SECURIITES AND
EXCHANGE COMMISSION



Washington, D.C. 20549



Form 10-KSB



Annual Report Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934



Date of Report: December
31, 2002



CAPSTONE INTERNATIONAL
CORPORATION

(Exact name of
registrant as specified in its charter)





|Delaware                                                             | 333-62588                      | 66-0349372                             
|-------------------------------------------------------------------- | ------------------------------ | ---------------------------------------
|(State of other
      jurisdiction of incorporation or organization) | (Commission File
      Number) | (IRS Employer
      Identification No.)



6966 Coach Lamp Drive,
Chilliwack, BC, Canada, V2R 2X6

(Address of principal
executive offices)



Registrant's telephone
number: (604) 791-1979



(Mark One)

> [X] Annual report
>     pursuant to Section 13 or 15(d) of the securities exchange act of 1934 for
>     the fiscal year ended December 31, 2002.

[ ] Transition report
under Section 13 or 15(d) of the securities exchange act of 1934



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





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



Common stock



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



Check if there is no
disclosure of delinquent filers in response to Item 405 or Regulation S-B is not
contained in this form, and no disclosure will be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB [X]



State issuer's
revenues for its most recent fiscal year: As of December 31, 2002, the Company
has not generated any revenues.



State the aggregate
market value of the voting and non-voting common equity held by non-affiliates
computed by reference to the price at which the common equity was sold, or the
average bid and asked price of such common equity, as of a specified date within
the past 60 days. _____________



State the number of
shares outstanding of each of the issuer's classes of common equity, as of the
latest practicable date. As of December 31, 2002, there were 2,113,536 common
shares issued and outstanding.





PART I



Item 1. Description of
Business



Business Development

Capstone International
Corporation was incorporated on November 16, 2000, in the state of Delaware. The
Company has never declared bankruptcy, it has never been in receivership, and it
has never been involved in any legal action or proceedings. Since becoming
incorporated, Capstone has not made any significant purchase or sale of assets,
nor has it been involved in any mergers, acquisitions or consolidations.
Capstone is not a blank check registrant as that term is defined in Rule
419(a)(2) of Regulation C of the Securities Act of 1933, since it has a specific
business plan or purpose.



Business of Issuer

Capstone is creating a
business as a reseller of insurance and annuity products. These products are
specially designed and marketed to compete directly with what are known as
pre-paid funerals. The products the Company intends to sell will provide its
customers with the assurance that all their final needs are provided for before
their death.



Principal Products and
Services

Capstone plans on
offering final needs insurance and annuity products that are specially designed
to compete with pre-paid funeral packages. By offering both insurance products
and annuity products, the Company can supply a pre-arranged funeral expense
alternative for virtually every consumer.



The insurance product is
a life insurance policy that will pay out a predetermined sum to a beneficiary
of the client's choice at the time of the policyholder's death. As with all life
insurance policies, there are pre-determined premiums payable for a specified
term with a pre-determined payout value. There are also maximum age requirements
and health related qualifiers that must be met. At the time of the
policyholder's death, the benefits are used to pay for funeral and other related
expenses on behalf of the deceased policyholder.



The annuity type product
that Capstone intends to sell is being made available for clients who do not
want to purchase life insurance, or who are unable to qualify for life insurance
due to health or age considerations. The annuity achieves virtually the same
result as the insurance policy. The client purchases the annuity with a
predetermined value. The cost of the annuity can be paid in one lump sum, or it
can be financed with predetermined monthly payments for a prescribed term. At
the time of the annuity holder's death, the beneficiary will use the money from
the annuity to pay for the funeral arrangements and related expenses on behalf
of the deceased annuity holder.



In the case of both the
life insurance policy and the annuity, the client will have absolute discretion
over how he or she wants the proceeds paid at the time of death. The client will
specify a beneficiary who will receive the proceeds, and make disbursements as
required. The beneficiary can be a person, the deceased's estate or a death
services provider, such as a funeral home, crematorium or cemetery.



