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


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

For the fiscal year ended December 31, 2001 OR
                          -----------------

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

For the transition period from _____________ to _____________

Commission File No. 1-8356
                    ------

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

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


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

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

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

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

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

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes  X      No
                                      -----   -----

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

The aggregate  market value of the Common Stock of the  Registrant  held by non-
affiliates as of March 15, 2002 was $2,870,209.

The number of shares  outstanding  of Common Stock of the Registrant as of March
15, 2002 was 21,313,563.
<PAGE>


                                    DVL, INC.

              INDEX TO ANNUAL REPORT ON FORM 10-K FILED WITH
                  THE SECURITIES AND EXCHANGE COMMISSION
                       YEAR ENDED DECEMBER 31, 2001

                            ITEMS IN FORM 10-K
                            ------------------

                                                                    Page
                                                                    ----
                                  PART I

Item  1.  Business                                                    1
Item  2.  Properties                                                  8
Item  3.  Legal Proceedings                                           8
Item  4.  Submission of Matters to a Vote of Security Holders         8

                                     PART II

Item  5.  Market for Registrant's Common Equity and Related
           Stockholder Matters                                       9
Item  6.  Selected Consolidated Financial Data                       10
Item  7.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations                       12

Item  7A. Quantitative and Qualitative Disclosures About
           Market Risk                                               23
Item  8.  Financial Statements and Supplementary Data                24
Item  9.  Changes In and Disagreements with Accountants on
           Accounting and Financial Disclosure                       25

                                 PART III

Item 10.  Directors and Executive Officers of the Registrant         25
Item 11.  Executive Compensation                                     27
Item 12.  Security Ownership of Certain Beneficial Owners
            and Management                                           34
Item 13.  Certain Relationships and Related Transactions             42

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports
            on Form 8-K                                              45

<PAGE>

                                 PART I

     This 2001 Annual Report on Form 10-K contains  statements  which constitute
forward-looking  statements  within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended.  Those statements include statements regarding the intent, belief or
current expectations of the Registrant and its management team. The Registrant's
stockholders  and  prospective  investors are  cautioned  that any such forward-
looking  statements are not guarantees of future  performance  and involve risks
and  uncertainties,  and that actual  results may differ  materially  from those
projected  in the  forward-looking  statements.  Such  risks  and  uncertainties
include,  among other things,  general economic  conditions,  the ability of the
Registrant to obtain  additional  financings,  the ability of the  Registrant to
successfully  implement its business  strategy and other risks and uncertainties
that are discussed herein.

ITEM 1.  BUSINESS.

OVERVIEW

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

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

    DVL  is  the  general  partner  of  approximately   70  Affiliated   Limited
Partnerships  which  own  income-producing  commercial,  office  and  industrial
properties  comprising  approximately 3.0 million square feet. A majority of the
properties are subject to long-term triple net leases with various tenants.  The
principal  tenant is Wal-Mart  Stores,  Inc. DVL does not consolidate any of the
various  Partnerships  in which it holds the general partner and limited partner
interest  nor does DVL  account for such  interests  on the equity  method.  The
remaining  properties  are shopping  centers,  industrial  properties  and other
commercial  properties.  The Company also performs  real estate and  partnership
management services for these partnerships, as well as, for third parties.

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

     The Company derives the majority of its income from the residual  interests
in securitized receivables portfolios,  wrap-around mortgages as a result of the
difference in the effective  interest rates between the wrap around mortgage and
the underlying mortgages,  percentage rents received from various tenants of the
Affiliated Limited Partnerships, rentals received as a result of its real


                                        1
<PAGE>

estate  holdings and  long-term  leasehold  interests,  fees received as General
Partner  of the  Affiliated  Limited  Partnerships  (including  disposition  and
management fees),  distributions received as a limited partner in the Affiliated
Limited  Partnerships,  and the sale of  partnership  properties,  and fees from
third-party management contracts.

     At December 31, 2001,  the Company had net  operating  loss  carry-forwards
("NOLS")  aggregating  approximately $57 million,  which expire in various years
through 2019,  including  $50 million which expire  through 2007. If the Company
generates  profits in the future,  the Company may be subject to  limitations on
the use of its NOLS pursuant to the Internal  Revenue  Code.  It is  anticipated
that the taxable  income  associated  with the residual  interests  will utilize
significant  NOLS.  There can be no assurance  that a significant  amount of the
Company's  existing  NOLS will be  available  to the Company at such time as the
Company desires to use them.

     DVL believes  that its  anticipated  cash flow  provided by  operations  is
sufficient  to meet its current cash  requirements  through  January  2003.  The
Company  has in the past and  expects in the future to  continue  to augment its
cash flow with  additional cash generated from either the sale or refinancing of
its  assets  and/or  borrowings.  See  Management  Discussion  and  Analysis  of
Financial Condition and Results of Operations.

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

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

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


                                        2
<PAGE>

BUSINESS ACTIVITIES

RESIDUAL INTERESTS IN SECURITIZED PORTFOLIOS

     On March 30, 2001, the Company, through a consolidated subsidiary, acquired
a 99.9% Class B member  interest in  Receivables  II-A LLC, a limited  liability
company ("Receivables II-A"), from an unrelated party engaged in the acquisition
and  management of periodic  payment  receivables.  The Class B member  interest
entitles  the  Company to be  allocated  99.9% of all items of income,  loss and
distribution of Receivables II-A.  Receivables II-A solely receives the residual
cash  flow  from  four  securitized   receivable  pools  after  payment  to  the
securitized noteholders.

     The Company  purchased  its interest in  Receivables  II-A for an aggregate
purchase  price of  $26,134,264,  including  costs  of  $809,264  including  the
issuance of a warrant,  valued at $74,000,  for the purchase of 2 million shares
of the common stock of DVL,  exercisable  until  February 15, 2011 at a price of
$.20 per share.  The purchase price was paid by the issuance of limited recourse
promissory  notes by the  consolidated  subsidiary  in the  aggregate  amount of
$25,325,000.  Principal  and interest  are payable from the future  monthly cash
flow.  The notes mature on December 31,  2021,  bear  interest at the rate of 8%
annually, and are secured by a pledge of the consolidated  subsidiary's interest
in Receivables II-A and all proceeds and distributions related to such interest.
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 up to $2,532,500 of the purchase  price.  The guaranty is
reduced by 10% of the principal paid. The amount of the guaranty at December 31,
2001 was $2,532,500. Payments, if any, due under this guaranty are payable after
December 31, 2021.

     In accordance with the purchase  agreement,  through December 31, 2001, the
residual interests in securitized  portfolios and the notes payable increased by
approximately $699,000 based on the performance of the underlying receivables.

     On  August  15,  2001,  the  Company,  through a  consolidated  subsidiary,
acquired a 99.9%  Class B member  interest  in  Receivables  II-B LLC, a limited
liability  company  ("Receivables  II-B"),  from the same  party  from  which it
acquired  Receivables  II-A. The Class B member interest entitles the Company to
99.9% of all  items  of  income,  loss and  distribution  of  Receivables  II-B.
Receivables  II-B receives the residual cash flow from a securitized  receivable
pool after payment to the securitized noteholders.

     The Company  purchased  its interest in  Receivables  II-B for an aggregate
purchase price of $9,657,000, including costs of $557,000 including the issuance
of a warrant,  valued at $62,000,  for the  purchase of 1 million  shares of the
common  stock of DVL,  exercisable  until August 15, 2011 at a price of $.20 per
share.  The  purchase  price  was  paid  by the  issuance  of  limited  recourse
promissory  notes by the  consolidated  subsidiary in the aggregate  amount of a
$9,100,000.  Principal and interest are payable from the future monthly residual
interest  cash flow.  The notes mature on August 15, 2020,  bear interest at the
rate  of  8%  annually,  and  are  secured  by  a  pledge  of  the  consolidated
subsidiary's  interest in  Receivables  II-B and all proceeds and  distributions
related to such  interest.  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 up to $910,000 of the
purchase price. The guaranty is reduced by 10% of the principal paid. The amount
of the guarantee at December 31, 2001 was $899,464.  Payments, if any, due under
this guaranty are payable after August 15, 2020.


                                        3
<PAGE>

     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:

                     March 30, 2001 Transaction    August 15, 2001 Transaction
                     --------------------------    ---------------------------

      Years                 Minimum    Maximum        Minimum      Maximum
      -----                 -------    -------        -------      -------

   2001 to 2009            $462,500    $500,000       $280,000    $380,000
   2010 to final payment    700,000     750,000       $350,000    $400,000
     on notes payable*

   * Final payment on the notes  payable  expected  2016  related to the March
     transaction and 2018 for the August transaction.

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

In connection with the  acquisitions of residual  interests in Receivables  II-A
and  Receivables  II-B  affiliates of NPO  Management,  LLC ("NPO" the Company's
asset servicer) and the special  director of the Company will be paid investment
banking  fees  of  $900,000  for  their  services   including  the  origination,
negotiation and structuring of the transactions.  The total fees will be payable
without  interest,  over the next three years from a portion of the monthly cash
flow generated by the acquisitions.

     MORTGAGE LOANS

     The Company's mortgage loan portfolio consists primarily of long-term wrap-
around and other mortgage loans to its Affiliated Limited  Partnerships  secured
by the types of properties  discussed above.  Most of the loans are subordinated
obligations  with the  majority  of the  payments  received  being  utilized  to
amortize  the related  underlying  mortgage  loan over the  primary  term of the
related  lease.  The Company  builds equity in the mortgage  loans over time. At
December  31,  2001,  the  Company  had  investments  in 34  mortgage  loans  to
Affiliated  Limited  Partnerships with a carrying value for financial  reporting
purposes  of  $35,567,000  (prior  to  a  loan  loss  reserve  of  approximately
$4,095,000).  These mortgage loan receivables are subject to underlying mortgage
obligations of $22,218,000.

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

     DVL's mortgage  portfolio included 23 and 26 loans with net carrying values
of $28,377,000 and  $33,639,000 as of December 31, 2001 and 2000,  respectively,
which are due from Affiliated Limited Partnerships that own properties leased to
Wal-Mart Stores,  Inc. These mortgage loan receivables are subject to underlying
mortgage  obligations of $19,546,000 and $22,971,000 as of December 31, 2001 and
2000,  respectively.  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  properties.  Net carrying  value
refers to the unpaid principal balance less any allowance for reserves,  and any
amount which represents future interest based upon the purchase of the loan at a
discount.


                                        4
<PAGE>

     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
virtually  all cases where the  partnership  is  entitled to receive  Percentage
Rent, a portion of such rent is required to be paid to the Company as additional
interest and/or additional debt service on the long-term mortgage.

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

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

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

     LOAN PORTFOLIO

     The  following  table sets  forth the  number of various  loans owed to the
Company which are outstanding,  the aggregate loan balances,  including  accrued
interest, and the allowances for loan losses, at December 31, 2001. See Tables 1
and 2 of Appendix "A" to this Form 10-K for detailed information as to each such
loan.

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

<S>                                                    <C>       <C>          <C>
Long-term mortgages due from Affiliated
 Limited Partnerships                                          $ 51,475
     Less:  unearned interest (1)                               (15,908)
                                                               --------

      Total loans collateralized by mortgages          34        35,567       $ 4,095
                                                       --      --------        ------

Loans collateralized by limited partnership
 interests                                             21           355           277
                                                       --      --------        ------

Advances due from Affiliated Limited Partnerships       5            14            -
                                                       --      --------        ------

      Total loans                                      60      $ 35,936       $ 4,372
                                                       ==      ========       =======
</TABLE>

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


                                        5
<PAGE>

     INVESTMENTS IN AFFILIATED LIMITED PARTNERSHIPS

     The  Company  over the  years  has  acquired  various  limited  partnership
interests  in its  Affiliated  Limited  Partnerships  pursuant  to the  terms of
certain settlement agreements and through various purchases and foreclosures. At
December  31, 2001 and 2000 the  Company's  carrying  value was  $1,121,000  and
$1,157,000, respectively.

     PARTNERSHIP AND PROPERTY MANAGEMENT

     The Company is the general partner of approximately  70 Affiliated  Limited
Partnerships from which it receives management,  transaction and other fees. The
Company,  through  Professional  Service Corporation  ("PSC"),  its wholly-owned
subsidiary,  is engaged in the management of an industrial  property  located in
New  Jersey  pursuant  to a master  lease.  This  master  lease  permits  PSC to
sub-lease the property to tenants and retain  profits  subject to the payment by
PSC of operating  expenses and rent to the entity that owns the property.  Prior
to  December  2000,  PSC  managed a second  industrial  property  in New  Jersey
pursuant to a master lease.  In December 2000, the Company  purchased all of the
real estate assets that encompassed the second master lease, as discussed below.

     In June 1998, the Company entered into a Management Services Agreement with
a limited  partnership  (in which certain of its partners are  affiliates of NPO
and  Blackacre)  under  which  the  Company  renders  services  for a fee.  This
agreement  may  be  terminated   with  30  days  notice  by  either  party.   As
compensation,  the Company  received the  following  (a) a monthly fee of $5,000
through  November 2000, and (b) after all the partners of the  partnership  have
earned a 20% internal  rate of return,  compounded  quarterly,  on their capital
contributions,  an amount of cash equal to 25% of the profits, as defined in the
agreement.  The Company  received  compensation  under such  agreement  equal to
$442,900 in 2001 and $362,500 in 2000.

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

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

     In November 1999, the Company entered into a management  service  agreement
with an entity whose partners are affiliates of NPO to render certain accounting
and administrative services. As compensation, the Company receives a monthly fee
of  $2,000,  a monthly  deferred  fee of $6,500 and an annual  incentive  fee if
certain  levels of  profitability  are  obtained.  The Company  recorded fees of
$152,000 and $102,000 in 2001 and 2000 which included  incentive fees of $50,000
and $-0-, respectively.


                                        6
<PAGE>

     REAL ESTATE HOLDINGS

     The Company currently owns three contiguous  properties  located in Kearny,
New Jersey. These properties are:

(1)  Two  acres  of  land  underlying   approximately   80,000  square  feet  of
manufacturing,  warehousing and commercial  buildings.  In November of 1998, the
Company  foreclosed  on its  mortgage  and now  owns  the  land,  buildings  and
improvements.

(2) Seven buildings  located in an industrial  park in Kearny,  NJ purchased for
$3,000,000,  plus closing  costs.  Prior to the  purchase,  the Company had been
leasing all of these buildings,  under a master lease agreement,  and subletting
this property to various unrelated tenants. The acquisition was funded with bank
financing  in  the  original   principal   amount  of  $3,000,000  and  cash  of
approximately  $255,000.  The bank financing accrues interest at the rate of 10%
per annum and requires  monthly  interest-only  payments until June 30, 2002, at
which time the loan matures.  The Company is currently  negotiating an extension
of this loan.

(3) Fee title in a parcel of land in  Kearny,  NJ  purchased  from an  unrelated
third party for a $365,000,  plus closing costs. The acquisition was funded with
bank  financing  in the  original  principal  amount  of  $200,000  and  cash of
approximately  $175,000.  The financing accrues interest at the rate of 9.5% per
annum and requires  monthly interest only payments until June 30, 2002, at which
time the loan matures. The Company is currently negotiating an extension of this
loan.

     OPPORTUNITY FUND

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

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

     The  Opportunity  Agreement  has not been  renewed or  extended.  While the
Opportunity  Fund no  longer  has the  right of first  refusal  with  regard  to
opportunities, the Company may continue to present opportunities to the fund.

     As of March 1, 2002, the  Opportunity  Fund has purchased 15 wrap mortgages
of Affiliated  Limited  Partnerships from unaffiliated third parties (seven were
purchased in 1998,  one was purchased in 1999 and seven were purchased in 2000),
acquired  limited  partnership  units  from  unaffiliated  individuals  in three
Affiliated  Limited  Partnerships,  and  acquired  an  ownership  interest  in a
property of an Affiliated Limited Partnership.  During 2000, DVL purchased three
of the mortgages  owned by the  Opportunity  Fund and the  Opportunity  Fund was
fully  satisfied on an additional four mortgage loans, as each of the properties
that


                                   7
<PAGE>

secured these four mortgage loans was sold. During 2001, a newly formed, wholly-
owned subsidiary of DVL purchased two of mortgages owned by the Opportunity Fund
and the Opportunity Fund was fully satisfied on an additional two mortgage loans
as each of the  properties  that secured these two mortgage  loans were sold. In
December  2001,  the  Opportunity  Fund also sold its ownership  interest in the
property  located  in  Kearny,  NJ to an entity in which  certain  partners  are
affiliates  of NPO.  As of  March  1,  2002,  the  Opportunity  Fund  owns  four
mortgages. During 2001, DVL was paid approximately $280,000 from the investments
by the  Opportunity  Fund, of which $189,000 was used to pay amounts owed by DVL
under a note in favor of an entity that is part of the Opportunity Fund.

     EMPLOYEES

     As of March 2002, the Company had 11 employees all of whom were employed on
a full-time basis other than the President of the Company, who serves on a part-
time basis.  The Company is not a party to any collective  bargaining  agreement
and the Company's  employees are not represented by any labor union. The Company
considers its relationship with its employees to be good.

ITEM 2.  PROPERTIES.

     The Company maintains  corporate  headquarters in New York City in a leased
facility  located  at 70 E. 55th  Street,  New York,  New York,  which  occupies
approximately 6,000 square feet of office space. The lease for such office space
is due to expire on February 7, 2003.  The base rent is  $227,160  per annum.  A
description  of the  other  properties  owned  by  the  Company  appears  in the
subsection  captioned  "Real  Estate  Holdings"  in Item 1  above.  The  Company
believes that its existing facilities are adequate to meet its current operating
needs and that suitable  additional  space should be available to the Company on
reasonable  terms should the Company  require  additional  space to  accommodate
future operations or expansion.

ITEM 3.  LEGAL PROCEEDINGS.

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

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

None.


                                        8
<PAGE>

                                     PART II

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

     The  Common  Stock of DVL is traded on the  over-the-counter  market and is
quoted on the OTC Bulletin Board maintained by the NASD under the symbol "DVLN".
As of March 15, 2002,  the last reported sale price of DVL common stock was $.20
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 2001
and 2000. Such prices are inter-dealer prices without retail mark-up,  mark-down
or commission, and do not represent actual transactions.

2001                                                           HIGH          LOW
----                                                           ----          ---
Fourth Quarter .......................................      $   .10      $   .07
Third Quarter ........................................          .09          .05
Second Quarter .......................................          .07          .05
First Quarter ........................................          .06          .05

2000                                                           HIGH          LOW
----                                                           ----          ---
Fourth Quarter .......................................      $   .11      $   .05
Third Quarter ........................................          .13          .06
Second Quarter .......................................          .20          .06
First Quarter ........................................          .34          .13

     At March 8, 2002,  there were  3,510  holders of record of Common  Stock of
DVL. No dividends  have been paid since October 1990. At this time, DVL does not
anticipate paying any dividends in the foreseeable future.


                                        9
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

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

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

                                                 2001         2000         1999        1998         1997
                                                 ----         ----         ----        ----         ----
<S>                                          <C>          <C>           <C>         <C>          <C>
Revenues
  Affiliates                                 $  4,499     $  4,812      $  6,360    $  5,794     $  6,183
  Other                                         5,056        1,251         1,375         528           70
                                             --------     --------      --------    --------     --------

          Total                              $  9,555     $  6,063      $  7,735    $  6,322     $  6,253
                                             ========     ========      ========     =======     ========

Income (loss) before extraordinary gain      $  2,505     $    199      $  1,026    $   (758)    $ (2,415)
Extraordinary gain on the settlement of           361          306         1,267         202        4,011
                                             --------     --------      --------    --------     --------
 indebtedness
         Net Income (loss)                   $  2,866     $    505      $  2,293    $   (556)    $  1,596
                                             ========     ========      ========    ========     ========
Basic earnings (loss) per share
  Income (loss) before extraordinary gain    $    .15     $    .01      $    .06    $  (.04)     $   (.15)
  Extraordinary gain                              .02          .02           .08        .01           .25
                                             --------     --------      --------    -------      --------

         Net Income (loss)                   $    .17     $    .03      $    .14    $  (.03)     $    .10
                                             ========     ========      ========    =======      ========

Diluted earnings (loss) per share
  Income (loss) before extraordinary gain         .03          .01           .02       (.04)         (.15)
  Extraordinary gain                              .00          .00           .02        .01           .25
                                             --------     --------      --------    -------      --------

         Net Income (loss)                   $    .03     $    .01      $    .04    $  (.03)     $    .10
                                             ========     ========      ========    =======      ========
</TABLE>


                                       10
<PAGE>

<TABLE>
<CAPTION>
                                                        Consolidated Balance Sheet Data
                                                                  (In thousands)
                                                               As at December 31

                                         2001          2000         1999           1998         1997
                                         ----          ----         ----           ----         ----
<S>                                    <C>           <C>          <C>            <C>          <C>
Total assets                           $79,690       $45,437      $41,858        $55,635      $64,942
                                       =======       =======      =======        =======      =======

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

Underlying mortgages payable           $22,218       $26,019      $27,692        $38,644      $45,306
                                       =======       =======      =======        =======      =======

Long-term debt and notes payable       $ 8,911       $10,781      $ 5,156        $ 9,937      $12,143
                                       =======       =======      =======        =======      =======
Shareholders' equity                   $10,955       $ 7,573      $ 7,068        $ 4,775      $ 5,279
                                       =======       =======      =======        =======      =======
</TABLE>


                                             11
<PAGE>

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

INTRODUCTION

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

     DVL believes  that its  anticipated  cash flow  provided by  operations  is
sufficient  to meet its current cash  requirements  through  January  2003.  The
Company  has in the past and  expects in the future to  continue  to augment its
cash flow with  additional cash generated from either the sale or refinancing of
its assets and/or borrowings.

