             ========    ========
</TABLE>

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)

                                                            2005          2004
                                                          -------       -------

Income from affiliates:
   Interest on mortgage loans                             $ 2,689       $ 2,399
   Gain on satisfaction of mortgage loans                      --           517
   Partnership management fees                                327           281
   Management fees                                            408           247
   Transaction and other fees from partnerships                34           229
   Distributions from partnerships                             98           147

Income from others:
   Interest income - residual interests                     4,857         4,360
   Net rental income (including depreciation and
     amortization of $194 for 2005 and $188 for 2004          723           640
   Distributions from investments                              46           143
   Other income and interest                                  100            50
                                                          -------       -------

                                                            9,282         9,013
                                                          -------       -------

Operating expenses:
   General and administrative                               1,549         1,465
   Asset Servicing Fee - NPO Management LLC                   702           683
   Legal and professional fees                                223           254
   Provision for losses                                       170            --
   Loss on redemption of notes payable                         --           114

Interest expense:
   Underlying mortgages                                       963           993
   Notes payable - residual interests                       2,792         2,542
   Affiliates                                                 333           317
   Litigation Settlement Notes                                 --           186
   Others                                                     819           795
                                                          -------       -------

                                                            7,551         7,349
                                                          -------       -------

Income from continuing operations before income
  tax benefit                                               1,731         1,664

Income tax benefit                                             82           164
                                                          -------       -------

Income from continuing operations                           1,813         1,828
                                                          -------       -------

Loss from discontinued operations -
   net of tax of $0 in all years                              (83)         (350)
                                                          -------       -------

Net income                                                $ 1,730       $ 1,478
                                                          =======       =======

                                  (continued)

See notes to consolidated financial statements.


                                       F-4
<PAGE>

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

                                                    2005              2004
                                                --------------   --------------

Basic earnings per share:

  Income from continuing
    Operations                                  $          .05   $          .06
   Loss from discontinued operations                      (.00)            (.01)
                                                --------------   --------------
   Net income                                   $          .05   $          .05
                                                ==============   ==============

Diluted earnings per share:

   Income from continuing
    Operations                                  $          .03   $          .04
   Loss from discontinued operations                      (.00)            (.01)
                                                --------------   --------------
   Net income                                   $          .03   $          .03
                                                ==============   ==============

Weighted average shares outstanding - basic         38,315,466       27,825,337
Effect of dilutive securities                       20,352,720       29,206,900
                                                --------------   --------------

Weighted average shares outstanding - diluted       58,668,186       57,032,237
                                                ==============   ==============

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>
                                             Preferred Stock          Common Stock         Additional
                                         ----------------------   -----------------------   Paid - In
                                           Shares     Amount        Shares      Amount       Capital       Deficit         Total
                                         ---------  -----------   ----------  -----------  -----------   -----------   -----------

<S>                                            <C>  <C>           <C>         <C>          <C>           <C>           <C>
Balance - January 1, 2004                      100  $         1   27,738,402  $       277  $    96,464   $   (83,077)  $    13,665

Effect of issuance of options                   --           --           --           --            5            --             5

Issuance of common stock in connection
  with repayment of notes payable               --           --   10,577,064          106        1,163            --         1,269

Net income                                      --           --           --           --           --         1,478         1,478
                                         ---------  -----------   ----------  -----------  -----------   -----------   -----------

Balance - December 31, 2004                    100            1   38,315,466          383       97,632       (81,599)       16,417
                                         ---------  -----------   ----------  -----------  -----------   -----------   -----------

Net income                                      --           --           --           --           --         1,730         1,730

Effect of issuance of options                   --           --           --           --            3            --             3
                                         ---------  -----------   ----------  -----------  -----------   -----------   -----------

Balance - December 31, 2005
                                               100  $         1   38,315,466  $       383  $    97,635   $   (79,869)  $    18,150
                                         =========  ===========   ==========  ===========  ===========   ===========   ===========
</TABLE>

See notes to consolidated financial statements


                                       F-6
<PAGE>

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

<TABLE>
<CAPTION>
                                                                    2005       2004
                                                                  -------    -------

<S>                                                               <C>        <C>
Cash flows from operating activities:

Continuing operations:
Income from continuing operations                                 $ 1,813    $ 1,828
 Adjustments to reconcile income to net cash provided by
   operating activities from continuing operations
 Interest income accreted on residual interests                      (763)      (467)
 Accrued interest added to indebtedness                               301        286
  Gain on satisfactions of mortgage loans                              --       (517)
  Loss on redemption of notes payable                                  --        114
  Issuance and repricing of options                                     3          5
  Depreciation                                                        188        188
  Provision for loan losses                                           200         --
  Amortization of unearned interest on loans receivable            (1,065)      (502)
  Imputed interest on notes                                            --        185
  Net increase in deferred tax asset                                 (297)      (184)
  Net decrease (increase) in prepaid financing and other assets       288       (121)
  Net (decrease) increase in accounts payable, security de-            (3)       121
    posits and accrued liabilities
  Net decrease in fees due to affiliates                              (44)      (174)
  Net increase in deferred income                                       2         --
                                                                  -------    -------

  Net cash provided by continuing operations                          623        762
                                                                  -------    -------
Discontinued operations:
  Loss from discontinued operations - net of tax                      (83)      (350)
   Adjustment to reconcile loss income to net cash (used in)
    discontinued operations
    Depreciation                                                       --         20
    (Gain) loss on sale of real estate                                (89)        26
    Impairment on real estate and real estate lease interests          --        200
    Net decrease in assets and liabilities of discontinued
     operations                                                      (170)      (230)
                                                                  -------    -------
    Net cash used in discontinued operations                         (342)      (334)
                                                                  -------    -------
    Net cash provided by operating activities                         281        428
                                                                  -------    -------
</TABLE>

                                   (continued)

See notes to consolidated financial statements.


