<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

                                  FORM 10-Q/A
                                AMENDMENT NO. 1

                  QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)

                     OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarter ended:                           Commission File Number:
September 30, 1996                                      0-9539
----------------------                           -----------------------

               S E A R C H  C A P I T A L  G R O U P,  I N C .
             ------------------------------------------------------
            (Exact name of Registrant as specified in its charter)

          Delaware                                     41-1356819
-------------------------------              --------------------------------
(State or other jurisdiction of              (IRS Employer Identification No.)
incorporation or organization)


                           700 North Pearl, Suite 400
                              Dallas, Texas 75201
                              -------------------
          (Address of principal executive offices, including zip code)
                                 214-965-6000
                                 ------------
              (Registrant's telephone number, including area code)

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 [ ]

       APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS
                       DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

                                Yes [X] No [ ]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:

                                             Number of Shares Outstanding
          Class                                   at November 11, 1996
----------------------------                 -----------------------------
Common Stock, $.01 par value                           28,634,870





<PAGE>   2



                           SEARCH CAPITAL GROUP, INC.
                               FORM 10-Q/A INDEX

<TABLE>
<CAPTION>
<S>      <C>                                                            <C>
PART I   FINANCIAL INFORMATION                                         PAGE
------                                                                 ----

Item 1.  Consolidated Financial Statements ............................. 3

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations............................14

PART II  OTHER INFORMATION..............................................24

Item 1.  Legal Proceedings..............................................24

Item 2.  Changes in Securities..........................................24

Item 3.  Default Upon Senior Securities.................................24

Item 4.  Submission of Matters to a Vote of Security Holders............24

Item 5.  Other Information..............................................24

Item 6.  Exhibits and Reports on Form 8-K...............................26

SIGNATURES..............................................................27
</TABLE>

The financial information for the interim periods presented herein is
unaudited. In the opinion of management, all adjustments necessary (which are
of a normal recurring nature) have been included for a fair presentation of the
results of operations. The results of operations for an interim period are not
necessarily indicative of the results that may be expected for a full year or
any other interim period.

                        SAFE HARBOR STATEMENT UNDER THE
                PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This Form 10-Q/A Amendment No. 1 for quarter ended September 30, 1996 contains
certain forward-looking statements as defined in the Private Securities
Litigation Reform Act of 1995, which may be identified by the use of
forward-looking terminology such as "may," "will," "expect," "anticipate,"
"estimate," "goal," "continue," or comparable terminology, that involve risks
or uncertainties and that are qualified in their entirety by the cautions and
risk factors contained in the Company's 10-K Transition Report for the six
months ended March 31, 1996 and in other Company documents filed with the
Securities and Exchange Commission.



                                       2
<PAGE>   3

PART I.  FINANCIAL INFORMATION

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS

                  SEARCH CAPITAL GROUP, INC. AND SUBSIDIARIES
                          Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                            SEPTEMBER 30,              MARCH 31,
                                               1996                      1996
                                            -------------    --------------------------------
                                              UNAUDITED       HISTORICAL   PRO FORMA (NOTE 3)
                                            -------------    --------------------------------
<S>                                         <C>               <C>            <C>
ASSETS
Gross contract receivables (Note 2)          $ 62,223,000    $ 37,086,000    $ 37,086,000
Unearned interest                             (13,327,000)     (6,435,000)     (6,435,000)
Net contracts receivable                       48,896,000      30,651,000      30,651,000
                                             ------------    ------------    ------------
Allowance for credit losses                   (13,319,000)    (13,353,000)    (13,353,000)
Net, loan origination costs                     1,130,000         406,000         406,000
                                             ------------    ------------    ------------
Net contract receivables - after
  allowance for credit losses & other
   costs                                       36,707,000      17,704,000      17,704,000
                                             ------------    ------------    ------------

ash and cash equivalents                       13,028,000      17,817,000      21,582,000
Vehicles held for resale                          362,000         566,000         566,000
Deferred offering cost, net                        76,000              --              --
Property and equipment, net                     1,263,000       1,062,000       1,062,000
Intangibles, net (Note 4)                       6,465,000              --              --
Other assets,                                     467,000         197,000         197,000
                                             ------------    ------------    ------------
  Total assets                               $ 58,368,000    $ 37,346,000    $ 41,111,000
                                             ============    ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Lines of credit (Note 4)                     $ 19,740,000    $  2,283,000    $         --
Accrued settlements                               500,000         688,000         688,000
Dividends payable                               1,532,000              --              --
Accounts payable and other liabilities          1,463,000       7,356,000       7,356,000
Redeemable warrants                               817,000         593,000         673,000
                                             ------------    ------------    ------------

   Total liabilities                           24,052,000      10,935,000       8,044,000
                                             ------------    ------------    ------------
   Stock repurchase commitment (Note 7)         2,078,000       2,078,000       2,078,000
                                             ------------    ------------    ------------

Stockholders' Equity
Convertible preferred stock                       199,000         154,000         174,000
Common stock                                      306,000         248,000         289,000
Additional paid-in capital                     87,070,000      79,124,000      85,046,000
Accumulated deficit                           (53,088,000)    (54,043,000)    (54,043,000)
Treasury stock                                 (1,150,000)     (1,150,000)     (1,150,000)
                                             ------------    ------------    ------------
   Total stockholders' equity                  33,337,000      24,333,000      30,316,000
                                             ------------    ------------    ------------
   Notes receivable - stockholders (Note 10)   (1,099,000)             --              --
                                             ------------    ------------    ------------
                                             $ 32,238,000

Total liabilities and stockholders' equity   $ 58,368,000    $ 37,346,000    $ 41,111,000
                                             ============    ============    ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       3
<PAGE>   4


                  SEARCH CAPITAL GROUP, INC. AND SUBSIDIARIES
                     Consolidated Statements of Operations
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                             SIX MONTHS ENDED    SIX MONTHS ENDED
                                                            SEPTEMBER 30, 1996  SEPTEMBER 30, 1995
                                                            ------------------  ------------------
<S>                                                          <C>                <C>
Interest revenue                                              $  3,898,000        $  4,778,000
Interest expense                                                   338,000           4,768,000
                                                              ------------        ------------
Net interest income                                              3,560,000              10,000
                                                                                              
Recovery of prior credit losses (Note 2)                         3,438,000           2,209,000
                                                              ------------        ------------
Net interest income after recoveries of prior credit losses      6,998,000           2,219,000
                                                              ------------        ------------

General and administrative expense                               6,043,000           8,660,000
Settlement                                                              --           2,837,000
Reorganization                                                          --             315,000
                                                              ------------        ------------
Operating and other expense                                      6,043,000          11,812,000
                                                              ------------        ------------
                                                                                              
Net income (loss) before dividends                                 955,000          (9,593,000)
Preferred stock dividends                                        2,946,000             120,000
                                                              ------------        ------------
                                                                                              
Net loss to common stockholders                               $ (1,991,000)       $ (9,713,000)
                                                              ------------        ------------
Primary net loss per share attributable to common 
stockholders                                                  $       (.07)       $      (1.11)
                                                              ============        ============
                                                                                              
Weighted average common shares outstanding                      27,214,000           8,764,000
                                                              ============        ============
</TABLE>


<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED   THREE MONTHS ENDED
                                                             SEPTEMBER 30, 1996   SEPTEMBER 30, 1995
                                                             ------------------   ------------------
<S>                                                          <C>                 <C>
Interest revenue                                             $  2,239,000          $    609,000 
Interest expense                                                  316,000             1,813,000 
                                                             ------------          ------------ 
Net interest income                                             1,923,000            (1,204,000)
                                                                                                
Recovery of (provision for) credit losses                       2,056,000             2,633,000 
                                                             ------------          ------------ 
Net interest income after recoveries of (provisions for)        3,979,000             1,429,000 
credit losses                                                                                   
                                                             ------------          ------------ 
                                                                                                
General and administrative expense                              3,515,000             4,808,000 
Settlement                                                             --             2,837,000 
Reorganization                                                         --               315,000 
                                                             ------------          ------------ 
Operating and other expense                                     3,515,000             7,960,000 
                                                             ------------          ------------ 
                                                                                                
Net income (loss) before dividends                                464,000            (6,531,000) 
Preferred stock dividends                                       1,542,000                60,000 
                                                             ------------          ------------ 
                                                                                                
Net loss to common stockholders                              $ (1,078,000)         $ (6,591,000)
                                                             ------------          ------------ 
                                                                                                
Primary loss per share attributable to common stockholders   $       (.04)         $       (.76)
                                                             ============          ============ 
                                                                                                
Weighted average number of common shares outstanding           26,628,000             8,671,000 
                                                             ============          ============ 
</TABLE>

          See accompanying notes to consolidated financial statements.