     The Company's  current  strategy is to (i) maximize the value of its assets
and  meet  its  short-term  working  capital  needs  by  continuing  to  manage,
administer and service its existing  portfolio,  (ii) obtain investments through
the use of bank  borrowings,  and (iii) expand through the acquisition of one or
more companies to generate  positive income.  There can be no assurance that the
Company  will be able to  identify  or  acquire  businesses.  While the  Company
regularly evaluates and discusses potential acquisitions,  the Company currently
has  no   understandings,   commitments  or  agreements   with  respect  to  any
acquisitions.  The Company anticipates that it would finance any possible future
acquisition  through new  borrowings  or the issuance of its common or preferred
stock.  During 2001,  the Company  purchased two new mortgage  loans,  purchased
securitized  receivables  portfolios,  purchased a parcel of land and refinanced
other investments.

     At December  31,  2001,  the Company had net  operating  loss  carryforward
("NOLS")  aggregating  approximately $57 million,  which expire in various years
through 2019,  including  $50 million which expire  through 2007. If the Company
generates  taxable  income  in  the  future,  the  Company  may  be  subject  to
limitations on the use of its NOLS pursuant to the Internal  Revenue Code. It is
anticipated that the taxable income associated with the residual  interests will
utilize significant NOLS. There can be no assurance that a significant amount of
the Company's existing NOLS will be available to the Company at such time as the
Company desires to use them.


                                       12

<PAGE>

SIGNIFICANT EVENTS

ACQUISITION OF RESIDUAL INTERESTS IN SECURITIZED PORTFOLIOS

     On March 30, 2001, the Company,  through its consolidated  subsidiary,  S2,
acquired a 99.9%  Class B member  interest  in  Receivables  II-A LLC, a limited
liability company  ("Receivables II-A"), and on August 15, 2001 acquired a 99.9%
Class B member interest in Receivables  II-B, LLC, a limited  liability  company
("Receivables  II-B") from an unrelated  party  engaged in the  acquisition  and
management of periodic payment receivables. The Class B member interest entitles
the Company to be allocated 99.9% of all items of income, loss and distribution.
Receivables  II-A and II-B  solely  receive  the  residual  cash  flow from five
securitized receivable pools after payment to the securitized noteholders.

     The Company  purchased  its interest in  Receivables  II-A for an aggregate
purchase  price of  $26,134,264,  including  costs  of  $809,264  including  the
issuance of a warrant,  valued at $74,000,  for the purchase of 2 million shares
of the common stock of DVL,  exercisable  until  February 15, 2011 at a price of
$.20 per share.  The purchase price was paid by the issuance of limited recourse
promissory  notes by the  consolidated  subsidiary  in the  aggregate  amount of
$25,325,000.  Principal  and interest  are payable from the future  monthly cash
flow.  The notes mature on December 31,  2021,  bear  interest at the rate of 8%
annually, and are secured by a pledge of the consolidated  subsidiary's interest
in Receivables II-A and all proceeds and distributions related to such interest.
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 up to $2,532,500 of the purchase price. Payments, if any,
due under this  guaranty are payable  after  December 31, 2021.  The guaranty is
reduced by 10% of the principal paid. The amount of the guaranty at December 31,
2001 was $2,532,500.

     In accordance with the purchase  agreement,  through December 31, 2001, the
residual   interests  in  securitized   portfolios  and  the  notes  payable  to
Receivables II-A increased by approximately $699,000 based on the performance of
the underlying receivables.

     The Company  purchased  its interest in  Receivables  II-B for an aggregate
purchase price of $9,657,000, including costs of $557,000 including the issuance
of a warrant,  valued at $62,000,  for the  purchase of 1 million  shares of the
common  stock of DVL,  exercisable  until August 15, 2011 at a price of $.20 per
share.  The  purchase  price  was  paid  by the  issuance  of  limited  recourse
promissory  notes by the  consolidated  subsidiary in the aggregate  amount of a
$9,100,000.  Principal and interest are payable from the future monthly residual
interest  cash flow.  The notes mature on August 15, 2020,  bear interest at the
rate  of  8%  annually,  and  are  secured  by  a  pledge  of  the  consolidated
subsidiary's  interest in  Receivables  II-B and all proceeds and  distributions
related to such  interest.  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 up to $910,000 of the
purchase price. The guaranty is reduced by 10% of the principal paid. The amount
of the guaranty at December  31,2001 was $899,464.  Payments,  if any, due under
this guaranty are payable after August 15, 2020.

     In connection with the  acquisitions  of residual  interests in Receivables
II-A and  Receivables  II-B an affiliate of NPO and the special  director of the
Company will be paid  investment  banking fees of $900,000 for their services in
connection   with  the   origination,   negotiation   and   structuring  of  the
transactions.  The total fees will be payable  without  interest,  over the next
three  years  from  a  portion  of  the  monthly  cash  flow  generated  by  the
acquisitions.


                                    13
<PAGE>

     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:

                     March 30, 2001 Transaction    August 15, 2001 Transaction
                     --------------------------    ---------------------------

      Years                 Minimum    Maximum        Minimum      Maximum
      -----                 -------    -------        -------      -------

   2001 to 2009            $462,500    $500,000       $280,000    $380,000
   2010 to final payment    700,000     750,000       $350,000    $400,000
     on the notes*

     * Final payment on the notes  payable  expected  2016  related to the March
       transaction and 2018 for the August transaction.

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

     BLACKACRE TRANSACTION

     The  Company  had  outstanding  as  of  December  31,  2001   approximately
$2,400,000  aggregate  principal amount of 10% redeemable notes due December 31,
2005.  The notes are  redeemable  in cash,  or at the option of DVL,  for common
stock at a formula based upon the market price of the DVL common stock.

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

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

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

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

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


                                       14
<PAGE>

     NPM AND NPO TRANSACTIONS

     In an  effort to  alleviate  its  liquidity  problems  and to meet  certain
mandatory  debt  repayment  requirements,  on September  27,  1996,  the Company
entered into a loan  transaction  with NPM Capital,  LLC ("NPM") under a certain
Amended and Restated Loan  Agreement  dated as of March 27, 1996 (the  "Original
Loan  Agreement"),  pursuant to which NPM purchased certain loans from creditors
of the Company.  The original principal loan amount from NPM was $8,382,000 (the
"Original Loan").

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

     In  connection  with the  transactions  contemplated  by the Original  Loan
Agreement,  in  March  1996,  the  Company  and NPO,  an  affiliate  of  certain
principals  of NPM,  entered  into an  Asset  Servicing  Agreement  (the  "Asset
Servicing  Agreement"),  pursuant to which NPO is  providing  the  Company  with
administrative  and advisory  services relating to the assets of the Company and
its Affiliated  Limited  Partnerships.  In consideration for such services,  the
Company  pays NPO  $600,000  per year (with cost of living  increases)  over the
seven-year term of the original  agreement,  subject to early  termination under
certain conditions.  During 2001 the agreement was extended under the same terms
and  conditions  for another five years to March 2008. The current annual fee is
$645,000.  The Company paid to NPO  $1,038,000  and $1,866,000 in 2001 and 2000,
respectively.  As of December 31, 2001 and 2000 the Company owed accrued fees of
$28,000 and $373,000, respectively.

     In connection with the Original Loan Agreement,  certain  affiliates of NPM
acquired an aggregate of 1,000,000  shares (the "Base  Shares") of the Company's
Common Stock for $200,000.  The Base Shares  currently  represent  approximately
4.7% of the  outstanding  Common Stock of the Company.  An affiliate of NPM also
acquired  100 shares of preferred  stock of the Company for $1,000.  The Company
issued to affiliates of NPM warrants (the "Warrants"), exercisable as of January
1999,  to purchase  such number of shares of Common  Stock as, when added to the
Base Shares,  represent an aggregate of 49% of the  outstanding  Common Stock of
the  Company  on a  fully-diluted  basis.  The  original  exercise  price of the
Warrants was $.16 per share, subject to applicable  anti-dilution provisions and
subject to a maximum aggregate exercise price of approximately  $1,900,000.  The
Warrants  expire on December 31, 2007.  The Warrants  were valued for  financial
statement  purposes at $516,000 at the date of issuance and such value  resulted
in a debt discount which was amortized using the effective interest rate method.
Through March 2002, no Warrants have been exercised.

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

     RECENT DEBT TENDER OFFERS AND REDEMPTIONS

     During 2000 and 2001, the Company  redeemed an aggregate of $721,000 of the
Company's 10%  redeemable  promissory  notes due December 31, 2005 (the "Notes")
for cash at the face value plus accrued interest of approximately $37,000. As of
December 31, 2001,  $162,000 has been paid and the remaining $596,000 to be paid
has been accrued, but will no longer accrue interest.


                                    15
<PAGE>

     Since October  1997,  the Company  conducted  three cash tender offers (the
"Offers")  at a Tender  Offer price of $0.12 per $1.00  principal  amount of the
Notes.  The first two Offers were financed with a loan from Blackacre  discussed
below.

The results were as follows:

                  Principal Amount    Principal Amount
                       of Notes            of Notes           Extraordinary
                     Purchased by        Purchased by           Gains to
                         DVL               Blackacre               DVL
                  ----------------    ----------------         ------------

Offer # 1          $ 6,224,390          $   392,750           $   202,000
                                                                  (1998)
                                                              $ 2,906,000
                                                                  (1997)

Offer # 2          $ 2,413,652          $   423,213           $ 1,267,000
                                                                  (1999)

Offer # 3          $   378,270          $    - 0 -            $   306,000
                                                                  (2000)

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

     Notes with an aggregate principal amount of approximately $2,400,000 remain
outstanding as of December 31, 2001. The Offers, redemptions and the exchange of
Notes  for  Common  Stock by  Blackacre  have  reduced  the  potential  dilutive
effective  on  the  Company's  current   stockholders  that  would  result  from
redemption of the notes for shares of Common Stock. However, given the aggregate
principal  amount of Notes which remains  outstanding,  the  potential  dilutive
effect of such a redemption is still significant.

Opportunity Fund
----------------

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


                                       16
<PAGE>

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

     The Opportunity  Agreement which expired, has not been renewed or extended.
While  the fund no  longer  has the  right  of  first  refusal  with  regard  to
opportunities, the Company may continue to present opportunities to the fund.

     As of March 1, 2002, the  Opportunity  Fund has purchased 15 wrap mortgages
of Affiliated  Limited  Partnerships from  unaffiliated  third parties (seven in
1998, one in 1999 and seven  mortgages in 2000),  acquired  limited  partnership
units from unaffiliated  individuals in three Affiliated  Limited  Partnerships,
and  acquired an ownership  of interest in a property of an  Affiliated  Limited
Partnership.

     During 2000, DVL purchased  three of the mortgages owned by the Opportunity
Fund and the Opportunity Fund was fully satisfied on an additional four mortgage
loans,  when each of the properties  that secured these four mortgage loans were
sold. During 2001, a newly formed,  wholly-owned subsidiary of DVL purchased two
of mortgages  owned by the Opportunity  Fund and the Opportunity  Fund was fully
satisfied on an additional  two mortgage  loans as each of the  properties  that
secured these two mortgage loans were sold. In December  2001,  the  Opportunity
Fund sold its ownership  interest in the property in Kearny,  NJ to an entity in
which  certain  partners  are  affiliates  of NPO.  As of  March  1,  2002,  the
Opportunity  Fund owns four mortgages.  During 2001, DVL was paid  approximately
$280,000 from the  investments  by the  Opportunity  Fund, of which $189,000 was
used to pay amounts  owed by DVL under a note in favor of an entity that is part
of the Opportunity Fund.

RESULTS OF OPERATIONS

     DVL had income before  extraordinary  gain, net income after  extraordinary
items, and extraordinary gains, as follows:

                                      2001             2000         1999
                                      ----             ----         ----

Income before extraordinary gain   $2,505,000     $   199,000    $1,026,000

Net income                         $2,866,000     $   505,000    $2,293,000

Extraordinary gains                $  361,000     $   306,000    $1,267,000

     Interest income on mortgage loans from  affiliates and interest  expense on
underlying  mortgages  decreased  from  1999  through  2001,  as a  result  of a
reduction in the size of DVL's  mortgage  portfolio.  The decrease  from 1999 to
2000 was partially  offset by additional  interest  income and interest  expense
from the purchase of eight new  mortgage  loans,  some of which have  underlying
mortgages.

         Gains on satisfaction of mortgage loans were as follows:

                                2001             2000         1999
                                ----             ----         ----

                            $  615,000      $   256,000    $1,639,000

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


                                       17
<PAGE>

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

                                2001             2000         1999
                                ----             ----         ----

                            $  260,000      $ 413,000      $  502,000

Transaction  and  other  fees  were  earned  in  connection  with  the  sales of
partnership  properties and refinancings of underlying  mortgages.  The decrease
from 1999 through 2001 was the result of fewer transactions in 2000 and 2001.

     Distributions from investments in affiliates  decreased in 2001 compared to
2000 due to fewer sales of  Affiliated  Limited  Partnerships  in which DVL owns
limited  partnership  units.  Distributions were higher in 1999 compared to 2000
due to the  distribution  of proceeds  to limited  partners  resulting  from the
refinancing of certain underlying  mortgages.  Distributions from investments in
2000  included   approximately  $77,000  distributed  to  the  Company  from  an
Affiliated  Limited  Partnership  that  distributed  excess  cash to its limited
partners.

     Interest income on residual  interests and interest  expense on the related
notes payable arose as DVL completed the  acquisitions  in March 2001 and August
2001.

         Net rental income from others was as follows:

                                2001           2000            1999
                                ----           ----            ----

                            $  720,000      $ 523,000      $  532,000

     The primary  reason for the increase in net rental income from 1999 to 2001
was the result of lower costs. The primary reason for the reduction in costs was
due to a reduction in lease obligations  resulting from the purchase in December
2000 of certain  real  estate  which the  Company  had  previously  leased.  The
increase in net rental income was partially  offset by a rent reduction  granted
to a tenant and greater  depreciation  expense  due to the  purchase of the real
estate assets, as well as higher insurance costs.

     The  Company has one large  tenant  which has been  experiencing  financial
difficulties.  As a result,  the tenant has been paying rent equal to 70% of its
monthly rental and 100% of its share of monthly operating expenses.  The Company
has not agreed to reduce the  monthly  rental and  continues  to invoice for the
full sum but has taken no other action as of this time. The monthly reduction in
rent being paid is approximately $30,000.

Management fees from others were as follows:

                                     2001             2000          1999
                                     ----             ----          ----

                                  $ 804,000      $   500,000    $  533,000

     Included in management  fees were  incentive  management  fees of $442,900,
$312,500 and $420,000  received during 2001, 2000 and 1999,  respectively,  from
PBD Holdings, Inc. an entity that is owned by affiliates of NPO and BCG ("PBD").
Incentive  management  fees are earned  when  properties  owned by PBD are sold;
therefore,  the fees earned by the Company vary based on the sales proceeds. PBD
currently has one parcel of land remaining.

     The Company also provided property  management and administrative  services
for which it received fees of $361,000,  $138,000 and $36,000 for 2001, 2000 and
1999  respectively,  which are included in  management  fees.  The  increases in
property management and administrative  services from 1999 to 2001 were a result
of the Company obtaining new property  management  contracts.  The fees for 2001
included non recurring fees of $174,000.


                                    18
<PAGE>

     Distributions  from  investments  from others  increased  in 2001 from 2000
primarily as a result of receiving $280,000 in distributions from investments in
the opportunity funds and $348,000 in distributions  above the carrying value of
other investments.

     Distribution  from  investments  from  others  increased  in 2000 from 1999
primarily  as a result of the  purchase  by the  Company of certain  real estate
assets  which the  Company  previously  had been  leasing  under a master  lease
agreement. The Company owned limited partnership units in the seller of the real
estate and as a result,  the Company  received  approximately  $121,000 from the
sale.

     General  and  administrative  expenses  increased  in 2001  from  2000  and
decreased  in 2000 as compared to 1999.  The primary  reason for the increase in
2001 from 2000 was increased salaries and hiring costs as well as rent costs for
the Company's  office  headquarters  due to escalation  charges and lower rental
reimbursements.  The primary  reasons for the  decrease in 2000 from 1999 were a
decrease  in salaries  and payroll  related  costs,  as well as, a reduction  in
stockholder  communication  costs.  These  decreases  were  partially  offset by
greater franchise and tax costs.

     The asset  servicing fee to NPO increased in 2001 from 2000 and 1999 due to
an increase in the consumer price index, as provided for in the agreement.

     Legal and professional  fees increased in 2001 as compared to 2000 but were
less in 2000 than in 1999.  Legal and  professional  fees increased in 2001 from
2000  primarily due to expenses  incurred in evaluating a potential  acquisition
that was not completed and the payment of fees for additional  services provided
by NPO. The Company has not employed an in-house  legal  counsel since 1998 and;
therefore,  legal  fees vary  depending  on the  number  and  sophistication  of
transactions that are executed.

     Legal and professional fees decreased slightly in 2000 from 1999 due to the
Company completing less transactions.

     Interest  expense on litigation  settlement  Notes would have  increased in
each year from 1999 through 2001 because of  compounding  of interest;  however,
the  Company's  efforts  to reduce  the  principal  amount of Notes  outstanding
through tender offers, redemptions and the exchange of Notes for common stock by
Blackacre have resulted in the interest expense remaining fairly consistent. The
exchange of the Notes by Blackacre in December, 2001 should significantly reduce
the interest expense on the litigation settlement Notes in the future.

     Interest  expense to  affiliates  consists  primarily  of  interest  on the
accrued  NPO asset  servicing  fees,  interest on the loan from  Blackacre,  and
interest expense on the loan to NPM.

     Interest  expense on the loan from  Blackacre  increased  from 1999 through
2001 as a result of compounding interest.  The Company made payments on the loan
from  Blackacre  of   approximately   $390,000   during  2001.   These  payments
significantly reduced the amount of interest expense recorded for 2001.

     Interest  expense  associated  with the  accrued  NPO asset  servicing  fee
decreased from 1999 through 2001. Interest accrues on all amounts due to NPO and
during  1999  through  2001 the  amount  due was  reduced  significantly.  As of
December 31, 2001 $28,000 remains due to NPO.

     Interest expense on the loan to NPM decreased from $665,000 in 1999 to $-0-
in 2000 as a result of the repayment of this loan in 1999.  The financing  costs
of the NPM Loan, as well as the value of the warrants  issued in connection with
obtaining such loan, were amortized  proportionately as such loan was repaid. As
the loan was totally repaid in 1999, all remaining costs were amortized in 1999.


                                       19
<PAGE>

     Interest  expense relating to other debts increased from 1999 through 2001.
During  2000,  the  Company  borrowed an  aggregate  of  $6,425,000  to fund the
acquisition  of  eight  new  mortgage  loans,  the  purchase  of all  the  land,
buildings,  and  improvements  from a  limited  partnership  which  owned  seven
buildings in an industrial  park in New Jersey,  and  refinanced  three existing
mortgage receivables. The Company paid $700,000 towards the principal balance of
one of such loans during 2000 and re-borrowed the $700,000 to partially fund the
acquisition  of additional  mortgage  loans.  Also,  during the first quarter of
2001, the Company borrowed $200,000 to purchase a parcel of land.

     Extraordinary  gains in  2001,  2000 and  1999 of  $525,000,  $306,000  and
$1,267,000 respectively were the result of tender offers and redemptions at less
than book value of the Notes. The Company also realized an extraordinary loss in
2001 of $164,000  resulting from the redemption of Notes at face value.  The net
extraordinary gain for 2001 was $361,000.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's  cash balance was  $2,987,000 at December 31, 2001,  compared
with $1,184,000 at December 31, 2000.

     The  Company's  cash flow from  operations  is generated  principally  from
rental  income  from its  leasehold  interests  and  ownership  of real  estate,
distributions in connection with residual  interests in securitized  portfolios,
interest  on its  mortgage  portfolio,  management  fees from third  parties and
affiliates  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  January 2003. DVL
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:

                     March 30, 2001 Transaction    August 15, 2001 Transaction
                     --------------------------    ---------------------------

      Years                 Minimum    Maximum        Minimum      Maximum
      -----                 -------    -------        -------      -------

   2001 to 2009            $462,500    $500,000       $280,000    $380,000
   2010 to final payment    700,000     750,000       $350,000    $400,000
     on the notes*

     * Final payment on the notes  payable  expected  2016  related to the March
       transaction and 2018 for the August transaction.

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


                                       20
<PAGE>

Acquisitions and Financings
---------------------------

Loans payable which are scheduled to become due through 2006 are as follows:

<TABLE>
<CAPTION>
                                                                     Outstanding
                                                   Original           Principal
                                                     Loan             Balance at         Due
Purpose                        Creditor             Amount           Dec. 31, 2001       Date
-------                        --------           ----------        --------------       ----
<S>                           <C>                    <C>                <C>                <C>
Repurchase of Notes
Issued by the Company          Blackacre(1)       $ 1,560,000        $  1,942,000       09/30/03

Purchase of Mortgages   Unaffiliated Bank(2)(3)   $ 1,000,000        $    820,000       05/01/06

Purchase of a Mortgage
and Refinancing of
Existing Mortgages       Unaffiliated Bank(2)(3)  $ 1,450,000        $  1,035,000       04/01/05

Purchase of Real Estate
Assets                   Unaffiliated Bank(4)     $ 3,000,000        $  3,000,000       06/01/02

Purchase of Land         Unaffiliated Bank(5)     $   200,000        $    200,000       06/01/02

Purchase of Mortgages    Unaffiliated Bank(6)     $   400,000        $          -       05/01/06
</TABLE>

(1)  Interest rate is 12% per annum, compounded monthly.  Interest is added to
     principal.
(2)  This loan self-amortizes.
(3)  Interest rate is prime plus 1.5% per annum.
(4)  Interest rate is 10% per annum.
(5)  Interest rate is 9.5% per annum.
(6)  Interest rate is 8.25% per annum.  This loan was originated in January of
     2002.

