<PAGE>

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

                                    FORM 10-Q
(Mark One)

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

       For the quarterly period ended March 31, 2002

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

       For the transition period from ______________ to _________________

                           Commission File No. 0-28067

                               FIRST RESERVE, INC.
             (Exact name of registrant as specified in its charter)

                 Florida                               86-0740730
     (State or other jurisdiction of                (I.R.S. Employer
      incorporation or organization)               Identification No.)

     1360 South Dixie Highway, Coral Gables, FL            33146
     (Address of principal executive offices)           (Zip Code)

                                 (305) 667-8871
                 Issuer's Telephone Number, Including Area Code:

                   __________________________________________
   (Former Name, Former Address and Former Fiscal Year, if changed since last
                                    report)

          Indicate by a 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.         [X ]  Yes  [  ]  No

          As of March 31, 2002, 6,475,050 shares of the Registrant's Common
Stock, no par value  per share, were outstanding.
<PAGE>

                      FIRST RESERVE, INC. AND SUBSIDIARIES
                               INDEX TO FORM 10-Q

<TABLE>
<CAPTION>
                                                                                     Page

                         PART I - FINANCIAL INFORMATION
<S>                                                                               <C>
Item 1.     Financial Statements

            Condensed Consolidated Balance Sheets
            March 31, 2002 and December 31, 2001                                     1

            Condensed Consolidated Statements of Income and Accumulated Deficit
            Three Months Ended March 31, 2002 and March 31, 2002                     1

            Condensed Consolidated Statements of Cash Flows
            Three Months Ended March 31, 2002 and March 31, 2002                     1

            Notes to Condensed Consolidated Financial Statements                     1

Item 2.     Management's Discussion and Analysis of Financial
            Condition and Results of Operations                                      1

Item 3.     Quantitative and Qualitative Disclosures About Market Risk               3

                             PART II - OTHER INFORMATION

Item 6.     Exhibits and Reports on Form 8-K                                         3

Signatures                                                                           4
</TABLE>
                                       ii
<PAGE>

                                    PART  I
                             FINANCIAL INFORMATION

Item 1.   Financial Statements.

Immediately following the signature page in this Form 10-Q.

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

The "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included herein should be read in conjunction with our Condensed
Consolidated Financial Statements, as of March 31, 2002, and the related notes
to the Condensed Consolidated Financial Statements, along with our Consolidated
Financial Statements as of December 31, 2001 and March 31, 2002, and the related
Notes to Consolidated Financial Statements.  Our Financial Statements have been
prepared in accordance with generally accepted accounting principles in the U.S.

The financial information in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" refers to our continuing operations.

Results of Operations

Revenues.  Our revenues increased approximately 10.2% for the three-month period
ended March 31, 2002, over those for the three-month period ended March 31,
2001.  The percentage increase resulted from the following sources: (i) the
operations of our new real estate offices in Coconut Grove and Las Olas/Ft.
Lauderdale opened during 2001; (ii) the operations of our existing sales
offices; and (iii) title company operations.

Operating Expenses.  Operating expenses increased to approximately $10.35
million for the three-month period ended March 31, 2002 versus $9.31 million for
the three-month period ended March 31, 2001.  The significant components of our
operating expenses are: (i) commissions to sales people; (ii) officer and staff
salaries; (iii) office rental costs; (iv) advertising expenses; (v) promotional
expenses  and; (vi) insurance.  Our operating expenses also increased as a
result of the costs incurred by the Company in connection with the opening of
its Las Olas/Ft. Lauderdale and Coconut Grove sales offices.

Interest. Interest income increased from $37,707 for the three-month period
ended March 31, 2001 to $39,588 for the three-month period ended March 31, 2002,
primarily due to increased cash balances.

Net Income. We had a net income of $102,024 for the three-month period ended
March 31, 2002 as compared to a net income of $171,876 for the three-month
period ended March 31, 2001. This decrease was primarily due to an increase in
income tax expense.

Liquidity and Capital Resources

                                       1
<PAGE>

Cash provided by operating activities was approximately $1.3 million for the
three-month period ended March 31, 2002.  This was primarily due to the increase
in revenues from sales commissions and receipts from lenders.

Cash used for investing activities was $990,280 for the three-month period ended
March 31, 2002.  This was primarily due to purchases of property and equipment
offset and a decrease in deposits.