<PAGE>   5



                  SEARCH CAPITAL GROUP, INC. AND SUBSIDIARIES
                     Consolidated Statements of Cash Flows
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                        SIX MONTHS ENDED        SIX MONTHS ENDED
                                                       SEPTEMBER 30, 1996      SEPTEMBER 30, 1995
                                                       ------------------      ------------------
<S>                                                       <C>                   <C>
OPERATING ACTIVITIES:
Net income (loss)                                         $    955,000            $ (9,593,000)  
   Adjustments to reconcile net income (loss) to                                                 
    cash used in operations:                                                                     
    Provision for recovery of credit losses (Note 2)        (1,691,000)             (2,209,000)  
    Accretion of warrant debt                                   50,000                           
    Amortization of deferred offering costs                      6,000               1,391,000   
    Amortization of loan origination costs                     251,000                 615,000   
    Depreciation                                               281,000                 253,000   
   Changes in assets and liabilities:                                                            
    Decreases (increases) in other assets                      (36,000)                (63,000)  
    Increases (decreases) in accounts payable               (5,377,000)              3,739,000   
                                                          ------------            ------------   
Cash used in operations                                     (5,324,000)             (5,867,000)  
                                                          ------------            ------------   
                                                                                                 
INVESTING ACTIVITIES:                                                                            
    Purchase of contracts receivable                       (14,488,000)            (14,160,000)  
    Increase in loan origination costs                        (975,000)
    Principal payments on contracts receivables                                                  
     including proceeds from sales of vehicles              12,936,000              25,092,000   
    Purchase of property and equipment                        (261,000)               (354,000)  
    Decrease in restricted cash                                     --              (1,692,000)  
                                                          ------------            ------------   
Cash provided by investing activities                       (2,788,000)             10,578,000   
                                                          ------------            ------------   
                                                                                                 
FINANCING ACTIVITIES:                                                                            
    Borrowings under line of credit                          3,952,000                           
    Repayments under lines of credit                        (2,228,000)             (1,217,000)  
    Notes payable repayments                                        --              (1,690,000)  
    Deferred offering costs                                    (82,000)                     --   
    Capital lease principal payments                           (30,000)                (58,000)  
    Net proceeds from debt to equity transaction (Note 3)    4,490,000                      --   
    Loans for stock purchases                               (1,099,000)                     --   
    Purchase of treasury stock                                      --              (1,125,000)  
    Payment of dividends on preferred stock                 (1,680,000)               (120,000)  
                                                          ------------            ------------   
Cash provided by (used in) financing activities              3,323,000              (4,210,000)  
                                                          ------------            ------------   
                                                                                                 
CHANGE IN CASH AND CASH EQUIVALENTS:                                                             
                                                                                                 
    Change in cash and cash equivalents                     (4,789,000)                501,000   
    Cash and cash equivalents - beginning                   17,817,000               1,633,000   
                                                          ------------            ------------   
    Cash and cash equivalents - ending                    $ 13,028,000            $  2,134,000   
                                                          ============            ============   
-------------------------------------------------------------------------------------------------
Supplemental Information:                                                                        
    Cash Paid for Interest                                $     60,000            $  3,725,000   
                                                          ============            ============   
</TABLE>


                                       5
<PAGE>   6



                  SEARCH CAPITAL GROUP, INC. AND SUBSIDIARIES
                    NOTES TO CONDENSED FINANCIAL STATEMENTS
                                  (Unaudited)

1.       BASIS OF PRESENTATION

         The consolidated financial statements of Search Capital Group, Inc.
("Search") and together with its subsidiaries ("Company") are unaudited and
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission applicable to quarterly reports on Form 10-Q. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although
management believes that the disclosures present fairly, in all material
respects, the financial position of the Company for the periods presented.

         During the quarter ended September 30, 1996, the Company recorded
adjustments which it considers not of a normal recurring nature. These
adjustments include a gain related to the closure of the Company's retail lots
and related make ready facility of $124,000, the reduction of an amount
previously reported as a liability under a terminated warranty program for the
Company's previously purchased contracts in the amount of $136,000, and
reversal of previously recorded expenses associated with a self-funded
insurance program in the amount of $36,000.

         These financial statements should be read in conjunction with the
audited consolidated financial statements and related notes and schedules
included in the Company's Form 10-K Transition Report for the six months ended
March 31, 1996. The consolidated financial statements include the accounts of
the Company. All significant intercompany accounts and transactions have been
eliminated. Certain reclassifications have been made to prior periods' balances
to conform to current period presentation.


2.       CONTRACT RECEIVABLES, ALLOWANCE FOR CREDIT LOSSES AND INTEREST INCOME

         The Company records receivable purchases at cost. Contractual finance
charges are recorded as unearned interest and amortized to interest income
using the interest method. As discussed below, amortization of interest income
ceases upon impairment. An initial allowance for credit losses is recorded at
the acquisition of a receivable equal to the difference between the amount
financed and the acquisition cost, which is what the Company estimates to be
fair value. An additional allowance may be recorded at acquisition if it is
determined that the discount recorded as allowance is not adequate to cover
expected losses.

         In accordance with SFAS No. 114, receivables are analyzed on a
loan-by-loan basis. The Company evaluates the impairment of receivables
generally based on the receivables' contractual delinquency. The Company
considers receivables that are contractually delinquent 60 days or more or with
respect to which the underlying collateral has been repossessed to be impaired.

                                       6
<PAGE>   7


When the receivable is considered impaired, interest income ceases to be
recognized. Once impaired, the Company looks to the underlying collateral for
repayment of the receivable. Therefore, at impairment, the Company writes down
the receivable to its estimated net realizable value, which is the fair value
of the underlying collateral if it has been repossessed or the estimated
recoverable cash flow if no repossession has occurred. If the measured amount
of the impaired receivable is less than the Company's net recorded investment
in the receivable, the Company recognizes a charge to provision for credit
losses in the amount of the deficiency and increases the allowance for credit
losses by a corresponding amount. The provision for credit losses is adjusted
for any differences between the final net proceeds from resale of the
underlying collateral and the estimated net realizable value. Generally, the
Company charges off a receivable against the allowance for credit losses at 180
days contractual delinquency, if no significant payments have been received in
the last six months, or, if earlier, after receipt of the sale proceeds from
liquidation of the collateral securing the receivable. Subsequent proceeds
received on a previously charged-off receivable are recorded as a recovery to
the allowance for credit losses. Any excess of cost paid ("premium") for net
receivables acquired is recorded as an asset and amortized over the life of the
related loans acquired as an adjustment to yield using the interest method.


CONTRACTUAL DELINQUENCIES

         The following tables set forth certain information related to the
contractual delinquency of the Company's receivables as of September 30, 1996
and March 31, 1996.

