<PAGE>

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

                                  FORM 10-QSB

(Mark One)

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

     For the quarterly period ended September 30, 2001

[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 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 September 30, 2001, 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-QSB

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

Item 1.   Financial Statements

          Condensed Consolidated Balance Sheets
          September 30, 2001 and December 31, 2000                                 F-1

          Condensed Consolidated Statements of Income and Accumulated Deficit
          Nine Months Ended September 30, 2001 and September 30, 2000              F-3

          Condensed Consolidated Statements of Income and Accumulated Deficit
          Three Months Ended September 30, 2001 and September 30, 2000             F-4

          Condensed Consolidated Statements of Cash Flows
          Nine Months Ended September 30, 2001 and September 30, 2000              F-5

          Notes to Condensed Consolidated Financial Statements                     F-7

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

                          PART II - OTHER INFORMATION

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

          Signatures                                                               4
</TABLE>
<PAGE>

                                    PART  I
                             FINANCIAL INFORMATION

Item 1.  Financial Statements.

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

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 September 30, 2001, and the related
notes to the Condensed Consolidated Financial Statements, along with our
Consolidated Financial Statements as of December 31, 2000, 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 34.3% for the nine-month period
ended September 30, 2001, over those for the nine-month period ended September
30, 2000. The percentage increase resulted from the following sources: (i) the
operations of Ross & Associates, Inc. ("Ross Group") and The Daniels Group, Inc.
("Daniels Group") both acquired in September, 2000; (ii) the operations of our
new offices in Weston, Florida, Ft. Lauderdale (Las Olas), Florida and Coconut
Grove, Florida; and (iii) improved sales from our existing offices.

Operating Expenses. Operating expenses increased to approximately $29.9 million
for the nine-month period ended September 30, 2001 as compared to $22.4 million
for the nine-month period ended September 30, 2000.  The significant components
of our operating expenses are: (i) commissions to sales people (69.3%); (ii)
officer and staff salaries (9.5%); (iii) office rental costs (3.9%); (iv)
advertising expenses (5.5%); (v) promotional expenses (1.0%) and; (vi) insurance
(0.9%). Our operating expenses increased as a result of the operations of Ross &
Associates and the Daniels Group, along with increased expenses as a result of
the opening of the Weston, Las Olas and Coconut Grove offices.

Interest. Interest income increased from $23,476 for the nine-month period ended
September 30, 2000 to $152,751 for the nine-month period ended September 30,
2001, primarily due to increased in mortgage loans held for sale.

                                       1
<PAGE>

Net Gain from Continuing Operations. We had a net gain from operations of
$1,691,550 for the nine-month period ended September 30, 2001 as compared to a
net gain of $1,079,689 for the nine-month period ended September 30, 2000. This
increase from continuing operations resulted primarily as a result of the
inclusion of the operations of Ross & Associates, the Daniels Group and the
Weston, Las Olas and Coconut Grove offices.

Liquidity and Capital Resources

Cash provided by operating activities was $1,279,949 for the nine-month period
ended September 30, 2001.  This was primarily due to increases in mortgage loans
held for sale, cash receipts from customers and interest income.

Cash used for investing activities was $280,021 for the nine-month period ended
September 30, 2001.  This was primarily due to purchases of property and
equipment.

Cash provided by financing activities was $263,723 for the nine-month period
ended September 30, 2001, principally due to an increase from the warehouse line
of credit, resulting from an increase in mortgage loans held for sale partially
offset by acquisitions of treasury stock.

At September 30, 2001, we had long-term obligations payable of approximately
$48,570.  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 September  30, 2001, the
balance of this "warehouse" line of credit was approximately $2,302,096 with a
corresponding asset of "mortgage loans held for sale" of $2,330,475.

At September 30, 2001, we had shareholder equity of $4,785,809.  For the nine-
month period ended September 30, 2001, working capital (current assets less
current liabilities) was approximately $1,575,693, primarily as a result of a
significant increase in cash and mortgage loans held for sale.