The Market

Two different types of
businesses dominate the market for pre-paid and pre-arranged death services:
funeral home and death care service providers - such as crematoriums, cemeteries
and monument suppliers - and insurance companies and underwriters. The funeral
home and death care service providers are allowed to sell both pre-paid funerals
and the insurance/annuity type products. The insurance companies and
underwriters sell only the insurance/annuity type products. Both of these groups
operate throughout the market place and have a strong presence in every region.



The demand for pre-paid
and pre-arranged funerals increases as our society ages. People tend to be more
concerned about their mortality as they grow older, and they often make
financial plans and other arrangements for their own final needs. The final
needs insurance and annuity products Capstone intends to provide are
specifically designed to satisfy these concerns.



Competition and
Competitive Strategy

Competition in the
pre-need death services marketplace comes from two major areas: funeral home and
other service providers, and insurance and annuity underwriters. Generally
speaking, the funeral home operators rely on walk-in trade and word of mouth
advertising to generate sales. Some of the larger national operators also
conduct direct mail marketing campaigns. Competition from insurance underwriters
is mainly in the form of national television advertising, newspaper and magazine
advertising, and direct mail marketing campaigns.



Capstone intends to
avoid all these areas of promotion and to instead concentrate on building a
strong network of independent brokers and agents. By offering our products
through pre-existing agencies and firms Capstone will gain immediate access to
this base of clientele that direct mail and other mass marketing techniques may
not reach. Capstone's agents and brokers will be able to present the Company's
products directly to select pre-qualified customers as part of a comprehensive
personal or family insurance portfolio.



Distribution

By working with fully
qualified experienced insurance professionals, Capstone will be able to offer
its customers the best possible distribution and customer service network. All
paperwork will be completed by fully trained professionals, who can answer any
questions the customer may ask. Paperwork will then be sent directly to the
underwriter for processing. The customer will receive the official acceptance
and contract in the mail as soon as the underwriter has accepted it.



New and or Innovative
Products and Services

Capstone has never made
any announcements concerning the introduction of new or innovative products or
services, nor does the Company have any intentions to do so in the future.



Sources and Availability
of Products and Supplies

All products and
supplies that are required by Capstone for consumption or re-sale are readily
available from numerous industry wholesalers. The final needs insurance and
annuity industry has not been characterized by product shortages, restrictions
or any other type of limiting factors, and there are no indications that such
problems will occur in the foreseeable future.



Dependence on One or a
Few Major Customers

The final needs
insurance and annuity services business is not the type of business that is, or
can be, dominated by one or a small number of customers. The types of products
and services that Capstone intends to provide have always been considered to be
very personal. Except for a very limited number of cases, the point of sale
decision or actual purchase event takes place between the consumer or purchaser
and the service provider.



Patent, Trademark,
License & Franchise Restrictions and Contractual Obligations &
Concessions

There are no inherent
factors or circumstances associated with this industry, or any of the products
or services that Capstone plans to provide that would give cause for any patent,
trademark or license infringements or violations. The Company has also not
entered into any franchise agreements or other contracts that have given, or
could give rise to obligations or concessions.



Governmental Controls
and Approvals

Capstone management has
been in contact with government regulators in British Columbia, Alberta and
Saskatchewan. In all cases the Company has been advised that it does not require
government licensing as a re-seller of final needs insurance and annuity
products. Only sales people and insurance underwriters are required to be
licensed in the jurisdictions where we have made enquiries. We have also been
advised that the insurance and financial service products being sold must also
be approved for sale. This approval is granted to the insurance underwriter.



While there is no
requirement for re-sellers such as Capstone to be licensed, as insurance agents,
brokers or sellers at this time, the Company has the ability, through its
consultant Mr. Santbir Minhas, to secure any type of licenses that may become
necessary. Mr. Minhas is a fully licensed General Insurance Agent and Broker and
as such has agreed to provide whatever services necessary or to undertake
whatever role is necessary to fulfill both present and future regulatory
requirements for the Company. That includes securing a General Agency license if
necessary.



Mr. Minhas' agreement
with Capstone may be terminated by either party upon delivery of (30)
thirty-days written notice. This agreement requires Mr. Minhas to assist
Capstone in developing training materials, and agreements with underwriters. Mr.
Minhas will be paid monthly on a fee for service basis at a rate of $500 per
day. Mr. Minhas works on an as needed basis with no minimum or maximum
commitment or requirement.