The Company is currently negotiating an extension of the two loans which are due
June 1, 2002.


                                   21
<PAGE>

     In early 2001,  DVL  purchased the fee title to a parcel of land in Kearny,
NJ from an unrelated third party for a purchase price of $365,000,  plus closing
costs. The acquisition was funded with bank financing in the original  principal
amount of  $200,000  and cash of  approximately  $175,000.  This bank  financing
accrues   interest  at  the  rate  of  9.5%  per  annum  and  requires   monthly
interest-only payments. The Company extended the loan under the same terms until
June 1, 2002 by paying an extension fee of $750.

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

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

IMPACT OF INFLATION AND CHANGES IN INTEREST RATES
-------------------------------------------------

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


                                       22
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

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

<TABLE>
<CAPTION>
                                                                     There-
In Thousands             2002    2003      2004      2005    2006    After     Total
------------------------------------------------------------------------------------
<S>                     <C>     <C>       <C>      <C>      <C>     <C>      <C>
ASSETS
Cash equivalents        $2,987                                               $ 2,987
  Variable rate
  Average interest rate   1.3%                                                  1.3%

LONG TERM DEBT
Fixed rate              $7,377  $2,421    $2,037   $2,115   $2,786  $10,651  $27,387
Average interest rate    9.03%   9.03%     9.03%    9.03%     9.03%   9.03%    9.03%

Variable rate           $  466  $  519    $  707   $  173   $  -0-  $  -0-   $ 1,865
Average interest rate      11%     11%       11%      11%      -0-     -0-
</TABLE>


                                       23
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         SUPPLEMENTARY DATA
         ------------------

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

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

<S>                       <C>               <C>             <C>             <C>            <C>
Total Revenue             $     1,546       $     2,401     $     2,436     $     3,172    $     9,555
Total Expenses                  1,474             1,985           2,082           2,479          8,020
  Income before
  extraordinary gain               72               416             354           1,663          2,505
Extraordinary gain                 14                 -               -             347            361
Net income                         86               416             354           2,010          2,866
Basic earnings per
  share:
  Income before extra-
  ordinary gain           $       .01       $       .03     $       .02     $       .10    $       .15
  Extraordinary gain      $       .00       $       .00     $       .00     $       .02    $       .02
  Net income              $       .01       $       .03     $       .02     $       .12    $       .17
Diluted earnings per
  share:
  Income before extra-
  ordinary gain           $       .00       $       .00     $       .00     $       .02    $       .03
  Extraordinary gain      $       .00       $       .00     $       .00     $       .01    $       .00
  Net income              $       .00       $       .00     $       .00     $       .03    $       .03
Weighted average
  shares outstanding:
  Basic                    16,560,450        16,560,450      16,560,450      17,020,429     16,599,517
  Diluted                 147,071,400       125,829,094      91,295,902      72,820,396    124,772,115
<CAPTION>
                                       Quarterly Data (Unaudited)
                                    For the Year Ended December 31, 2000
                             (In Thousands Except Share and Per Share Data)

                              1st               2nd             3rd             4th             Full
                            Quarter           Quarter         Quarter         Quarter           Year
<S>                       <C>               <C>             <C>             <C>            <C>
Total Revenue             $     1,257       $     1,523     $     1,448     $     1,835    $     6,063
Total Expenses                  1,383             1,504           1,405           1,572          5,864
Income (loss) before
  extraordinary gain             (126)               19              43             263            199
Extraordinary gain                 23               126             107              50            306
Net income (loss)                (103)              145             150             313            505
Basic earnings (loss)
  per share:
  Income (loss) before
  extraordinary gain      $     (0.01)      $      0.00     $      0.00     $      0.02    $      0.01
  Extraordinary gain      $      0.00       $      0.01     $      0.01     $      0.00    $      0.02
  Net income (loss)       $     (0.01)      $      0.01     $      0.01     $      0.02    $      0.03
Diluted earnings (loss)
  per share:
  Income (loss) before
  extraordinary gain      $     (0.01)      $      0.00     $      0.00     $      0.00    $      0.01
  Extraordinary gain      $      0.00       $      0.00     $      0.00     $      0.00    $      0.00
  Net income (loss)       $     (0.01)      $      0.00     $      0.00     $      0.00    $      0.01
Weighted average
  shares outstanding:
  Basic                    16,560,450        16,560,450      16,560,450      16,560,450     16,560,450
  Diluted                  16,560,450        87,278,971     107,114,914      96,337,586     96,337,586
</TABLE>

Basic and diluted earnings per share are computed  independently for each of the
periods. Accordingly the sum of the quarterly earnings per share amounts may not
agree to the total for the year.

The financial  statements  and notes  thereto,  together  with the  accountants'
report  thereon of Richard A. Eisner & Company,  LLP, are set forth on pages F-1
through F-32, which follow. The financial statements are listed in Item 14(a)(1)
hereof.


                                           24
<PAGE>

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

         None.

                                 PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF DVL

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

           NAME                             POSITION


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

     In addition to three directors, who have all of the powers normally granted
to corporate  directors,  the Company has one special purpose director,  who was
elected  in 1996 by the  holder  of the 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   Certificate   of
Incorporation).

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

     FREDERICK E.  SMITHLINE (age 69) has served as Chairman of the Board of the
Company  since 1990 and as a director  since 1982.  From  September  1989 to May
1996, Mr.  Smithline was of counsel to the law firm of Epstein,  Becker & Green,
P.C., New York, New York. He is currently in private practice as an attorney.

     MYRON  ROSENBERG  (age 73) has served as a director  of the  Company  since
1973. Mr. Rosenberg is currently a financial consultant.  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.

     ALLEN  YUDELL (age 62) served as a director of the Company  from  September
1996 until November 2001 when he resigned for personal reasons.


                                       25
<PAGE>

     ALAN E.  CASNOFF  (age 58) has served as  President  of the  Company  since
November  1994,  and was  appointed  as a  director  in  November  2001 upon the
resignation  of Allen Yudell.  Mr. Casnoff served as Executive Vice President of
the Company from October 1991 to November  1994.  Mr. Casnoff has maintained his
other business  interests during this period and thus has devoted less than full
time to the business  affairs of DVL. From  November  1990 to October 1991,  Mr.
Casnoff  served as a consultant to the Company and from 1971 to October 1991, as
Secretary  of the  Company.  Since May 1991,  Mr.  Casnoff  has also served as a
director of Kenbee Management, Inc. ("Kenbee"), an affiliate of the Company, and
as President of Kenbee since  November  1994.  Since 1977,  Mr. Casnoff has also
been a  partner  of P&A  Associates,  a private  real  estate  development  firm
headquartered  in  Philadelphia,  Pennsylvania.  Since  1969,  Mr.  Casnoff  was
associated  with various  Philadelphia,  Pennsylvania  law firms which have been
legal  counsel to the Company and Kenbee.  Since July 1999,  he is of counsel to
Klehr, Harrision, Harvey, Brazenburg & Ellers ("Klehr").

     JAY THAILER (age 33) 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.

     GARY FLICKER (age 42) was Chief Financial Officer of the Company from April
1997 through November 2001. Mr. Flicker  continues to be employed by the Company
as Executive Vice President;  however, Mr. Flicker has relocated out of New York
and will cease employment with the Company as of May 1, 2002.

     KEITH B. STEIN (age 45) has been a special purpose  director of the Company
since September 1996. Mr. Stein is the Chairman,  Chief Executive Officer, and a
director of National Auto Receivables  Liquidation,  Inc.  (NASDAQ/BB:  NATA), a
specialty  automobile  finance  company.  From March 1993 to September  1994, he
served as Senior Vice  President,  Secretary  and General  Counsel of  WestPoint
Stevens,  Inc., a textile  company,  after  having  served the same company from
October  1992 to February  1993 in the  capacity of Acting  General  Counsel and
Secretary. From May 1989 to February 1993, Mr. Stein was associated with the law
firm of Weil, Gotshal & Manges LLP. Mr. Stein is an affiliate of NPM.

(c)  COMPLIANCE WITH SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors,  and persons who are beneficial owners of more
than 10% of a  registered  class of the  Company's  equity  securities,  to file
reports of ownership  and changes in ownership  with the  Commission.  Officers,
directors,  and greater than 10%  beneficial  owners are required by  Commission
regulations  to furnish the Company with copies of all Section  16(a) forms they
file.  To the  Company's  knowledge,  based  solely on  review  of such  reports
furnished to the Company, and written representations that no other reports were
required  during or with respect to the fiscal year ended December 31, 2001, all
Section 16(a) filing requirements applicable to such persons were satisfied.


                                       26
<PAGE>

ITEM 11.    EXECUTIVE COMPENSATION

     A. SUMMARY COMPENSATION TABLE

     The following  table sets forth all  compensation  awarded to, earned by or
paid to the following  persons for services  rendered to the Company in 2001 and
(if  applicable) in 2000 and 1999: (1) the person serving as the Company's chief
executive  officer  during  2001;  (2) those other  persons who were  serving as
executive  officers as of the end of 2001 whose  compensation  exceeded $100,000
during 2001:

                           SUMMARY COMPENSATION TABLE
                           --------------------------
<TABLE>
<CAPTION>
                                        Annual Compensation               Long-Term Compensation Awards
                             ---------------------------------------     ------------------------------
                                                                           Securities
                                                       Other Annual        Underlying            LTIP
    Name              Year     Salary      Bonus       Compensation        Options/SAR         Payouts
    ----              ----   ----------   -------    ----------------    ---------------       -------
<S>                   <C>     <C>           <C>         <C>               <C>                   <C>
Alan E.  Casnoff      2001   $120,000    $  10,000          -             100,000(3)              -
President and         2000    120,000          -            -                  -                  -
Chief Executive       1999    120,000       10,000          -                  -                  -
Officer

Jay Thailer           2001   $110,000    $  15,000          -              15,000(3)              -
Executive Vice
President and Chief
Financial Officer(2)

Gary Flicker          2001   $140,600    $  20,000          -                   -                 -
Executive Vice        2000    136,000       17,500          -              25,000(3)              -
President (1)         1999    132,500       17,500          -              25,000(3)              -
</TABLE>

-------------------
(1)  Mr.  Flicker  became  Vice  President  and Chief  Financial  Officer of the
     Company on April 16, 1997 and Executive Vice  President in September  1998.
     Mr. Flicker served as Chief Financial Officer until November 8, 2001.
(2)  Mr. Thailer became Executive Vice President and Chief Financial  Officer of
     the Company on November 8, 2001.
(3)  Consists of options to purchase shares of Common Stock under the 1996 Stock
     Options Plan.


                                       27
<PAGE>

     B. OPTION GRANTS IN LAST FISCAL YEAR
        ---------------------------------

     The following  table sets forth  information as to options  granted in 2001
under the DVL,  Inc.  1996  Stock  Option  Plan (the  "Plan")  to the  executive
officers  named in the Summary  Compensation  Table.  The Plan  provides for the
grant of options to purchase up to 2,500,000 shares of Common Stock to Employees
and Non-Employee Directors (in each case as defined in the Plan).

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

     As of  December  31,  2001,  options  to  purchase  1,473,131  shares  were
outstanding under the Plan and 1,027,869 shares were available for issuance upon
exercise of options which may be granted in the future.


                                       28
<PAGE>

<TABLE>
<CAPTION>
                                         Individual Grants                            Grant Date Value
                      -------------------------------------------------------------  -------------------
                                             Percentage of
                                             Total Options
                      Number of Securities     Granted to    Exercise
                       Underlying Options     Employees in     Price     Expiration      Grant Date
     Name(1)               Granted(1)        Fiscal Year(2)  ($/Sh)(3)      Date      Present Value (4)
-------------------   --------------------   --------------  ---------   ----------  -------------------
<S>                        <C>                    <C>           <C>      <C>              <C>
Alan Casnoff               100,000                80%           .075     08/07/2011       $7,000
Jay Thailer                 15,000                12%           .075     08/07/2011       $1,050
</TABLE>

(1)  Individual   grants  to  employees  become   exercisable  in  whole  or  in
     installments,  and at such  times,  and subject to the  fulfillment  of any
     conditions on exercisability  (in addition to the Section 382 Restrictions)
     as may be  determined  by  the  Compensation  Committee  of  the  Board  of
     Directors (the "Committee") at the time of grant. All options listed in the
     above table became exercisable upon grant,  subject only to the Section 382
     Restrictions. The Committee also has the discretion to establish provisions
     relating to the  forfeiture of an option in connection  with the employee's
     termination of employment with the Company,  or to grant any option without
     a  forfeiture  provision.  Each of the  options  listed in the above  table
     provides that the option will be forfeited  upon  termination of employment
     for "cause" (as therein defined).
(2)  Total options granted to employees in fiscal year 2001 was 125,000.
(3)  Represents  the fair market value of the  underlying  shares on the date of
     grant  (determined in accordance  with the Plan as the closing price of the
     Common Stock on the OTC Bulletin Board).
(4)  The  Black-Scholes  option  pricing  model was chosen to estimate the grant
     date present value of the options set forth in this table. The Company does
     not  believe  that  the  Black-Scholes  model,  or  any  other  model,  can
     accurately  determine  the  value of an  option.  Accordingly,  there is no
     assurance that the value,  if any,  realized by an option holder will be at
     or near the value estimated by the Black-Scholes model. Future compensation
     resulting  from option  grants is based  solely on the  performance  of the
     Company's stock price. The Black-Scholes  ratio of .07 was determined using
     the  following  assumptions:  a  volatility  of 85%,  an  historic  average
     dividend  yield of 0%, a risk  free  interest  rate of 4.98%  and a 10 year
     projected exercise period.


                                            29
<PAGE>

     C.  FISCAL YEAR-END OPTION VALUES
         -----------------------------

     The following table sets forth information as to options held as of the end
of 2001 by the executive  officers named in the Summary  Compensation  Table. No
options  were  exercised  by said  officers in 2001.  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                       none
Gary Flicker                 125,000                       none
Jay Thailer                   42,000                       none

     D.  COMPENSATION OF DIRECTORS

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

     On September 17, 1999, 2000 and 2001,  options to purchase 15,000 shares of
Common Stock were  granted to each of the three  directors  (Messrs.  Rosenberg,
Smithline and Yudell (who resigned as a director in November 2001)). The options
were granted under the Plan,  which provides for automatic grants of options for
15,000 shares to each  incumbent  regular  director on each  anniversary  of the
adoption of the Plan. The options vested  immediately  and are exercisable for a
term of ten (10) years from the date of grant.  The  exercise  price is equal to
the fair market value on the date of grant.

     E.  EMPLOYMENT CONTRACTS AND ARRANGEMENTS

     Gary  Flicker  entered  into an  Employment  Agreement  with  the  Company,
effective as of April 16, 1997,  providing for his  employment as Vice President
and Chief Financial Officer for a one-year term at an annual salary of $120,000,
and for the grant of 50,000 stock  options under the Plan upon  commencement  of
employment.  Effective  January 1, 2002,  2001, and 2000, Mr.  Flicker's  annual
salary  was  $140,600,  $140,600  and  $136,500,  respectively.  The  Employment
Agreement  with Mr.  Flicker  expired  on April  16,  1998 and was not  renewed.
However,  Mr.  Flicker  continues  to be  employed  by the  Company,  without an
employment  agreement,  as Executive Vice  President;  however,  Mr. Flicker has
relocated out of New York and will cease his  employment  with the Company as of
May 1, 2002.

     The Company  entered into an  Indemnification  Agreement with Mr.  Flicker,
effective upon  commencement  of his  employment,  contractually  obligating the
Company to indemnify him to the fullest extent  permitted by applicable  law, in
connection with claims arising from his service to, and activities on behalf of,
the Company.

     Jay Thailer  became a Vice President of the Company in August 1998 at which
time the Company  entered into an  Indemnification  Agreement  with Mr.  Thailer
which is  equivalent to agreement  entered into with Mr.  Flicker.  Mr.  Thailer
currently serves as Chief Financial  Officer and Executive Vice President to the
Company.


                                       30
<PAGE>

     F.  BOARD OF DIRECTORS INTERLOCKS AND INSIDER PARTICIPATION

     During 2001, 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.

     G.  BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION

     The independent  members of the Board of Directors of the Company,  Messrs.
Rosenberg and Smithline act in the stead of a formal compensation  committee. In
such  capacity,  the Board of Directors  reviews  compensation  of the executive
officers  of the  Company  to  determine  if such  compensation  is in line with
similar  organizations and determine the compensation of the executive  officers
of the Company.

     The  Company's  executive  compensation  program is designed to attract and
retain  qualified  executives with competitive  levels of compensation  that are
related to  performance  goals and which  recognize  individual  initiative  and
accomplishments.   The  principal   components   of  the   Company's   executive
compensation program are fixed compensation in the form of base salary, variable
compensation in the form of annual cash bonuses and stock options.

     The Company is subject to Section  162(m) of the  Internal  Revenue Code of
1986,  as  amended  (the  "Code"),  which  limits the  deductibility  of certain
compensation  payments to its  executive  officers.  The Company does not have a
policy requiring the Board to qualify all compensation for  deductibility  under
this  provision.  The Board,  however,  considers the net cost to the Company in
making all  compensation  decisions  and will continue to evaluate the impact of
this provision on its executive compensation.

     Base  Salary:  Any  discretionary  increases in base salary are based on an
annual  evaluation  by the  Board of the  performance  of the  Company  and each
executive  officer,  and  take  into  account  any new  responsibilities  of the
executive,  his or her  experience  and years of service  with the Company and a
comparison of base salaries for comparable positions at similar companies.

     Annual  Bonus:  The  Board  may  decide  to award a bonus to any  executive
officer.  Any awards of discretionary  bonuses are based on an annual evaluation
by the Board of the performance of the Company and each executive  officer,  and
take into account any special  contributions of the executive  officer.  Messrs.
Flicker,  Casnoff and Thailer  were  awarded a  discretionary  bonus of $20,000,
$10,000 and $15,000, respectively in 2001.

     Stock Options: The Stock Option Plan was adopted by the Board in April 1996
and ratified by the  stockholders in September 1996. The Board believes that the
significant  equity  interests  in the Company held by the  Company's  executive
officers have served to link the interest of the  executive  officers with those
of the stockholders.  Under the Company's Stock Option Plan, options to purchase
shares of Common Stock may be granted to the executive  officers of the Company.
The Board  believes that the grant of stock options is, and will continue to be,
an important component of the Company's executive  compensation program.  During
2001,  Mr. Thailer was granted an amount of stock options under the Stock Option
Plan as provided in the table set forth herein  entitled  "Option Grants in Last
Fiscal Year." In determining the size of such grants to executive officers,  the
Board reviewed various  factors,  including the executives'  total  compensation
package  and the  performance  of the Company and each  executive  officer.  The
stockholdings of an executive  officer were not a factor in determining the size
of such grants.

     Chief Executive Officer Compensation:  Mr. Casnoff, the Company's President
and Chief Executive  Officer,  is not party to an employment  agreement with the
Company,  and Mr.  Casnoff's  compensation is established in accordance with the
principles  described  above in connection  with the  compensation  of executive
officers.  The Board reviews Mr.  Casnoff's  performance and determines any base
salary  adjustments,  additional bonuses and stock option grants considering the
various factors described above with respect to executive officers.


                                  31
<PAGE>

     Mr.  Casnoff's  base salary was $120,000 for fiscal 2001 which was the same
as 2000 and 1999. Mr. Casnoff received a discretionary  bonus of $10,000,  and a
Stock Option grant for 2001 of 100,000 shares.

     Myron Rosenberg

     Fred Smithline


     H.  PERFORMANCE COMPARISON

     The following graph compares the yearly percentage change in the cumulative
total stockholder return on the Company's Common Stock for each of the last five
years with the cumulative return (assuming reinvestment of dividends) of the Dow
Jones Industrials Index and the S&P 1500 Diversified Financial Services Index.

     Since August 1995, the Common Stock has been traded on the over-the-counter
market  and has been  quoted on the NASD OTC  Bulletin  Board  under the  symbol
"DVLN".  Until August 3, 1995, the Common Stock was traded on the New York Stock
Exchange.


                                   32
<PAGE>

                               [GRAPHIC OMITTED]


                                       33
<PAGE>

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
            MANAGEMENT

     A. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

     The following table sets forth certain  information as of December 31, 2001
regarding  the  ownership  of common  stock of the Company by each person who is
known to the management of the Company to have been the beneficial owner of more
than 5% of the outstanding shares of the Company's common stock.