Our third office in Broward County opened in June 2001.  This office is located
in Fort Lauderdale, Florida and will specifically target the "Las Olas" market,
which is located near downtown Fort Lauderdale. Although we began to incur
expenses in connection with the opening of the Las Olas office in April, 2001,
we anticipate that this new office, along with our existing Broward County
offices, will increase opportunities to substantially increase sales.  We also
anticipate that our title and insurance businesses will continue to be
profitable during 2001, as opposed to the net loss posted for this line of
business in 2000, and will contribute to our cash flow and our overall financial
performance.

Our eighth office in Miami-Dade County also opened in June 2001.  This office is
located in Coconut Grove, Florida and complements the other Esslinger, Wooten &
Maxwell,

                                       2
<PAGE>

Inc.("EWM") offices in the south Miami-Dade County markets. This office was
leased in a location that had formerly housed a real estate office since the
early 1920s.

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.

Forward Looking Statements

From time to time, we make statements about our future results in this Form 10-
QSB 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.

                                    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: November 14, 2001             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)
                                                   September 30,   December 31,
CURRENT ASSETS                                         2001            2000
                                                   -------------   ------------
<S>                                                <C>             <C>
  Cash                                               $ 2,144,909    $   881,258
  Interest-bearing deposit with bank                     225,000        225,000
  Receivables                                            600,255        800,315
  Mortgage loans held for sale                         2,330,475      2,059,016
  Prepaid expenses and other                             233,024        264,013
                                                     -----------    -----------

      Total current assets                             5,533,663      4,229,602
                                                     -----------    -----------

PROPERTY AND EQUIPMENT
  Furniture and equipment                              1,303,578      1,233,021
  Office equipment                                       889,818        928,329
  Transportation equipment                                20,000         20,000
  Leasehold improvements                                 741,805        690,244
  Equipment held under capital leases                     35,730         35,730
                                                     -----------    -----------
                                                       2,990,931      2,907,324

  Less accumulated depreciation                       (1,170,182)    (1,085,269)
                                                     -----------    -----------

      Net property and equipment                       1,820,749      1,822,055
                                                     -----------    -----------

OTHER ASSETS
  Goodwill, net                                        1,240,356      1,286,660
  Deposits and other                                     197,581        182,513
                                                     -----------    -----------

      Total other assets                               1,437,937      1,469,173
                                                     -----------    -----------

      Total assets                                   $ 8,792,349    $ 7,520,830
                                                     ===========    ===========
</TABLE>

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

                                      F-1
<PAGE>

<TABLE>
<CAPTION>
                     LIABILITIES AND STOCKHOLDERS' EQUITY

                                                     (Unaudited)
                                                    September 30,    December 31,
CURRENT LIABILITIES                                     2001            2000
                                                    -------------    -----------
<S>                                                 <C>              <C>
  Accounts payable and accrued expenses               $   485,678    $   546,576
  Bank overdraft                                           79,118        108,360
  Deferred mortgage fee income                             66,465         58,625
  Reserves on deposit                                      24,825         63,820
  Warehouse line of credit - bank                       2,302,096      1,788,324
  Income tax payable                                      492,776              -
  Current portion of obligations under
    capital leases                                          7,012          7,012
  Current maturities of long-term debt, net
    of unamortized discount                               500,000        204,985
                                                      -----------    -----------

      Total current liabilities                         3,957,970      2,777,702
                                                      -----------    -----------

LONG-TERM LIABILITIES
  Obligations under capital leases                         12,120         17,287
  Note payable, net of unamortized discount                     -        725,843
  Deferred tax liability                                   36,450              -
                                                      -----------    -----------

      Total long-term liabilities                          48,570        743,130
                                                      -----------    -----------

      Total liabilities                                 4,006,540      3,520,832
                                                      -----------    -----------

STOCKHOLDERS' EQUITY
  Common stock, no par value, 100,000,000
    authorized shares, 6,915,050 shares
    issued, 6,475,050 and 6,715,050 shares
    outstanding at September 30, 2001 and
    December 31, 2000, respectively                     6,139,307      6,139,307
  Accumulated deficit                                    (759,498)    (1,869,309)
  Less treasury stock, 440,000 and 200,000
    shares common stock, no par value at
    cost at September 30, 2001 and
    December 31, 2000, respectively                      (594,000)      (270,000)