                                       F-7
<PAGE>

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

                                                             2005        2004
                                                            -------    -------

Cash flows from investing activities:

Continuing operations:
Collections on residual interests                           $    --    $     3
Collections on loans receivable                               2,761      3,316
Investments in loans receivable                                  --     (1,600)
Real estate acquisitions and capital improvements               (65)       (94)
Proceeds from insurance settlement                               --         38
Net (increase) decrease in affiliated limited partnership
  interests and other investments                                (8)        82
                                                            -------    -------
    Net cash provided by investing operations                 2,688      1,745
                                                            -------    -------

Discontinued operations:
  Proceeds from the sale of real estate                         206        174
                                                            -------    -------
  Cash provided by discontinued investing activities            206        174
                                                            -------    -------
  Net cash provided by investing activities                   2,894      1,919
                                                            -------    -------

Cash flows from financing activities:

   Proceeds from new borrowings                               3,000      2,349
   Principal payments on debt                                (4,000)    (1,098)
   Payments on underlying mortgages payable                  (2,557)    (2,419)
   Payments on notes payable - residual interests              (522)      (576)
   Payments related to debt redemptions                          (1)       (11)
                                                            -------    -------

   Net cash used in financing activities                     (4,080)    (1,755)
                                                            -------    -------

Net (decrease) increase in cash                                (905)       592
Cash, beginning of year                                       2,768      2,176
                                                            -------    -------

Cash, end of year                                           $ 1,863    $ 2,768
                                                            =======    =======

Supplemental disclosure of cash flow Information:

Cash paid during the year for interest                      $ 4,690    $ 4,318
                                                            =======    =======

Cash paid for income taxes                                  $   194    $    86
                                                            =======    =======

See notes to consolidated financial statements

                                   (continued)


                                       F-8
<PAGE>

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

                                                               2005        2004
                                                              ------      ------

Supplemental disclosure of non-cash investing and
  financing activities:

  Net reduction of notes payable - debt repayments
    with common stock                                         $   --      $1,155
                                                              ======      ======

  Residual interests in securitized portfolios - Increase     $4,101      $  208
                                                              ======      ======

  Notes payable - residual interests - Increase               $4,101      $  208
                                                              ======      ======

  Foreclosure on mortgage loan receivable
    Collateralized by real estate                             $   --      $  289
                                                              ======      ======

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, LLC ("S2"), DVL
Mortgage Holdings, LLC ("DMH") Delbrook Holdings, LLC ("Delbrook"), all of which
are consolidated for accounting purposes. In consideration of Financial
Accounting Standards Board Interpretation No. 46R ("FIN 46R"). DVL does not
consolidate the various partnerships (the "Affiliated Limited Partnerships") in
which it holds the general partner and limited partner interests, except where
DVL has control, 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 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 of 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, if
any. 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. Receivables IIA, LLC and Receivables IIB, LLC are consolidated into
S2 for financial reporting purposes. 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 results of
operations. Favorable changes in future cash flows are recognized through
results of operations 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 Company did not have any impaired
loans at December 31, 2005 and 2004.

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 plus
an estimated residual value at the end of the primary term of the leases. The
value of partnership properties which are not subject to percentage rents was
based upon market research of current market value rents and sale prices of
similar properties. 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 valuations
periodically, and considers changes in the status of the existing tenancy in
such evaluations.

      Allowances related to the Company's investments in Affiliated Limited
Partnerships are adjusted quarterly based on Management's estimate of their
realizable value.

e. REAL ESTATE: Land, buildings and equipment are stated at cost. Depreciation
is provided by charges to operations on a straight-line 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 and are included in other
assets.

g. IMPAIRMENT OF REAL ESTATE INVESTMENTS AND REAL ESTATE LEASE INTERESTS: A
write down for impairment is recorded based upon a periodic review of the real
estate and real estate lease interests owned by the Company. Real estate and
real estate lease interests are carried at the lower of depreciated cost or
estimated fair value. In performing this review, management considers the
estimated fair value of the property based upon cash flows, as well as other
factors, such as the current occupancy, the prospects for the property and the
economic situation in the region where the property is located. Because this
determination of estimated fair value is based upon future economic events, the
amount ultimately reflected in an appraisal or realized upon a disposition may
differ materially from the carrying value.


                                      F-11
<PAGE>

      A write-down is inherently subjective and is based upon management's best
estimate of current conditions and assumptions about expected future conditions.
The Company may provide for write-downs in the future and such write-downs could
be material.

h. RESTRICTED CASH: As of December 31, 2005 and 2004, DVL had restricted cash of
$24, and $176, respectively. The restricted cash at December 31, 2005 and 2004,
represents monies owed to the settlement fund established pursuant to the
Limited Partnership Settlement.

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, 2005 and 2004:

<TABLE>
<CAPTION>
                                                                          2005                                   2004
                                                            --------------------------------        -------------------------------
                                                                        Weighted       Per                     Weighted       Per
                                                               Net       Average      Share           Net       Average       Share
                                                             Income      Shares       Amount        Income      Shares       Amount
<S>                                                         <C>        <C>           <C>            <C>       <C>            <C>
Basic EPS, Net income available to common stockholders      $ 1,730    38,315,466    $   .05        $1,478    27,825,337     $  .05
Effect of litigation settlement notes                            --            --                      186    10,149,040
Effective of dilutive stock options and warrants                 --    20,352,720                       --    19,057,860
                                                            -------    ----------                   ------    ----------
Diluted EPS, Net income available to common stockholders    $ 1,730    58,668,186    $   .03        $1,664    57,032,237     $  .03
                                                            =======    ==========    =======        ======    ==========     ======
</TABLE>

      At December 31, 2005, and 2004, 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 4,068,131 and 4,068,131,
thereby resulting in an anti-dilutive effect.