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

Lawrence J.  Cohen               5,284,162 (1)(4)               17.1%

Milton Neustadter                3,170,437 (1)(5)               11.0%

Jay Chazanoff                    5,003,245 (2)(6)               16.3%

Ron Jacobs                       4,694,664 (2)(7)               15.5%

Stephen Simms                    4,694,663 (2)(8)               15.5%

Keith B.  Stein                  4,870,788 (3)(9)               15.9%

Robert W.  Barron                4,464,096 (3)(10)              14.8%

Adam Frieman                     4,299,074 (3)(11)              14.3%

Peter Offerman                   4,175,051 (3)(12)              13.9%

Joseph Huston                    4,131,021 (3)(13)              13.8%

Jan Sirota                       4,175,051 (3)(14)              13.9%

Neal Polan                       4,175,051 (3)(15)              13.9%

Michael Zarriello                4,175,051 (3)(16)              13.9%

Mark Mahoney                     4,163,409 (3)(17)              13.9%

The SIII Associates Limited      6,209,427 (3)(18)              19.5%
Partnership Third Addison
Park Corporation and
Gary L.  Shapiro

J.G. Wentworth, S.S.C.
   Limited Partnership           3,000,000 (19)                 11.6%

Stephen Feinberg,                5,406,113 (20)                 21.0%


                                       34
<PAGE>

NOTES TO TABLE
--------------

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

(1) As  described  in detail  below in "Changes of  Control",  such  persons are
members of the Pembroke  Group (as defined in "Changes of Control"  below),  and
said persons share  dispositive  power with each other as to 2,734,092 shares of
the Company's  Common Stock  issuable to the members of the Pembroke  Group upon
the exercise of Warrants by such members,  which shares  constitute 50.1% of all
of the shares issuable to the members of the Pembroke Group upon the exercise of
Warrants.  The address of each member of the  Pembroke  Group is c/o Lawrence J.
Cohen, 70 East 55th Street,  Seventh Floor,  New York, NY 10022.  The members of
the Pembroke Group explicitly disclaim beneficial ownership of all of the shares
of Common Stock and Warrants (and shares of Common Stock  issuable upon exercise
of Warrants) owned by the other members of the Pembroke Group.

(2) As  described  in detail  below in "Changes of  Control",  such  persons are
members of the Millennium Group (as defined in "Changes of Control" below),  and
said persons share  dispositive  power with each other as to 3,515,091 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 Lawrence
J. Cohen, 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 4,042,973 shares of
the Company's Common Stock issuable to the members of the Florida Group upon the
exercise of Warrants (as defined in "Changes in Control" below) by such members,
which shares  constitute  50.1% of all of the shares  issuable to the members of
the Florida  Group upon the exercise of Warrants.  The address of each member of
the Florida Group is c/o Keith Stein,  70 East 55th Street,  Seventh Floor,  New
York, NY 10022.

(4) Based upon a Schedule  13D, as  amended,  as filed with the  Securities  and
Exchange   Commission  (the  "Commission")  on  November  18,  1999,  Mr.  Cohen
possesses:  (i) the sole power to vote 4,884,722  shares of Common Stock,  which
includes  4,659,984  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 2,550,070 shares of Common Stock,  which includes 2,325,332 shares of
Common Stock issuable upon exercise of Warrants;  and (iv) shared power with the
other  member of the  Pembroke  Group to dispose of  2,734,092  shares of Common
Stock,  which  includes  2,334,652  shares of  Common  Stock  issuable  upon the
exercise  of  Warrants  held by Mr.  Cohen and  399,440  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.


                                   35
<PAGE>

(5) Based upon a Schedule  13D,  as  amended,  as filed with the  Commission  on
November 18, 1999, Mr. Neustadter possesses:  (i) the sole power to vote 835,784
shares of Common Stock,  which includes  797,284 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  436,345  shares of  Common  Stock,  which
includes 397,845 shares of Common Stock issuable upon exercise of Warrants;  and
(iv)  shared  power with the other  member of the  Pembroke  Group to dispose of
2,734,092 shares of Common Stock,  which includes 399,440 shares of Common Stock
issuable  upon the exercise of Warrants  held by Mr.  Neustadter  and  2,334,652
shares of Common  Stock  issuable  upon  exercise of Warrants  held by the other
member of the Pembroke Group. Mr.  Neustadter  explicitly  disclaims  beneficial
ownership  of all of the  shares of Common  Stock and  Warrants  (and  shares of
Common Stock  issuable upon  exercise of Warrants)  owned by the other member of
the Pembroke Group.

(6) Based upon a Schedule  13D,  as  amended,  as filed with the  Commission  on
November 18, 1999, Mr. Chazanoff possesses: (i) the sole power to vote 2,848,190
shares of Common Stock, which includes 2,714,644 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  1,488,153  shares of Common  Stock,  which
includes  1,354,607  shares of Common Stock  issuable upon exercise of Warrants;
and (iv) shared power with the other members of the Millennium  Group to dispose
of 3,515,091 shares of Common Stock,  which includes  1,360,037 shares of Common
Stock issuable upon the exercise of Warrants held by Mr. Chazanoff and 2,155,054
shares of Common  Stock  issuable  upon  exercise of Warrants  held by the other
members of the Millennium Group. Mr. Chazanoff  explicitly  disclaims beneficial
ownership  of all of the  shares of Common  Stock and  Warrants  (and  shares of
Common Stock  issuable upon exercise of Warrants)  owned by the other members of
the Millennium Group.

(7) Based upon a Schedule  13D,  as  amended,  as filed with the  Commission  on
November 18, 1999,  Mr. Jacobs  possesses:  (i) the sole power to vote 2,257,100
shares of Common Stock, which includes 2,150,753 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  1,179,573  shares of Common  Stock,  which
includes  1,073,226  shares of Common Stock  issuable upon exercise of Warrants;
and (iv) shared power with the other members of the Millennium  Group to dispose
of 3,515,091 shares of Common Stock,  which includes  1,077,527 shares of Common
Stock  issuable  upon the exercise of Warrants  held by Mr. Jacobs and 2,437,564
shares of common  stock  issuable  upon  exercise of Warrants  held by the other
members of the Millennium  Group.  Mr. Jacobs  explicitly  disclaims  beneficial
ownership  of all of the  shares of Common  Stock and  Warrants  (and  shares of
Common Stock  issuable upon exercise of Warrants)  owned by the other members of
the Millenium Group.

(8) Based upon a Schedule  13D,  as  amended,  as filed with the  Commission  on
November 18, 1999,  Mr. Simms  possesses:  (i) the sole power to vote  2,257,099
shares of Common Stock, which includes 2,150,752 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  1,179,572  shares of Common  Stock,  which
includes  1,073,226  shares of Common Stock  issuable upon exercise of Warrants;
and (iv) shared power with the other members of the Millennium  Group to dispose
of 3,515,091 shares of Common Stock,  which includes  1,077,527 shares of Common
Stock  issuable  upon the exercise of Warrants  held by Mr. Simms and  2,437,564
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.

(9) Based upon a Schedule  13D,  as  amended,  as filed with the  Commission  on
November 18, 1999,  Mr. Stein  possesses:  (i) the sole power to vote  1,582,135
shares of Common Stock, which includes 1,505,628 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  827,815  shares of  Common  Stock,  which
includes 751,308 shares of Common Stock issuable upon exercise of Warrants;  and
(iv)


                                   36
<PAGE>

shared power with the other members of the Florida Group to dispose of 4,042,973
shares of Common Stock,  which includes  754,320 shares of Common Stock issuable
upon the exercise of Warrants held by Mr. Stein and  3,288,653  shares of Common
Stock  issuable  upon  exercise  of  Warrants  held by the other  members of the
Florida Group. Mr. Stein explicitly disclaims beneficial ownership of all of the
shares of Common Stock and Warrants  (and shares of Common Stock  issuable  upon
exercise of Warrants) owned by the other members of the Florida Group.

(10) To the Company's  knowledge,  Mr. Barron  possesses:  (i) the sole power to
vote 806,664  shares of Common Stock,  which  includes  769,544 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 385,541 shares of Common Stock,
which  includes  384,003  shares of  Common  Stock  issuable  upon  exercise  of
Warrants;  and (iv) shared power with the other  members of the Florida Group to
dispose of 4,042,973  shares of Common Stock,  which includes  385,541 shares of
Common  Stock  issuable  upon the  exercise of Warrants  held by Mr.  Barron and
3,657,432  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 501,539  shares of Common Stock,  which  includes  489,897 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 256,100 shares of Common Stock,
which  includes  244,458  shares of  Common  Stock  issuable  upon  exercise  of
Warrants;  and (iv) shared power with the other  members of the Florida Group to
dispose of 4,042,973  shares of Common Stock,  which includes  245,439 shares of
Common  Stock  issuable  upon the exercise of Warrants  held by Mr.  Frieman and
3,797,534  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 252,996  shares of Common Stock,  which  includes  241,354 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 132,077 shares of Common Stock,
which  includes  120,435  shares of  Common  Stock  issuable  upon  exercise  of
Warrants;  and (iv) shared power with the other  members of the Florida Group to
dispose of 4,042,973  shares of Common Stock,  which includes  120,919 shares of
Common Stock  issuable  upon the exercise of Warrants  held by Mr.  Offerman and
3,922,054  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 168,656  shares of Common Stock,  which  includes  160,895 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 88,048 shares of Common Stock,
which includes 80,287 shares of Common Stock issuable upon exercise of Warrants;
and (iv) shared power with the other  members of the Florida Group to dispose of
4,042,973  shares of Common Stock,  which includes 80,608 shares of Common Stock
issuable upon the exercise of Warrants  held by Mr. Huston and 3,962,365  shares
of Common Stock  issuable upon exercise of Warrants held by the other members of
the Florida Group.

(14) To the Company's  knowledge,  Mr. Sirota  possesses:  (i) the sole power to
vote 252,996  shares of Common Stock,  which  includes  241,354 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 132,077 shares of Common Stock,
which  includes  120,435  shares of  Common  Stock  issuable  upon  exercise  of
Warrants;  and (iv) shared power with the other  members of the Florida Group to
dispose of 4,042,973  shares of Common Stock,  which includes  120,919 shares of
Common  Stock  issuable  upon the  exercise of Warrants  held by Mr.  Sirota and
3,922,054  shares of Common Stock issuable upon exercise of Warrants held by the
other members of the Florida Group.


                                          37
<PAGE>

(15) To the Company's knowledge, Mr. Polan possesses: (i) the sole power to vote
252,996 shares of Common Stock,  which  includes  241,354 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 132,077 shares of Common Stock, which
includes 120,435 shares of Common Stock issuable upon exercise of Warrants;  and
(iv)  shared  power with the other  members of the  Florida  Group to dispose of
4,042,973 shares of Common Stock,  which includes 120,919 shares of Common Stock
issuable upon the exercise of Warrants held by Mr. Polan and 3,922,054 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 252,996  shares of Common Stock,  which  includes  241,354 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 132,077 shares of Common Stock,
which  includes  120,435  shares of  Common  Stock  issuable  upon  exercise  of
Warrants;  and (iv) shared power with the other  members of the Florida Group to
dispose of 4,042,973  shares of Common Stock,  which includes  120,919 shares of
Common Stock  issuable upon the exercise of Warrants  held by Mr.  Zarriello and
3,922,054  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 241,354  shares of Common Stock,  which  includes  241,354 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 120,435 shares of Common Stock,
which  includes  120,435  shares of  Common  Stock  issuable  upon  exercise  of
Warrants;  and (iv) shared power with the other  members of the Florida Group to
dispose of 4,042,973  shares of Common Stock,  which includes  120,919 shares of
Common  Stock  issuable  upon the exercise of Warrants  held by Mr.  Mahoney and
3,922,054  shares of Common Stock issuable upon exercise of Warrants held by the
other members of the Florida Group.

(18)  To the  Company's  knowledge,  the  SIII  Associates  Limited  Partnership
possesses:  (i) the sole power to vote 4,138,928  shares of Common Stock,  which
includes  3,937,074  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 2,166,454 shares of Common Stock,  which includes 1,964,600 shares of
Common Stock issuable upon exercise of Warrants;  and (iv) shared power with the
other  members of the  Florida  Group to dispose of  4,042,973  shares of Common
Stock,  which  includes  1,972,474  shares of  Common  Stock  issuable  upon the
exercise  of  Warrants  held by the  SIII  Associates  Limited  Partnership  and
2,070,499  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.

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

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


                                       38
<PAGE>

B.  SECURITY OWNERSHIP OF MANAGEMENT
    --------------------------------

     The following table sets forth certain  information as of December 31, 2001
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 (7 persons). Unless otherwise indicated, each stockholder listed below has
sole voting and  investment  power with respect to the shares set forth opposite
such  stockholder's  name.  All  persons  listed  below have an address  c/o the
Company's principal executive offices in New York.

    Name of                  Amount and Nature of          Percentage
Beneficial Owner             Beneficial Ownership           of Class
----------------             --------------------          ----------

Alan E.  Casnoff                     685,000 (2)                 3.1%
Gary Flicker                         125,000 (3)                   **
Jay Thailer                           52,000 (4)                   **
Myron Rosenberg                      363,854 (5)                 1.7%
Frederick E.  Smithline              132,550 (6)                   **
Keith B.  Stein                    4,870,788 (7)                15.9%
All current directors
and executive officers
as a group (6 persons)             6,229,192 (8)               23.22%

     * In each  instance  where a named  individual is listed as the holder of a
currently  exercisable option or warrant,  the shares which may be acquired upon
exercise  thereof have been deemed  outstanding for the purpose of computing the
percentage  owned by such  person,  but not for the  purpose  of  computing  the
percentage owned by any other person, except the group referred to in note 8. An
option or warrant is deemed to be currently  exercisable  if it may be exercised
within 60 days.

     ** Less than 1%

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

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

(3)  Represents  125,000  shares  which may be  acquired  upon the  exercise  of
currently exercisable options.

(4)  Represents  42,000  shares  which  may be  acquired  upon the  exercise  of
currently exercisable options and 10,000 shares held by Mr. Thailer and his wife
as joint tenants.

(5) Includes  4,300 shares held by Mr.  Rosenberg's  wife, as to which shares he
disclaims beneficial ownership, and 75,000 shares which may be acquired upon the
exercise of currently exercisable options.

(6) Includes  550 shares held by Mr.  Smithline  and his brother as  tenants-in-
common and 6,000 shares held by Mr.  Smithline's  wife, as to which 6,000 shares
Mr. Smithline disclaims beneficial ownership.  Also includes 75,000 shares which
may be acquired upon the exercise of currently exercisable options.

(7) Based upon a Schedule  13D,  as  amended,  as filed with the  Commission  on
November 18, 1999,  Mr. Stein  possesses:  (i) the sole power to vote  1,006,963
shares of Common Stock,  which includes  930,456 shares of Common Stock issuable
upon exercise of Warrants; (ii) shared power to vote 0 shares of Common Stock;


                                       39
<PAGE>

(iii) the sole  power to  dispose  of  540,805  shares of  Common  Stock,  which
includes 464,298 shares of Common Stock issuable upon exercise of Warrants;  and
(iv)  shared  power with the other  members of the  Florida  Group to dispose of
2,498,498 shares of Common Stock,  which includes 466,158 shares of Common Stock
issuable upon the exercise of Warrants held by Mr. Stein and 2,032,340 shares of
Common Stock issuable upon exercise of Warrants held by the other members of the
Florida Group. Mr. Stein explicitly disclaims beneficial ownership of all of the
shares of Common Stock and Warrants  (and shares of Common Stock  issuable  upon
exercise of Warrants) owned by the other members of the Florida Group.

(8) Number of shares and percentage owned includes 3,831,303 shares which may be
acquired through exercise of currently  exercisable options and Warrants held by
certain of the named persons.  The number of outstanding  shares for the purpose
of computation of percentage of ownership by the group includes such shares.

     C. CHANGES IN CONTROL

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

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

     Pursuant to the Agreement,  the Holders have agreed to certain  limitations
on the disposition of Common Stock and Warrants owned or held by them, which are
described below. The Holders presently have rights of first  refusal/first offer
with respect to the  disposition  of shares of Common Stock and Warrants held by
other Holders (unless the disposition is made to certain specified affiliates of
a Holder).  Subject to the  above-mentioned  rights of first refusal/first offer
and certain  other  limitations,  (i) through  September  27, 1999, a Holder may
dispose of up to one-half  (or more  subject to the consent of a majority of the
Holders in such  Holder's  Holder  Group) of his shares of Common Stock and (ii)
after  September  27,  1999, a Holder may dispose of all of his or its shares of
Common Stock (excluding shares issuable upon exercise of Warrants). A Holder may


                                  40
<PAGE>

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


                                       41
<PAGE>

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     BLACKACRE TRANSACTION
     ---------------------

The Company had  outstanding  as of December 31, 2001  approximately  $2,400,000
aggregate  principal  amount of 10% redeemable  notes due December 31, 2005. The
notes are  redeemable  in cash,  or at the option of DVL,  for common stock at a
formula based upon the market price of the DVL common stock.

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

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

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

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

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

     NPM AND NPO TRANSACTIONS
     ------------------------

     The Company consummated a multi-faceted  transaction on September 27, 1996,
pursuant to which: (i) certain existing indebtedness of the Company was acquired
by NPM, under an Amended and Restated Loan Agreement  dated as of March 27, 1996
pursuant to which the Company became  indebted to NPM in the original  principal
amount of $8,382,000;  (ii) 1,000,000 shares of Common Stock  (representing 4.7%
of the Common  Stock now  outstanding)  were  issued to, and  purchased  by, the
Holders (see Item 12(C) above);  (iii) the Certificate of  Incorporation  of the
Company  was  amended to permit the  issuance of  warrants,  to limit  change of
ownership  of capital  stock of the Company  and to  designate  Preferred  Stock
together with rights,  powers and  preferences  (including the  appointment of a
special purpose director); (iv) Warrants to purchase additional shares of Common
Stock (which,  when added to the 1,000,000 shares acquired,  represent rights to
acquire up to 49% of the  outstanding  Common Stock,  on a fully diluted  basis)
were issued to, or for the benefit of, the Holders;  (v) 100 shares of Preferred
Stock were issued to an affiliate of NPM;  (vi) most,  but not all,  convertible
securities and warrants  existing and outstanding  prior to the transaction were
converted into Common Stock;  and (vii) the Company  continued the engagement of
NPO to perform  administrative  and advisory  services relating to the assets of
the  Company and its  affiliated  partnerships,  pursuant to an Asset  Servicing
Agreement dated March 27, 1996. In consideration for such services,  the Company
pays NPO $600,000 per year (with cost of living  increases)  over the seven-year
term of the  original  agreement,  subject to early  termination  under  certain
conditions.


                                       42
<PAGE>

During 2001 the agreement was extended  under the same terms and  conditions for
another  five years to March  2008.  The  current  annual fee is  $645,000.  The
Company paid to NPO $1,038,000 and $1,866,000 in 2001 and 2000 respectively.  As
of December  31, 2001 and 2000 the Company had accrued  service  fees payable to
NPO of $28,000 and $373,000 respectively.

     In 1997, NPM advanced the Company an additional $200,000. In addition, from
January  1998  through May 1999,  NPM advanced  additional  amounts  aggregating
$370,000 to DVL.  These  advances  were not  required  under the  Original  Loan
Documents.  In May 1999, the Company paid all remaining  outstanding amounts due
on the loan to NPM.

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

     Since June 1998,  the Company has received fees from a limited  partnership
(in which  certain of its partners are  affiliates of NPO and  Blackacre).  This
agreement  may be terminated  with 30 days notice by either  party.  The Company
receives the following (a) a monthly fee of $5,000  through  November  2000, and
(b) after all the partners of the partnership have earned a 20% internal rate of
return, compounded quarterly, on their capital contributions,  an amount of cash
equal to 25% of the profits, as defined in the agreement.  For 2001 and 2000 the
Company  received  compensation  under  such  agreement  equal to  $442,900  and
$362,500, respectively.

     The Company has received fees pursuant to a service  agreement with another
limited  partnership  whose  general  partner is an  affiliate of NPO, to render
certain accounting and  administrative  services.  As compensation,  the Company
receives  expense  reimbursements  of $4,000 per  month.  The  Company  received
aggregate compensation under such agreement of $48,000 for 2001 and 2000.

     The Company  received  fees from an entity that is part of the  Opportunity
Fund in consideration for the Company providing  property  management  services.
For 2001 and 2000,  the  Company  received  compensation  equal to  $27,000  and
$27,000, respectively.

     The Company has received fees from an entity whose  partners are affiliates
of NPO in  consideration  for  the  Company  providing  certain  accounting  and
administrative services. As compensation,  the Company receives a monthly fee of
$2,000,  a monthly deferred fee of $6,500 and an annual incentive fee if certain
levels of profitability are obtained.  The Company recorded fees of $152,000 and
$102,000  in 2001 and 2000 which  included  incentive  fees of $50,000 and $-0-,
respectively.

     The Millenium Group, an affiliate of NPO,  received  approximately  $67,000
and $90,000 for 2001,  and 2000,  respectively,  representing  compensation  and
reimbursement  of expenses for collection  services on limited partner notes. In
addition,  in 2001 and 2000 the Company  paid or accrued  fees of  $150,000  and
$25,000 to the  Millenium  Group and $205,000 and $55,000 to the Pembroke  Group
(another affiliate of NPO), respectively, and agreed in 2002 to issue a total of
400,000 shares of Common Stock to the Pembroke Group and the Millenium Group for
additional  services  rendered  to the  Company  outside  the scope of the Asset
Servicing Agreement.


                                  43
<PAGE>

     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 $86,453 and $106,900 from various  Affiliated Limited
Partnerships in 2001 and 2000, respectively.

     OPPORTUNITY FUND
     ----------------

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

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

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

     The  Opportunity  Agreement  has not been  renewed or  extended.  While the
Opportunity  Fund no  longer  has the  right of first  refusal  with  regard  to
opportunities, the Company may continue to present opportunities to the fund.