      Total stockholders' equity                        4,785,809      3,999,998
                                                      -----------    -----------
      Total liabilities and stockholders' equity      $ 8,792,349    $ 7,520,830
                                                      ===========    ===========
</TABLE>

                                      F-2
<PAGE>

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

                                           (Unaudited)     (Unaudited)
                                            Nine-month      Nine-month
                                           period ended    period ended
                                          September 30,   September 30,
                                               2001            2000
                                          -------------   -------------
REVENUES
  Real estate management and brokerage      $28,795,300     $21,615,313
  Mortgage                                    1,463,638       1,088,514
  Title fees                                  1,236,156         760,509
  Insurance                                      10,617               -
                                            -----------     -----------

      Total revenues                         31,505,711      23,464,336
                                            -----------     -----------

COSTS AND EXPENSES
  Commissions, fees, and other
   incentives:
    Real estate                              19,952,839      14,693,300
    Mortgage                                    509,389         367,876
    Title                                       378,978         203,693
  General and administrative expenses         8,751,967       6,825,976
  Depreciation and amortization                 305,347         263,413
                                            -----------     -----------

      Total costs and expenses               29,898,520      22,354,258
                                            -----------     -----------

      Income from operations before
       income taxes and other
       income and expenses                    1,607,191       1,110,078
                                            -----------     -----------

OTHER INCOME AND (EXPENSES)
  Interest income                               152,751          23,476
  Interest expense                             (124,465)       (108,089)
  Other income                                   60,788          49,687
  (Loss)/gain on disposition of                  (4,715)          4,537
   property and equipment                   -----------     -----------

      Total other income and (expenses)          84,359         (30,389)
                                            -----------     -----------

      Income before income taxes              1,691,550       1,079,689

PROVISION FOR INCOME TAX                        581,739           7,488
                                            -----------     -----------

      Net income                              1,109,811       1,072,201

ACCUMULATED DEFICIT, beginning of period     (1,869,309)     (3,246,487)
                                            -----------     -----------

ACCUMULATED DEFICIT, end of period          $  (759,498)    $(2,174,286)
                                            ===========     ===========

BASIC EARNINGS PER COMMON SHARES            $      0.17     $      0.16
                                            ===========     ===========

WEIGHTED AVERAGE COMMON SHARES                6,687,331       6,783,314
                                            ===========     ===========

DILUTED EARNINGS PER COMMON SHARES          $      0.17     $      0.16
                                            ===========     ===========

WEIGHTED AVERAGE DILUTED COMMON SHARES        6,687,331       6,783,314
                                            ===========     ===========

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

                                      F-3
<PAGE>

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

                                           (Unaudited)     (Unaudited)
                                           Three-month     Three-month
                                           period ended    period ended
                                          September 30,   September 30,
                                               2001            2000
                                          -------------   -------------
REVENUES
  Real estate management and brokerage      $10,023,216     $ 7,370,516
  Mortgage                                      508,371         467,495
  Title fees                                    540,443         302,373
  Insurance                                       4,199               -
                                            -----------     -----------
      Total revenues                         11,076,229       8,140,384
                                            -----------     -----------

COSTS AND EXPENSES
  Commissions, fees, and other
   incentives:
    Real estate                               6,942,660       4,964,429
    Mortgage                                    178,624         159,162
    Title                                       166,095          79,838
  General and administrative expenses         3,126,238       2,339,102
  Depreciation and amortization                 106,301          93,589
                                            -----------     -----------

      Total costs and expenses               10,519,918       7,636,120
                                            -----------     -----------

      Income from operations before
       income taxes and other
       income and expenses                      556,311         504,264
                                            -----------     -----------

OTHER INCOME AND (EXPENSES)
  Interest income                                61,343          10,896
  Interest expense                              (38,627)        (43,262)
  Other income                                   15,390          16,955
  Gain on disposition of property and                 -           4,537
   equipment                                -----------     -----------

      Total other income and (expenses)          38,106         (10,874)
                                            -----------     -----------