<TABLE>
<CAPTION>
                                                                             AS OF SEPTEMBER 30, 1996
                                                  -----------------------------------------------------------------------
                                                                   % OF
                                                     NUMBER OF     TOTAL         TOTAL
         CONTRACTUAL                                  ACTIVE       ACTIVE        UNPAID         UNEARNED         NET
         DELINQUENCY                               CONTRACTS(1)   CONTRACTS    INSTALLMENTS     INTEREST     RECEIVABLES
----------------------------                      -------------   ----------   ------------   ------------   ------------
<S>                                               <C>              <C>        <C>             <C>             <C>        
Current to 60 days past due                           9,873          93%       $ 57,765,000   $ 12,594,000   $ 45,171,000
61-over days past due                                   769           7%          4,458,000        733,000      3,725,000
                                                      -----         ---        ------------   ------------   ------------
Total                                                10,642         100%       $ 62,223,000   $ 13,327,000     48,896,000
                                                     ======         ===        ============   ============   ============
Allowance for credit losses                                                                                   (13,319,000)
                                                                                                             ------------
Receivables, net of allowance for credit losses                                                              $ 35,577,000
                                                                                                             ============
</TABLE>
                                       7
<PAGE>   8

<TABLE>
<CAPTION>
                              -------------------------------------------------------------------------
                                                             AS OF MARCH 31, 1996
                              -------------------------------------------------------------------------
                                                 % OF
                               NUMBER OF         TOTAL           TOTAL
CONTRACTUAL                     ACTIVE          ACTIVE           UNPAID        UNEARNED         NET
DELINQUENCY                   CONTRACTS(1)     CONTRACTS      INSTALLMENTS     INTEREST      RECEIVABLES
-----------                   -------------   ------------    ------------   ------------   ------------
<S>                           <C>              <C>            <C>            <C>         
Current to 60 days past due       7,575           93%         $ 34,995,000   $  6,055,000   $ 28,940,000
61-over days past due               421            7%            2,091,000        380,000      1,711,000
                                  -----          ---          ------------   ------------   ------------
Total                             7,996          100%         $ 37,086,000   $  6,435,000     30,651,000
                                  =====          ===          ============   ============
Allowance for credit losses                                                                  (13,353,000)
                                                                                            ------------
Receivables, net of allowance for credit losses                                             $ 17,298,000
                                                                                            ============
</TABLE>

(1) Excludes 245 and 333 accounts which were reclassified to vehicles held for
    resale as of September 30, 1996 and March 31, 1996, respectively.


ALLOWANCE FOR CREDIT LOSSES

         The following table shows the changes in the Company's allowance for
loan losses for the six months ending September 30, 1996.

<TABLE>
<CAPTION>
                                                            SIX MONTHS ENDING
                                                            SEPTEMBER 30, 1996
                                                            ------------------
<S>                                                         <C>         
Balance at beginning of period                                 $ 13,353,000 
Allowance recorded on acquisition of receivables                  5,869,000 
Increase in allowance for loan losses                                    -- 
Proceeds received on previously charged off accounts              1,747,000 
Reduction in allowance for credit losses                         (3,438,000)
Receivables charged off against allowance                        (3,988,000)
                                                               ------------ 
Balance at end of period                                       $ 13,319,000 
                                                               ------------ 
Net credit losses as a percent of average net receivables                16%
                                                               ============ 
</TABLE>

         The allowance for credit losses contained a reduction of the provision
for loan losses from prior estimates for the quarter ended September 30, 1996 as
Follows (in thousands).

<TABLE>
<CAPTION>
                                                               September 30, 1996
                                                               ------------------
<S>                                                                  <C>
Provision for loan losses                                            $    --
Reduction in allowance                                                (3,438)
                                                                     -------
Net effect on statement of operations                                 (3,438)
Less proceeds received on previously charged-off accounts              1,747
                                                                     -------
Non cash (reduction) of credit loss provision                        $(1,691)
                                                                     =======
</TABLE>

         The Company's receivables are generally installment receivables having
a fixed annual percentage rate ("APR"). These receivables are predominantly
secured by motor vehicles, although during the fiscal year ending March 31,
1997, the Company expects to commence making and 




                                      8


<PAGE>   9

acquiring non-auto consumer loans that may be secured or unsecured. The
obligors of the Company's receivables are domestically-based at the time the
receivables are originated or purchased by the Company from a dealer, and the
Company has no material amount of foreign receivables.

         Receivables will become nonaccrual status due to their contractual
delinquency exceeding 60 days or due to repossession of underlying collateral.
The Company also considers certain delinquent receivables that are in the
contractual status of less than 60 days past due to be potential problem
receivables. Uncertainty as to overall economic conditions, regional
considerations, and current trends in portfolio growth cause the Company to
review these receivables for potential problems.

         The Company considers Texas and Tennessee to be states with receivable
concentrations, because receivables with obligors in each of these states
exceed 10% of total outstanding receivables. Most of the Company's receivables
are due from individuals located in large metropolitan areas of Texas and other
southern and western states. To some extent, realization of the receivables
will be dependent on local economic conditions. The Company holds vehicle
titles as collateral for all motor vehicle receivables until such receivables
are paid in full.


CONTRACTUAL MATURITIES

         The following tables set forth certain information related to the
contractual maturities of the Company's contract receivables as of September
30, 1996 and March 31, 1996.

<TABLE>
<CAPTION>
                                           AS OF SEPTEMBER 30, 1996
                             -----------------------------------------------------
                                          12 MONTHS ENDING SEPTEMBER 30,
                                                          1999 AND
                                1997          1998         BEYOND          TOTAL
                             -----------   -----------   -----------   -----------
<S>                          <C>           <C>           <C>           <C>        
Future payments receivable   $32,343,000   $18,947,000   $10,377,000   $62,223,000

Less unearned interest         8,900,000     3,876,000       551,000    13,327,000
                             -----------   -----------   -----------   -----------

Net contractual maturities   $23,999,000   $15,071,000   $ 9,826,000   $48,896,000
                             ===========   ===========   ===========   ===========
</TABLE>


<TABLE>
<CAPTION>
                                            AS OF MARCH 31, 1996
                             -----------------------------------------------------
                                         12 MONTHS ENDING MARCH 31,
                                                           1999 AND
                                1997          1998          BEYOND        TOTAL
                             -----------   -----------   -----------   -----------
<S>                          <C>           <C>           <C>            <C>       
Future payments receivable   $23,445,000   $11,507,000   $ 2,134,000    37,086,000
Less unearned interest         4,886,000     1,450,000        99,000     6,435,000
                             -----------   -----------   -----------   -----------
Net contractual maturities   $18,559,000   $10,057,000   $ 2,035,000   $30,651,000
                             ===========   ===========   ===========   ===========
</TABLE>


         In the opinion of management, a portion of the receivables at
September 30, 1996 and March 31, 1996 will be repaid or extended either before
or past the contractual maturity date. In addition, some of those receivables
will be charged off before maturity. The above tabulation, therefore, is not to
be regarded as a forecast of future cash collections.



                                       9

<PAGE>   10
GENERAL CONTRACT CHARACTERISTICS

         The following sets forth certain general information related to the
contract receivables of the Company as of September 30, 1996 and March 31,
1996.

<TABLE>
<CAPTION>
                                                             AS OF               AS OF
                                                         SEPTEMBER 30, 1996   MARCH 31, 1996
                                                         ------------------   --------------
<S>                                                       <C>                   <C>
Unearned as a percent of gross receivables                     20.79%                17.35%
                                                           =========             ========= 
Allowance for loan losses as percent of  net receivables       27.37%                43.56%
                                                           =========             ========= 
Average Original Loan Amount                               $   7,433             $   6,997 
                                                           =========             ========= 
Average Net Receivable Remaining Balance                   $   4,610             $   3,833 
                                                           =========             ========= 
Weighted Average APR                                           20.71%                23.81%
                                                           =========             ========= 
Weighted Average Original Term in Months                       36.94                 32.42 
                                                           =========             ========= 
Weighted Average Remaining Term in Months                      26.68                 19.09 
                                                           =========             ========= 
</TABLE>


3.       TRANSACTIONS WITH HALL AND AFFILIATES

         On November 30, 1995, Search entered into a Funding Agreement
("Funding Agreement") with Hall Financial Group, Inc. ("HFG"). Pursuant to the
Funding Agreement, HFG made loans totaling $2,283,000 ("HFG Notes") to Search.
The HFG Notes could, at the election of HFG or its assigns, be converted into a
maximum 2,500,000 shares of Search common stock. Effective April 2, 1996,
Hall/Phoenix Inwood, Ltd. ("HPIL"), as assignee from HFG of the HFG Notes,
fully exercised the rights of the holder of the HFG Notes to convert the Notes
into 2,500,000 shares of Search common stock. Because the conversion price
specified in the HFG Notes for these shares was less than the full amount due
HFG, Search paid to HPIL the remaining portion of the debt evidenced by the HFG
Notes in cash.