     As of March 1, 2002, the  Opportunity  Fund has purchased 15 wrap mortgages
of Affiliated  Limited  Partnerships from unaffiliated third parties (seven were
purchased in 1998, one was purchased in 1999 and seven  mortgages were purchased
in 2000),  acquired limited  partnership units from unaffiliated  individuals in
three  Affiliated  Limited  Partnerships,   and  acquired  the  property  of  an
Affiliated Limited Partnership.  In addition,  during 1999, the Opportunity Fund
acquired a property of an Affiliated Limited Partnership and the land underlying
this property from DVL.  During 2000, DVL purchased three of the mortgages owned
by the  Opportunity  Fund and the  Opportunity  Fund was fully  satisfied  on an
additional  four mortgage  loans,  as each of the properties  that secured these
four mortgage loans was sold. In December 2001, the  Opportunity  Fund also sold
its property  located in Kearny,  NJ to an entity in which certain  partners are
affiliates of NPO. During 2001, a newly formed,  wholly-owned  subsidiary of DVL
purchased two of mortgages  owned by the  Opportunity  Fund and the  Opportunity
Fund was fully  satisfied on an  additional  two  mortgage  loans as each of the
properties that secured these two mortgage loans were sold. As of March 1, 2002,
the  Opportunity   Fund  owns  four   mortgages.   During  2001,  DVL  was  paid
approximately  $280,000 from the investments by the  Opportunity  Fund, of which
$189,000  was used to pay amounts owed by DVL under a note in favor of an entity
that is part of the Opportunity Fund.


                                       44
<PAGE>

                                 PART IV

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

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

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

                                 Item 8
                                                              Page No.
                                                              --------

          Independent Auditors' Report                          F - 1

          Consolidated Balance Sheets -
          December 31, 2001 and 2000                            F - 2

          Consolidated Statements of Operations
          for each of the years in the three year period
          ended December 31, 2001                               F - 4

          Consolidated Statements of Shareholders'
          Equity for each of the years in the three
          year period ended December 31, 2001                   F - 6

          Consolidated Statements of Cash Flows for
          each of the years in the three year period
          ended December 31, 2001                               F - 7

          Notes to Consolidated Financial Statements            F - 10

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

          Schedule III - Real Estate and Accumulated
          Depreciation

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


                                    45
<PAGE>

     (3)  INDEX OF EXHIBITS

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

     3.   ARTICLES OF INCORPORATION AND BY-LAWS.

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

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

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

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

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

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

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

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

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

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

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

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

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


                                       46
<PAGE>

    10.   MATERIAL CONTRACTS.

    10.1  Voting Trust  Agreement  between R&M Holding  Company and Alan Casnoff
          dated May 15, 1991. (Incorporated by reference to Exhibit 10(a)(18) to
          DVL's Form 10-K for the fiscal year ended December 31, 1991.)

    10.2  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.)

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

    10.4  Amended and Restated Loan  Agreement  between DVL and NPM, dated as of
          March 27, 1996.  (Incorporated  by  reference to Exhibit  10(b)(33) to
          DVL's Form 10-K for the fiscal year ended December 31, 1995.)

    10.5  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.)

    10.6  Third  Voting  Trust  Extension  between R&M Holding  Company and Alan
          Casnoff  dated March 7, 1996.  (Incorporated  by  reference to Exhibit
          10(b)(35)  to DVL's Form 10-K for the fiscal year ended  December  31,
          1995.)

    10.7  Amended and Restated Loan Agreement  between DVL, and NPM, dated dated
          March 27, 1996.  (Incorporated  by reference to Proxy  Statement dated
          July 31, 1996 - Exhibit A.)

    10.8  Amended  and  Restated  Negotiable  Promissory  Note  from DVL to NPM.
          (Incorporated  by reference to DVL's Proxy  Statement  dated July July
          31, 1996 - Exhibit B.)

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

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

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

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

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


                                       47
<PAGE>

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

    10.15 Employment Agreement and Indemnification  Agreement comprising Exhibit
          A  thereto,  between  DVL and  Gary  Flicker,  dated  April  16,  1997
          (effective  as of said date).  (Incorporated  by  reference to Exhibit
          10.2 to DVL's Form 10-Q for the quarter ended June 30, 1997).

    10.16 Amendment  dated as a July 10,  1996,  to Amended  and  Restated  Loan
          Agreement  dated as of  March  27,  1996  between  DVL and  NPM.  (In-
          corporated  by reference to Exhibit  10.3.1 to DVL's Form 10-Q for the
          quarter ended June 30, 1997.)

    10.17 Second  Amendment  dated as of  September  27,  1996,  to Amended  and
          Restated  Loan  Agreement  dated as of March 27, 1996  between DVL and
          NPM.  (Incorporated  by reference to Exhibit 10.3.2 to DVL's Form 10-Q
          for the quarter ended June 30, 1997.)

    10.18 Third  Amendment  dated as of March 6, 1997,  to Amended and  Restated
          Loan  Agreement  dated as of March 27,  1996  between  DVL and NPM and
          Promissory  Note dated as of March 6,  1997,  comprising  Exhibit  A-1
          thereto.  (Incorporated  by reference to Exhibit  10.3.3 to DVL's Form
          10-Q for the quarter ended June 30, 1997.)

    10.19 Fourth  Amendment  dated as of October 20,  1997,  among DVL,  Black-
          acre, NPM and NPO, to Amended and Restated Loan  Agreement,  dated as
          of March 27, 1997, as amended,  between DVL and NPM. (Incorporated by
          reference  to Exhibit  10.1 to DVL's Form 10-Q for the quarter  ended
          September 30, 1997.)

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

    10.21 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.)

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

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

    10.24 Waiver of Event of  Default  and  Agreement  regarding  the Demand and
          Payment of Fees dated March 1999 by NPO. (Incorporated by reference to
          DVL's Form 10-K for the fiscal year ended December 31, 1998.)

    10.25 Waiver of Event of  Default  and  Agreement  regarding  the Demand and
          Payment of Fees dated March 2000 by NPO. (Incorporated by reference to
          DVL's Form 10-K for the fiscal year ended December 31, 1999.)


                                       48
<PAGE>

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

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

    10.28 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.)

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

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

    10.31  Agreement of Purchase and Sale, dated as of October 2, 2000, relating
           to the purchase of real estate  assets by Del Toch,  LLC from Passaic
           Avenue South Associates.

    10.32  Agreement  of  Purchase  and  Sale,  dated as of  October  12,  2000,
           relating to the purchase of land by Delborne Land  Company,  LLC from
           Mcany of Kearny, Inc.

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

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

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

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

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


                                       49
<PAGE>

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

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

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

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

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

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

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

    10.45  Exchange  Agreement,  dated as of December 28,  2001,  by and between
           DVL, Inc. and Blackacre Bridge Capital, L.L.C.

    *11.   Schedule of Computation of Net Earnings Per Share.

    21.    SUBSIDIARIES OF DVL.

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

(b)  No reports on Form 8-K were filed  during the quarter  ended  December  31,
     2001.


                                       50
<PAGE>
                                   SIGNATURES

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

                                    DVL, INC.

Date: March   , 2002            By:
           ---                       ---------------------------
                                     Alan E. Casnoff, President
                                     and Chief Executive Officer


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

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


--------------------------
Jay Thailer                  Executive Vice President and     March   , 2002
                             Chief Financial Officer                --
                             (Principal Financial and
                              Accounting Officer)


--------------------------
Alan E. Casnoff              Director, President and Chief    March   , 2002
                             Executive Officer (Principal           --
                             Executive Officer)


--------------------------
Frederick E. Smithline       Director                         March   , 2002
                                                                    --


--------------------------
Myron Rosenberg              Director                         March   , 2002
                                                                    --


                                       51
<PAGE>

                                      SIGNATURES

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

                                    DVL, INC.

Date: March   , 2002             By: /s/ Alan E. Casnoff
            --                       ---------------------------
                                     Alan E. Casnoff, President
                                     and Chief Executive Officer

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

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

/s/ Jay Thailer
--------------------------
Jay Thailer                  Executive Vice President and     March   , 2002
                             Chief Financial Officer                --
                             (Principal Financial and
                              Accounting Officer)


/s/ Alan E. Casnoff
--------------------------
Alan E. Casnoff              Director, President and Chief    March   , 2002
                             Executive Officer (Principal           --
                               Executive Officer)


/s/ Frederick E. Smithline
--------------------------
Frederick E. Smithline       Director                         March   , 2002
                                                                    --


/s/ Myron Rosenberg
--------------------------
Myron Rosenberg              Director                         March   , 2002
                                                                    --


                                       52
<PAGE>

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

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

                                                                  Page
                                                                  ----

Independent Auditors' Report                                      F - 1

Consolidated Balance Sheets-December 31, 2001 and 2000            F - 2

Consolidated Statements of Operations for each of the
  years in the three year period ended December 31, 2001          F - 4

Consolidated Statements of Shareholders' Equity
 for each of the years in the three year period
  ended December 31, 2001                                         F - 6

Consolidated Statements of Cash Flows for each of the
  years in the three year period ended December 31, 2001          F - 7

Notes to Consolidated Financial Statements                        F - 10

Schedule III - Real Estate and Accumulated Depreciation
<PAGE>

Richard A.  Eisner & Company, LLP
100 Campus Drive
Florham Park, New Jersey  07932

INDEPENDENT AUDITORS' REPORT

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

We have audited the  accompanying  consolidated  balance sheets of DVL, Inc. and
subsidiaries  as of  December  31, 2001 and 2000,  and the related  consolidated
statements of operations,  shareholders'  equity, and cash flows for each of the
years in the  three-year  period ended  December 31,  2001.  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

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

In our opinion, the consolidated  financial statements  enumerated above present
fairly, in all material  respects,  the consolidated  financial position of DVL,
Inc. and  subsidiaries  as at December 31, 2001 and 2000,  and the  consolidated
results of their  operations and their  consolidated  cash flows for each of the
years in the  three-year  period  ended  December  31, 2001 in  conformity  with
accounting principles generally accepted in the United States of America.

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

RICHARD A. EISNER & COMPANY, LLP

Florham Park, New Jersey
March 5, 2002


                                       F-1
<PAGE>

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

                                                               December 31,
                                                          ----------------------
                                                             2001        2000
ASSETS                                                    ----------  ----------
------

Residual interests in securitized portfolios              $ 36,906     $      -
                                                          --------     --------
Mortgage loans receivable from affiliated
 partnerships (net of unearned interest of
 $15,908 for 2001 and $12,340 for 2000)                     35,567       41,639

  Allowance for loan losses                                  4,095        5,250
                                                          --------     --------
  Net mortgage loans receivable                             31,472       36,389
                                                          --------     --------

Cash (including restricted cash of $215 and $213
  for 2001 and 2000, respectively)                           2,987        1,184

Investments
  Real estate at cost (net of accumulated deprecia-
    tion of $104 for 2001 and $26 for 2000)                  4,142        3,737

  Real estate lease interests                                1,080        1,215

  Affiliated limited partnerships (net of allow-
   ance for losses of $540 and $647 for 2001 and
   2000, respectively)                                       1,121        1,157

  Other investments (net of allowance for losses
   of $400 for 2000)                                             -          648

Deferred income tax benefits                                 1,050            -

Prepaid financing and other assets                             932        1,107
                                                          --------     --------
    Total assets                                          $ 79,690     $ 45,437
                                                          ========     ========

See notes to consolidated financial statements.

                                   (continued)


                                       F-2
<PAGE>

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

                                                               December 31,
                                                          ----------------------
                                                             2001        2000
                                                          ---------    ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------

Liabilities:

  Notes Payable - residual interests                       $ 35,044    $      -
  Underlying mortgages payable                               22,218      26,019
  Long-term debt - affiliates                                 1,942       2,282
  Long-term debt - other                                      5,067       5,577
  Notes payable - litigation settlement                       1,902       2,922
  Redeemed notes payable - litigation settlement                596         106
  Fees due to affiliates                                        928         373
  Accounts payable, security deposits and accrued
    liabilities (including deferred income of $17
    for 2001 and $13 for 2000)                                1,038         585
                                                           --------    --------
     Total liabilities                                       68,735      37,864
                                                           --------    --------

Commitments and contingencies

Shareholders' equity:

  Preferred  stock $10.00 par value,  authorized -
    100 shares for 2001 and 2000, issued - 100 shares
    for 2001 and 2000                                              1           1
  Preferred stock, $.01 par value, authorized 5,000,000
    shares for 2001 and 2000, issued - 0 shares for 2001
    and 2000                                                      -           -
  Common stock, $.01 par value, authorized -
   90,000,000 shares, issued - 21,313,563 shares for
   2001 and 16,560,450 shares for 2000                          213         166
  Additional paid-in capital                                 95,757      95,288
  Deficit                                                   (85,016)    (87,882)
                                                           --------    --------
     Total shareholders' equity                              10,955       7,573
                                                           --------    --------
     Total liabilities and shareholders' equity            $ 79,690    $ 45,437
                                                           ========    ========
See notes to consolidated financial statements.


                                       F-3
<PAGE>

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

                                                 Year Ended December 31,
                                           ----------------------------------
                                              2001        2000        1999
                                           ----------  ----------  ----------
Income from affiliates:

  Interest on mortgage loans               $    3,118  $    3,436  $    3,549
  Gain on satisfaction of mortgage loans          615         256       1,639
  Partnership management fees                     368         454         405
  Transaction and other fees from
   partnerships                                   260         413         502
  Distributions from investments                  138         253         265

Income from others:

  Interest income - residual interests          2,802           -           -
  Net rental income (including depreciation
   of $80 for 2001 and $10 for 2000)              720         523         532
  Management fees                                 804         500         533
  Distributions from investments                  667         149          34
  Other income and interest                        63          79         276
                                           ----------  ----------  ----------
                                                9,555       6,063       7,735
                                           ----------  ----------  ----------
Operating expenses:

  Recovery of provision for losses                 (3)        (37)        (48)
  General and administrative                    1,541       1,309       1,327
  Asset Servicing Fee - NPO Management LLC        640         623         600
  Legal and professional fees                     549         393         427

Interest expense:

  Underlying mortgages                          2,029       2,329       2,640
  Notes payable - residual interests            1,840           -           -
  Litigation Settlement Notes                     484         502         481
  Affiliates                                      389         434       1,191
  Others                                          551         311          91
                                           ----------  ----------  ----------
                                                8,020       5,864       6,709
                                           ----------  ----------  ----------
Income before income tax benefit
  and extraordinary gain                        1,535         199       1,026

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

Income before extraordinary gain                2,505         199       1,026

Extraordinary gain on the settlements
 of indebtedness                                  361         306       1,267
                                           ----------  ----------  ----------
Net income                                 $    2,866  $      505  $    2,293
                                           ==========  ==========  ==========

                                      (continued)


                                           F-4
<PAGE>

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

                                                 Year Ended December 31,
                                           ----------------------------------
                                              2001        2000        1999
                                           ----------  ----------  ----------

Basic earnings per share:
  Income before extraordinary gain         $      .15  $      .01  $      .06
    Extraordinary gain                            .02         .02         .08
                                           ----------  ----------  ----------
      Net income                           $      .17  $      .03  $      .14
                                           ==========  ==========  ==========

Diluted earnings per share:
  Income before extraordinary gain         $      .03  $      .01  $      .02
  Extraordinary gain                              .00         .00         .02
                                           ----------  ----------  ----------
  Net income                               $      .03  $      .01  $      .04
                                           ==========  ==========  ==========
Weighted average shares outstanding -
  basic                                    16,599,517  16,560,450  16,560,450
Effect of dilutive securities             108,172,598  79,777,136  50,422,788
                                          -----------  ----------  ----------
Weighted average shares outstanding -
  diluted                                 124,772,115  96,337,586  66,983,238
                                          ===========  ==========  ==========

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>       <C>
Balance-January 1, 1999                                100  $    1   16,560,450  $   166   $95,288   $(90,680) $ 4,775

Net income                                               -       -            -        -         -      2,293    2,293
                                                  --------  ------  -----------  -------   -------   --------  -------
Balance - December 31, 1999                            100       1   16,560,450      166    95,288    (88,387)   7,068

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


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

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

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

Net income                                               -       -            -        -         -      2,866    2,866
                                                  --------  ------   ----------  -------   -------   --------  -------
Balance - December 31, 2001                            100  $    1   21,313,563  $   213   $95,757   $(85,016) $10,955
                                                  ========  ======   ==========  ========  =======   ========  =======
</TABLE>

See notes to consolidated financial statements.


                                       F-6
<PAGE>

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

<TABLE>
<CAPTION>
                                                         Year Ended December 31,
                                                     ------------------------------
                                                       2001       2000       1999
                                                     --------   --------   --------
<S>                                                  <C>        <C>        <C>
Cash flows from operating activities:

 Income before extraordinary gain                    $  2,505   $    199   $  1,026
  Adjustments to reconcile income before extra-
   ordinary gains to net cash provided by (used
   in) operating activities
    Income tax benefit                                 (1,050)         -          -
    Interest income accreted on residual interests       (381)         -          -
    Recovery of provision for losses                       (3)       (37)       (48)
    Accrued interest added to indebtedness                294        273        247
    Gain on satisfactions of mortgage loans              (615)      (256)    (1,639)
    Depreciation                                           80         10          -
    Amortization of unearned interest on loans
     receivable                                          (115)       (62)       (67)
    Amortization of real estate lease interests           135        136        138
    Amortization of debt discount                           -          -        234
    Imputed interest on notes                             484        502        481
    Net decrease (increase) in prepaid financing
     and other assets                                     303       (390)       997
    Net increase (decrease) in accounts payable,
     security deposits and accrued liabilities            447        132        (95)
    Net (decrease) in fees due to affiliates             (345)    (1,094)      (247)
    Net increase (decrease) in deferred income              4        (22)         5
                                                     --------   --------   --------
      Net cash provided by (used in) operating
       activities                                       1,743       (609)     1,032
                                                     --------   --------   --------

Cash flows from investing activities:

Collections on loans receivable                         7,872      4,949     14,851
Investments in loans receivable                          (325)    (2,426)        --
Real estate acquisitions and capital improvements        (610)    (3,391)        --
Net decrease in affiliated limited partnership
  interests and other investments                         684        169        123
Proceeds on sale of real estate                             -          -        300
                                                     --------   --------   --------
      Net cash provided by (used in) investing
        activities                                      7,621       (699)    15,274
                                                     --------   --------   --------
</TABLE>

                                   (continued)


                                       F-7
<PAGE>

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

<TABLE>
<CAPTION>
                                                         Year Ended December 31,
                                                     ------------------------------
                                                       2001       2000       1999
                                                     --------   --------   --------
<S>                                                  <C>        <C>        <C>
Cash flows from financing activities:

  Proceeds from new borrowings                       $    200   $  6,425   $    588
  Repayment of indebtedness                            (1,288)      (992)    (4,707)
  Payments on underlying mortgages payable             (5,701)    (4,040)   (10,952)
  Payments on notes payable - residual interests         (105)         -          -
  Payments related to debt tender offers and
    redemptions                                          (667)      (171)      (357)
                                                     --------   --------   --------

     Net cash provided by (used in) financing
       activities                                      (7,561)     1,222    (15,428)
                                                     --------   --------   --------

Net (decrease) increase in cash                         1,803        (86)       878
Cash, beginning of year                                 1,184      1,270        392
                                                     --------   --------   --------

Cash, end of year                                    $  2,987   $  1,184   $  1,270
                                                     ========   ========   ========

Supplemental disclosure of cash flow
 information:

  Cash paid during the year for interest             $  4,601   $  2,499   $  2,382
                                                     ========   ========   ========

  Cash paid for income taxes                         $     44   $     35   $     21
                                                     ========   ========   ========
</TABLE>

                                   (continued)


                                       F-8
<PAGE>

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

                                                   Year Ended December 31,
                                                 ---------------------------
                                                   2001      2000      1999
                                                 -------   -------   -------

Supplemental disclosure of non-cash investing
 and financing activities:

  Net reduction of notes payable - debt
   tender offer and redemptions                  $   945   $   306   $ 1,267
                                                 =======   =======   =======

  Residual interests in securitized portfolios   $36,525   $     -   $     -
                                                 =======   =======   =======

  Notes payable - residual interests             $35,124   $     -   $     -
                                                 =======   =======   =======

See notes to consolidated financial statements.


                                       F-9
<PAGE>

                        DVL, INC. AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   Summary of Significant Accounting Policies

a. THE COMPANY:  DVL, Inc.  ("DVL or the  "Company")  is a Delaware  corporation
headquartered  in New York, New York.  DVL's common stock is traded on the over-
the-counter  market and is quoted on the OTC Bulletin  Board  maintained  by the
NASD under the symbol "DVLN".  DVL is a commercial finance company which manages
numerous  real  estate  properties  and  partnerships,  and holds  and  services
commercial  mortgage  loans.  DVL's  investments  consist  primarily of residual
interests  in  securitized  portfolios,   commercial  mortgage  loans  due  from
affiliated   partnerships,   limited   partnership   investments  in  affiliated
partnerships  and other real  estate  interests.  DVL has six 100% owned  active
subsidiaries:  Professional  Service  Corporation  ("PSC"),  Del Toch, LLC ("Del
Toch"),  Delborne Land Company, LLC ("Delborne"),  S2 Holdings, Inc. ("S2"), DVL
Mortgage Holdings,  LLC ("DMH") and Delbrook  Holdings,  LLC ("Delbrook") all of
which are consolidated for accounting purposes.  DVL does not consolidate any of
the various  partnerships  (the "Affiliated  Limited  Partnerships") in which it
holds the general partner and limited partner interests nor does DVL account for
such interests on the equity method due to the following:  (i) DVL's interest in
the partnerships as the general partner is a 1% interest,  (which 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); (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 partnership,  due to the triple net lease arrangements for
the partnership properties and (v) there are no financing policies determined by
the  partnerships as all mortgages were either 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  limited
partnerships,  which are  considered  affiliates,  on a cost basis with the cost
basis adjusted for impairments  which took place in prior years.  Accounting for
such investments on the equity method would not result in any material change to
the Company's financial position or results of operations.

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

b. 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.

c.  ALLOWANCE FOR LOSSES:  Specific loss reserves are provided as required based
on  management's  evaluation  of the  underlying  collateral  on  each  loan  or
investment.