      Income before income taxes                594,417         493,390

PROVISION FOR INCOME TAX                        206,044           2,888
                                            -----------     -----------

      Net income                                388,373         490,502

ACCUMULATED DEFICIT, beginning of period     (1,147,871)     (2,664,788)
                                            -----------     -----------

ACCUMULATED DEFICIT, end of period          $  (759,498)    $(2,174,286)
                                            ===========     ===========

BASIC EARNINGS (LOSS) PER COMMON SHARES     $      0.06     $      0.07
                                            ===========     ===========

WEIGHTED AVERAGE COMMON SHARES                6,685,702       6,783,314
                                            ===========     ===========

DILUTED EARNINGS (LOSS) PER COMMON          $      0.06     $      0.07
 SHARES                                     ===========     ===========

WEIGHTED AVERAGE DILUTED COMMON SHARES        6,685,702       6,783,314
                                            ===========     ===========

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

                                      F-4
<PAGE>

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

                                                (Unaudited)     (Unaudited)
                                                 Nine-month      Nine-month
                                                period ended    period ended
                                                September 30,   September 30,
                                                    2001             2000
                                               -------------    ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
  Cash received from customers                  $ 31,727,505    $ 23,512,232
  Interest received                                  152,751          23,476
  Interest paid                                     (124,465)       (127,100)
  Cash paid to suppliers and employees           (29,641,332)    (22,006,480)
  Receipts from (payments to borrowers), net        (379,819)        (16,330)
  Settlements paid                                  (422,691)       (177,588)
  Income taxes paid                                  (32,000)         (7,488)
                                                ------------    ------------

      Net cash provided by operating
       activities                                  1,279,949       1,200,722
                                                ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Advances to employees                               (2,500)        (12,700)
  Net (increase) decrease in deposits                (39,806)         12,823
  Purchases of property and equipment               (237,715)       (655,355)
  Proceeds from disposition of property and
    equipment                                              -           4,537
                                                ------------    ------------

      Net cash used in investing activities         (280,021)       (650,695)
                                                ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from bank overdraft                        79,118               -
  Net proceeds from warehouse line of credit         513,772          16,952
  Payment on loan payable                                  -          (4,646)
  Payment of capital lease obligation                 (5,167)         (4,520)
  Acquisition of treasury stock                     (324,000)              -
                                                ------------    ------------

      Net cash provided by financing
       activities                                    263,723           7,786
                                                ------------    ------------

      Net increase in cash                         1,263,651         557,813

CASH, beginning of period                            881,258         727,130
                                                ------------    ------------

CASH, end of period                             $  2,144,909    $  1,284,943
                                                ============    ============

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

                                      F-5
<PAGE>

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


                                                   (Unaudited)     (Unaudited)
                                                    Nine-month      Nine-month
                                                   period ended    period ended
                                                   September 30,   September 30,
                                                       2001            2000
                                                   -------------   -------------
RECONCILIATION OF NET INCOME TO
  NET CASH PROVIDED BY (USED IN)
  OPERATING ACTIVITIES:
    Net income                                         $1,109,811   $1,072,201
    Adjustments to reconcile net income
       to net cash provided by (used in)
       operating activities:
        Depreciation                                      234,306      203,144
        Amortization                                       71,041       60,269
        Loss/(gain) on disposition of property
           and equipment                                    4,715       (4,537)
        Decrease in accounts receivable                   200,060        8,137
        Increase in mortgage loans held for sale         (271,459)     (16,330)
        Decrease in prepaid expenses and
           other assets                                    33,490       19,057
        Decrease in reserves on deposit                   (38,995)         -
        (Decrease) increase in accounts
          and notes (operating) payable
          and accrued expenses                           (491,726)    (131,291)
        Decrease in bank overdraft (operating)           (108,360)         -
        Increase (decrease) in deferred
           mortgage fee income                              7,840       (5,019)
        Decrease in escrow deposits                           -         (4,909)
        Increase in income tax payable                    492,776          -
        Increase in deferred tax liability                 36,450          -
                                                       ----------   ----------

            Net cash provided by operating activities  $1,279,949   $1,200,722
                                                       ==========   ==========

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
On September 1, 2000, Esslinger, Wooten & Maxwell, Inc. ("EWM") purchased
substantially all the assets of Ross & Associates, Inc., for $186,300 in stock
of the Company.  As a result of this acquisition, accounted for as a purchase,
property, plant, and equipment of $46,875, accounts receivable of $41,500, and
other assets of $97,925 were recorded.