         The Funding Agreement also provided to HFG the option to purchase
common stock, 9%/7% convertible preferred stock, and warrants. Effective April
2, 1996, HPIL, as assignee of HFG, fully exercised this purchase option by
paying $4,346,000 cash to Search for which Search issued 1,638,400 shares of
common stock, 2,032,800 shares of 9%/7% preferred stock, and warrants to
purchase 676,000 shares of common stock to HPIL.

         Pursuant to the Funding Agreement, HFG was entitled to elect one
director to Search's Board if HFG converted the HFG Notes into common stock and
to elect another director if HFG purchased at least $1,000,000 Present Value of
securities from Search. As a result of satisfaction of these conditions, two
HFG officers were appointed to Search's Board.


                                      10
<PAGE>   11



4.       ACQUISITION OF DEALERS ALLIANCE CREDIT CORPORATION

         On August 2, 1996, Search Funding IV, Inc. ("SFIV"), a wholly-owned
subsidiary of Search, acquired all of the assets and assumed certain
liabilities of Dealers Alliance Credit Corp. ("DACC"). DACC conducted
purchasing and servicing of used motor vehicle receivables in Atlanta, Georgia.
DACC had purchased loans from over 1,000 new and used car dealers, primarily in
Georgia, Texas, Tennessee and Florida. The Company has been using the DACC
facilities as a regional marketing branch for southeastern states, a collection
center and as a full-service consumer loan facility. The acquisition was
accounted for under the purchase method of accounting. Accordingly, results of
operations related to the acquired assets have been included in the
consolidated financial statements since the date of acquisition. The purchase
price was allocated to the net assets acquired based upon their estimated fair
value. For DACC's net assets, valued at approximately $21,000,000, Search
delivered 1,277,030 shares of common stock, 2,554,060 shares of 9%/7%
convertible preferred stock, and Warrants to purchase 1,277,030 shares of
common stock with a total value of $4,795,000. In addition, the Company assumed
approximately $17,450,000 in bank debt under a restructured line of credit.

         The calculation of the purchase price and allocation to the acquired
assets of DACC is as follows (in thousands):

<TABLE>
<S>                                                                    <C>    
Net contracts receivable                                               $14,380
Cash and cash equivalents                                                  753
Vehicles held for sale                                                     284
Property and equipment                                                     222
Customer lists                                                           2,175
Dealer network                                                           2,200
Other assets                                                               835
                                                                       -------

Total estimated fair value of assets acquired                           20,849
                                                                       -------

Liabilities assumed                                                     18,239
Fair value of Search equity instruments issued, including redeemable     4,795
    warrants treated as debt
Direct acquisition costs                                                   143
                                                                       -------
Total cost                                                             $23,177
                                                                       -------
         Cost in excess of fair value of net assets acquired and
             other identifiable intangibles                            $ 2,328
                                                                       =======
</TABLE>

         The cost in excess of fair value of net tangible assets acquired of
$6,703,000 is being amortized over a weighted term of approximately 11 years on
a straight-line basis. The Company periodically evaluates the recoverability
and remaining life of the excess value and determines whether it should be
completely or partially written-off or the amortization period accelerated. The
Company will recognize an impairment of excess value to the extent that the


                                      11
<PAGE>   12



undiscounted estimated future operating cash flows of the acquired assets are
determined to be less than the carrying amount of the excess value. If an
impairment of excess value were to occur, the Company would reflect the
impairment through a reduction in the carrying value of such excess value.

         The Warrants issued in the DACC transaction have redemption features
which require the Company to redeem all unexercised warrants at $2.00 for each
share of stock subject to the Warrants in March 2001. The Warrants are
considered debt and have been recorded at their estimated fair value. The
accretion from fair value to redemption amount is recorded as interest expense
over the term of the warrants using the interest method.

         In September 1996, the Company acquired approximately $12,000,000 in
gross receivables from Eagle Finance Corp. for a total cash price of
approximately $9,600,000. In November 1996, the Company acquired approximately
$21,000,000 in gross receivables from MS Financial, Inc. for a total cash price
of approximately $14,400,000. The receivables were purchased at a premium over
the net assets acquired. The premiums are amortized over the life of the
related portfolio as an adjustment to yield using the interest method.


5.       LINE OF CREDIT

         On September 11, 1996, Search Funding II, Inc. ("SFII"), a
wholly-owned subsidiary of Search, entered into a revolving line of credit
agreement (the "line") with Hibernia National Bank (HNB). The line bears
interest at the prime rate plus one percentage point, currently 9.25% as of
October 31, 1996. The line has a maximum borrowing commitment of $25,000,000
and is limited to a percentage of eligible contracts held by SFII. The line is
secured by all SFII assets and expires on September 11, 1999. Search has
guaranteed the line. Search and SFII must comply with various covenants that
require the maintenance of certain financial ratios and other financial
conditions.

6.       RELATED PARTY INFORMATION

         A director of the Company is a principal in a securities firm which
will receive fees for its services to be rendered in connection with obtaining
potential subordinate debt and senior debt financing for the Company. The
Company will pay a marketing fee of $60,000 and a placement fee of 3.0% related
to the subordinated debt offering and a .375% agency fee for the senior debt.

         A director of the Company is a managing director of an investment
banking firm retained by the Company to act as its financial advisor. The
Company is obligated to pay $50,000 per year under this agreement to the firm.
Additionally, the Company has retained this director's firm to provide a
fairness opinion with respect to the Company's acquisition of certain assets
and liabilities of DACC and U.S. Lending Corporation. In connection with these
opinions, the Company will pay $100,000 and $125,000, respectively.


                                      12
<PAGE>   13



7.       STOCK CANCELLATION AND STOCK REPURCHASE AGREEMENT

         In May 1995, Search purchased from one of its directors 500,000 shares
of Search's common stock for $2.25 per share, market value on that date.
Simultaneously with the purchase, the director resigned from the Board. Search
was also given an irrevocable proxy expiring in May 1997 to vote 812,120 shares
of common stock held by a trust formed by the former director. These shares
held by the trust and an additional 111,216 shares held by an individual
retirement account of the former director were subject to a "put" to the
Company in May 1997 for $2.25 per share, the market value at the date of the
agreement. These shares are shown on the balance sheet outside of permanent
equity at the redemption price. If these redeemable shares were excluded from
net loss per share, the six months ended September 30, 1996 net loss per share
would have been $(.08).

8.       REDEEMABLE WARRANTS

         Search is authorized to issue Warrants to purchase up to 10,000,000
shares of common stock pursuant to a warrant agreement dated as of March 22,
1996, as amended. Warrants to purchase 5,000,000 shares are to be issued to
noteholders and other unsecured claim holders under the Joint Plan and Warrants
to purchase 1,277,030 shares of common stock issued in connection with the
acquisition of the assets of DACC.

         The exercise price per share of the Warrants is $2.25 and increases by
$.25 on March 15 of each successive year through 2000. The Warrants will expire
on March 14, 2001, at which time Search must redeem all unexercised Warrants at
a redemption price of $.25 per share. Because the Warrants must be redeemed if
not exercised, they have been classified outside of permanent equity as debt at
fair value. An accretion to the redemption amount of $1,569,000 will be made
over the term of five years using the interest method.