Cash used in financing activities was approximately $527,000 for the three-month
period ended March 31, 2002, principally due to an increase in pay downs on the
warehouse line of credit.

At March 31, 2002, we had long-term obligations payable of approximately
$998,270.  We also had a $3.5 million "warehouse" line of credit available to
fund loans to be made in connection with Embassy's operations.  Each "warehouse"
loan is fully backed by a permanent "take-out" loan commitment from a national
institutional lender in residential financing.  As of March 31, 2002, the
balance of this "warehouse" line of credit was approximately $2,352,460 with a
corresponding asset of "mortgage loans held for sale" of $2,376,900.  Current
maturities of long term debt due in 2002 was approximately $500,000, exclusive
of the "warehouse" line of credit.

At March 31, 2002, we had shareholder equity of approximately $4,966,400.  For
the three-month period ended March 31, 2002, working capital (current assets
less current liabilities) was $1,743,815, primarily as a result of a significant
increase in cash and mortgage loans held for sale offset by an increase in the
warehouse line of credit.

We anticipate that our Broward offices and our new offices in Coconut Grove and
Las Olas/Ft. Lauderdale will continue to increase opportunities to substantially
increase our sales.  We also anticipate that our title and insurance businesses
will continue to be profitable during 2002 and will contribute to our cash flow
and our overall financial performance.

Seasonality

Our operations are principally based on the residential real estate market in
South Florida.  These markets have historically been seasonal with generally
higher sales in the second and third fiscal quarters.  Therefore, the results of
any interim period is not necessarily indicative of the results that might be
expected during a full fiscal year.

                                       2
<PAGE>

Forward Looking Statements

From time to time, we make statements about our future results in this Form 10-Q
that may constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements are based on
our current expectations and the current economic environment. We caution you
that these statements are not guarantees of future performance. They involve a
number of risks and uncertainties that are difficult to predict. Our actual
results could differ materially from those expressed or implied in the forward-
looking statements. Important assumptions and other important factors that could
cause our actual results to differ materially from those in the forward-looking
statements, include, but are not limited to: (i) the continued growth in the
residential real estate market in South Florida; (ii) the general availability
of home mortgage financing at favorable rates; (iii) continued positive economic
climate in the U.S.; (iv) competition in our existing lines of business; and (v)
our ability to obtain and maintain working capital, whether internally generated
or from financing sources (on acceptable terms) in order to finance our growth
strategy.

Item 3.        Quantitative and Qualitative Disclosures About Market Risk

The Company, in its normal course of business, is exposed to interest rate
changes as they relate to real estate mortgage loans and the effect of such
mortgage rate changes. Additionally, the Company's cash equivalents and short-
term investments, if any, generally bear variable interest rates. Changes in the
market rates of interest on short-term investments will affect the interest
earned by the Company. Since the Company does not rely on its interest earnings
on short-term investments to fund working capital needs, changes in these
interest rates will not have an impact on the Company's results of operations or
working capital position.

                                    PART II
                               OTHER INFORMATION

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

     (a)       Exhibits.

               None.

     (b)       Reports on Form 8-K.

               None.

                                       3
<PAGE>

                                   SIGNATURES



     Pursuant to the requirements 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.



Date: May 20, 2002                         FIRST RESERVE, INC.

                                           By:  /s/ Ronald A. Shuffield
                                                Ronald A. Shuffield,
                                                President and Principal
                                                Financial Officer

                                       4
<PAGE>

                      FIRST RESERVE, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEET


<TABLE>
<CAPTION>
                             ASSETS
                                              (Unaudited)
                                                 March 31,          December 31,
                                                  2002                  2001
                                               -----------          ------------
<S>                                            <C>                  <C>
CURRENT ASSETS
  Cash                                         $ 2,120,282          $  2,333,012
  Receivables                                      520,794               409,551
  Mortgage loans held for sale                   2,376,906             3,422,025
  Prepaid expenses and other                       202,233               167,160
                                               -----------          ------------


     Total current assets                        5,220,215             6,331,748
                                               -----------          ------------



PROPERTY AND EQUIPMENT
  Building                                       1,019,668                     -
  Furniture and equipment                        1,393,040             1,378,055
  Office equipment                                 945,563               921,348
  Transportation equipment                          20,000                20,000
  Leasehold improvements                            35,730                35,730
  Equipment held under capital leases              779,830               779,830
                                               -----------          ------------
                                                 4,193,831             3,134,963