On September 1, 2000, EWM acquired substantially all of the assets of The
Daniels Group, Inc., for $13,500 in stock of the Company.  As a result of this
acquisition, accounted for as a purchase, property, plant, and equipment
totaling $13,500 was recorded.


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

                                      F-6
<PAGE>

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


NOTE 1 -  SUMMARY OF SIGNIFICANT ACCOUNT 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 September 30, 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-QSB and, accordingly, do not include all
          disclosures required by generally accepted accounting principles. 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 2000 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-KSB annual
          report for the year ended December 31, 2000.

          The Company created a new subsidiary, First Reserve Insurance, Inc.
          ("FRINS") in 2000. On September 13, 2000, FRINS signed an exclusive
          agreement with an insurance broker to market and sell insurance
          products to the clients of EWM and the Company. These insurance
          products include, but are not limited to, property and casualty,
          automobile, life, and health insurance policies. The results of
          operations of FRINS for 2000 are included in the consolidated
          condensed statement of income for the period from September 13, 2000
          to September 30, 2000.

NOTE 2 -  USE OF ESTIMATES
          The preparation of financial statements in conformity with accounting
          principles generally accepted in the United States of America requires
          management to make estimates and assumptions that affect the amounts
          reported in the financial statements and accompanying notes. Actual
          results could differ from those estimates.

                                      F-7
<PAGE>

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


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's 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 will be issued pending future gross commission
          income to be generated by the former shareholder of Ross between
          January 1, 2001 to December 31, 2001. Due to the contingent nature of
          these shares, the Company will record them as additional purchase
          price upon issuance of the shares. 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 $186,000.

          On September 1, 2000, EWM acquired substantially all of the assets of
          The Daniels Group, Inc. ("Daniels") in a business combination
          accounted for as a purchase. Daniels was primarily engaged in the same
          activity as EWM. Under the terms of the agreement, Daniels' sole
          shareholder received 10,000 shares of common stock of the Company on
          the date of the acquisition. Additional cash consideration to the
          former shareholder of Daniels may be paid, pending the achievement of
          certain commission levels during three separate one-year periods,
          ending on August 31, 2004. If these commission levels are not achieved
          during these three separate one-year periods, no additional cash
          consideration will be paid. Due to the contingent nature of this cash
          consideration, the Company will record this transaction as additional
          purchase price upon the former shareholder of Daniels achieving the
          required commission levels. 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 was
          approximately $13,500.

          The assets of Ross and Daniels (the "acquired companies") are
          reflected in the accompanying consolidated financial statements. The
          results of operations of the acquired companies are included in the
          consolidated results from the date they were acquired, September 1,
          2000. The following proforma consolidated statement of income gives
          effect to the acquisitions of all the outstanding shares of Daniels
          and Ross as if it had occurred on January 1, 2000, after giving effect
          to certain adjustments, including increased amortization of goodwill
          generated from the acquisitions. The proforma adjustments are based
          upon available information and certain assumptions that the Company
          believes are reasonable.

                                      F-8
<PAGE>

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


NOTE 3 -  BUSINESS COMBINATIONS (CONTINUED)
          This unaudited proforma condensed consolidated information does not
          purport to represent what the actual results of operations would have
          been assuming the acquisitions had taken place on the dates assumed
          above, nor do they purport to predict the results of operations in
          future periods:

                                                           Nine-month
                                                          period ended
                                                          September 30,
                                                               2000
                                                           ------------

             Total revenue                                  $26,779,609
                                                            ===========

             Net income                                     $ 1,040,221
                                                            ===========
             Earnings per share:
               Basic                                        $     0.15
                                                            ==========
               Weighted average shares                       6,783,314
                                                            ==========

               Diluted                                      $     0.15
                                                            ==========
               Weighted average shares                       6,783,314
                                                            ==========

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 September 30, 2001, the Company held
          $7,446,675 of funds in trust.