      In 2004, the Company adopted the fair value recognition Provisions of SFAS
123R prospectively to all employee awards granted, modified or settled after the
adoption.

      SFAS 123R requires public entities to record non-cash compensation expense
related to payment for employee services by an equity award, such as stock
options, in their financial statements over the requisite service period. Stock
based compensation for 2005 and 2004 is $3 and $5, respectively, and is included
in compensation expense.

      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 Affiliated Limited Partners and DVL's general partner
interest in the Affiliated Limited Partnerships and the authority of the
Oversight Committee, the amount at which the loans and underlying mortgages
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 discussions on residual interests.

      Financial instruments held by the Company include cash and cash
equivalents, receivables, and accounts payable. The fair value of cash and cash
equivalents, receivables and accounts payable approximates their current
carrying amounts due to their short-term nature.

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. The allowance for credit losses is subject to significant
change in the near term.

m. RECLASSIFICATIONS: Certain prior year amounts have been reclassified to
conform to the 2005 presentation, including the reporting of discontinued
operations for those assets that have been disposed of or classified as held for
sale in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets".


                                      F-13
<PAGE>

n. CASH AND CASH EQUIVALENTS: The Company considers all highly liquid
investments with original purchase maturity dates of three months or less to be
cash equivalents.

o. CONCENTRATION OF CREDIT RISK: Substantially all of the Company's cash and
cash equivalents consist of money market mutual funds which invest in U.S.
Treasury Bills and repurchase agreements with original maturity dates of three
months or less.

      The Company maintains cash with several banking institutions, which
amounts at times exceeds federally insured limits.

p. RECENTLY ISSUED ACCOUNTING STANDARDS: In December 2004, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 123 (Revised 2004),
"Share-Based Payment" ("SFAS No. 123R"). This revised accounting standard
eliminates the ability to account for share-based compensation transactions
using the intrinsic value method in accordance with APB Opinion No. 25 and
requires instead that such transactions be accounted for using a
fair-value-based method. SFAS No. 123R requires public entities to record
non-cash compensation expense related to payment for employee services by an
equity award, such as stock options, in their financial statements over the
requisite service period. The Company has adopted SFAS No. 123R during fiscal
2004. The adoption of SFAS No. 123R did not have a material effect on the
Company's consolidated financial statements. The Company has historically
provided proforma disclosures pursuant to SFAS No. 123 and SFAS No. 148 as if
the fair value method of accounting for stock options had been applied, assuming
use of the Black-Scholes option-pricing model.

      In May, 2005, the FASB issued FAS No. 154, "Accounting Changes and Error
Corrections - A Replacement of APB Opinion No. 20 and FAS Statement No. 3" ("FAS
154"). FAS 154 changes the requirements for the accounting and reporting of a
change in accounting principle by requiring retrospective application to prior
periods' financial statements of the change in accounting principle, unless it
is impracticable to do so. FAS 154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15, 2005. We
do not expect the adoption of FAS 154 to have any impact on our financial
statements.

      In June 2005, the FASB ratified the consensus in EITF Issue No. 04-5,
Determining Whether a General Partner, or the General Partners as a Group,
Controls a Limited Partnership or Similar Entity When the Limited Partners Have
Certain Rights ("EITF 04-5"), which provides guidance in determining whether a
general partner controls a limited partnership. EITF 04-5 states that the
general partner in a limited partnership is presumed to control that limited
partnership. The presumption may be overcome if the limited partners have either
(1) the substantive ability to dissolve the limited partnership or otherwise
remove the general partner without cause or (2) substantive participating
rights, which provide the limited partners with the ability to effectively
participate in significant decisions that would be expected to be made in the
ordinary course of the limited partnership's business and thereby preclude the
general partner from exercising unilateral control over the partnership. If the
criteria in EITF 04-5 are met, the consolidation of existing joint ventures
accounted for under the equity method may be required. Our adoption of EITF 04-5
is expected to have no effect on net income or shareholders' equity. EITF 04-5
is effective June 30, 2005 for new or modified limited partnership arrangements
and effective January 1, 2006 for existing limited partnership arrangements.


                                      F-14
<PAGE>

      In 2005, The FASB issued Interpretation No. 47, Accounting for Conditional
Asset Retirement Obligations (FIN 47), which clarifies certain aspects of SFAS
No. 143, Accounting for Asset Retirement Obligations which requires that
companies estimate the fair value of asset retirement obligations, including the
removal of asbestos containing material, and record such obligation in the
financial statements. FIN 47 clarifies that a legal obligation in which the
timing or method of settlement is conditional on a future event that may or may
not be within the control of the entity is within the scope of SFAS No. 143. The
Company adopted FIN 47 in 2005 and the adoption had no impact on the Company's
financial statements.