                                      F-10
<PAGE>

d.  DEPRECIATION:  Depreciation is provided by charges to operations on either a
straight-line  basis or accelerated  basis at rates which will allocate the cost
of the assets over their estimated useful lives.

e. DEFERRED CHARGES: Deferred charges applicable to debt financing are amortized
over the term of the debt using the effective interest rate method.

f.  RESIDUAL  INTERESTS:  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.

g. INCOME RECOGNITION:  Interest income is not recognized on the non- performing
portion  of DVL's  loan  portfolio.  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.  DVL accounts for  increases  and  decreases in the amount or
timing of expected  future cash flows on its loan  portfolio  by  adjusting  the
valuation  allowance,  not to exceed the recorded  investment in the loan.  Cash
receipts on  restructured  loans are  treated as interest  income as a result of
previous  write-downs  of such  loans  due to  prior  impairments.  DVL  records
contingent rents in the period in which the contingency is resolved.  Management
and transaction  fees are recognized in income when earned.  Distributions  from
investments  are  recorded  as  income  when the  amount to be  received  can be
estimated and  collection is probable.  Rental income is recognized in income as
rent under the related leases becomes due.

h. IMPAIRMENT OF REAL ESTATE  INVESTMENTS AND REAL ESTATE LEASE  INTERESTS:  DVL
does not have any  impaired  real estate  investments  and/or real estate  lease
interests  at December 31, 2001.  All assets are  analyzed  annually  based upon
prior  appraised  values,  which  are  adjusted  every  year  based on cash flow
assumptions set forth in such appraisals.

i. RESTRICTED CASH: As of December 31, 2001 and 2000, DVL had restricted cash of
$215,000 and $213,000,  respectively.  The restricted  cash at December 31, 2001
and 2000, represents monies owed to the Settlement Fund.

j.  UNEARNED  INTEREST ON MORTGAGE  LOANS AND LOAN  ORIGINATION  FEES AND COSTS:
Unearned  interest on mortgage loans is recognized as income using the effective
interest method over the life of the corresponding  loans.  Presently,  DVL does
not receive loan  origination  fees as the Company is not  originating new loans
receivable.

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

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


                                      F-11
<PAGE>

     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 the 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.

m. EARNINGS PER SHARE: All income is attributable to common stock. The preferred
stock  issued by DVL at the  present  time total 100 shares  with a par value of
$10.00  per share.  There are no  cumulative  dividends  or  accretion.  Diluted
earnings per share includes the dilutive  effect of the  outstanding  litigation
settlement notes payable, the NPM warrants and stock options.

     The Company reports a dual presentation of Basic Earnings per Share ("Basic
EPS")  and  Diluted  Earnings  per Share  ("Diluted  EPS").  Basic EPS  excludes
dilution and is computed by dividing net income by the weighted  average  number
of common shares  outstanding  during the reported period.  Diluted EPS reflects
the potential  dilution that could occur if stock options and other  commitments
to issue common stock were exercised using the treasury stock method.

n.  RECENTLY  ISSUED  ACCOUNTING  STANDARDS:  Statement of Financial  Accounting
Standards  (SFAS) No. 141,  BUSINESS  COMBINATIONS,  and SFAS 142,  GOODWILL AND
OTHER INTANGIBLE  ASSETS,  were issued in June 2001. SFAS 141 was effective July
1, 2001 and SFAS 142 is  effective  beginning  January 1, 2002.  Under these new
standards, goodwill and intangible assets having indefinite lives will no longer
be  amortized  but  will be  subject  to  annual  impairment  tests.  SFAS  144,
ACCOUNTING  FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED  ASSETS,  was issued in
August 2001 and is  effective  beginning  January 1, 2002.  SFAS 144  provides a
single, comprehensive accounting model for impairment and disposal of long-lived
assets and discontinued operations.  The Company does not expect the adoption of
those  pronouncements  to  result  in any  material  effects  on  the  Company's
Consolidated Financial Statements.

2.   Residual Interests In Securitized Portfolios

     On March 30, 2001, the Company,  through its consolidated  subsidiary,  S2,
acquired a 99.9%  Class B member  interest  in  Receivables  II-A LLC, a limited
liability company  ("Receivables  II-A"), from an unrelated party engaged in the
acquisition and management of periodic payment  receivables.  The Class B member
interest entitles the Company to be allocated 99.9% of all items of income, loss
and  distribution  of Receivables  II-A.  Receivables  II-A solely  receives the
residual cash flow from four  securitized  receivable pools after payment to the
securitized noteholders.

     The Company  purchased  its interest in  Receivables  II-A for an aggregate
purchase  price of  $26,134,264,  including  costs  of  $809,264  including  the
issuance of a warrant,  valued at $74,000,  for the purchase of 2 million shares
of the common stock of DVL,  exercisable  until  February 15, 2011 at a price of
$.20 per share.  The purchase price was paid by the issuance of limited recourse
promissory  notes by the  consolidated  subsidiary  in the  aggregate  amount of
$25,325,000. Principal and interest are payable from the future monthly cash


                                  F-12
<PAGE>

flow.  The notes mature on December 31,  2021,  bear  interest at the rate of 8%
annually, and are secured by a pledge of the consolidated  subsidiary's interest
in Receivables II-A and all proceeds and distributions related to such interest.
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 up to $2,532,500 of the purchase  price.  The guaranty is
reduced by 10% of the principal paid. The amount of the guaranty at December 31,
2001 was $2,532,500. Payments, if any, due under this guaranty are payable after
December 31, 2021.

     In accordance with the purchase  agreement,  through December 31, 2001, the
residual interests in securitized  portfolios and the notes payable increased by
approximately $699,000 based on the performance of the underlying receivables.

     On  August  15,  2001,  the  Company,  through a  consolidated  subsidiary,
acquired a 99.9%  Class B member  interest  in  Receivables  II-B LLC, a limited
liability  company  ("Receivables  II-B"),  from the same  party  from  which it
acquired  Receivables  II-A. The Class B member interest entitles the Company to
99.9% of all  items  of  income,  loss and  distribution  of  Receivables  II-B.
Receivables  II-B receives the residual cash flow from a securitized  receivable
pool after payment to the securitized noteholders.

     The Company  purchased  its interest in  Receivables  II-B for an aggregate
purchase price of $9,657,000, including costs of $557,000 including the issuance
of a warrant,  valued at $62,000,  for the  purchase of 1 million  shares of the
common  stock of DVL,  exercisable  until August 15, 2011 at a price of $.20 per
share.  The  purchase  price  was  paid  by the  issuance  of  limited  recourse
promissory  notes by the  consolidated  subsidiary in the aggregate  amount of a
$9,100,000.  Principal and interest are payable from the future monthly residual
interest  cash flow.  The notes mature on August 15, 2020,  bear interest at the
rate  of  8%  annually,  and  are  secured  by  a  pledge  of  the  consolidated
subsidiary's  interest in  Receivables  II-B and all proceeds and  distributions
related to such  interest.  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 up to $910,000 of the
purchase price. The guaranty is reduced by 10% of the principal paid. The amount
of the guarantee at December 31, 2001 was $899,464.  Payments, if any, due under
this guaranty are payable after August 15, 2020.

     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:

                     March 30, 2001 Transaction    August 15, 2001 Transaction
                     --------------------------    ---------------------------

      Years                 Minimum    Maximum        Minimum      Maximum
      -----                 -------    -------        -------      -------

   2001 to 2009            $462,500    $500,000       $280,000    $380,000
   2010 to final payment    700,000     750,000       $350,000    $400,000
     on notes payable*

     * Final payment on the notes  payable  expected  2016  related to the March
       transaction and 2018 for the August transaction.

The Company expects to receive significant cash flows after final payment of the
notes payable.


                                  F-13
<PAGE>

The following  table presents the key economic  assumptions at December 31, 2001
and the  sensitivity  of the  current  fair  value  of  residual  cash  flows to
immediate 10 percent and 20 percent adverse  changes in those  assumptions ($ in
thousands):

      Carrying value of residual interests                  $ 36,906
      Fair value of residual interests                      $ 37,597
      Weighted-average life (in years)                          11.1
      Expected credit losses                                    5.39%
        Impact on fair value of 10% adverse change          $  2,181
        Impact on fair value of 20% adverse change          $  3,201
      Discount rate                                            12.40%
        Impact on fair value of 10% adverse change           $ 3,007
        Impact on fair value of 20% adverse change           $ 5,675

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

3.   Mortgage Loans Receivable and Underlying Mortgages Payable

     Virtually all of DVL's loans  receivable arose out of transactions in which
Affiliated  Limited  Partnerships  purchased  commercial,  office and industrial
properties  typically leased on a long-term basis to unaffiliated,  creditworthy
tenants.  Each mortgage loan is collateralized by a lien, primarily  subordinate
to senior  liens,  on real estate owned by an  Affiliated  Limited  Partnership.
DVL's loan  portfolio is comprised of long-term  wrap-around  and other mortgage
loans due from  Affiliated  Limited  Partnerships;  and  loans due from  limited
partners  collateralized by their interests in Affiliated  Limited  Partnerships
("Partners'   Notes")  and  were  principally  pledged  to  collateralize  DVL's
indebtedness  to NPM (Note  6),  until May  1999,  at which  time,  the loan was
repaid.

     DVL's mortgage  portfolio included 23 and 26 loans with net carrying values
of $28,377,000 and  $33,639,000 as of December 31, 2001 and 2000,  respectively,
which are due from Affiliated Limited Partnerships that own properties leased to
Wal-Mart  Stores,  Inc.  Wal-Mart is a public  company  subject to the reporting
requirements  of the SEC.  Wal-Mart has closed  certain of its stores located on
the properties subject to the Company's mortgages.  However,  Wal-Mart continues
to pay the required rent with respect to such leases.  Net carrying value refers
to the unpaid principal balance less any allowance for reserves,  and any amount
which  represents  future  interest  based  upon the  purchase  of the loan at a
discount.

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

     The  Limited  Partner  Settlement,  as well as the  settlements  with other
limited  partnerships,   resulted  in  the  modification  of  terms  of  certain
performing mortgage loans receivable from Affiliated Limited  Partnerships which
bore  interest  at  effective  rates  of up to 15% per  annum,  aggregating  net
carrying values of $5,101,000, and $5,353,000 subject to underlying mortgages of
$3,087,000  and  $3,488,000  at December  31, 2001 and 2000,  respectively,  and
mature through 2027. The effect of the  modification on these mortgages on DVL's
interest income for 2001 was not material.


                                      F-14
<PAGE>

     In  addition,  at the time of the  settlement,  the  terms of the  loans to
Kenbee  collateralized  by similar loans were  restructured  and  modified.  The
restructured and modified loans due directly from the partnerships bear interest
at stated rates of up to 15.5% and mature  through 2030. As of December 31, 2001
and 2000 the modified  loans due directly from the  partnerships  aggregated net
carrying  values of  $19,160,000  and  $24,224,000  and  subject  to  underlying
mortgages of $14,594,000 and $18,905,000,  respectively. DVL recognized interest
income on these restructured mortgage loans of approximately $251,000,  $309,000
and $360,000 for 2001, 2000, and 1999, respectively. Had these loans not been in
default and had the terms not been modified,  interest  income relating to these
notes would have been approximately  $2,000,000 in 2001, $2,500,000 in 2000, and
$3,000,000 in 1999.


                                   F-15
<PAGE>

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

<TABLE>
<CAPTION>
                                                                  2001                                      2000
                                                   ------------------------------------    ----------------------------------------
                                                                     Accrued                                    Accrued
                                                                     Interest  Allowance                        Interest   Allowance
                                                   Number            Included  For Loan     Number              Included   For Loan
Mortgage Loans Due From Affiliated Partnerships     of      Loan     In Loan   Losses        of        Loan     In Loan    Losses
(dollar amounts in thousands)                      Loans   Balance   Balance   (Note 4)     Loans     Balance   Balance    (Note 4)
-----------------------------------------------    ------  -------   --------  --------    -------    -------   --------   ---------
<S>                                                  <C>    <C>        <C>      <C>            <C>    <C>         <C>       <C>
Long-term wrap-around mortgage loans ranging
  from $376 to $3,107 in 2001 and from $393
  to $2,625 in 2000 maturing at various dates
  through May 2029 (a)                               16     $ 27,264   $ 21     $     -        16     $ 23,127    $  74     $     -

Other  long-term  mortgage  loans ranging from
  $1,329 to $1,433 in 2001 and from $1,363 to
  $1,436 in 2000 maturing at various dates
  through May 2029 (b)                                2        2,762      -         945        2         2,799        -         545

Long-term  wrap-around and other mortgage loans
  acquired from Kenbee pursuant to the Limited
  Partner Settlement ranging from $285 and $2,438
  in 2001 and from $285 to $3,308 in 2000 maturing
  at various dates through June 2031 (c)             16       21,449      -       3,150       20        28,053        -       4,705
                                                     --     --------  -----     -------      ---      --------   ------     -------
Total mortgage loans                                 34       51,475     21       4,095       38        53,979       74       5,250


Loans Collateralized By Limited Partnership Interests
-----------------------------------------------------
Loans ranging from $1 and $58 in 2001 and from $1
  to $58 in 2000 in default (d) Included in
  prepaid financing and other assets                 21          355      -         278       24           389        -         284

Due from affiliated partnerships
--------------------------------
Advances and Other - Included in prepaid
  financing and other assets                          5           14      -           -       16           170        -           -
                                                     --     --------  -----     -------      ---      --------   ------      ------
Total loans receivable                               60       51,844  $  21     $ 4,373       78        54,538   $   74     $ 5,534
Less unearned interest on partnership mortgage      ===               =====     =======      ===                 ======     =======
  loans                                                       15,908                                    12,340
                                                            --------                                  --------
Net loans receivable                                        $ 35,936                                  $ 42,198
                                                            ========                                  ========

Underlying mortgages ranging from $197 and
  $2,424 in 2001 and from $30 to $2,836
  in 2000 maturing at various dates through 2011           $ 22,218                                  $ 26,019
                                                           ========                                  ========
</TABLE>


                                      F-16
<PAGE>

Activity on all collateralized loans is as follows:

                                            2001       2000       1999
                                          --------   --------   --------
                                                   (in thousands)

Balance, beginning of year                $ 54,368   $ 48,802   $ 65,861
Investments in loans receivables             6,109     13,584          -
Collections on loans to affiliates          (7,872)    (4,949)   (14,851)
Unearned interest offset against loans
 satisfied, sold and written off              (775)    (2,199)    (2,066)
Loans written-off and written down               -       (870)      (142)
                                          --------   --------   --------
Balance, end of year                      $ 51,830   $ 54,368   $ 48,802
                                          ========   ========   ========

Unearned interest activity is as follows:
                                            2001       2000       1999
                                          --------   --------   --------
                                                   (in thousands)

Balance, beginning of year                $ 12,340   $  5,810   $  7,944
Additional unearned interest in
  connection with new loans receivable       4,458      8,791          -
Amortization to income                        (115)       (62)       (68)
Decrease in connection with the
 satisfaction or write-off of loans           (775)    (2,199)    (2,066)
                                          --------   --------   --------
Balance, end of year                      $ 15,908   $ 12,340   $  5,810
                                          ========   ========   ========

     (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  $7,624,000 in 2001 and  $7,114,000 in
2000,  which bear interest at rates ranging from 7.5% to 13.125% per annum,  are
payable to unaffiliated lenders in monthly installments, mature on various dates
through August 2011 and are  collateralized  by liens senior to DVL's liens. See
Note 6 for the five year maturities of such underlying loans.


                                      F-17
<PAGE>

     (b) DVL's other  long-term  mortgage  loans,  exclusive of its  wrap-around
mortgages,  are collateralized by two first mortgages aggregating $2,762,000 and
$2,799,000  at December  31,  2001 and 2000,  respectively.  These loans  mature
through  December 2029,  bear interest at effective rates of up to 15% per annum
and  are   collateralized  by  first  mortgages  on  commercial  and  industrial
properties  located in various  states.  The scheduled  principal  maturities of
DVL's commercial mortgage loan portfolio,  excluding wrap-around  mortgages,  in
each of the next five  years are  $44,000 in 2002,  $47,000 in 2003,  $51,000 in
2004,  $55,000 in 2005 and $59,000 in 2006. All such  commercial  mortgage loans
and the  wrap-around  mortgages are  collateralized  by liens on commercial  and
industrial  properties  located in various  states.  During 2001, the tenant who
leases one of DVL's commercial  properties filed for bankruptcy protection under
Chapter  11 and and  dissaffirmed  its  lease.  DVL has  not  received  mortgage
principal nor interest  payments  since April,  2001 and intends to foreclose on
the property that  collateralizes  the wrap around mortgage.  As of December 31,
2001,  the  carrying  value of this DVL wrap around  mortgage  is  approximately
$415,000.

     (c)  DVL  acquired  long-term  wrap-around  and  other  mortgage  loans  to
Affiliated Limited Partnerships pursuant to the Limited Partner Settlement.  The
principal  balance  of such  loans  when  acquired  in 1992  equaled  DVL's  net
investment  in the  related  loan  previously  due  from  Kenbee  less  specific
write-downs of $18,223,000 on certain of these loans based upon the  anticipated
cash flow to be  generated  by each loan  (Note 4).  Although  these  loans have
stated  interest  rates of up to 15.5% per annum,  interest,  if any, is imputed
based upon the anticipated cash flow to be generated by each loan. The loans are
collateralized by first, second and third mortgages on commercial and industrial
properties  located  in  various  states  and  mature  through  June  2031.  The
wrap-around  loans  are  subject  to  senior  liens of  $14,594,000  in 2001 and
$18,905,000  in 2000,  which bear interest at rates ranging from 7.5% to 14% per
annum,  are payable to  unaffiliated  lenders,  mature on various  dates through
January 2012 and are  collateralized by liens senior to DVL's liens. The payment
of the underlying  first  mortgages are also being made by the  partnerships  or
tenants as discussed in (a) above.  See Note 6 for the five year  maturities  of
such underlying loans.

     (d)  DVL  made  loans  directly  to  limited   partners  to  finance  their
partnership  investments.  As a result of the Limited  Partner  Settlement,  DVL
received  loans due from limited  partners in 1992 in  replacement  of loans due
from Kenbee  collateralized by such Partners' Notes. The majority of these loans
were  non-performing at December 31, 2001 and 2000. These assets are included in
prepaid financing and other assets on the Balance Sheet.

4.   Allowance for Losses and Other Reserves

Allowance for loan loss activity is as follows:

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

Balance, beginning of year                     $   5,534   $  6,697
Loans satisfied, written-off or written-down      (1,161)    (1,163)
                                                 -------   --------
Balance, end of year                           $   4,373   $  5,534
                                                ========   ========

     DVL's  allowance for loan losses is based upon the value of the  collateral
underlying  each  loan  in  its  portfolio.   Management's  evaluation  of  such
collateral  previously resulted in substantial loan write-offs and a substantial
allowance  for loan losses.  The  evaluation  considered  the magnitude of DVL's
non-performing  loan  portfolio,  updated  internally  generated  appraisals  of
certain properties and updated information on certain properties.


                                      F-18
<PAGE>

     The allowance for losses on DVL's mortgage loan portfolio was calculated by
first comparing the appraised value of the property  collateralizing  a mortgage
loan,  net of liens  senior  to DVL's  liens,  to DVL's  net  investment  in the
mortgage loan.  For those  mortgages  which were  modified,  further losses were
provided for by then comparing  DVL's net investment in the mortgage loan,  less
any allowance  necessary based upon the appraised value of the property,  to the
anticipated cash flow to be generated by the terms of the mortgage or the amount
anticipated  to be  received  through  the  liquidation  of  the  mortgage.  The
partnership  properties  were valued based upon the cash flow  generated by base
rents and anticipated  percentage  rents or base rent escalations to be received
by the partnership. The value of partnership properties which are not subject to
percentage rents was based upon 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   revalued  the  property  as  it   reasonably   believed
appropriate.  The  value of the  partnership  properties  which are  subject  to
percentage rents was based upon internally generated appraisals. Such appraisals
valued the future percentage rents utilizing assumed sales growth percentages of
up to 3% annually,  based upon each  individual  store's sales  history  through
January  31,  2001.   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.

As  of  December  31,  2001  and  2000,  the  loans  collateralized  by  limited
partnership   interests  deemed   uncollectible   were  provided  for  based  on
management's   assessment  of  the  estimated  residual  value  of  the  related
partnership investment.

5.   Investments

     REAL ESTATE
     -----------

     The Company currently owns three contiguous  properties  located in Kearny,
New Jersey.

These properties are:

(1)  Two  acres  of  land  underlying   approximately   80,000  square  feet  of
manufacturing,  warehousing and commercial  buildings.  In November of 1998, the
Company  foreclosed  on its  mortgage  and now  owns  the  land,  buildings  and
improvements.

(2) Seven buildings  located in an industrial  park in Kearny,  NJ purchased for
$3,000,000,  plus closing  costs.  Prior to the  purchase,  the Company had been
leasing all of these buildings,  under a master lease agreement,  and subletting
this property to various unrelated tenants. The acquisition was funded with bank
financing  in  the  original   principal   amount  of  $3,000,000  and  cash  of
approximately  $255,000.  The bank financing accrues interest at the rate of 10%
per annum and requires  monthly  interest-only  payments until June 30, 2002, at
which time the loan matures.  The Company is currently  negotiating an extension
of this loan.

(3) Fee title in a parcel of land in  Kearny,  NJ  purchased  from an  unrelated
third party for $365,000,  plus closing costs.  The  acquisition was funded with
bank  financing  in the  original  principal  amount  of  $200,000  and  cash of
approximately  $175,000.  The financing accrues interest at the rate of 9.5% per
annum and requires  monthly interest only payments until June 30, 2002, at which
time the loan matures. The Company is currently negotiating an extension of this
loan.