NOTE 5 -  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 6 -  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 September 30, 2001, the shareholder of Ross had met 92%
          of the gross commission income requirement stated in the agreement. If
          the review period had ended on September 30, 2001, no shares would be
          issued to this shareholder because there is no pro-rata allocation of
          shares, and they are not included in the basic or diluted earnings per
          share calculation.

                                      F-9
<PAGE>

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


NOTE 7 -  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 were increased at the beginning of the period, or at
          time of issuance, if later.

          The following is the calculation of earnings per share:

                                                 Nine-month      Nine-month
                                                period ended    period ended
                                                September 30,   September 30,
                                                     2001            2000
                                                -------------   -------------
         Basic earnings per common share:
           Numerator
             Net income before extraordinary
               items applicable to common
               stockholders                        $1,109,811      $1,072,201
             Extraordinary items, net                     -               -
                                                   ----------      ----------
             Income applicable to common
               stockholders                        $1,109,811      $1,072,201
                                                   ==========      ==========

           Denominator
             Weighted average common shares         6,687,331       6,783,314
                                                   ----------      ----------
             Basic EPS                             $     0.17      $     0.16
                                                   ==========      ==========

         Diluted earnings per common share:
           Numerator
             Net income before extraordinary
               items applicable to common
               stockholders                        $1,109,811      $1,072,201
             Extraordinary items, net                     -               -
                                                   ----------      ----------
             Income applicable to common
               stockholders                        $1,109,811      $1,072,201
                                                   ==========      ==========

           Denominator
             Weighted average common shares         6,687,331       6,783,314
                                                   ----------      ----------
             Diluted EPS                           $     0.17      $     0.16
                                                   ==========      ==========


                                     F-10
<PAGE>

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


NOTE 7 -  EARNINGS PER SHARE (CONTINUED)

                                                 Three-month    Three-month
                                                period ended   period ended
                                                September 30,  September 30,
                                                     2001           2000
                                                -------------  -------------

         Basic earnings per common share:
           Numerator
             Net income before extraordinary
               items applicable to common
               stockholders                        $  388,373     $  490,502
             Extraordinary items, net                       -              -
                                                   ----------     ----------
             Income applicable to common
               stockholders                        $  388,373     $  490,502
                                                   ==========     ==========

           Denominator
             Weighted average common shares         6,685,702      6,783,314
                                                   ----------     ----------
             Basic EPS                             $     0.06     $     0.07
                                                   ==========     ==========


         Diluted earnings per common share:
           Numerator
             Net income before extraordinary
               items applicable to common
               stockholders                        $  388,373     $  490,502
             Extraordinary items, net                       -              -
                                                   ----------     ----------
             Income applicable to common
               stockholders                        $  388,373     $  490,502
                                                   ==========     ==========

           Denominator
             Weighted average common shares         6,685,702      6,783,314
                                                   ----------     ----------
             Diluted EPS                           $     0.06     $     0.07
                                                   ==========     ==========

         For the nine-month periods ended September 30, 2001 and 2000, warrants
         to purchase 500,000 shares of common stock at $2.54 per share, and
         500,000 shares of common stock at $2.93 and $2.92 per share,
         respectively, 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.

                                     F-11
<PAGE>

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


NOTE 8 - BUSINESS SEGMENT INFORMATION

         The Company's operations are principally managed on a product services
         basis and are comprised of four reportable segments: Esslinger, Wooten
         & Maxwell, Inc. ("EWM"), Embassy Financial Services, Inc. ("Embassy"),
         Columbia Title of Florida, Inc. ("Columbia"), and First Reserve
         Insurance, Inc. ("FRINS").  EWM's product services consist of
         residential and commercial real estate brokerage, management, 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 services have been in the capacity of a title company.  FRINS
         has been in the capacity of insurance broker.  Revenue, net income
         (loss), and EBITDA, which is defined as earnings before interest,
         taxes, depreciation, and amortization, and identifiable assets for
         these segments are as follows:

<TABLE>
<CAPTION>
                                               Nine-month period ended September 30, 2001
                                               ------------------------------------------