      In December 2004, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 153, Exchanges of Nonmonetary Assets - An Amendment of
APB Opinion No. 29. The amendments made by SFAS No. 153 are based on the
principle that exchanges of nonmonetary assets should be measured based on the
fair value of the assets exchanged. Further, the amendments eliminate the narrow
exception for nonmonetary exchanges of similar productive assets and replace it
with a broader exception for exchanges of nonmonetary assets that do not have
"commercial substance." SFAS No. 153 is effective for nonmonetary asset
exchanges occurring in fiscal periods beginning after June 15, 2005. The
adoption of SFAS No. 153 on its effective date did not have a material effect on
the Company's consolidated financial statements.

2. Residual Interests in Securitized Portfolios

      The Company, through its wholly-owned consolidated subsidiary, S2, owns
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"). The Class B member interests, which are
consolidated into S2 for financial statement reporting purposes, 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
receive all the residual cash flow from five securitized receivable pools after
payment to the securitized noteholders. The Company considered Financial
Accounting Standards Board Interpretation No. 46R "Consolidation of Variable
Interest Entities" when consolidating S2's ownership of its member interests.
The Company determined that S2's member interests do not meet the definition of
variable interest entities.

      The purchase price was paid by the issuance of 8% per annum limited
recourse promissory notes by S2. The Notes Payable - residual interests balances
were $36,227 and $32,648 as of December 31, 2005 and 2004, respectively.
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 Receivable 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, 2005 was
$3,260. Payments, if any, due under this guaranty are payable after August 15,
2020.

      In accordance with the purchase agreements with respect to such
acquisitions, from the acquisition dates through December 31, 2005, the residual
interests in securitized portfolios and the notes payable were increased by
approximately $3,772 as a result of purchase price adjustments. Adjustments to
the receivables based on the performance of the underlying periodic payment
receivables, both increases and decreases, could be material in the future.
Permanent impairments are recorded immediately through results of operations.
Favorable changes in future cash flows are recognized through results of
operations as interest over the remaining life of the retained interest.


                                      F-15
<PAGE>

      The following table reconciles the initial purchase price with the
carrying value at December 31, 2005:

      Initial purchase price                                     $ 35,791
      Adjustments to purchase price                                 3,772
      Principal payments                                              (51)
      Accretion                                                     2,686
                                                                 --------
                                                                 $ 42,198
                                                                 ========

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

      2006 to 2009                                      $  743      $  880
      2010 to final payment on notes payable*           $1,050      $1,150

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

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

The following table presents the key economic assumptions at December 31, 2005
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                        $42,198
      Fair value of residual interest                             $42,198
      Weighted-average life (in years)                                8.4
      Expected credit losses                                          4.0%
        Impact on fair value of 10% adverse change                    145
        Impact on fair value of 20% adverse change                    301
      Discount rate                                                 12.09%
        Impact on fair value of 10% adverse change                  2,784
        Impact on fair value of 20% adverse change                  5,297

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.

The fair value of the Notes Payable - residual interests is not practical to
estimate as they are non-negotiable promissory notes.


                                      F-16
<PAGE>

3. Mortgage Loans Receivable and Underlying Mortgage Payable

      Virtually all of DVL's loans receivable arose out of transactions in which
Affiliated Limited Partnerships purchased commercial, office and industrial
properties which were 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 the 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 23 mortgage loans with net carrying
values of $22,754 and $24,376 as of December 31, 2005 and 2004, 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 ranging from 6.53%
and 8.25% and require principal and interest payments solely from the proceeds
of the wrap-around mortgages receivable.

      The Limited Partnership 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 14.37% per annum, aggregating net
carrying values of $4,605, and $4,781 subject to underlying mortgages of $1,187,
and $1,710, at December 31, 2005 and 2004, respectively, and original maturity
dates through 2028.

      In addition, at the time of the Limited Partnership Settlement, the terms
of the loans to Kenbee Management, Inc. ("Kenbee") collateralized by similar
loans were restructured and modified. The restructured and modified loans due
directly from the partners bear interest at stated rates of up to 15.5% and
mature through 2030. As of December 31, 2005 and 2004 the modified loans due
directly from the Affiliated Limited Partnerships aggregated net carrying values
of $10,613 and $11,772 and subject to underlying mortgages of $7,221, and
$8,379, respectively. DVL recognized interest income on these restructured
mortgage loans of approximately $213, and $341, for 2005 and 2004, respectively.


                                      F-17
<PAGE>

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

<TABLE>
<CAPTION>
                                                          2005                                            2004
                                       --------------------------------------------   ----------------------------------------------
                                                             Accrued      Allowance                           Accrued      Allowance
Mortgage Loans Due From Affiliated                           Interest     For Loan                            Interest      For Loan
Limited Partnerships                   Number of   Loan    Included in     Losses     Number of    Loan     Included In     Losses
  (Dollar Amounts in Thousands)          Loans    Balance  Loan Balance   (Note 4)      Loans     Balance   Loan Balance    (Note 4)
----------------------------------     ---------  -------  ------------   ---------   ---------   -------   ------------   ---------
<S>                                       <C>     <C>        <C>          <C>             <C>     <C>          <C>          <C>
Long-term wrap-around mortgage loans      17      $32,016    $    20      $   597         17      $33,576      $    28      $   397
ranging from $296 to $4,798 in 2005
and from $318 to $4,955 in 2004
maturing at various dates through May
2029 (a)

Other long-term mortgage loan of           1        1,169         --           --          1        1,212           --           --
$1,169 in 2005 and $1,212 in 2004
maturing in August 2021 (b)

Long-term wrap-around and other           11       12,602         --        1,989         11       13,760           --        1,989
mortgage loans acquired from Kenbee
pursuant to the Limited Partner
Settlement ranging from $539 to
$2,103 in 2005 and from $650 to
$2,196 in 2004 maturing at various
dates through January 2030 (c)