  Less accumulated depreciation                 (1,337,070)           (1,249,088)
                                               -----------          ------------


     Net property and equipment                  2,856,761             1,885,875
                                               -----------          ------------



OTHER ASSETS
  Goodwill, net                                  1,224,922             1,224,922
  Deposits and other                               139,173               245,219
                                               -----------          ------------


  Total other assets                             1,364,095             1,470,141
                                               -----------          ------------

     Total assets                              $ 9,441,071          $  9,687,764
                                               ===========          ============
</TABLE>

The accompanying notes to the condensed consolidated financial statements are an
integral part of these statements.
<PAGE>

                     LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                             (Unaudited)
                                                              March 31,           December 31,
                                                                2002                  2001
                                                             ----------           ------------
<S>                                                          <C>                   <C>
CURRENT LIABILITIES
  Accounts payable and accrued expenses                      $  562,348            $  390,988
  Deferred mortgage fee income                                   45,989                64,296
  Reserves on deposit                                             9,467                10,414
  Warehouse line of credit - bank                             2,352,457             3,377,379
  Current portion of obligations under capital
   leases                                                         6,139                 8,049
  Current maturities of long-term debt                          500,000               400,000
                                                             ----------            ----------

     Total current liabilities                                3,476,400             4,251,126
                                                             ----------            ----------

LONG-TERM LIABILTIES
  Obligations under capital leases                                9,238                 9,238
  Notes payable                                                 900,000               500,000
  Deferred tax liability                                         89,031                63,022
                                                             ----------            ----------

     Total long-term liabilities                                998,269               572,260
                                                             ----------            ----------

     Total liabilities                                        4,474,669             4,823,386
                                                             ----------            ----------

STOCKHOLDERS' EQUITY
  Common stock, no par value, 100,000,000
   authorized shares, 6,915,050 shares issued at
   March 31, 2002 and December 31, 2001, and
   6,475,050 outstanding at March 31, 2002 and
   December 31, 2001                                          6,139,307             6,139,307
  Accumulated deficit                                          (578,905)             (680,929)
  Less treasury stock, 440,000 common stock, no par            (594,000)             (594,000)
                                                             ----------            ----------
   value at cost at March 31, 2002 and December 31,
   2001

     Total stockholders' equity                               4,966,402             4,864,378
                                                             ----------            ----------


     Total liabilities and stockholders' equity              $9,441,071            $9,687,764
                                                             ==========            ==========
</TABLE>

The accompanying notes to the condensed consolidated financial statements are an
integral part of these statements.

                                  Page 2 of 10
<PAGE>

                      FIRST RESERVE, INC. AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                             AND ACCUMULATED DEFICIT

<TABLE>
<CAPTION>
                                                          (Unaudited)         (Unaudited)
                                                          Three-month         Three-month
                                                          period ended        period ended
                                                         March 31, 2002      March 31, 2001
                                                        ----------------    ----------------
<S>                                                     <C>                 <C>
REVENUES
  Real estate management and brokerage                      $ 9,769,998         $ 8,775,891
  Mortgage                                                      387,069             451,028
  Title fees                                                    318,543             281,545
  Insurance                                                       6,460               3,956
                                                            -----------         -----------

         Total revenues                                      10,482,070           9,512,420
                                                            -----------         -----------

COSTS AND EXPENSES
  Commissions, fees, and other incentives:
     Real estate                                              6,810,320           6,216,318
     Mortgage                                                   149,160             146,100
     Title                                                      108,478              83,272
     Insurance                                                        -                   -
  General and administrative expenses                         3,190,275           2,773,330
  Depreciation and amortization                                  96,227              95,717
                                                            -----------         -----------

         Total costs and expenses                            10,354,460           9,314,737
                                                            -----------         -----------

         Income from operations before income taxes
         and other income and expenses                          127,610             197,683
                                                            -----------         -----------
OTHER INCOME AND (EXPENSES)
  Interest income                                                39,588              37,707
  Interest expense                                              (48,477)            (36,525)
  Other income                                                   77,880              15,700
  Loss on disposition of property and equipment                       -              (4,715)
                                                            -----------         -----------

         Total other income and (expenses)                       68,991              12,167
                                                            -----------         -----------

         Income before income taxes                             196,601             209,850

PROVISION FOR INCOME TAX                                         94,577              37,974
                                                            -----------         -----------

         Net income                                             102,024             171,876