Existing or Probable
Government Regulations

Other than the licensing
requirements discussed above, there are no other types of government regulations
existing or being contemplated that would adversely affect the Company's ability
to operate. Labor Standards Laws, Workplace Occupational Health and Safety
Regulations, and local government business licensing requirements are the only
other government regulations that will affect Capstone.



Research and Development
Activities and Costs

Capstone has not
undertaken any research and development to date, nor does it have any plans to
undertake any research or development in the future.



Compliance With
Environmental Laws

There are no
environmental laws that have been enacted, nor is Capstone aware of any such
laws being contemplated for the future to address issues specific to the
business of the issuer.



Facilities

Capstone does not own or
rent facilities of any kind. At present the Company is operating from its
official address that is located within the offices of the Company's President.
Capstone intends to continue to operate from this location until it has
sufficient revenues from sales to support a rented facility. Capstone
anticipates no need for additional space during the first year of operations,
however, if growth occurs faster then expected the Company would make every
effort to find facilities that offer long-term adaptability to growth.



Employees

Capstone has no
intention to hire employees until the business has been successfully launched
with sales revenues flowing into the Company. The Company's Officers and
Directors intend to do whatever work is necessary to bring the Company to the
point of earning revenues from the sale of final needs insurance and annuities.
Human resource planning will be part of an ongoing process that will include
constant evaluation of operations and revenue realization. The Company expects
to have no more than two full time employees by the end of the first year of
operations. Both of these employees will be hired very near the end of the first
year.



Reports to Security
Holders

Capstone will
voluntarily make available to securities holders an annual report, including
audited financials on Form 10-K or Form 10-KSB.



The public may read and
copy any materials filed with the SEC at the SEC's Public Reference Room at 450
Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information
about the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy
and information statements, and other information regarding issuers that file
electronically with the SEC at



Item 2. Description of
Property.



Capstone does not own
any property, real or otherwise. For the first year, Capstone intends to operate
from the President's office at his residence, at no cost to the Company.



The Company does not
have any investments or interests in any real estate. Capstone does not invest
in real estate mortgages, nor does it invest in Securities of, or interests in,
persons primarily engaged in real estate activities.



Item 3. Legal
Proceedings



Capstone is not a party
to any pending legal proceedings.



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



No matter was submitted
during the fourth quarter of the fiscal year ended December 31, 2002, to a vote
of security holders, through the solicitation of proxies or otherwise.



PART II



Item 5. Market for
Common Equity and Related Stockholder Matters.



Market Information

Currently there is no
public trading market for Capstone stock, and Capstone has not applied to have
its common stock listed.



Holders.

As of December 31, 2002,
the Company had thirty-six (36) shareholders of record of its common stock.



Dividends.

As of December 31, 2002,
registrant has not paid any dividends to its shareholder. There are no
restrictions which would limit the ability of Capstone to pay dividends on
common equity or that are likely to do so in the future. Capstone does not
intend to pay dividends to its shareholders in the foreseeable future.



Recent Sales of
Unregistered Securities



We have not sold
securities during the fiscal year ended December 31, 2002 without registering
the securities under the Securities Act of 1933 on two separate occasions.



Item 6. Management's
Discussion and Analysis or Plan of Operation.



Capstone plans to market
its insurance and annuity products differently from other sellers of the same
products. Capstone's plan is to market its products through the existing network
of general insurance and financial service brokers and agents. By using this
pre-existing network, Capstone will gain instant access to hundreds of fully
staffed and operational retail locations. This will lessen the financial
pressure on the Company, as there will be no need to license and train
employees, or to provide equipment, facilities and administrative support for a
large workforce.



During the past year
Capstone management has met with numerous insurance-underwriting firms in an
effort to secure insurance and annuity products to sell. At present the Company
has narrowed its list of likely candidates to two well-established American
companies. Both firms have been in the business of providing final needs
insurance and annuity products in the United States for many years. One of the
firms has been in business for over 25 years. Both firms are very interested in
gaining a presence in the Canadian market. Neither of the firms' products is
currently available in Canada.