                                       -----      -------      -----      -------      -----      -------      -------      -------
Total mortgage loans                      29       45,787         20        2,586         29       48,548           28      $ 2,386

Loans Collateralized By Limited
Partnership Interests

Loans ranging from $3 to $177 in 2005     17          229         --          195         17          230           --          195
and from $1 to $178 in 2004 in
default (d) Included in other assets

Due from affiliated partnerships

Advances and Other                         6           89                      --          6          128           --           --
                                       -----      -------      -----      -------      -----      -------      -------      -------
Total loans receivable                    52       46,105         20      $ 2,781         52       48,906      $    28      $ 2,581
                                       =====                   =====      =======      =====                   =======      =======

Less unearned interest on partnership              20,332                                          21,397
mortgage loans                                    -------                                         -------

Net loans receivable                              $25,773                                         $27,509
                                                  =======                                         =======

Underlying mortgages ranging from                 $11,928                                         $14,485
$202 to $2,089 in 2005 and from $9 to             =======                                         =======
$2,182 in 2004 maturing at various
dates through 2011
</TABLE>


                                      F-18
<PAGE>

Activity on all collateralized loans is as follows:

                                                        2005             2004
                                                        ----             ----

                                                            (in thousands)

Balance, beginning of year                            $ 48,778         $ 40,541
Investments in loans receivables                            --           11,350
Collections on loans to affiliates                      (2,762)          (2,828)
Loans written-off and written down                          --             (285)
                                                      --------         --------
Balance, end of year                                  $ 46,016         $ 48,778
                                                      ========         ========

Unearned interest activity is as follows:

                                                        2005             2004
                                                        ----             ----

                                                            (in thousands)

Balance, beginning of year                            $ 21,397         $ 14,300
Additional unearned interest in connection with
  new loans receivable                                      --            7,599
Amortization to income                                  (1,065)            (502)
                                                      --------         --------
Balance, end of year                                  $ 20,332         $ 21,397
                                                      ========         ========

      (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 $4,707 in 2005 and $6,106 in 2004 which
bear interest at rates ranging from 6.66% to 8.25% 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.


                                      F-19
<PAGE>

      (b) DVL's other long-term mortgage loan, exclusive of its wrap-around
mortgages, is collateralized by one first mortgage aggregating $1,169 at
December 31, 2005 and $1,212 at December 31, 2004, respectively. This loan
matures August 2021, bears interest at an effective rate of 6% per annum and is
collateralized by a first mortgage on a commercial property. The scheduled
principal maturities of DVL's commercial mortgage loan portfolio, excluding
wrap-around mortgages, in each of the next five years are $46 in 2006, $49 in
2007, $52 in 2008, $55 in 2009, $59 in 2010 and $907 thereafter.

      (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 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 January 2030. The wrap-around loans
are subject to senior loans of $7,221 in 2005 and $8,379 in 2004, which bear
interest at rates ranging from 6.69% to 7.50% 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 loans. The majority of these loans were
non-performing at December 31, 2005 and 2004. These assets are included in other
assets on the Consolidated Balance Sheet.

4. Allowance for Losses

Allowance for loan loss activity is as follows:

                                                        2005             2004
                                                        ----             ----

                                                            (in thousands)

Balance, beginning of year                            $  2,581         $  2,601
Additional provision for loan losses                       200               --
Loans satisfied, written-off or written down                --              (20)
                                                      --------         --------

Balance, end of year                                  $  2,781         $  2,581
                                                      ========         ========

5. Investments

      Real Estate

      The Company currently owns (or disposed of during the current year) 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.


                                      F-20
<PAGE>

      This site represents a portion of the Passaic River Development area as
designated for redevelopment by the town of Kearny, New Jersey. The Company is
currently negotiating with the Town of Kearny to be designated as the developer
for the site as well as other sites along Passaic Avenue. There can be no
assurance that the Company will be designated as the developer for such site or
any other site along Passaic Avenue. Pending final resolution of this issue, the
Company continues to lease the property to multiple tenants and receives a
positive cash flow from the properties.

(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.

(3) A vacant 31,000 square foot former Grand Union Supermarket and approximately
six acres of land underlying the building located in Fort Edward, NY. The entire
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. The property is
currently being carried at $137.

Summary of Real Estate Holdings:

                                                       2005          2004
                                                       ----          ----

      Land                                            $1,248        $1,183
      Buildings                                        7,033         7,032
      Improvements                                       302           302
                                                      ------        ------
      Subtotal                                         8,583         8,517
      Less: Accumulated depreciation                     778           589
                                                      ------        ------
          Total                                       $7,805        $7,928
                                                      ======        ======

      Affiliated Limited Partnerships

      DVL acquired various interests in Affiliated Limited Partnerships pursuant
to the Terms of certain settlement agreements and through purchases. Allowances
are adjusted quarterly based on Management's estimate of the realizable value.
During 2005 and 2004, DVL recorded income of $98, and $147, respectively, from
distributions received from these investments.

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

                                                             2005         2004
                                                             ----         ----

                                                              (in thousands)

Balance, beginning of year                                 $   918      $ 1,000
Various interests acquired through purchases and
  foreclosed partner notes                                      13           --
Distributions received from partnerships                      (103)        (245)
Distributions recorded as income                                98          147
Change in reserves, net of write-offs                           --           16
                                                           -------      -------

Balance, end of year                                       $   926      $   918
                                                           =======      =======


                                      F-21
<PAGE>

      Other Investments

      In connection with the 1993 Litigation Settlement with three related
partnerships that did not participate in the Limited Partner Settlement, DVL
received limited partnership interest 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, are currently being carried
at $-0-.