                                      F-19
<PAGE>

     AFFILIATED LIMITED PARTNERSHIPS
     -------------------------------

     DVL acquired various interests in Affiliated Limited Partnerships  pursuant
to the terms of certain settlement agreements and through purchases.  Management
valued all of these investments at approximately 14% of the original  investment
amount  due  to  potential   anticipated   losses  upon   liquidation  of  these
investments.  During  2001,  2000 and 1999,  DVL  recorded  income of  $138,000,
$253,000,  and $265,000,  respectively,  from distributions  received from these
investments.

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

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

Balance, beginning of year                           $1,157     $1,326
Various interests acquired through
 purchases and foreclosed partner notes                  94          3
Distributions received from sales                      (328)      (447)
Income from distributions                               138        253
Change in reserves, net of write-offs                    60         22
                                                      -----     ------
Balance, end of year                                 $1,121     $1,157
                                                     ======     ======

     At December  31,  2001,  all of DVL's  investments  in  Affiliated  Limited
Partnerships are pledged to collateralize its indebtedness (Note 6).

     OTHER INVESTMENTS
     -----------------

     In  connection  with  a  1993  litigation  settlement  with  three  related
partnerships  that did not  participate in the Limited Partner  Settlement,  DVL
received   limited   partnership   interests   in  three   partnerships.   These
partnerships' sole assets are the restructured partnership mortgage loans on the
properties  leased to Wal-Mart Stores,  Inc. by the three related  partnerships.
These investments, which are carried on the equity basis, were valued based upon
the anticipated  cash flow to be generated by the  restructured  mortgage loans.
Management  had provided an allowance  for losses of $400,000 as of December 31,
2000  primarily  resulting  from a decrease in the  estimated  fair value of the
underlying collateral of one of the three partnership mortgage loan. In December
2001, the  partnerships  refinanced the underlying loans  collateralized  by the
restructured  mortgage  loans and DVL  received  net  proceeds of  approximately
$1,400,000 which was approximately $348,000 in excess of the carrying value. The
$348,000 was recorded as income from distributions from investments - others.


                                      F-20
<PAGE>

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

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

                                                          2001      2000
                                                        -------   -------
                                                          (in thousands)
  Indebtedness restructured in 1995 collateralized
   by commercial mortgages which matured in 2001       $     -   $    198
  Loan collateralized by commercial mortgage loans
   and real estate bearing interest at prime plus
   1.5% per annum maturing May, 2006                       824        987
  Loan collateralized by commercial mortgage loans
   and real estate bearing interest at prime plus
   1.5% per annum maturing April, 2005                   1,041      1,317
  Unsecured promissory note which matured
   March 2001, without interest                              -         75
  Loan collateralized by real estate bearing
   interest at 9.5% per annum, maturing June, 2002         202          -
  Loan collateralized by real estate bearing
   interest at 10% per annum, maturing
   December, 2001 (a)                                    3,000      3,000
                                                       -------   --------
                                                         5,067      5,577

  Loan collateralized by commercial mortgages
   and real estate bearing interest at 12% per
   annum, maturing September 2003 (b)                    1,942      2,080

  Loan collateralized by DVL's interest in the
   Opportunity Fund bearing interest at 12% per
   annum maturing August 2002                              ---        202

  Loan indebtedness due NPM bearing interest at
   10.25% maturing in September 2002, collater-
   alized by commercial mortgages and real estate
   (loan repaid May 1999)(c)                                -           -
                                                       -------   --------
   Total long-term debt                                $ 7,009   $  7,859
                                                       =======   ========

   (a) See Investments-Real Estate (Note 5) for financing agreements.

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

   (c) Under the terms of the NPM Loan,  the principal  balance was payable over
       six years with  interest at the rate of 10.25%.  DVL was required to make
       certain mandatory payments towards the principal balance over the term of
       the loan.  DVL's  principal  payments  exceeded these  requirements  from
       September 27, 1996 through May 1999 when the entire loan was repaid.

     The effective rate of interest on the NPM Loan was  approximately  36%. The
effective annual interest rate to DVL for financial  reporting purposes included
DVL's costs  associated with the NPM Loan, as well as, the value of the Warrants
(described  below) was 15%.  These rates are based on payments  made through May
1999.


                                      F-21
<PAGE>

     In connection with NPM Loan which  originated in 1996 the affiliates of NPM
acquired  1,000,000 shares (the "Base Shares") of DVL Common Stock for $200,000.
The Base Shares currently represent approximately 4.7% of the outstanding common
stock of DVL. An  affiliate of NPM also  acquired 100 shares of preferred  stock
for  $1,000.  DVL  also  issued  to  affiliates  of NPM  and NPO  warrants  (the
"Warrants")  to purchase such number of shares of Common Stock as, when added to
the Base Shares, represent rights to acquire up to 49% of the outstanding Common
Stock  of DVL on a fully  diluted  basis.  The  original  exercise  price of the
Warrants was $.16 per share, subject to applicable  anti-dilution provisions and
subject to a maximum aggregate exercise price of $1,900,000. The Warrants expire
on December 31, 2007. No warrants have been exercised through December 31, 2001.

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

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

        2002                              $   5,610         $ 2,207
        2003                                    519           2,421
        2004                                    707           2,037
        2005                                    173           2,115
        2006                                      -           2,786
     Thereafter                                   -          10,652
                                          ---------         -------
                                          $   7,009         $22,218
                                          =========         =======

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

     In December 1995, DVL completed its obligations  under a 1993 settlement of
its class action litigation. The settlement,  which was approved by the court in
1993,  provided that DVL would issue the  plaintiffs  (1) 900,000  shares of DVL
common  stock at a  minimum  price of $1.50  per  share  (or  notes to cover any
deficiency in the event that aggregate  market value was less than  $1,340,000);
(2) $9  million  face  value of notes due in ten  years,  with  interest  at 10%
payable in kind for five years, callable after the third year and payable in the
tenth year in cash or with DVL common  stock  equal to 110% of the face value of
the notes (valued in 1993 at $3,690,000 by an independent investment banker) and
(3) $1.4 million plus interest at 3% from August 16, 1993 and expenses,  payable
in cash or DVL common stock.  In December 1995, DVL issued the 900,000 shares of
common  stock and as a result of the  deficiency  in its  market  value,  issued
additional  notes with the same terms, in the face amount of $1,386,851  (valued
at $330,000 by DVL).  In payment of the $1.4 million plus interest and expenses,
DVL issued 4,017,582 shares of common stock in December 1995.

     In December 1995, DVL issued notes (the "Notes") in the aggregate principal
amount of $10,386,851 as a series in conjunction with the settlement agreed upon
in the DVL  stockholder  class action  matter  entitled IN RE DEL-VAL  FINANCIAL
CORP. SECURITIES LITIGATION.  The Notes, which are general unsecured obligations
of DVL,  accrue  interest  at the rate of ten  (10%)  percent  per  annum,  with
principal  under the  Notes,  together  with all  accrued  and  unpaid  interest
thereunder,  due on  December  31,  2005.  Pursuant  to the terms of the  Notes,
accrued and unpaid interest payable on any of the first five  anniversary  dates
following  the  issuance of the Notes is  payable,  at the option of DVL, by the
issuance  of similar  additional  Notes  with a  principal  amount  equal to the
accrued and unpaid interest  obligation then due. On the five anniversary  dates
following  the  issuance  of the  Notes,  the  Company  satisfied  its  interest
obligations  thereunder by issuing such  additional  Notes in lieu of payment of
any cash.


                                      F-22
<PAGE>

     During 2000 and 2001, the Company sent redemption  letters  ("Redemptions")
to note holders who held Notes that aggregated  approximately  $721,000 offering
to  pay  the  Notes  in  cash  at  the  face  value  plus  accrued  interest  of
approximately  $37,000.  As of December 31, 2001, $162,000 has been paid and the
remaining  $596,000  to be paid has been  accrued,  but  will no  longer  accrue
interest.

     Additionally,  the Company  entered into an agreement in December 2001 with
Blackacre  Bridge Capital,  LLC  ("Blackacre")  under which Blackacre  exchanged
$1,188,278  principal amount of Notes for 4,753,113 shares of DVL's common stock
valued at $380,000.

     Since October  1997,  the Company  conducted  three cash tender offers (the
"Offers")  at a Tender  Offer price of $0.12 per $1.00  principal  amount of the
Company's 10% redeemable  promissory  notes due December 31, 2005 (the "Notes").
The first two Offers were financed with a loan from Blackacre discussed below.

The results were as follows:

              Principal Amount  Principal Amount
                 of Notes           of Notes       Extraordinary    Date
                Purchased by      Purchased by        Gains to      Offer
                   DVL            Blackacre             DVL       Terminated
              ---------------   ----------------   -------------  ----------

Offer # 1     $ 6,224,390         $   392,750       $   202,000    02/27/98
                                                          (1998)
                                                    $ 2,906,000
                                                          (1997)

Offer # 2     $ 2,413,652         $   423,213       $ 1,267,000    05/14/99
                                                          (1999)

Offer # 3     $   378,270         $    - 0 -        $   306,000    08/15/00
                                                          (2000)

     Notes with an aggregate principal amount of approximately $2,400,000 remain
outstanding as of December 31, 2001 (discounted value  $1,902,000).  The Offers,
Redemptions and the exchange of Notes for Common Stock by Blackacre have reduced
the potential  dilutive  effective on the Company's  current  stockholders  that
would result from  redemption of the Notes for shares of Common Stock.  However,
given the  aggregate  principal  amount of Notes which remain  outstanding,  the
potential dilutive effect of such a redemption is still significant.

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


                                      F-23
<PAGE>

     In order to fund the  acquisition  of the  Notes in the  first  and  second
offers,  the Company borrowed from Blackacre  Capital Group,  LLC  ("Blackacre")
(the "BC Loan"). The BC Loan matures on September 30, 2003 and bears interest at
the rate of 12% per annum  compounded  monthly  and payable at  maturity.  Total
borrowings  under the BC Loan including  accrued  interest were $1,942,000 as of
December 31, 2001.  In  addition,  Blackacre  was entitled to acquire 15% of all
Notes  acquired by the Company in excess of $3,998,000  in  connection  with the
first and second  Offers  under the same terms and  conditions  as the  Company.
Blackacre  acquired Notes aggregating  $392,750 under these terms from the first
Offer in 1997 and 1998 and $423,213  from the second  Offer in 1999.  DVL funded
the third Offer with available  cash.  The Notes  acquired by Blackacre  accrued
interest of $372,315  through  December  28, 2001 when the  aggregate  amount of
$1,188,278 of Notes was exchanged for Stock.

     As further  consideration for Blackacre's providing the Company with the BC
Loan, the Company issued to Blackacre 653,000 shares of Common Stock.

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

8.  Other Transactions with Affiliates

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

    A.  OPPORTUNITY FUND
        ----------------

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

     As of March 1, 2002, the  Opportunity  Fund has purchased 15 wrap mortgages
of Affiliated  Limited  Partnerships from unaffiliated third parties (seven were
purchased in 1998, one was purchased in 1999 and seven  mortgages were purchased
in 2000),  acquired limited  partnership units from unaffiliated  individuals in
three Affiliated Limited  Partnerships,  and acquired an ownership interest in a
property of an Affiliated Limited Partnership.  During 2000, DVL purchased three
of the mortgages  owned by the  Opportunity  Fund and the  Opportunity  Fund was
fully  satisfied on an additional four mortgage loans, as each of the properties
that secured  these four mortgage  loans was sold.  During 2001, a newly formed,
wholly-owned subsidiary


                                      F-24
<PAGE>

of DVL  purchased  two of the mortgages  owned by the  Opportunity  Fund and the
Opportunity Fund was fully satisfied on an additional two mortgage loans as each
of the  properties  that secured these two mortgage loans were sold. As of March
1, 2002,  the  Opportunity  Fund owns four  mortgages.  In  December  2001,  the
Opportunity Fund sold its ownership interest in the property in Kearny, NJ to an
entity in which certain  partners are  affiliates of NPO.  During 2001,  DVL was
paid  approximately  $280,000 from the investments by the  Opportunity  Fund, of
which  $189,000  was used to pay amounts owed by DVL under a note in favor of an
entity that is part of the Opportunity Fund.

B. Since June 1998, the Company has received fees from a limited partnership (in
which  certain  of its  partners  are  affiliates  of NPO and  Blackacre).  This
agreement  may be terminated  with 30 days notice by either  party.  The Company
receives the following (a) a monthly fee of $5,000  through  November  2000, and
(b) after all the partners of the partnership have earned a specified return, an
incentive  fee of 25% of the  profits,  as defined in the  agreement.  For 2001,
2000, and 1999 the Company received  compensation  under such agreement equal to
$442,900, $362,500, and $480,000, respectively.

C. The Company has received  fees pursuant to a service  agreement  with another
limited  partnership  whose  general  partner is Lawrence  J.  Cohen,  to render
certain accounting and  administrative  services.  As compensation,  the Company
receives  expense  reimbursements  of $4,000 per month. For 2001, 2000, and 1999
the Company  received  aggregate  annual  compensation  under such  agreement of
$48,000.

D. The Company received fees from an entity that is part of the Opportunity Fund
in consideration for the Company providing  property  management  services.  For
2001,  2000 and 1999, the Company  received  compensation,  under such agreement
equal to $27,000, $27,000 and $12,000, respectively.

E. The Company has received fees from an entity whose partners are affiliates of
NPO,  Messrs.  Cohen,  Chazanoff,  Simms and Jacobs,  in  consideration  for the
Company   providing  certain   accounting  and   administrative   services.   As
compensation,  the Company  receives a monthly fee of $2,000, a monthly deferred
fee of $6,500 and an annual incentive fee if certain levels of profitability are
attained.  The Company  recorded  fees of $152,000 and $102,000 in 2001 and 2000
which included incentive fees of $50,000 and $-0-, respectively.

F. The Millenium Group, an affiliate of NPO, received  approximately $67,000 and
$90,000  for  2001,  and  2000,  respectively,   representing  compensation  and
reimbursement  of expenses for collection  services on limited partner notes. In
addition,  in 2001 and 2000 the Company  paid or accrued  fees of  $150,000  and
$25,000 to the  Millenium  Group and $205,000 and $55,000 to the Pembroke  Group
(another affiliate of NPO), respectively, and agreed in 2002 to issue a total of
400,000 shares of Common Stock to the Pembroke Group and the Millenium Group for
additional  services  rendered  to the  Company  outside  the scope of the Asset
Servicing Agreement.

In  connection   with  the  sales  of  property  owned  by  Affiliated   Limited
Partnerships,  a licensed real estate brokerage  affiliate of the Pembroke Group
was paid brokerage fees of $86,453 and $106,900 from various  Affiliated Limited
Partnerships in 2001 and 2000, respectively.

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

                                        2001      2000       1999
                                        ----      ----       ----

     NPM Capital, LLC                  $   -     $   -     $  665
     Blackacre Capital Group, LLC        319       275        245
     NPO                                  53       149        281
     Opportunity Fund                     17        10          -
                                       -----     -----     ------
                                       $ 389     $ 434     $1,191
                                       =====     =====     ======


                                   F-25
<PAGE>

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

I. The law firm of Klehr,  Harrison,  Harvey,  Brazenburg,  & Ellers  ("Klehr"),
Philadelphia, Pennsylvania, of which Alan E. Casnoff, a director of the Company,
is of counsel,  has acted as counsel to the Company since July, 1999. Legal fees
for services  rendered by Klehr to the Company  during the fiscal year ended did
not exceed 5% of the  revenues  of such firm for its most  recent  fiscal  year.
During 2001,  the Company and the  Affiliated  Limited  Partnerships  paid Klehr
$17,000 and 9,000, respectively, for legal services.

9. Stock Option Plans

     DVL has  elected  to follow  Accounting  Principles  Board  Opinion  No. 25
"Accounting   for  Stock   Issued  to   Employees"   ("APB   25")  and   related
interpretations  in accounting  for its employee  stock  options.  Under APB 25,
where the exercise price of DVL's employee stock options equals the market price
of the underlying stock on the date of grant, no compensation is recognized.

     Pro forma  information  regarding  net  income  and  earnings  per share is
required by Statement of Financial  Accounting Standards No. 123 "Accounting for
Stock-Based Compensation" ("SFAS No. 123"). Such information has been determined
as if DVL has  accounted  for its employee  stock  options  under the fair value
method of that statement.  The effect of applying SFAS No. 123 on 1999, 2000 and
2001 pro forma net income is not  necessarily  representative  of the effects on
reported  net income for future years due to,  among other  things:  (1) vesting
period of the stock options and(2) the fair value of additional stock options in
future years. Had compensation cost for DVL's stock option plans been determined
based  upon the  fair  value  at the  grant  date for  awards  under  the  plans
consistent with the methodology  prescribed under SFAS No. 123, DVL's net income
in 2001, 2000, and 1999, would have been approximately $2,854,000, $505,000, and
$2,270,000,  basic  earnings  per share  would  have been $.17,  $.03,  and $.14
respectively  and diluted  earnings  per share would have been $.03,  $.01,  and
$.04, respectively.

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

     All options are non-qualified stock options.

     As of December 31, 2001,  there were  outstanding  1,473,131  ten (10) year
options.  Under the Plan,  the  Company  had  1,026,869  shares of common  stock
remaining under the Plan for future grants of stock options.


                                   F-26
<PAGE>

     The following table summarizes the activity under the Plan:

<TABLE>
<CAPTION>
                                           Year Ended December 31,
                       ---------------------------------------------------------------
                               2001                  2000                  1999
                       -------------------    -----------------  ---------------------
                                 Weighted              Weighted               Weighted
                                  Average              Average                 Average
                                  Exercise             Exercise               Exercise
                        Shares     Price      Shares    Price     Shares        Price
                       --------- --------    --------  --------  ---------    --------

<S>                    <C>         <C>      <C>         <C>     <C>            <C>
Options Outstanding at
 Beginning of Year     1,278,131   $0.18    1,175,131   $0.19   1,020,131      $0.18
Granted                  195,000    0.07      120,000    0.10     205,000       0.21
Cancelled                      -       -      (17,000)   0.21     (50,000)      0.12
                       ---------   -----    ---------   -----   ---------      -----
Options Outstanding at
 End of Year           1,473,131   $0.17    1,278,131   $0.18   1,175,131      $0.19
                       =========   =====    =========   =====   =========      =====
Options Exercisable at
 End of Year           1,473,131   $0.17    1,278,131   $0.18   1,175,131      $0.19
                       =========   =====    =========   =====   =========      =====
</TABLE>

                              Year Ended December 31, 2001
                     ----------------------------------------------
              Options Outstanding                      Options Exercisable
--------------------------------------------------    ---------------------
                                         Weighted
                            Weighted      Average                  Weighted
  Range of                  Average      Remaining                 Average
  Exercise                  Exercise      Life In                  Exercise
   Price        Shares       Price         Years       Shares       Price
-----------   ---------     --------     ---------   ---------    --------

$.08   0.12     420,000      $0.09         7.90        420,000      $0.09
 .13 - 0.19     205,000       0.16         6.38        205,000       0.16
 .20 - 0.22     848,131       0.21         5.13        848,131       0.21
-----------   ---------     --------     ---------   ---------    --------
      TOTAL   1,473,131      $0.17         6.10      1,473,131      $0.17
              =========     ========     =========   =========    ========

     The weighted-average fair value at date of grant for options granted during
the years ended  December  31, 2001,  2000 and 1999 was $.07,  $.09 and $.17 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:

<TABLE>
<CAPTION>
                                                       December 31,
                                     --------------------------------------------------
                                          2001               2000             1999

                                     -------------      -------------   ---------------
<S>                                  <C>                <C>              <C>
Risk-free interest rates             4.98% - 4.98%      5.83% - 6.56%    5.00% - 5.92%
Expected option life in years             10                 10                10
Expected stock price volatility           85%                85%               85%
Expected divided yield                     0%                 0%                0%
</TABLE>


                                      F-27
<PAGE>

10.  Commitments, Contingent Liabilities and Legal Proceedings

COMMITMENTS AND CONTINGENT LIABILITIES
--------------------------------------

     Pursuant to the terms of the Limited  Partner  Settlement,  a fund has been
established  into which DVL is required to deposit 20% of the cash flow received
on 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 principals generally accepted in the
United  States of  America)  subject  to certain  adjustments  in the years 2001
through  2012.  The  adjustments  are  significant  enough that no amounts  were
accrued for 2001.

     No monies had been paid to the fund through  December 31, 1999 as DVL had a
receivable  from the fund  for  expenses  paid by DVL on  behalf  of  Affiliated
Limited  Partnerships.  During 2000, the Company paid $117,000 to the fund which
represented  all amounts due to/from the fund as of December  31,  2000.  During
2001 the Company expensed  approximately $551,000 for amounts due to the fund of
which  approximately  $149,000 was accrued at year end and paid in January 2002.
These  costs have been  netted  against the gain on  satisfaction  of  mortgages
and/or interest on mortgage loans, where appropriate.

     In  August  1998,   DVL  entered  into  a  lease  of  premises   comprising
approximately  6,000  square  feet.  The lease for such  office  space is due to
expire on  February  7, 2003.  The base rent is  $227,160  per annum,  plus real
estate and operating expense escalation clauses.  Net rent expense was $236,000,
$189,000, and $187,000 in 2001, 2000, and 1999, respectively.