The underwriting firms
are responsible for securing proper licensing from the appropriate Canadian
authorities. One of the firms with whom we are negotiating has secured the
necessary licenses for most Canadian jurisdictions, but is still waiting for
approval in British Columbia. The other firm has made the necessary enquiries
and advises us that licensing will be forthcoming as required. Capstone expects
to negotiate a final contract with an underwriter shortly after our company's
stock is approved for trading. The Company plans on confirming sales agency
agreements immediately after the underwriter has been selected.



Capstone has had ongoing
discussions with a number of general insurance brokers and agents for almost one
year. The firms with whom it met have indicated a definite interest in offering
the Capstone insurance and annuity products for sale. The Company continues to
meet with potential sellers on a regular basis. At the time of this filing
Capstone has not signed any contracts or agreements with sellers, as it would be
imprudent to do so until the Company has a contract in place with an
underwriter.



In addition to meeting
with potential underwriters, sales brokers and agents, Capstone has also done a
considerable amount of work developing training materials. A draft of the
materials has been completed and edited, and is ready to go to production. The
Company is waiting until an underwriter has been selected in case modifications
will be required to the materials. When the underwriter has been retained the
package will be reviewed by the Company's consultant and put into print.
Capstone anticipates having the materials ready for distribution to sales
brokers and agents as required.



Although Capstone has
not yet completed negotiations on a re-sellers agreement nor settled on a final
fee or commission structure with an underwriting firm, the Company believes it
can generate gross revenues of between seventeen percent (17%) to twenty-three
percent (23%) on the insurance policies and annuity contracts sold. The final
amount will depend upon the age of the policy/contract holder, whether it is an
insurance policy or an annuity and the payment terms.



During the first year of
operations, Capstone will concentrate its efforts exclusively on building its
business in British Columbia. As the Company gains experience, and develops
sufficient revenues from sales it will expand its business eastward across the
country. At this time, the Company has no plans to expand outside Canada



Item 7. Financial
Statements





CAPSTONE INTERNATIONAL
CORPORATION

(A DEVELOPMENT STAGE
COMPANY)

FINANCIAL STATEMENTS

DECEMBER 31, 2002 AND
DECEMBER 31 2001



TABLE OF CONTENTS



Page Number

INDEPENDENT ACCOUNTANT'S
REPORT 1

FINANCIAL STATEMENT

Balance
Sheets                                                                                                
2

Statements of Operations and Deficit

Accumulated During the Development
Stage                                                       
3

Statement of Changes in Stockholder's
Equity                                                    
4

Statements of Cash
Flows                                                                                 
5

Notes to the Financial
Statements                                                                     
6-7



David E. Coffey

Certified Public
Accountant



INDEPENDENT ACCOUNTANT'S
REPORT



To the Board of
Directors and Stockholders

of Capstone
International Corporation

Surrey, BC, Canada



I have audited the
accompanying balance sheets of Capstone International Corporation (a development
stage company) as of December 31, 2002 and December 31, 2001 and the related
statements of operations, cash flows, and changes in stockholders' equity for
the years then ended, as well as the cumulative period from November 16, 2000
(date of inception) to December 31, 2002. These statements are the
responsibility of Capstone International Corporation's management. My
responsibility is to express an opinion on these financial statements based on
my audit.



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



In my opinion, the
accompanying financial statements present fairly, in all material respects, the
financial position of Capstone International Corporation as of December 31, 2002
and December 31, 2001 and the results of operations, cash flows, and changes in
stockholders' equity for the years then ended, as well as the cumulative
period from November 16, 2000, in conformity with generally accepted accounting
principles.



The accompanying
financial statements have been prepared assuming that the Company will continue
as a going concern. The Company has not generated revenues from operations which
raises substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.





David E. Coffey, C.P.A.