6. Debt, Loans Payable Underlying Wrap-around Mortgages

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

<TABLE>
<CAPTION>
                                                                     2005       2004
                                                                     ----       ----

                                                                     (in thousands)
<S>                                                                <C>        <C>
Loan collateralized by real estate bearing interest at prime
  plus 2% per annum.  Monthly payments are interest only,
  maturing September, 2006                                         $ 4,529    $ 4,529
Loan collateralized by real estate bearing interest at 7.50%
  per annum with a balloon payment due June, 2008 of $2,285          2,470      2,535
Loans collateralized by commercial mortgage loans and real
  estate bearing interest at prime plus 1.5% per annum
  maturing May, 2009                                                   826      1,198
Loans collateralized by commercial mortgage loans and real
  estate bearing interest at prime plus 1.5% per annum
  maturing November, 2006                                               --        259
Loan to purchase existing mortgages annual principal payments
  of $50, bearing interest at prime plus .5% per annum with
  a balloon payment due 1/31/09 of $1,200                            1,350      1,400
                                                                   -------    -------
                                                                     9,175      9,921

Loan from affiliate collateralized by shares of common stock of
  S2 bearing interest at 12% per annum compounded monthly (1)        2,503         --
Loan from affiliate collateralized by commercial mortgages
  and real estate bearing interest at 12% per annum, scheduled
  to mature January 2006 (2)                                            --      2,456
                                                                   -------    -------

Total debt                                                         $11,678    $12,377
                                                                   =======    =======
</TABLE>

(1) To repay the Company's existing obligation to Blackacre in the amount of
$2,553, on December 27, 2005 the Company entered into a Loan and Security
Agreement (the "Pemmil Loan Agreement") with Pemmil Funding, LLC ("Pemmil"),
pursuant to which the Company borrowed from Pemmil $2,500. The Pemmil Loan
Agreement provides that principal and unpaid interest are due December 27, 2008
and provides for interest at a rate of 12% per annum, compounded monthly.
Interest is payable monthly on the loan, but the Company may elect not to make
any such interest payment when due, and such amount of unpaid monthly interest
shall be added to principal. The company is required to prepay the loan (plus
any accrued and unpaid interest) to the extent that the Company consummates
certain capital transactions (as defined in the Loan Agreement) that result in
net proceeds (as defined in the Loan Agreement) to the Company. The obligations
under the Pemmil Loan Agreement are secured by a pledge of the Company's equity
interest in S2. The Company may prepay all or a portion of the loan at any time
prior to maturity without penalty or premium.


                                      F-22
<PAGE>

Certain members of Pemmil are insiders and/or affiliates of the Company,
including Alan Casnoff, the Company's President and a Director of the Company,
and Lawrence J. Cohen, Steve Simms, Ron Jacobs, Keith Stein and Jay Chazanoff,
each of whom is a beneficial owner of greater than 10% of the Company's common
stock.

DVL, believes that the rate being charged and the terms obtained are equal to or
better than that which could be obtained in the market place.

(2) The Company's obligations under this loan from Blackacre Capital Group, L.P.
("BCG") (the "BC Loan") were secured by substantially all of the assets of the
Company. The BC Loan was senior to all indebtedness of the Company other than
indebtedness to NPO Management LLC ("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 (an
affiliate of BCG and Stephen Feinberg) in connection therewith, was
approximately 14% per annum.

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

                                                           Loans Payable
                                                           Underlying Wrap
                                                  Debt     Around Mortgages
                                               --------    ----------------

                                                    (in thousands)

        2006                                   $  4,948       $  2,749
        2007                                        410          2,947
        2008                                      5,120          2,214
        2009                                      1,200          1,102
        2010                                          -            782
     Thereafter                                       -          2,134
                                               --------       --------
                                               $ 11,678       $ 11,928
                                               ========       ========

      7. Redeemed Notes Payable - Litigation Settlement

      In December 1995, DVL completed its obligations under the 1993 Limited
Partnership Settlement by, among other things, issuing notes to the plaintiffs
(the "Notes") in the aggregate principal amount of $10,387.

      To date, the Company has sent redemption letters ("Redemptions") to note
holders who held Notes that aggregated approximately $1,161 offering to pay the
notes in cash at the face value plus accrued interest of approximately $49. As
of December 31, 2005, $421 has been paid and the remaining $789 payable is
reflected as a non-interest bearing liability. As a result of the redemptions,
all obligations under the Notes have been satisfied.


                                      F-23
<PAGE>

      8. Transactions with Affiliates

      The members of the Millennium Group (defined below), the Pembroke Group
(defined below), and the Florida Group (defined below) are affiliates of NPM
Capital, LLC ("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 Millennium
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 Millennium Group ("Millennium 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. The members of
the Florida Group ("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).
Blackacre and its affiliates are beneficial owners of more than 5% of the
outstanding shares of the Company's Common Stock.

A. 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 $162,and $196 in 2005
and 2004 which included incentive fees of $60 and $94, respectively.

B. The Millennium Group, an affiliate of NPO, received approximately $18 and $23
for 2005 and 2004, respectively representing compensation and reimbursement of
expenses for collection services on notes payable to the Company. In addition,
in 2005, and 2004, the Company paid or accrued fees of $108 and $108, to the
Millennium Group.

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 $-0- and $13, from various Affiliated Limited
Partnerships in 2005 and 2004, respectively.