ACCUMULATED DEFICIT, beginning of period                       (680,929)         (1,869,309)
                                                            -----------         -----------

ACCUMULATED DEFICIT, end of period                          $  (578,905)        $(1,697,433)
                                                            ===========         ===========

BASIC EARNINGS PER COMMON SHARE                             $      0.02         $      0.03
                                                            ===========         ===========

WEIGHTED AVERAGE COMMON SHARES                                6,475,050           6,694,772
                                                            ===========         ===========

DILUTED EARNINGS PER COMMON SHARE                           $      0.02         $      0.03
                                                            ===========         ===========

WEIGHTED AVERAGE DILUTED COMMON SHARES                        6,587,050           6,806,772
                                                            ===========         ===========
</TABLE>

The accompanying notes to the condensed consolidated financial statements are an
integral part of these statements.

                                  Page 3 of 10
<PAGE>

                      FIRST RESERVE, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


<TABLE>
<CAPTION>
                                                                     (Unaudited)           (Unaudited)
                                                                     Three-month           Three-month
                                                                     period ended          period ended
                                                                    March 31, 2002        March 31, 2001
                                                                 --------------------  --------------------
<S>                                                              <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Cash received from customers                                          $ 10,413,573           $ 9,393,843
  Interest received                                                           39,588                37,707
  Interest paid                                                              (48,477)              (26,208)
  Cash paid to suppliers and employees                                   (10,101,301)           (9,089,806)
  Income taxes paid                                                          (60,000)                    -
  Receipts from lenders, (payments to borrowers), net                      1,045,119              (638,544)
  Rent received                                                               15,880                     -
                                                                        ------------           -----------

  Net cash provided by (used in) operating activities                      1,304,382              (323,008)
                                                                        ------------           -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Advances to employees                                                      (29,212)                8,500
  Net decrease in deposits                                                    97,800                11,489
  Purchases of property and equipment                                     (1,058,868)              (65,449)
                                                                        ------------           -----------

  Net cash used in investing activities                                     (990,280)              (45,460)
                                                                        ------------           -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net (pay downs) proceeds from warehouse line of credit                  (1,024,922)              782,543
  Proceeds from borrowings                                                   500,000                     -
  Payment of capital lease obligation                                         (1,910)               (1,663)
  Acquisition of treasury stock                                                    -               (33,750)
                                                                        ------------           -----------

  Net cash (used in) provided by financing activities                       (526,832)              747,130
                                                                        ------------           -----------

  Net (decrease) increase in cash                                           (212,730)              378,662

CASH, beginning of period                                                  2,333,012               881,258
                                                                        ------------           -----------

CASH, end of period                                                     $  2,120,282           $ 1,259,920
                                                                        ============           ===========
</TABLE>

The accompanying notes to the condensed consolidated financial statements are an
integral part of these statements.

                                  Page 4 of 10
<PAGE>

                      FIRST RESERVE, INC. AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


<TABLE>
<CAPTION>
                                                                    (Unaudited)       (Unaudited)
                                                                    Three-month       Three-month
                                                                    period ended      period ended
                                                                   March 31, 2002    March 31, 2001
                                                                   --------------    --------------
<S>                                                                <C>               <C>
RECONCILIATION OF NET INCOME TO
  NET CASH (USED IN) PROVIDED BY
  OPERATING ACTIVITIES:
    Net income                                                      $   102,024       $   171,876
    Adjustment to reconcile net income to net cash (used
       in) provided by operating activities:
       Depreciation                                                      87,982            72,036
       Amortization                                                       8,246            35,232
       Loss on abandonment of property and equipment                          -             4,715
       Increase in accounts receivable                                 (111,243)          (83,450)
       Decrease (increase) in mortgage loans held for sale            1,045,119          (530,184)
       (Increase) decrease in prepaid expenses and other assets          (5,861)           53,139
       Decrease in reserves on deposit                                     (947)          (55,490)
       Increase in accounts payable and accrued expenses                171,360           112,815
       Decrease in bank overdraft                                             -          (108,360)
       (Decrease) increase in deferred mortgage fee income              (18,307)            4,663
       Increase in deferred tax liability                                26,009                 -
                                                                    -----------       -----------

            Net cash provided by (used in) operating                $ 1,304,382       $  (323,008)
             activities                                              ==========       ===========
</TABLE>

The accompanying notes to the condensed consolidated financial statements are an
integral part of these statements.