Las Vegas, Nevada

March 31, 2003



CAPSTONE INTERNATIONAL
CORPORATON

(A DEVELOPMENT STAGE
COMPANY

BALANCE SHEETS



|                                                      |       | December 31,
      2002 |       | December 31,
      2001
|----------------------------------------------------- | ----- | ----------------------- | ----- | -----------------------
|                                                      |       | ----------------------  |       | -----------------------
|ASSETS                                                |       |                         |       |                        
|                                                      |       |                         |       |                        
|Cash                                                  | $     | 0                       | $     | 2,761                  
|                                                      |       | ----------------------  |       | -----------------------
|Total Assets                                          | $     | 0                       | $     | 2,761                  
|                                                      |       | ============            |       | =============          
|                                                      |       |                         |       |                        
|LIABILITIES &
      STOCKHOLDERS' EQUITY             
|                                                      |       |                         |       |                        
|Accounts payable                                      | $     | 24,015                  | $     | 729                    
|Common stock sold
      subject to a rescission offer |       | 0                       |       | 6,354                  
|                                                      |       | ----------------------  |       | -----------------------
|Total
        Liabilities                             |       | 24,015                  |       | 7,083                  
|                                                      |       |                         |       |                        
|Stockholders'
      Equity                            |       |                         |      
|Common stock,
        authorized                      |       |                         |      
|100,000,000
        shares at $.001 par value         |       |                         |      
|2,113,536 shares
        of 2,050,000 shares,         |       |                         |      
|respectively,
        issued and outstanding          | 2,114 |                         | 2,050
|Additional
        paid-in capital                    |       | 24,840                  |       | 18,550                 
|Deficit
        accumulated during the                |       |                         |       |                        
|development
        stage                             |       | (50,969)                |       | (24,922)               
|                                                      |       | ----------------------  |       | -----------------------
|Total
        Stockholders' Equity                    |       | (24,015)                |       | (4,322)                
|                                                      |       |                         |       |                        
|Total Liabilities
      and Stockholders' Equity      | $     | 0                       | $     | 2,761                  
|                                                      |       | ============            |       | =============          



























The accompanying notes
are in integral an integral part of

these financial
statements



-2-



CAPSTONE INTERNATIONAL
CORPORATION

(A DEVELOPMENT STAGE
COMPANY)

STATEMENTS OF OPERATIONS
AND DEFICIT

ACCUMULATED DURING THE
DEVELOPMENT STAGE

(With Cumulative Figures
From Inception)





|                                                       |           | Year ending
      December 31, |           | From Inception,
      Nov. 16, 2000 to Dec. 31, 2002
|------------------------------------------------------ | --------- | ------------------------------ | --------- | ----------------------------------------------------
|                                                       |           | 2002                           |           | 2001                                                
|                                                       |           | ------------                   |           | ---------------                                     
|Income                                                 | $         | 0                              | $         | 0                                                   
|                                                       |           |                                |           |                                                     
|Expenses                                               |           |                                |           |                                                     
|Organizational
        costs                           |           | 0                              |           | 0                                                   
|Professional
        fees                              |           | 24,515                         |           | 23,217                                              
|Fees                                                   |           | 0                              |           | 519                                                 
|Office expenses                                        |           | 546                            |           | 218                                                 
|Interest Expense                                       |           | 986                            |           | 0                                                   
|                                                       |           | ------------                   |           | ---------------                                     
|Total Expenses                                         |           | 26,047                         |           | 23,954                                              
|                                                       |           |                                |           |                                                     
|Net Loss                                               |           | (26,047)                       |           | (23,954)                                            
|                                                       |           |                                |           |                                                     
|                                                       |           |                                |           |                                                     
|Retained earnings,
      beginning of period           | (24,922)  |                                | (968)     |                                                     
|                                                       |           | ------------                   |           | ---------------                                     
|Deficit
      accumulated during the development stage | $         | (50,969)                       |           | (24,922)                                            
|                                                       |           | ======                         |           | ========                                            
|                                                       |           |                                |           |                                                     
|Earnings (loss)
      per share, assuming dilution:    |           |                                |           |                                                     
|Net Loss                                               | $         | (0.01)                         | $         | (0.02)                                              
|                                                       |           | ======                         |           | ========                                            
|                                                       |           |                                |           |                                                     
|Weighted average
      shares outstanding              | 2,081,768 |                                | 1,329,167 |                                                     
|                                                       |           | ======                         |           | ========                                            



























The accompanying notes
are an integral part of

these financial
statements.