9.       BULK ACQUISITIONS

         On September 27, 1996, the Company acquired approximately $12,000,000
in gross receivables including unearned interest from Eagle Finance Corp. for a
total cash price of approximately $9,600,000. The receivables were purchased at
a premium over the net assets acquired. The premiums are amortized over the
life of the related portfolio as an adjustment to yield using the interest
method. The accounts will be serviced out of the Company's existing collection
facility in Dallas, Texas. The 1,084 accounts were all receivables originated
in Texas and are all secured by motor vehicle receivables.

10.      NOTES RECEIVABLE STOCKHOLDERS

         In July 1996, the Company implemented a loan program for its directors
and senior executive officers to finance the purchase of shares of common stock
and 9%/7% convertible preferred stock in open market transactions. The loans
are evidenced by promissory notes from the borrowers, bear interest at the
prime rate, payable quarterly, and mature three years from the date made. The
shares of stock purchased with the proceeds of the loans are pledged to the
Company as security for the loans. The aggregate amount of these loans
outstanding at September 30, 1996 was


                                      13
<PAGE>   14



$1,099,000.  These loans are shown as a deduction from total stockholders equity
on the face of the balance sheet.


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

GENERAL

         The Company specializes in the purchase and servicing of used motor
vehicle receivables. These receivables are secured by medium-priced, used
automobiles and light trucks which typically have been purchased by consumers
with substandard credit histories at retail prices generally ranging from
$5,000 to $15,000. The Company generally purchases these receivables from a
network of unaffiliated new and used automobile dealers (the "Dealer Network").
The Company from time to time makes bulk acquisitions of these receivables. The
members of the Dealer Network generate the receivables and offer them for sale
on a non-exclusive basis to the Company. Members of the Dealer Network forego
some future profit on each receivable sold to the Company in exchange for an
immediate return of their invested capital. The Company's acquisition of DACC
enhanced the Company's Dealer Network by adding new dealers to the network with
existing purchasing relationships. Additionally, the Company now has a larger
marketing presence in the southeastern United States non-prime automobile
market. The Company has identified the dealers DACC purchased contracts from
which would be eligible to become a member of the Dealer Network. It is
anticipated that new receivables from these dealers will help increase the
Company's purchasing volume during the fiscal year ending March 31, 1997 and
thereafter. The Company plans to add marketing representatives who will work
out of the existing facilities previously occupied by DACC. The Company also
plans to use the existing systems and office space to conduct limited
purchasing activity of new receivables. The Company expects to receive
applications, evaluate credit risk, assess collateral value and make
preliminary loan approval or turndowns. This will decrease the current work
load for the Company's employees engaged in similar activities in its Dallas,
Texas purchasing facility. 

         In addition to the benefits the Company expects to receive from an
enhanced Dealer Network, the Company has plans for a consumer loan operation to
be initially based in the same facilities. The Company identified over 600
accounts which it intends to target for conversion to consumer loans. The
current personnel in the branch, combined with the Company's existing
management, have significant experience in consumer lending. The initial
consumer loans will be made after regulatory approval is obtained. It is
expected that one third of the targeted consumer loan customers will ultimately
be converted into consumer loans which the Company will attempt to retain as
customers for an indefinite period of time. It is expected that the benefits
from the consumer loan operation will be minimal during fiscal 1997. However,
during fiscal 1998, the Company expects to generate additional revenue both
from interest income and insurance product commissions. The Company administers
its receivables purchasing, servicing and management activities utilizing a
receivables management system developed by Norwest Financial Information
Systems Group, Inc. in conjunction with the Company's proprietary Auto Note
Management System software. The Company commenced its used motor vehicle
receivables purchasing and servicing business in 1991.



                                      14
<PAGE>   15


         The Company opened its first consumer finance office on November 1,
1996 in Baton Rouge, Louisiana. The Company intends to open more branch offices
in the near future. These offices will make and collect retail sales finance
loans, second mortgage real estate loans, and other consumer loans.

         Prior to November 4, 1994, the Company primarily financed the purchase
of used motor vehicle receivables through the private and public sale of
interest-bearing notes (the "Notes") issued by wholly owned subsidiaries
organized specifically for this purpose (the "Fund Subsidiaries") and through
reinvestment of operating cash flow. Until March 1996, the purchasing of
receivables for the Fund Subsidiaries was governed by trust indentures (the
"Trust Indentures") which restricted management's ability to alter its
receivables purchasing criteria. In March 1996, following confirmation of the
Fund Subsidiaries' plan of reorganization under Chapter 11 of the bankruptcy
code, the Notes and the indebtedness represented by the Notes, together with
their related Trust Indentures, were canceled. At that time, the Company
implemented its new purchasing program (the "Preferred Program"). The Preferred
Program continues to focus on the purchasing of used motor vehicle receivables
whose obligors have non-prime credit histories, but places more emphasis on
job, income and residence stability and re-established positive credit of the
obligor than the Company's earlier programs.

         The Company anticipates lower repossession rates and higher
repossession sale proceeds as a result of the Preferred Program. If the Company
is unable to select the proper dealers, purchase contracts with obligors which
meet its credit criteria, and realize collection proceeds in adequate amounts,
the repossession rate and sale proceeds could be higher and lower,
respectively. The repossession rate and sale proceeds could be higher and
lower, respectively. The terms of loans under the Preferred Program generally
range from 30 months to 60 months.


RESULTS OF OPERATIONS

Comparison of Six Month Periods Ended September 30, 1996 and 1995

         The Company purchased 509 non-bulk contracts during the six months
ended September 30, 1996 compared to 2,659 non-bulk contracts during the six
months ended September 30, 1995. The cost of non-bulk contracts purchases was
$5,076,000 ($9,972 per contract) compared to $14,160,000 ($5,325 per contract)
for the six month periods in 1996 and 1995, respectively. The Company purchased
1,098 bulk contracts at a cost of $9,717,000 ($8,849 per contract) during the
six months ended September 30, 1996 compared to 112 bulk contracts at a cost of
$513,000 ($4,580 per contract) for the six months ended September 30, 1995. The
increase in cost of non-bulk contracts is due to a higher purchase price per
contract under the Preferred Program generally due to a lower mileage vehicle,
higher credit quality customers and higher wholesale and retail value per
vehicle. The increase in cost of bulk contracts is due to the Company
purchasing contracts that involve a higher credit quality obligors or higher
value vehicle collateral than the contracts previously purchased by the
Company, or both. The Company expects to continue to see an increase in its per
contract cost under its Preferred


                                   15

<PAGE>   16


Program when compared to purchases under its old program. Additionally, during
the three months ended September 30, 1996, the Company purchased 725 non-auto
consumer finance contracts which were not secured by automobiles at a cost of
$278,000. The Company's acquisition of DACC provided the Company with
approximately 3,800 accounts with aggregate balances of approximately
$26,000,000.

         Interest revenue decreased from $4,778,000 for the six months ended
September 30, 1995 to $3,898,000 for the six months ended September 30, 1996.
The decrease of $880,000, or 18%, is primarily a result of higher average
interest earning net receivables for the six month period ended September 30,
1995 of $48,894,000 compared to $27,251,000 average interest earning net
receivables for the period ended September 30, 1996. The acquisition of DACC in
August provided the Company with additional interest earning receivables;
however, the two months which included the DACC accounts were not enough to
offset the decrease in the Company's old receivable portfolio.

         Interest expense decreased from $4,768,000 to $338,000 for the six
months ended September 30, 1996 compared to the same six month period ended
September 30, 1995. The decrease in interest expense is a result of
confirmation and effectiveness of the Fund Subsidiaries' plan of reorganization
during the first calendar quarter of 1996. Additionally, as a result of the
plan's effectiveness, the Company paid the balance owing on its outstanding
lines of credit. The Company assumed debt from DACC averaged approximately
$17,000,000 during the six-month period. Additionally, the accretion to the
redemption value for the Company's redeemable warrants is included as interest
expense.