                                  Page 5 of 10
<PAGE>

                      FIRST RESERVE, INC. AND SUBSIDIARIES
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


NOTE  1 -   SIGNIFICANT ACCOUNTING POLICIES
            In the opinion of management, the accompanying unaudited condensed
            consolidated interim financial statements reflect all adjustments
            (consisting of only normal and recurring adjustments) necessary to
            present fairly the financial position of First Reserve, Inc. and
            Subsidiaries (the "Company"), as of March 31, 2001, and the results
            of their operations and cash flows for the periods then ended. The
            results of operations for such interim periods are not necessarily
            indicative of the results for a full year. The accompanying
            unaudited condensed consolidated interim financial statements have
            been prepared in accordance with accounting principles generally
            accepted in the United States of America for interim financial
            reporting and with instructions to Form 10-Q and, accordingly, do
            not include all disclosures required by accounting principles
            generally accepted in the United States of America. The condensed
            consolidated financial statements should be read in conjunction with
            the audited consolidated financial statements and the notes to the
            audited consolidated financial statements included in the Company's
            Form 10-KSB annual report for 2001 filed with the Securities and
            Exchange Commission.

            The accounting policies followed for interim financial reporting are
            the same as those disclosed in Note 1 of the notes to the
            consolidated financial statements included in the Company's Form
            10-K annual report for the year ended December 31, 2001.

NOTE  2 -   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 amounts reported in the financial statements and
            accompanying notes. Actual results could differ from those
            estimates.

NOTE  3 -   BUSINESS COMBINATIONS
            On September 1, 2000, EWM acquired substantially all the assets of
            Ross & Associates, Inc. ("Ross") in a business combination accounted
            for as a purchase. Ross was primarily engaged in the same activity
            as EWM. Under the terms of the agreement, Ross' sole shareholder
            received 138,000 shares of common stock of the Company on the date
            of the acquisition. An additional 112,000 "contingent" shares of
            common stock of the Company were to be issued pending future gross
            commission income to be generated by the former shareholder of Ross
            from January 1, 2001 to December 31, 2001. At March 31, 2002, the
            former shareholder of Ross had met the gross commission requirement.
            These additional 112,000 shares will be issued during 2002. At the
            time of issuance, the Company will record additional goodwill. Based
            on recent trading of the Company's stock, the fair value of the
            Company's stock price on the acquisition date was $1.35 per share.
            The total cost of the acquisition, excluding the contingent shares,
            was $186,300.

                                  Page 6 of 10
<PAGE>

                      FIRST RESERVE, INC. AND SUBSIDIARIES
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE  4 -   CASH HELD IN TRUST
            The Company maintains separately designated trust accounts for home
            buyers' earnest money, property owners, tenants, and other third
            parties. The Company holds such funds until sold properties are
            closed and leases have expired. Funds are disbursed in accordance
            with the settlement instructions or rental management agreements.
            These funds are not recorded in the Company's financial statements
            as they are held in a fiduciary capacity. At March 31, 2002, the
            Company held $8,295,165 of funds in trust.

NOTE  5 -   GOODWILL AND OTHER INTANGIBLE ASSETS - ADOPTION OF SFAS NO. 142
            Effective January 1, 2002, the Company adopted the Financial
            Accounting Standards Board Statement of Financial Accounting
            Standards No. 142 ("SFAS No. 142"), "Goodwill and Other Intangible
            Assets." SFAS No. 142 changes the accounting for goodwill and other
            intangible assets. Under this standard, goodwill and intangible
            assets with indefinite lives are no longer amortized, but are
            subject to an annual impairment test. The Company is in the process
            of testing goodwill for impairment in accordance with SFAS No. 142
            and expects completion by the second quarter of 2002. The Company
            will routinely perform a detail valuation analysis in connection
            with the application of this statement, which may result in future
            charges. However, it does not believe that the application of this
            statement will have a material effect on its future financial
            position or cash flows.