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

                                                          2005        2004
                                                          ----        ----

      Blackacre Capital Group, L.P.                       $323        $311
      NPO                                                    7           6
      Pemmil Funding (See Note 6)                            3          --
                                                          ----        ----
                                                          $333        $317
                                                          ====        ====


                                      F-24
<PAGE>

D. The Company recorded fees to NPO of $702 and $683 under the Asset Servicing
Agreement for 2005 and 2004, respectively, plus other expenses of $7, and $5,
respectively in each year. During 2005 and 2004, the Company provided office
space under the Asset Servicing Agreement to NPO consisting of 228 square feet
of the Company's New York location.

E. Since June 1998, the Company has received fees from a limited partnership (in
which certain of its partners are affiliates of NPO and Blackacre). For 2005 and
2004, the Company received compensation under such agreement equal to $192 and
$-0-, respectively. The Limited Partnership dissolved as of the end of 2005.

F. The Company received fees from a company (in which certain of its partners
are affiliates of NPO) in consideration for the Company providing property
management services. During each of 2005 and 2004, the Company received
compensation equal to $31 and $27 under such arrangement.

G. The Company received fees from an entity whose partners are Lawrence J. Cohen
and Blackacre in consideration for the Company providing property management
services. The Company received aggregate compensation of $24 in each of the
years 2005 and 2004.

H. The Philadelphia, Pennsylvania, law firm of Zarwin Baum DeVito ("Zarwin"), of
which Alan E. Casnoff, a director of the Company, is of counsel, has acted as
counsel to the Company since November 2004. [Legal fees for services rendered by
Zarwin to the Company during 2005 did not exceed 5% of the revenues of such firm
for its most recent fiscal year.] During 2005 and 2004, the Company and the
Affiliated Limited Partnerships paid Zarwin $15 and $17, respectively, for legal
services.

I. 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.

During 2004 a wholly-owned subsidiary of DVL purchased the remaining three
mortgages owned by the Opportunity Fund for $2,000 and DVL was paid $484 from
the investments by the Opportunity Fund. The Opportunity Fund was dissolved at
the end of 2004.

9. Commitments, Contingent Liabilities and Legal Proceedings

Commitments and Contingent Liabilities

      Pursuant to the terms of the Limited Partnership 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) in the years 2004 through
2012 subject to certain adjustments. The adjustments to DVL's net income were
significant enough that no amounts were accrued for 2005 and 2004.


                                      F-25
<PAGE>

      During 2005 and 2004, the Company expensed approximately $230 and $275,
respectively, for amounts due to the fund based on cash flow on mortgage loans
of which approximately $-0- and $-0-, respectively, was accrued at year end.
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 $226 and $221 in 2005 and 2004, respectively.

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

                   2006                      $   216
                   2007                          216
                   2008                           18
                                             -------
                                             $   450
                                             =======

      DVL is a limited recourse guarantor on debt of approximately $2,202 which
is secured solely by DVL's interest in the property securing such debt. DVL's
interest in the property is carried at zero on the financial statements.

      The Asset Servicing Agreement, pursuant to which NPO is providing the
Company with administrative and advisory services, requires monthly payments of
approximately $59 through May 2008 with cost of living increases, aggregating
$702, and $683, in 2005 and 2004.

      In connection with the Exchange Agreement with Blackacre Bridge Capital,
LLC ("BBC" an affiliate of BCG), 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 $1,000.

10. Shareholders' Equity

Preferred and Common Stock

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

Restriction on Certain Transfers of Common Stock

      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 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.


                                      F-26
<PAGE>

Stock Option Plans

      The weighted-average fair value at date of grant for options granted
during the years ended December 31, 2005 and 2004 was $.12 and $.11, 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,
                                        --------------------------------
                                            2005               2004
                                        -------------      -------------

Risk-free interest rates                4.25% - 4.25%      4.13% - 4.14%
Expected option life in years                     10                 10
Expected stock price volatility                   85%                85%
Expected divided yield                             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 annual grants of 15,000 options to each non-employee director.

      All options are non-qualified stock options.

      As of December 31, 2005 and 2004, there were outstanding 1,633,131 and
1,603,131 ten year options, respectively. Under the Plan, the Company had
866,869 and 896,869 shares of common stock remaining under the Plan for future
grants of stock options as of December 31, 2005 and 2004, respectively.


                                      F-27
<PAGE>

      The following table summarizes the activity under the Plan:

                                       2005                       2004
                             -----------------------     -----------------------
                                           Weighted                    Weighted
                                            Average                     Average
                                           Exercise                    Exercise
                               Shares        Price         Shares        Price
                             ---------     ---------     ---------     ---------
Options outstanding at
  Beginning of Year          1,603,131     $    0.17     1,558,131     $    0.17
Granted                         30,000          0.12        45,000          0.11
Cancelled                           --            --            --           . -
                             ---------     ---------     ---------     ---------

Options Outstanding at
  End of Year                1,633,131     $    0.16     1,603,131     $    0.17
                             =========     =========     =========     =========

Options Exercisable at
  End of Year                1,633,131     $    0.16     1,603,131     $    0.17
                             =========     =========     =========     =========

                          Year Ended December 31, 2005
                          ----------------------------

                 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       490,000     $  0.09        4.98          490,000      $   0.09
 .13 - 0.19       295,000        0.15        3.84          295,000          0.15
 .20 - 0.22       848,131     $  0.21        1.14          848,131          0.21
-----------     ---------     -------      ------        ---------      --------

      TOTAL     1,633,131     $  0.16        2.78        1,633,131      $   0.16
                =========     =======      ======        =========      ========


                                      F-28
<PAGE>

Warrants Redeemable in Stock

      During 2001, the Company, in connection with the purchase of the residual
interests issued warrants to purchase 3,000,000 shares of common stock with an
exercise price of $0.20 per share which expires as follows: warrant for
2,000,000 shares - February 2011; warrant for 1,000,000 shares - August 2011.