         The provision for credit losses increased from a recovery of 
$2,209,000 for the six months ended September 30, 1995 to a recovery of
$3,438,000 for the six months ended September 30, 1996. The increase in the
recovery of prior credit losses is due to increased recoveries of prior credit
losses from previously charged off accounts. During the six month period ended
September 30, 1996, the Company recovered $1,747,000 of proceeds from accounts
previously charged off. During the same three month period in the six months
ended September 1995, the Company did not recover any proceeds. The Company's
remote collections facilities, which were opened during the second calendar
quarter of 1995, have been successful in contacting and collecting some of the
chronically delinquent and charged-off accounts and locating previously
identified skips. Additionally, the acquisition of DACC provided the Company
with a new pool of deficiency balances to collect of which the Company collected
approximately $300,000 in the quarter ended September 30, 1996. In the future,
management anticipates a lower amount of recovery of prior credit losses as
these collections decrease. During the six months ended September 30, 1996, the
Company received a one-time settlement of $115,000 from a car dealer for
deficiencies on sales of repossessed cars purchased from that dealer.
Additionally, during the six months ended September 30, 1996, the Company
reduced its loan loss provision by an additional $1,691,000 to reflect a
reduction in anticipated loan losses.

         General and administrative expenses decreased from $8,660,000 to
$6,043,000, or $2,617,000 for the six months ended September 30, 1995, compared
to the same six month period in September 30, 1996. The decrease in general and
administrative expenses is primarily


                                      16
<PAGE>   17


related to reduced expenses associated with processing repossessions, personnel
cost, and professional fees. The Company closed all three of its retail lots,
which were used to process repossessions, by December 31, 1995. The six month
period ended September 30, 1995 contains general and administrative expenses,
related to these retail lots whereas the six months ended September 30, 1996
contain none of the same expenses. The Company's employee count averaged 115
persons for the six months ended September 30, 1996 compared to 127 persons for
the six months ended September 30, 1995. The DACC acquisition increased the
Company's general and administrative expenses, primarily for personnel and
occupancy costs.

         Preferred stock dividends increased $2,826,000 from $120,000 for the
six months ended September 30, 1995 to $2,946,000 for the six months ended
September 30, 1996. The increase in preferred stock dividends is related to the
issuance of 17,064,000 shares of the Company's 9%/7% Convertible Preferred
Stock upon confirmation of the Fund Subsidiaries' plan of reorganization and
2,554,000 shares of Series B 9%/7% Convertible Preferred Stock in the
acquisition of DACC. The Company had 400,000 shares of its 12% Convertible
Preferred Stock outstanding and no 9%/7% Convertible Preferred Stock during the
six months ended September 30, 1995, compared to 400,000 and an average of
17,915,000 shares of 12% Convertible Preferred Stock, 9%/7% Convertible
Preferred Stock and Series B 9%/7% Convertible Preferred Stock, respectively,
outstanding during the six months ended September 30, 1996.

         Net loss per share decreased from $(1.11) per share for the six months
ended September 30, 1995 to $(.07) per share for the six months ended September
30, 1996. The decrease is due to lower net loss per share attributable to
common stockholders of $7,722,000 and an increased number of weighted average
shares outstanding from 8,764,000 to 27,214,000, for the six months ending
September 30, 1995 and 1996, respectively. In addition to the above, the
Company experienced significant costs related to the Fund Subsidiaries plan of
reorganization and settlement of claims of a non- reoccurring nature of
$3,152,000 during 1995.

Comparison of Three Month Periods Ended September 30, 1996 and 1995

         The Company purchased 236 non-bulk contracts during the three months
ended September 30, 1996 compared to 1,254 non-bulk contracts during the same
three months ended September 30, 1995. The cost of non-bulk contract purchases
was $2,645,000 ($11,207 per contract) compared to $7,508,000 ($5,987 per
contract) for the three month periods in 1996 and 1995, respectively. The
Company purchased 1,098 bulk contracts at a cost of $10,514,000 ($9,576 per
contract) during the three months ended September 30, 1996 compared to 112 bulk
contracts at a cost of $513,000 ($4,580 per contract) during the three month
period ended September 30, 1995. The increase in cost in non-bulk contracts of
$5,220 per contract is due to a higher purchase price per contract under the
Preferred Program compared to its old program. The Company expects to continue
to see an increase in its per contract cost under its Preferred Program when
compared to purchases under its old program. The increase in cost per bulk
contract of $4,996 per contract is due to a generally higher credit quality
customer and or collateral than what was previously purchased by the Company.
The Company expects to continue to see an increase in its non-bulk and bulk
contract cost when compared to the previously non-bulk and bulk purchases. The
Company's acquisition of DACC provided the



                                      17
<PAGE>   18


Company with approximately 3,800 accounts with aggregate balances of
approximately $26,000,000.

         Interest revenue increased from $609,000 for the three months ended
September 30, 1995 to $2,239,000 for the three months ended September 30, 1996.
The difference arises primarily from a reclassification of interest revenue and
provision for credit losses which was made during third calendar quarter of
1995 and had no effect on earnings per share. Average interest earning
contracts were $29,429,000 for the three months ended September 30, 1996
compared to $45,662,000 for the three month period ended September 30, 1995.
The acquisition of DACC in August provided the Company with additional interest
earning receivables; however, the two months which included the DACC accounts
were not enough to offset the decrease in the Company's old receivable
portfolio.

         Interest expense decreased from $1,813,000 to $316,000 for the three
months ended September 30, 1995 compared to the same three month period ended
September 30, 1996. The decrease in interest expense is a result of
confirmation and effectiveness of the Fund Subsidiaries' plan of reorganization
during the first calendar quarter of 1996. Additionally, as a result of the
plan's effectiveness, the Company paid the balance owing on its outstanding
lines of credit. The Company anticipates an increase in the amount of interest
expense in the foreseeable future as it will access its credit line to fund
contract purchases. The Company assumed debt from DACC averaged approximately
$17,000,000 during the six-month period. Additionally, the accretion to the
redemption value for the Company's redeemable warrants is included as interest
expense.

         The provision for credit losses decreased from a recovery of
$2,633,000 for the three months ended September 30, 1995 to a recovery of
$2,056,000 for the three months ended September 30, 1996. The decrease in the
recovery of prior credit losses is due to lower anticipated loan losses in this
three month period compared to the same three month period in 1995.
Additionally, the difference arises primarily from a reclassification of
interest revenue and provision for credit losses which were made during third
calendar quarter of 1995 and had no effect on earnings per share. The Company's
remote collections facilities, which were opened during the second calendar
quarter of 1995, have been successful in contacting and collecting some of the
chronically delinquent and charged-off accounts and locating previously
identified skips. In the future, management anticipates a lower amount of
recovery of prior credit losses as these collections decrease.

         General and administrative expenses decreased from $4,808,000 to
$3,515,000 for the three months ended September 30, 1995, compared to the same
three month period ended in September 30, 1996. The decrease in general and
administrative expenses is primarily related to reduced expenses associated
with processing repossessions, personnel cost, and professional fees. The
Company closed all three of its retail lots, which were used to process
repossessions, by December 31, 1995. The three-month period ended September 30,
1995 contains general and administrative expenses, related to these retail lots
whereas the three months ended September 30, 1996 contain none of the same
expenses. The Company's employee count averaged 127 persons for the three


                                      18
<PAGE>   19



months ended September 30, 1995, compared to 130 persons for the three months
ended September 30, 1996. The DACC acquisition increased the Company's general
and administrative expenses, primarily for personnel and occupancy costs.

         Preferred stock dividends increased from $60,000 for the three months
ended September 30, 1995 to $1,542,000 for the three months ended September 30,
1996. This increase in preferred stock dividends is related to the issuance of
17,064,000 shares of the Company's 9%/7% Convertible Preferred Stock upon
confirmation of the Fund Subsidiaries' plan of reorganization and 2,554,000
shares of Series B 9%/7% Convertible Preferred Stock in the acquisition of
DACC. The Company had outstanding 400,000 shares of its 12% Convertible
Preferred Stock outstanding and no 9%/7% Convertible Preferred Stock during the
three months ended September 30, 1995, compared to 400,000 and an average of
18,767,000 shares of 12% Convertible Preferred Stock, 9%/7% Convertible
Preferred Stock and Series B 9%/7% Convertible Preferred Stock , respectively,
outstanding during the three months ended September 30, 1996.