                                                                                First
                                 Esslinger,       Embassy        Columbia      Reserve       First
                                  Wooten &       Financial       Title of     Insurance,    Reserve,
                                Maxwell, Inc.  Services, Inc.  Florida, Inc.     Inc.         Inc.          Total
                                -------------  --------------  -------------  ---------    -----------  -------------
         <S>                    <C>            <C>             <C>            <C>          <C>          <C>
         Revenue                  $28,795,300      $1,463,638     $1,236,156    $10,617     $       -     $31,505,711
         EBITDA                   $ 1,901,240      $  184,134     $  188,717    $ 7,695     $(160,424)    $ 2,121,362
         Net income
          (loss)                  $   936,890      $   53,368     $  172,707    $ 4,548     $ (57,702)    $ 1,109,811
         Identifiable
          assets at
          period end              $ 5,461,218      $2,842,951     $  303,318    $12,857     $ 172,005     $ 8,792,349
</TABLE>

<TABLE>
<CAPTION>
                                               Three-month period ended September 30, 2001
                                               -------------------------------------------

                                                                                  First
                                   Esslinger,        Embassy       Columbia      Reserve      First
                                    Wooten &        Financial       Title of    Insurance,  Reserve,
                                  Maxwell, Inc.   Services, Inc.  Florida, Inc.    Inc.       Inc.           Total
                                  -------------   --------------  ------------- ---------   ---------     -----------
         <S>                      <C>             <C>             <C>           <C>         <C>           <C>
         Revenue                  $ 10,023,216     $    508,371   $   540,443   $  4,199    $       -     $11,076,229
         EBITDA                   $    603,954     $     59,014   $   119,665   $  3,377    $ (46,665)    $   739,345
         Net income
          (loss)                  $    316,610     $     14,564   $    62,865   $  2,106    $  (7,772)    $   388,373
         Identifiable
          assets at
          period end              $  5,461,218     $  2,842,951   $   303,318   $ 12,857    $ 172,005     $ 8,792,349
</TABLE>

                                 Page 11 of 12
<PAGE>

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


NOTE 8 - BUSINESS SEGMENT INFORMATION (CONTINUED)


<TABLE>
<CAPTION>
                                                            Nine-month period ended September 30, 2000
                                                            ------------------------------------------

                                                Esslinger,       Embassy        Columbia       First
                                                 Wooten &       Financial       Title of      Reserve,
                                               Maxwell, Inc.  Services, Inc.  Florida, Inc.     Inc.        Total
                                               -------------  --------------  -------------  ----------  -----------
         <S>                                   <C>            <C>             <C>            <C>         <C>
         Revenue                                $21,615,313     $1,088,514       $760,509    $       -   $23,464,336
         EBITDA                                 $ 1,442,369     $  122,633       $ 55,410    $(169,221)  $ 1,451,191
         Net income
            (loss)                              $ 1,212,782     $   78,251       $ 45,427    $(264,259)  $ 1,072,201
         Identifiable
            assets at
            period end                          $ 4,445,237     $1,217,857       $211,657    $ 254,165   $ 6,128,916
</TABLE>

<TABLE>
<CAPTION>
                                                            Three-month period ended September 30, 2000
                                                            -------------------------------------------

                                                Esslinger,       Embassy       Columbia        First
                                                 Wooten &       Financial       Title of      Reserve,
                                               Maxwell, Inc.  Services, Inc.  Florida, Inc.     Inc.        Total
                                               -------------  --------------  -------------  ----------  -----------
         <S>                                   <C>            <C>             <C>            <C>         <C>
         Revenue                                $ 7,370,516     $  467,495       $302,373    $       -   $ 8,140,384
         EBITDA                                 $   559,730     $   97,970       $ 39,220    $ (66,679)  $   630,241
         Net income
            (loss)                              $   478,659     $   62,856       $ 45,502    $ (96,515)  $   490,502
         Identifiable
            assets at
            period end                          $ 4,445,237     $1,217,857       $211,657    $ 254,165   $ 6,128,916
</TABLE>

NOTE 9 - 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.

                                     F-13