      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, including common stock issued to redeem the
Notes, and subject to a maximum aggregate exercise price of $1,916. At December
31, 2005, shares underlying the Warrants and exercise price per share aggregated
37,381,985 and $.05 respectively. No warrants have been exercised through
December 31, 2005.

11. Income Taxes

      The (benefit) provision for income taxes for the years ended December 31,
2005 and 2004 were as follows:

                                                          2005             2004
                                                          ----             ----
Current Provision
   Federal                                               $ 215            $  20
   State                                                    --               --
                                                         -----            -----
   Total Current Provision                                 215               20
                                                         -----            -----
Deferred Provision
   Federal                                                (297)            (184)
   State                                                    --               --
                                                         -----            -----
   Total Deferred Benefit                                 (297)            (184)
                                                         -----            -----
   Total Benefit                                         $ (82)           $(164)
                                                         =====            =====


                                      F-29
<PAGE>

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

                                                             2005          2004
                                                             ----          ----

U.S. Federal Statutory Rate                                  34.0%         34.0%

Change In Valuation Allowance and
  Utilization of Unrecognized Deferred
  Tax Assets                                                -38.3%        -43.9%
                                                            -----         -----
Effective Income Tax Rate                                   - 4.3%        - 9.9%
                                                            =====         =====

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:

                                                            2005          2004
                                                            ----          ----

Allowance for Losses                                     $      -      $      8
Notes Payable Litigation Settlement                             -           429
Other                                                           -            11
Carrying Value of LP Investments                              (26)            2
NOL Carryforward                                            2,569         2,101
Retained Interests                                         (2,891)       (1,421)
Mortgage Loans                                                 19           270
Change in Valuation Allowance                                  32        (1,584)
                                                         --------      --------
Total Deferred (Benefit)                                 $   (297)     $   (184)
                                                         ========      ========

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

                                                            2005          2004
                                                            ----          ----

Allowance for Losses                                     $  1,004      $  1,003
Notes Payable Litigation Settlement
  Redeemed Notes                                              307           308
Other                                                         174           174
Carrying Value of LP Investments                           (1,896)       (1,921)
NOL Carryforward                                           11,670        14,239
Retained Interests                                         10,556         7,665
Mortgage Loans                                              2,325         2,343
                                                         --------      --------
Deferred Tax Asset                                         24,140        23,811

Valuation Allowance                                       (21,845)      (21,813)
                                                         --------      --------

Net Deferred Tax Asset                                   $  2,295      $  1,998
                                                         ========      ========

Current taxes payable for 2005 have been reduced by $2,569 relating to the
utilization of net operating loss carryforwards. At December 31, 2005, the
Company had aggregate unused net operating loss carryforwards of approximately
$30,000, which may be available to reduce future taxable income, expiring
through 2019, with approximately $23,000 expiring through 2007. The deferred tax
benefit of $297 in 2005 resulted primarily from the deferred benefit relating to
the retained interests net of the deferred tax expense relating to the
utilization of net operating loss carryforwards. The deferred tax benefit of
$184 in 2004 resulted primarily from a reduction in the valuation allowance on
deferred tax assets.


                                      F-30
<PAGE>

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 receivable portfolios. The
Corporate/other net income of $133 and $192 in 2005 and 2004, respectively
include $297 and $184 of deferred income tax benefit, respectively.

                                                         2005            2004
                                                         ----            ----
     Revenue
       Real estate                                     $  4,325        $  4,603
       Residual interests                                 4,857           4,360
       Corporate/other                                      100              50
                                                       --------        --------

Total consolidated revenue                             $  9,282        $  9,013
                                                       ========        ========

     Net income (loss)
       Real estate                                     $   (365)       $   (163)
       Residual interests                                 2,045           1,799
       Corporate/other                                      133             192
                                                       --------        --------

Total income from continuing operations                $  1,813        $  1,828
                                                       ========        ========

     Assets
       Real estate                                     $ 34,854        $ 38,030
       Residual interests                                42,198          37,334
       Corporate/other                                    2,295           1,998
                                                       --------        --------

Total consolidated assets                              $ 79,347        $ 77,362
                                                       ========        ========

13. Discontinued Operations

      During the years ended December 31, 2005 and 2004 the Company disposed of
certain real estate properties. The sale and operation of these properties for
all periods presented have been recorded as discontinued operations in
compliance with the provisions of statement of Financial Accounting Standards
("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long Lived
Assets."

      The Company also sold its defibrillator business to a non-affiliated
purchaser. The operation of the defibrillator business for all periods presented
have been recorded as discontinued operations.

Discontinued operations for the years ended December 31, 2005 and 2004 are
summarized as follows:

                                                           2005      2004
                                                           ----      ----

      Loss income from discontinued operations            $   83    $  350
                                                          ======    ======


                                      F-31
<PAGE>

      Other assets and other liabilities of discontinued operations at December
31, 2005 and 2004 are summarized as follows:

                                                       2005           2004
                                                       ----           ----

      Other assets                                     $626           $598
                                                       ====           ====
      Other liabilities                                $ 90           $115
                                                       ====           ====

14. Subsequent Events

      The Company extended the due date of the $4,500 loan which was due to
expire on March 1, 2006. The new expiration date is September 1, 2006.


                                      F-32