         Net loss per share decreased from $(.76) per share for the three
months ended September 30, 1995 to $(.04) per share for the three months ended
September 30, 1996. The decrease is due to lower net loss per share
attributable to common stockholders of $5,513,000 and an increased number of
fully-diluted weighted average shares outstanding from 8,671,000 to 26,628,000,
for the three months ending September 30, 1995 and 1996, respectively. In
addition to the above, the Company experienced significant costs related to the
Fund Subsidiaries' plan of reorganization and settlement of claims which are of
a non-recurring nature of $3,152,000 during 1995.


LIQUIDITY AND CAPITAL RESOURCES

General

         The Company's business will have an ongoing requirement to raise
substantial amounts of cash to support its activities. Currently, the principal
cash requirements include amounts to purchase receivables, cover operating
expenses, and pay preferred stock dividends. The Company has a significant
amount of cash on hand as of September 30, 1996, which it considers adequate to
meet its reasonably anticipated needs. The Company intends to invest a portion
of this cash into receivables. In the future, additional liquidity will be
necessary to support growth of the Company's loan portfolio and operations.

         Because the used motor vehicle and consumer finance industries require
the purchase, origination and carrying of receivables, a relatively high ratio
of borrowings to net worth is customary and will be an important element in the
Company's operations. The Company intends to leverage its net worth and any
subordinated debt in the future to enhance its liquidity. Additionally, the
Company will endeavor to maximize its liquidity by diversifying its sources of
funds which it is anticipated will include (a) cash from operations, (b) the
securitization of receivables, (c) lines of credit available from commercial
banks and other financing sources, and (d) a possible subordinated
debt-offering.


                                      19
<PAGE>   20



         The Company has obtained a commitment for a warehouse line of credit
to purchase receivables which would then be assigned to special purpose
entities for future securitization. As of November 11, 1996, this commitment is
subject to completion of definitive documentation. The Company is continuing
preparation of a private placement memorandum to issue $25,000,000 to
$30,000,000 of senior subordinated notes with warrants to purchase common
stock. Additionally, the Company is discussing with several other commercial
lenders which include investment banking firms and brokerage firms to provide
additional financing, which would be utilized for the purchases of receivables
and/or the purchases of other operating entities. The Company is also seeking
several additional participants to expand its $25,000,000 line of credit with
Hibernia Bank. As of November 11, 1996, the Company had approximately
$23,700,000 outstanding under its line with Hibernia Bank.

         The Company intends to evaluate and pursue acquisition opportunities
that the Company anticipates will enable it to grow its receivable base. The
Company will consider all forms of financing available to it with respect to
any particular acquisition, including additional borrowings and sales or
exchanges of equity or debt securities. The Company's ability to acquire
additional portfolios and companies is dependent on its obtaining additional
financing.


OPERATING ACTIVITIES

Principal Sources and Uses of Cash in Operating Activities

         The principal source of cash from operating activities is provided by
net interest income. The principal uses of cash in operations are for general
and administrative expenses, other non-recurring types of expenses and payments
relating to previously accrued expenses.

Comparison of Operating Cash Flows for the Six Months Ended September 30, 1996
to the Six Months Ended September 30, 1995

         During the six months ended September 30, 1996, the Company utilized
$5,324,000 of cash in its operations compared to $5,867,000 of cash being
utilized in operations in the six months ended September 30, 1995. The decrease
of $543,000 is primarily a result of reduction in expense accruals of
$5,377,000 related to the Fund Subsidiaries' plan of reorganization during the
six months ended September 30, 1996 compared to an increase in accruals of
$3,739,000 in the same period ended September 30, 1995. The change in offering
cost amortization of $1,385,000 was due primarily to the confirmation of the
Fund Subsidiaries' plan of reorganization.

         The Company anticipates having negative cash flows in the foreseeable
future as it continues to expand its Dealer Network, expands into consumer
finance, and grows its receivable base.


                                      20

<PAGE>   21



INVESTING ACTIVITIES

Principal Sources and Uses of Cash Provided by Investing Activities

         The principal sources of cash from investing activities include cash
from principal payments on receivables and proceeds from the sale of
repossessed vehicles. The principal uses of cash in investing activities
include cash used for purchasing receivables and property and equipment.

Comparison of Investing Cash Flows for the Six Months Ended September 30, 1996
to the Six Months Ended September 30, 1995.

         Cash provided by investing activities decreased $13,366,000 from
$10,578,000 for the six months ended September 30, 1995 to a use of $2,788,000
for the six months ended September 30, 1996. The decrease is primarily due to a
decrease of approximately $13,000,000 in principal payments and sale proceeds.

         The Company anticipates encountering negative cash flows from
investing activities in the foreseeable future as it continues to expand its
non-prime automobile receivable base by expanding into more states and greater
market penetration in existing states and expands into consumer finance.


FINANCING ACTIVITIES

Principal Sources and Uses of Cash Provided by Financing Activities

         The principal sources of cash from financing activities are from
borrowings under line of credit agreements, debt offerings proceeds, and sales
of equity securities. The principal uses of cash in financing activities
include cash for the repayment of amounts borrowed under lines of credit,
repayment of debt offerings, and payment of dividends on preferred stock.

Comparison of Financing Cash Flows for the Six Months Ended September 30, 1996
to the Six Months Ended September 30, 1995.

         During the six months ended September 30, 1996, the Company's
financing activities provided $3,323,000 of cash compared to utilizing cash of
$4,210,000 during the same six month period ended September 30, 1995. The
change of $7,533,000 was caused primarily by borrowings exceeding payments
under its line of credit, proceeds from sale of stock during the six months
ended September 30, 1996 and a lack of a purchase of treasury stock such as
occurred in the six months ended September 30, 1995.

         The Company's annual dividend requirements on the outstanding shares
of its 12% Preferred Stock and 9%/7% Preferred Convertible Stock, as of
September 30, 1996, were $240,000 and $6,155,000, respectively. The annual
dividend requirement on the Company's


                                      21
<PAGE>   22


9%/7% Convertible Preferred Stock will remain at the 9% level until March 31,
1999 and then decrease to the 7% level, or $4,787,000, until March 2003. Any
conversion to Common Stock would reduce these dividend requirements.

         The Company's acquisition of assets from DACC required the Company to
assume approximately $17,450,000 in bank debt. The terms of the loan require
the Company to repay the loan by August 1997. Any portion not retired would
require refinancing under existing terms or terms more or less favorable to the
Company or a cash payment from existing cash on hand to liquidate the loan.
Currently, the Company anticipates having to refinance or liquidate a portion
of the loan at its maturity date. Management is evaluating several possible
options.

         Since the date of acquisition, the Company has reduced the balance on
the loan by $3,158,000, or 18%, to $14,292,000 as of October 31, 1996. During
this same period of time, the collateral base has decreased from approximately
$20,000,000 in net contracts receivable and inventory to $18,190,000, or 9%.

         During the quarter ended September 30, 1996, the Company implemented a
loan program for its directors and certain officers to finance the purchase of
the Company's common and preferred stock in open market transactions. The loans
bear interest at the prime rate and require quarterly interest payments and
mature at the end of three years. As of September 30, 1996, the Company had
advanced $1,099,000 to ten of the eligible participants to fund stock
purchases. Currently, the maximum allowed to be funded for any participant is
$150,000. During the quarter ended September 30, 1996, the Company recorded
$16,000 of interest revenue from participants under this program. The loans are
evidenced by notes from participants and the Company holds the stock as
collateral under security agreements.

         The Company has potential obligation to purchase 812,127 shares from a
trust formed by a former director of the Company under a stock purchase
agreement dated May 5, 1995. The trust, at its option, can elect to have the
Company purchase 812,127 shares of stock at $2.25 per share. This purchase
would require cash on hand or borrowings under its existing line of credit
unless an additional source is available.