NOTE  6 -   MORTGAGE PAYABLE
            On January 18, 2002, EWM acquired commercial real estate located in
            Key Biscayne, Florida to be used as an office by EWM for
            approximately $990,000. EWM obtained a mortgage loan from an
            unrelated third party in the amount of $500,000. The loan bears
            interest at 7.5% for the first year. After the first year, interest
            is at the Wall Street Journal prime rate with a 12% ceiling and a
            7.5% floor. The loan is payable in monthly installments of
            interest-only and the principal is due on February 18, 2007. In
            addition to this mortgage loan, First Reserve's existing $400,000
            loan was changed to a mortgage loan secured by this real estate. The
            new mortgage loan bears interest at 7.5% for the first year. After
            the first year, interest is at the Wall Street Journal prime rate
            with a 12% ceiling and a 7.5% floor. The loan is payable in monthly
            installments of interest-only and the principal is due on February
            18, 2007.

NOTE  7 -   COMMITMENTS
            In January 2002, EWM entered into an exclusive marketing and sales
            management agreement with a Miami Beach developer to sell-off the
            remaining unit inventory of two luxury beach-front apartment
            buildings in Miami Beach. The agreement is for a twelve-month period
            or until all the units are sold, whichever comes first. Under the
            terms of the agreement, EWM will become the exclusive agent for the
            buildings, will staff and support the buildings' sales center, and
            provide other marketing and advertising services.

                                  Page 7 of 10
<PAGE>

                      FIRST RESERVE, INC. AND SUBSIDIARIES
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


NOTE  7 - COMMITMENTS (CONTINUED)
            The developer will reimburse EWM for the cost of maintaining the
            sales center. EWM will earn a commission on each unit sold, as
            defined in the agreement. Additionally, the agreement has an
            incentive clause whereby EWM receives additional compensation if the
            units are sold within two separate specified time periods.

NOTE  8 - LEGAL AND OTHER SETTLEMENTS
            Included in legal and other settlement amounts are costs incurred by
            EWM in settling various disputes arising with customers or tenants
            in the ordinary course of business.

NOTE  9 - CONTINGENT SHARES
            Under the terms of the September 1, 2000 asset acquisition agreement
            between EWM and Ross, the sole shareholder of Ross would receive an
            additional 112,000 "contingent" shares of common stock of the
            Company, pending future gross commission income to be generated by
            the sole shareholder of Ross over a 12-month "review" period,
            beginning January 1, 2001. Due to the contingent nature of the
            shares, the Company will record them as additional purchase price
            upon issuance of the shares. At March 31, 2002, the shareholder of
            Ross had met the gross commission income requirement stated in the
            agreement. These shares are not included in the basic earnings per
            share calculation, but are included in the diluted earnings per
            share calculation.

NOTE  10 -  EARNINGS PER SHARE
            Basic earnings per share ("EPS") were computed by dividing net
            income by the weighted average number of common shares outstanding
            during the period. Diluted EPS were determined on the assumption
            that the contingent shares where excised at the beginning of the
            period, or at time of issuance, if later.

            The following is the calculation of earnings per share:

<TABLE>
<CAPTION>
                                                                           Three-month      Three-month
                                                                          period ended     period ended
                                                                         March 31, 2002   March 31, 2001
                                                                         --------------   --------------
            <S>                                                          <C>              <C>
            Basic earnings per common share:
            Numerator
                 Net income before extraordinary items applicable to
                  common stockholders                                      $  102,024       $  171,876
                 Extraordinary items, net                                           -                -
                                                                           ----------       ----------
                 Income applicable to common stockholders                  $  102,024       $  171,876
                                                                           ----------       ==========

              Denominator
                 Weighted average common shares                             6,475,050        6,694,772
                                                                           ----------       ----------
                 Basic EPS                                                 $     0.02       $     0.03
                                                                           ==========       ==========
</TABLE>

                                  Page 8 of 10
<PAGE>

                      FIRST RESERVE, INC. AND SUBSIDIARIES
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


NOTE  10 -  EARNINGS PER SHARE (CONTINUED)

<TABLE>
<CAPTION>
                                                                           Three-month       Three-month
                                                                          period ended      period ended
                                                                         March 31, 2002    March 31, 2001
                                                                         --------------    --------------
            <S>                                                          <C>               <C>
            Diluted earnings per common share:
            Numerator
                 Net income before extraordinary items applicable to
                  common stockholders                                      $  102,024        $  171,876
                 Extraordinary items, net                                           -                 -
                                                                           ----------        ----------
                 Income applicable to common stockholders                  $  102,024        $  171,876
                                                                           ==========        ==========

              Denominator
                 Weighted average common shares                             6,587,050         6,806,772
                                                                           ----------        ----------
                 Diluted EPS                                               $     0.02        $     0.03
                                                                           ==========        ==========
</TABLE>