     DVL entered into a contract to buy a leasehold  interest in Kearny,  NJ for
the purchase  price of $1.3 million plus the  assumption  of $2,850,000 in debt.
The tenant is K-Mart Corporation, Inc. which has filed for Chapter 11 bankruptcy
protection,  and the bankruptcy court could disaffirm the lease.  There has been
no indication  from the court as to the status of the lease.  The transaction is
expected to close in May 2002.

     The real estate lease  interest held by the Company's  subsidiary,  PSC, is
subject to a master lease  agreement  through June 2010 which  requires  monthly
payments of $39,441.  The master lease payments are netted against rental income
in the Company's financial statements.

     The Asset  Servicing  Agreement,  pursuant  to which NPO is  providing  the
Company with administrative and advisory services,  requires monthly payments of
$53,750 through May 2008 with cost of living increases.

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

11.  Shareholders' Equity

     Warrants for 3 million shares in aggregate  were issued in connection  with
the Company's  purchase of its interest in Receivables II-A and Receivables II-B
during the year 2001 (Note 2).

     As described in Note 7, the Company issued 4,753,113 shares of common stock
to Blackacre in December 2001 to retire  $1,188,278  principal  amount of Notes.
This  represents  a  conversion  rate of $.25 per  share.  As a  result  of this
exchange,  Blackacre now owns  approximately 25% of DVL's issued and outstanding
common stock.


                                      F-28
<PAGE>

     See  Note  6(c)  and 7 with  respect  to  Warrants  and  Notes,  which  are
redeemable  at the Company's  option in stock.  Depending on the market price of
the Company's stock, there may not be sufficient  authorized shares available to
be issued upon the redemption of the Warrants and the Notes.

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

     In  February  2000,  DVL  amended  its  Certificate  of  Incorporation  and
increased  its number of authorized  shares of capital stock from  40,000,100 to
95,000,100  in order to (a)  increase the number of  authorized  shares of DVL's
common stock,  $.01 par value from  40,000,000  to 90,000,000  and (b) authorize
5,000,000 shares of "blank check" preferred stock, $.01 par value.

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

12.  Subsequent Events

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


                                      F-29
<PAGE>

13.  Income Taxes

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

                                            2001           2000            1999
                                            ----           ----            ----
Currently Payable
   Federal                            $       80       $      -         $     -
   State                                       -              -               -
                                      -----------------------------------------
   Total Current Provision                    80              -               -
                                      -----------------------------------------
Deferred Provision
   Federal                                (1,050)             -               -
   State                                       -              -               -
                                      -----------------------------------------
   Total Deferred (Benefit)               (1,050)             -               -
                                      -----------------------------------------
   Total (Benefit)                    $     (970)      $      -         $     -
                                      =========================================


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

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

Change in Valuation Allowance
  and utilization of unrecognized
  deferred tax assets                      -85.1%         -34.0%          -34.0%
                                     -------------------------------------------
Effective Income Tax Rate                  -51.1%           0.0%            0.0%
                                     ===========================================

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

Allowance for Losses                  $      497       $    324         $   520
Notes Payable Litigation Settlement          206            (10)            445
Other                                         41            222             200
Carrying Value of LP Investments            (391)          (971)           (263)
NOL Carryforwards                          1,686            216            (228)
Retained Interests                          (909)             -               -
Mortgage Loans                               (69)            87            (310)
Change in Valuation Allowance             (2,111)           132            (364)
                                     -------------------------------------------
Total Deferred (Benefit)              $   (1,050)      $      0         $     0
                                     ===========================================


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

                                             2001           2000
                                             ----           ----

Allowance for Losses                     $   1,701       $  2,198
Notes Payable Litigation Settlement
  Redeemed Notes                               972          1,178
Other                                          227            268
Carrying Value of LP Investments            (2,025)        (2,416)
NOL Carryforwards                           22,314         24,000
Retained Interests                             909              -
Mortgage Loans                               2,750          2,681
                                         ------------------------
Deferred Tax Asset                          26,848         27,909

Valuation Allowance                        (25,798)       (27,909)
                                         ------------------------
Net Deferred Tax Asset                   $   1,050       $      -
                                         ========================


                                      F-30
<PAGE>

Current taxes  payable for 2001 have been reduced by $1,686,000  relating to the
utilization  of net  operating  loss  carryforwards.  At December 31, 2001,  the
Company had aggregate  unused net operating loss  carryforwards of approximately
$57 million,  which may be available to reduce future taxable  income,  expiring
through 2019, with approximately $50 million expiring through 2007. The deferred
tax benefit of $1,050,000 resulted from a reduction in the valuation  allowance,
as the  Company's  ability  to  utilize  a  portion  of its net  operation  loss
carryforwards is more likely than not.

14.  Segment Information

The Company has two reportable segments; real estate and residual interests. The
real estate business is comprised of real estate assets,  mortgage loans on real
estate,   real  estate   management  and   investments  in  Affiliated   Limited
Partnerships which own real estate. The residual interests business is comprised
of investments in residual interests in securitized receivables portfolios.

                                             2001        2000        1999
                                             ----        ----        ----
            Revenues
              Real estate                $  6,753    $  6,063    $  7,735
              Residual interests            2,802           -           -
                                         --------    --------    --------
       Total consolidated revenues       $  9,555    $  6,063    $  7,735
                                         ========    ========    ========

            Net income
              Real estate                $  1,409    $    505    $  2,293
              Residual interests            1,457           -           -
                                         --------    --------    --------
       Total consolidated net income     $  2,866    $    505    $  2,293
                                         ========    ========    ========

            Assets
              Real estate                $ 42,248    $ 45,437    $ 41,858
              Residual interests           37,442           -           -
                                         --------    --------    --------
        Total consolidated assets        $ 79,960    $ 45,437    $ 41,858
                                         ========    ========    ========


                                      F-31
<PAGE>

15. Earnings Per Share

<TABLE>
<CAPTION>
                                                              Year Ended
                                                             December 31,
                                             ---------------------------------------------
                                                  2001            2000             1999
                                               ----------      ----------       ----------
<S>                                          <C>             <C>             <C>
Income before extraordinary gain             $      2,505    $        199    $      1,026

Interest expense on litigation/settlement
  notes                                               484             502             481
                                             ------------    ------------    ------------
Income before extraordinary gain
  attributable to common stock                      2,989             701           1,507

Extraordinary gain                                    361             306           1,267
                                             ------------    ------------    ------------
Net income attributable to common stock      $      3,350    $      1,007           2,774
                                             ============    ============    ============
Weighted average number of common
 shares outstanding - basic                    16,599,517      16,560,450      16,560,450

Shares issuable upon exercise of
 dilutive options and warrants                137,085,102      97,577,336      61,028,722

Less shares assumed repurchased               (28,912,504)    (17,800,200)    (10,605,934)
                                             ------------    ------------    ------------
Weighted average number of common
 shares outstanding - diluted                 124,772,115      96,337,586      66,983,238
                                             ============    ============    ============
Basic earnings per share:
 Income before extraordinary gain            $        .15    $        .01    $        .06
 Extraordinary gain                                   .02             .02             .08
                                             ------------    ------------    ------------
Net income                                   $        .17    $        .03    $        .14
                                             ============    ============    ============
Diluted earnings per share:
 Income before extraordinary gain            $        .03    $        .01    $        .02
 Extraordinary gain                                   .00             .00             .02
                                             ------------    ------------    ------------
Net income                                   $        .03    $        .01    $        .04
                                             ============    ============    ============
</TABLE>

     At December 31, 2001, 2000 and 1999,  there were  1,473,131,  1,130,131 and
863,131,   respectively,  in  stock  options  that  were  not  included  in  the
computation  of Diluted  EPS  because the  exercise  price was greater  than the
average market price of the Common Stock,  thereby resulting in an anti-dilutive
effect.

     Additionally,  there were 3,000,000, -0- and -0- warrants in 2001, 2000 and
1999,  respectively,  that were not included in the  computation  of Diluted EPS
because the  exercise  price was greater  than the average  market  price of the
Common Stock, there by resulting in an anti-dilutive effect.


                                      F-32
<PAGE>

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

<TABLE>
<CAPTION>
                                                                Costs Capitalized
                                                                  Subsequent To     Gross Amount Of Which Carried
                                                Initial Cost       Acquisition           At  Close Of Period
                                            --------------------   -------------    -----------------------------
                                                    Building and   Building and            Building and
Description                  Encumbrances   Land    Improvements   Improvements    Land     Improvement   Total
---------------              ------------   ----    ------------   ------------    ----     -----------   -----
<S>                            <C>          <C>        <C>            <C>          <C>        <C>         <C>
Warehouse
 Manufacturing

 Kearny, New Kersey            $      -     $   80     $    426       $   -        $  80      $  514      $  594

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

Leasehold Imrprovements
Bogota, New Jersey             $      -      $   -     $     19       $   7        $    -     $   26      $   26

Land:  Kearny, NJ              $    200      $  388    $      -       $   -        $  388     $    -      $  388
                               --------      -------   --------       -----        ------     ------      ------
                               $  3,200      $1,116    $  3,035       $   7        $1,116     $3,130      $4,246
                               ========      ======    ========       -----        ======     ======      ======

<CAPTION>
                                                                      Line on Which Depreciation
                             Accumulated      Date  of      Date      in Latest Income Statement
                             Depreciation   Construction   Acquired           is Computed
                             ------------   ------------   --------   --------------------------
Description
-----------
<S>                            <C>              <C>          <C>           <C>
Warehouse
 Manufacturing

 Kearny, New Jersey            $     34         1977         11/98         Straight-line method
                                                                                40 years
Warehouse Manu-
Facturing & Retail
Kearny, New Jersey             $     69         1977         12/00         Straight-line method
                                                                                40 years
Leasehold Improvements
Bogota, New Jersey             $      1         2000         12/00         Straight-line method
                                                                                40 years
Land:  Kearny, NJ              $      -           -          03/01                 -
                               --------
                               $    104
                               ========
</TABLE>
                                                      YEAR ENDED DECEMBER 31,
                                                     2001       2000       1999
                                                   ----------------------------
(A) RECONCILIATION OF REAL ESTATE OWNED
BALANCE AT BEGINNING OF YEAR                       $3,763     $  506     $  706
ADDITIONS DURING THE YEAR                             483      3,257          9
DELETIONS DURING THE YEAR                            --         --         (209)
                                                   ------     ------     ------
BALANCE AT END OF YEAR                             $4,246     $3,763     $  506
                                                   ======     ======     ======

                                                       Year Ended December 31,
                                                     2001       2000       1999
                                                   ----------------------------
(A) RECONCILIATION OF ACCUMULATED DEPRECIATION
BALANCE AT BEGINNING OF YEAR                       $   26     $   13     $    2
ADDITIONS DURING THE YEAR:  DEPRECIATION               78         13         11
                                                   ------     ------     ------
BALANCE AT END OF YEAR                             $  104     $   26     $   13
                                                   ======     ======     ======


                 See notes to consolidated financial statements


                                  F-33
<PAGE>

EXHIBIT 11

                           DVL, INC. and Subsidiaries
                        Computation of Earnings Per Share
                 (in thousands except share and per share data)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                              Year Ended
                                                             December 31,
                                             ---------------------------------------------
                                                  2001            2000             1999
                                               ----------      ----------       ----------
<S>                                          <C>             <C>             <C>
Income before extraordinary gain             $      2,505    $        199    $      1,026

Interest expense on litigation/settlement
  notes                                               484             502             481
                                             ------------    ------------    ------------
Income before extraordinary gain
  attributable to common stock                      2,989             701           1,507

Extraordinary gain                                    361             306           1,267
                                             ------------    ------------    ------------
Net income attributable to common stock      $      3,350    $      1,007           2,774
                                             ============    ============    ============
Weighted average number of common
 shares outstanding - basic                    16,599,517      16,560,450      16,560,450

Shares issuable upon exercise of
 dilutive options and warrants                137,085,102      97,577,336      61,028,722

Less shares assumed repurchased               (28,912,504)    (17,800,200)    (10,605,934)
                                             ------------    ------------    ------------
Weighted average number of common
 shares outstanding - diluted                 124,772,115      96,337,586      66,983,238
                                             ============    ============    ============
Basic earnings per share:
 Income before extraordinary gain            $        .15    $        .01    $        .06
 Extraordinary gain                                   .02             .02             .08
                                             ------------    ------------    ------------
Net income                                   $        .17    $        .03    $        .14
                                             ============    ============    ============
Diluted earnings per share:
 Income before extraordinary gain            $        .03    $        .01    $        .02
 Extraordinary gain                                   .00             .00             .02
                                             ------------    ------------    ------------
Net income                                   $        .03    $        .01    $        .04
                                             ============    ============    ============
</TABLE>


<PAGE>

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

                        DECEMBER 31, 2001 (In Thousands)
<TABLE>
<CAPTION>
                                                         Net      Under-
                 Location of                             Mtg.     lying                                   Security
Affiliated        Property       Mortgage   Unearned    Loan      Loan              Monthly               [mortgage(s)
Partnership     Securing Loan    Balance    Interest   Receiv.   Balance    Yield   Amdat.    Maturity    upon]          Tenant(s)
---------------------------------------------------------------------------------------------------------------------------------

<S>             <C>              <C>      <C>         <C>       <C>         <C>      <C>      <C>       <C>             <C>
Alexandria      Wellsville, NY   $   839  $   629     $   210   $    --     51%      $ 1      February   Land and       Eckerd
Associates                                                                                    2027       a commercial   Stores, Inc.
                                                                                                         building (1)
Alma            Alma, AR           1,863      734       1,129       687     15%      $12      March      Land and       Wal-Mart
Associates (2)                                                                                2027       a commercial   Stores, Inc.
                                                                                                         building (1)
Ava Associates  Ossipee, NH          812      551         261         -     16%      $ -      February   Land and       Hannaford
Associates (2)                                                                                2027       a commercial   Bros. Co.
                                                                                                         building (1)
Brent           Brent, AL          1,397      530         867       519     15%      $ 9      February   Land and       Wal-Mart
Associates (2)                                                                                2027       a commercial   Stores, Inc.
                                                                                                         building (1)
Champlain       Champlain, NY      1,321      691         630         -     21%      $ -      January    Land and       Ames Dept.
Associates                                                                                    2020       a commercial   Stores, Inc.
                                                                                                         building (1)
Checotah        Checotah, OK       1,462      610         852       527     15%      $ 9      February   Land and       Wal-Mart
Associates (2)                                                                                2027       a commercial   Stores, Inc.
                                                                                                         building (1)

Edna            Edna, TX           3,107    2,239         868       673     23%      $ -      January    Land and       Wal-Mart
Associates                                                                                    2028       a commercial   Stores, Inc.
                                                                                                         building (1)

Fairbury        Fairbury, NE       1,707      729         978       605     15%      $10      August     Land and       Wal-Mart
Associates (2)                                                                                2027       a commercial   Stores, Inc.
                                                                                                         building (1)
Fort Edward (3) Fort Edward, NY    1,433       73       1,360         -     12%      $14      May        Land and a     Vacant
Associates                                                                                    2029       supermarket

FYS             Yakima, WA           376       78         298         -     10%      $ 1      August     Land and a     Kroger Co.
Associates                                                                                    2021       supermarket

Hoosick Falls   Hoosick Falls, NY  1,329      640         689         -     15%      $10      August     Land and a     GU Markets,
Associates                                                                                    2021       supermarket    Inc.
</TABLE>



<PAGE>


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

                        DECEMBER 31, 2001 (In Thousands)
<TABLE>
<CAPTION>
                                                         Net     Under-
                 Location of                             Mtg.    lying                                   Security
Affiliated        Property       Mortgage   Unearned    Loan     Loan            Monthly                [mortgage(s)
Partnership     Securing Loan    Balance    Interest   Receiv.   Balance  Yield   Amort.    Maturity    upon]        Tenant(S)
---------------------------------------------------------------------------------------------------------------------------------
<S>              <C>              <C>      <C>        <C>         <C>      <C>    <C>        <C>       <C>           <C>
Jena            Jena, LA         $ 2,602  $ 1,932     $   670      606     35%    $ 1      February   Land and       Wal-Mart
Associates                                                                                 2027       a commercial   Stores, Inc.
                                                                                                      building (1)
                                                                                                      building (1)
Orange Park     Jacksonville, FL   1,404      551         853      811     12%    $9 with  January    Land and       Toys "R" Us,
Associates                                                                        a final  2020       a commercial   Inc.
                                                                                  pmt. of             building (1)
                                                                                  $672
Port Isabel     Port Isabel, TX    2,045      770       1,275      749     15%    $12      February   Land and       Wal-Mart
Associates (2)                                                                             2027       a commercial   Stores, Inc.
                                                                                                      building (1)
Stigler         Stigler, OK        2,536    1,909         627      524     28%    $ 2      August     Land and       Wal-Mart
Associates                                                                                 2027       a commercial   Stores, Inc.
                                                                                                      building (1)
St.  Albans     St.  Albans, VT    1,753      772         981      626     30%    $15      May        Land and a     Fonda Group
Associates                                                                                 2029       commercial
                                                                                                      building (1)
Waldron         Waldron, AR        3,002    2,218         784      654     22%    $ -      December   Land and a     Wal-Mart
Associates                                                                                 2031       commercial     Stores, Inc.
                                                                                                      building (1)
Watseka         Watseka, IL        1,038      252         786      643     12%    Varying  December   Land and a     K-Mart
Associates                                                                                   2015     commercial     Corporation (3)
                                 -------  -------     -------                                         building (1)

                                 $30,026  $15,908     $14,118   $7,624
</TABLE>

-------------------
(1)  These loans are wrap-around loans.
(2)  These loans were  restructured as part of the Limited  Partner  Settlement.
     The  settlement  may have the effect of reducing DVL's yield in the future,
     which  reduced  yield is  dependent on the actual  additional  debt service
     received on these mortgages in the future.
(3)  Building  is  currently  vacant,   tenant  has  filed  for  bankruptcy  and
     dissaffirmed its lease.
(4)  DVL's net  investment in these  mortgages was  $6,494,000 and $6,472,000 at
     December 31, 2001 and 2000, respectively.



<PAGE>

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

                        DECEMBER 31, 2001 (In Thousands)
<TABLE>
<CAPTION>
                                                  Partner-   Under-    Net Amt.  Net
                            Location              ship       lying     of Col-   Mtg.
                            of Property           Mortgage   Loan      lateral   Loans
Affiliated Partnership      Securing Loan         Balance    Balance   Pledged   Recvable   Maturity       Tenant
-----------------------------------------------------------------------------------------------------------------------------------
<S>                         <C>                   <C>        <C>       <C>       <C>        <C>             <C>
Aledo Associates LP         Aledo, IL (2)         $ 1,843    $   964   $   879   $ 1,207    November 2018   Wal-Mart Stores, Inc.
Caldwell Associates         Caldwell, TX (2)        1,621        820       801     1,085    May 2019        Wal-Mart Stores, Inc.
Cherokee Associates         Woodstock, GA (2)       2,902      2,424       478     2,438    July 2023       Wal-Mart Stores, Inc.
Clinton Associates          Clinton, IL (2)         3,357        771     2,586     1,865    June 2029       Wal-Mart Stores, Inc.
Columbus Associates         Columbus, TX (2)        3,840        891     2,949     1,812    December 2029   Wal-Mart Stores, Inc.
Covington Associates        Covington, GA (2)       4,709      1,271     3,438     1,885    January 2030    Wal-Mart Stores, Inc.(4)
Douglas Associates          Douglas, GA (2)         2,140        936     1,204     2,118    December 2023   Wal-Mart Stores, Inc.
                                                                                                             operating as - Buds
Elmira Associates           Elmira, NY (2)            682          -       682       285    November 2021   Fays Drug Company, Inc.
Iowa Park Associates LP     Iowa Park, TX (2)       1,715        657     1,058       938    March 2021      Wal-Mart Stores, Inc.
Lawrenceburg Associates     Lawrenceburg, KY (2)    2,961        720     2,241     1,024    December 2029   Wal-Mart Stores, Inc.
Marshall Associates LP      Marshall, IL (2)        1,576        861       715     1,072    November 2018   Wal-Mart Stores, Inc.
Mt. Pleasant Associates LP  Mt. Pleasant, IA (2)    2,288      1,150     1,138     1,458    November 2019   Wal-Mart Stores, Inc.
Robstown Associates LP      Robstown, TX (2)        1,895        804     1,091       878    October 2020    Wal-Mart Stores, Inc.(4)
Sonya Associates LP         Booneville, MO (2)      1,554        920       634     1,172    June 2018       Wal-Mart Stores, Inc.
Southfield Associates       Southfield, MI (3)      3,539        592     2,947       837    July 2026       Pitney-Bowes, Inc.
Winder Associates           Winder, GA (2)          1,754        813       941     1,375    March 2021      Wal-Mart Stores, Inc.
                                                  -------    -------   -------   -------
                                                  $38,376    $14,594   $23,782   $21,449
</TABLE>
--------------------------------
(1)  These loans were acquired  pursuant to the Limited Partner  Settlement from
     Kenbee.  DVL's loan balance  equals it's net investment in the related loan
     due  previously  from Kenbee,  less specific  write-downs  on certain loans
     based upon the anticipated cash flow to be generated by each loan.
(2)  The loans due from these  partnerships  are secured by mortgages  upon land
     and commercial buildings.
(3)  The loans due from these  partnerships  are secured by mortgages  upon land
     and office buildings.
(4)  Building is currently vacant,  however, tenant is obligated under the terms
     of the lease to continue to pay rent.
(5)  DVL's  total  loan  balances  of  these  mortgages  were   $21,449,000  and
     $28,053,000  at December  31,  2001 and 2000,  respectively.  The  decrease
     resulted  from the  satisfaction  of  certain  mortgage  indebtedness  (eg.
     Douglasville, Marlow, and Van Buren) and collections on certain mortgages.