         The Company anticipates an increase in cash flows from financing
activities due to its anticipated subordinated debt offering, completion and
utilization of warehouse lines, and other debt and stock offerings. The Company
will require additional cash flow to grow its receivable base and expand into
consumer finance.

Receivable Concentrations

         The Company considers Texas and Tennessee to be states with receivable
concentrations because receivables with obligors in each of these states exceed
10% of total outstanding receivables.

                                      22


<PAGE>   23



Inflation

         Historical statistics indicate that collateral value, vehicle sales
prices, and receivable interest rates are relatively stable within the
Company's market segment. Significant inflation in prices could adversely
impact the Company's ability to acquire receivables at favorable prices.
General increases in interest rates will result in increases in the Company's
interest expense.

Seasonality

         The Company's operations are seasonably impacted by higher delinquency
rates during certain periods, including November and December holiday periods.

Changes in Asset Quality

         The Company believes that it is upgrading its credit quality through
higher underwriting and collateral standards compared to prior periods. No
assurance can be given at this time as to whether these new standards will
improve the Company's credit loss experience.



                                      23
<PAGE>   24



PART II.  OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

          On October 24, 1996, Search initiated legal action in state District
Court, Dallas County, Texas against two of its directors, Craig Hall and Larry
E. Levey, and Hall Phoenix/Inwood Ltd., a company controlled by Mr. Hall that
is Search's largest stockholder. The defendants have filed an answer seeking
dismissal of the action. Additionally, Messrs. Hall and Levey seek recovery
from Search of all legal fees, disbursements and other reasonable expenses
incurred by them in defending the action. The suit alleges fraud,
misrepresentation and breach of fiduciary duty by the defendants. No opinion
can be given as to the final outcome. Messrs. Hall and Levy filed suit against
Search in the Court of Chancery, New Castle County, Delaware on October 16,
1996 seeking access as directors to certain of Search's books and records.

          On October 25, 1996, Search's subsidiary, Automobile Credit Acceptance
Corp. ("ACAC"), was served with an Original Class Action Petition lawsuit
commenced in the County Court at Law of Nueces County, Texas. The lawsuit,
styled William Bourland and Rolando H. Trevino v. Automobile Credit Acceptance
Corp., alleges that ACAC contracted for delinquency charges greater than those
authorized by the Texas Consumer Credit Code and seeks certification of a class
of all persons who purchased a motor vehicle in Texas with financing from ACAC
within the last four years. The suit seeks statutory penalties, attorneys' fees
and interest. ACAC has not yet filed its answer in the lawsuit and no opinion
can be given as to its final outcome. ACAC believes the lawsuit is without
merit and intends to vigorously defend itself.


ITEM 2.   CHANGES IN SECURITIES-NONE

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES-NONE

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS-NONE

ITEM 5.   OTHER INFORMATION

          On November 1, 1996, Susan A. Brown resigned as a director of the
Company.

          On November 5, 1996, the Company entered into an amendment to the
Asset Purchase Agreement between the Company and U.S. Lending Corporation
("USLC"), a company subject to Chapter 11 bankruptcy proceedings, providing for
the Company to purchase all of USLC's used motor vehicle retail installment
sales contracts and repossessed motor vehicles, and a portion of USLC's cash,
on the closing date. In consideration for the transfer of assets, the Company
will issue shares of its Common Stock and Series B 9%/7% Convertible Preferred
Stock ("Series B Stock") based on a purchase price to be determined at the
closing equal to the cash received from USLC, 59% of the total unpaid
installments of USLC's active contracts, plus the wholesale value of USLC's
repossessed vehicles. The number of shares of Common Stock and Series B Stock
will equal 25% and 100%, respectively, of the purchase price divided by the


                                       24
<PAGE>   25

weighted average of the high bid and low asked trading prices for those
securities for the 20 trading days preceding the closing. The Company will also
issue at the closing five-year warrants to purchase Common Stock at $2.00 per
share (increasing by $0.25 per year). The number of shares of Common Stock
purchasable under the warrants will equal 20% of the total Common Stock
equivalents represented by the Series B Stock and Common Stock issued at the
closing. If certain proposed clarifying amendments to the terms of the
Company's 9%/7% Convertible Preferred Stock are approved by the Company's
stockholders, the shares of Series B Stock issued by the Company in the
acquisition will be automatically converted, on a one-for-one basis, into newly
issued shares of Company's 9%/7% Convertible Preferred Stock. If that
conversion does not occur by April 1, 1997, the Company will be required to pay
USLC $.08 for each share of Series B Stock issued at the closing.

         As of November 1, 1996, USLC had cash of approximately $3,400,000,
active contracts with total unpaid installments of approximately $2,222,000 and
repossessed vehicles with a wholesale value of approximately $53,000.


                                      25
<PAGE>   26



ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits:

         The following exhibits are filed in response to Item 601 of Regulation
S-K.


EXHIBIT
NUMBER         DESCRIPTION
--------       -----------------------------------------------------------------
 2.1           Motor Vehicle Installment Sales Contract Assignment and 
               Purchase Agreement dated as of November 1, 1996 between MS
               Financial, Inc. and Search Funding Corp. (excluding the schedule
               of contracts that is Exhibit A, a copy of which will be
               furnished to the Commission supplementally upon request.
 2.2           Letter agreement between the Registrant and MS Financial, Inc.
               dated November 4, 1996. 
 3.1           Certificate of Amendment of Certificate of Designation of 9%/7% 
               Convertible Preferred Stock. 
 3.2           Certificate of Designation Series B 9%/7% Convertible Preferred 
               Stock. 
 3.3           Certificate of Corrections to the Restated Certificate of 
               Incorporation of Search.
 3.4           Certificate of Amendment of Certificate of Designation of 9%/7% 
               Convertible Preferred Stock. 
 3.5           Certificate of Amendment of Certificate of Designation of Series
               B 9%/7% Convertible Preferred Stock. 
10.1           Second Amendment dated November 5, 1996 to Asset Purchase 
               Agreement among U.S. Lending Corporation, as
               Debtor-In-Possession, and Search Capital Group, Inc. and Search 
               Funding III, Inc., dated July 17, 1996.
27.0           Financial Data Schedule


         (b)   Reports on Form 8-K:

               The Company filed a Current Report on Form 8-K, dated September
          27, 1996 reporting the acquisition of a portfolio of non-prime 
          automobile retail installment sales contracts from Eagle Finance Corp.

               The Company filed a Current Report on Form 8-K, dated August 6,
          1996 reporting the acquisition of substantially all of the assets,
          and assumption of certain liabilities, of Dealers Alliance Credit
          Corp.



                                      26

<PAGE>   27



SIGNATURES

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

                           SEARCH CAPITAL GROUP, INC.

<TABLE>
<CAPTION>
SIGNATURE                     TITLE                                      DATE
---------                     -----                                      ----
<S>                          <C>                                         <C>
/s/ George C. Evans                                                      June 6, 1997  
------------------------                                                 --------------
George C. Evans               Chairman of the Board, Chief    
                              Executive Officer, Chief Operating         
                              Officer and Director                       
                                                                         
                                                                         
/s/ Robert D. Idzi                                                       June 6, 1997  
------------------------                                                 --------------
Robert D. Idzi                Senior Executive Vice President, Chief     
                              Financial Officer and Treasurer            
                                                                         
                                                                         
/s/ Andrew D. Plagens                                                    June 6, 1997  
------------------------                                                 --------------
Andrew D. Plagens             Senior Vice President, Controller 
                              and Chief Accounting Officer
</TABLE>




                                      27

<PAGE>   28
                                 EXHIBIT INDEX

<TABLE>
<CAPTION>

EXHIBIT
NUMBER                                      DESCRIPTION
--------       -----------------------------------------------------------------
<S>            <C>
27.0           Financial Data Schedule
</TABLE>