            For the three-month periods ended March 31, 2002 and 2001, warrants
            to purchase 500,000 shares of common stock at $2.54 per share, and
            500,000 shares of common stock at $2.93, per share, were outstanding
            but were not included in the computation of diluted EPS because the
            warrants' exercise price was greater than the average market price
            of the common shares. The warrants, which expire on August 31, 2003,
            were still outstanding at the end of the periods

NOTE  11 -  BUSINESS SEGMENT INFORMATION
            The Company's operations are principally managed on a product
            services basis and are comprised of five reportable segments:
            Esslinger, Wooten & Maxwell, Inc. ("EWM"), Embassy Financial
            Services, Inc. ("Embassy"), Columbia Title of Florida, Inc.
            ("Columbia"), First Reserve Insurance, Inc. ("FRINS"), and First
            Reserve, Inc. EWM's product services consist of residential and
            commercial real estate brokerage and relocation services. Embassy's
            product services have been in the capacity of a mortgage lender and
            mortgage broker in the South Florida area, specializing in
            conventional, FHA, and VA mortgages. Columbia's product has been in
            the capacity of a title company. FRINS has been in the capacity of
            insurance broker. First Reserve's capacity has been as a holding
            company.

                                  Page 9 of 10
<PAGE>

                      FIRST RESERVE, INC. AND SUBSIDIARIES
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


NOTE  11 -  BUSINESS SEGMENT INFORMATION (CONTINUED)
            Revenue, net income (loss) EBITDA, which is defined as earnings
            before interest, taxes, depreciation and amortization, and
            identifiable assets for these segments are as follows:

<TABLE>
<CAPTION>
                                                               Three-month period ended March 31, 2002
                                                               ---------------------------------------
                                                 Esslinger,     Embassy       Columbia       First
                                                  Wooten &     Financial      Title of      Reserve       First
                                                  Maxwell,      Services      Florida,     Insurance     Reserve
                                                    Inc.          Inc.          Inc.          Inc.         Inc.          Total
                                                -----------   -----------   -----------   -----------  -----------    -----------
            <S>                                 <C>           <C>           <C>           <C>          <C>            <C>
            Revenue                             $ 9,769,998   $   387,069   $   318,543   $     6,460  $         -    $10,482,070
            EBITDA                              $   523,644   $   (29,965)  $   (56,050)  $     6,458  $  (102,782)   $   341,305
            Net income (loss)                   $   256,012   $   (44,488)  $   (40,113)  $     4,028  $   (73,415)   $   102,024
            Identifiable asset at period end    $ 6,404,216   $ 2,581,942   $   221,397   $     9,185  $   224,331    $ 9,441,071
</TABLE>

<TABLE>
<CAPTION>
                                                               Three-month period ended March 31, 2001
                                                               ---------------------------------------
                                                 Esslinger,     Embassy       Columbia       First
                                                  Wooten &     Financial      Title of      Reserve       First
                                                  Maxwell,      Services      Florida,     Insurance     Reserve
                                                    Inc.          Inc.          Inc.          Inc.         Inc.          Total
                                                -----------   -----------   -----------   -----------  -----------    -----------
            <S>                                 <C>           <C>           <C>           <C>          <C>            <C>
            Revenue                              $8,775,891   $  451,028    $  281,545    $    3,956   $        -     $9,512,420
            EBITDA                               $  332,904   $   69,133    $   (2,407)   $    3,935   $  (61,473)    $  342,092
            Net income                           $  143,334   $   38,566    $   22,978    $    2,975   $  (35,977)    $  171,876
            Identifiable asset at period end     $4,836,330   $3,092,583    $  241,381    $    6,960   $  216,210     $8,393,464

</TABLE>

NOTE  12 -  REGULATORY MATTERS
            HUD Requirements
            ----------------
             Embassy is a non-supervised loan correspondent for purposes of the
             U.S. Department of Housing and Urban Development ("HUD"). As such,
             24-CFR Part 202 of the HUD handbook requires Embassy to have an
             Adjusted Net Worth of at least $50,000. Embassy is in compliance
             with this requirement.

             State of Florida Requirements
             -----------------------------
             Embassy is also a licensed mortgage lender under Chapter 494 of the
             State of Florida. As such, Embassy is required to have a minimum
             net worth of $250,000. Embassy is in compliance with this
             requirement.

                                 Page 10 of 10