-3-





CAPSTONE INTERNATIONAL
CORPORATION

(A DEVELOPMENT STAGE
COMPANY)

STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY

FROM NOVEMBER 16, 2000
(Date of Inception) TO DECEMBER 31, 2002



|                                       | Common Stock     |   | Additional     |   | Deficit accumul- |   | Total                 
|-------------------------------------- | ---------------- | - | -------------- | - | ---------------- | - | ----------------------
|                                       | Shares           |   | Amount         |   | Paid-in          |   | Ated during the       
|                                       |                  |   |                |   | Capital          |   | Development           
|                                       |                  |   |                |   |                  |   | Stage                 
|                                       | ---------------- |   | -------------  |   | ---------------- |   | ----------------------
|Balance, November
      16, 2000       | ---              | $ | ---            | $ | ---              | $ | ---                   
|                                       |                  |   |                |   |                  |   |                       
|Issuance of common
      stock         |                  |   |                |   |                  |   |                       
|for cash,                              |                  |   |                |   |                  |   |                       
|November 20, 2000                      | 100,000          |   | 100            |   | 900              |   | 0                     
|                                       |                  |   |                |   |                  |   |                       
|Less net loss                          | 0                |   | 0              |   | 0                |   | (968)                 
|                                       | ---------------- |   | -------------  |   | ---------------- |   | ----------------------
|                                       |                  |   |                |   |                  |   |                       
|Balance, December
      31, 2000       | 100,000          | $ | 100            | $ | 900              | $ | (968)                 
|                                       |                  |   |                |   |                  |   |                       
|Issuance of common
      stock         |                  |   |                |   |                  |   |                       
|for cash,                              |                  |   |                |   |                  |   |                       
|May 9, 2001                            | 400,000          |   | 400            |   | 3,600            |   | 0                     
|May 14, 2001                           | 700,000          |   | 700            |   | 6,300            |   | 0                     
|June 14, 2001                          | 850,000          |   | 850            | ` | 7,650            |   | 0                     
|                                       |                  |   |                |   |                  |   |                       
|Currency
      translation adjustment  | 0                |   | 0              |   | 100              |   | 0                     
|                                       |                  |   |                |   |                  |   |                       
|Less net loss                          | 0                |   | 0              |   | 0                |   | (23,954)              
|                                       | ---------------- |   | -------------  |   | ---------------- |   | ----------------------
|                                       |                  |   |                |   |                  |   |                       
|Balance, December
      31, 2001       | 2,050,000        |   | 2,050          |   | 18,550           |   | (24,922)              
|                                       | =========        |   | ========       |   | =========        |   | ============          
|                                       |                  |   |                |   |                  |   |                       
|July 15, 2002
      Expiration of re-  |                  |   |                |   |                  |   |                       
|scission offer for
      Nov. 14, 2001 |                  |   |                |   |                  |   |                       
|sale of common
      stock             | 63,536           |   | 64             |   | 6,290            |   | 0                     
|                                       |                  |   |                |   |                  |   |                       
|Less net loss                          | 0                |   | 0              |   | 0                |   | (26,047)              
|                                       | ---------------- |   | -------------- |   | ---------------  |   | --------------------- 
|                                       |                  |   |                |   |                  |   |                       
|Balance, December
      31, 2002       | 2,113,536        | $ | 2,114          | $ | 24,840           | $ | (50,969)              
|                                       | =========        |   | ========       |   | =========        |   | ============          
|                                       |                  |   |                |   |                  |   |                       





















The accompanying notes
are an integral part of

These financial
statements



-4-





CAPSTONE INTERNATIONAL
CORPORATION

(A DEVELOPMENT STAGE
COMPANY)

STATEMENTS OF CASH FLOWS

(With Cumulative Figures
From Inception)



|                                                        |         | Year ending
      December 31, |          | From Inception,    
|------------------------------------------------------- | ------- | ------------------------------ | -------- | -------------------
|                                                        |         |                                |          |                    
|                                                        |         | 2002                           |          | 2001               
|                                                        |         | -----------------              |          | -------------------
|CASH FLOWS
      PROVIDED BY OPERATING ACTIVITIES       |         |                                |          |                    
|Net Loss                                                | $       | (26,047)                       | $        | (23,954)           
|Non-cash items
      included in net loss               |         | 0                              |          | 0                  
|Adjustments to
      reconcile net loss to              |         |                                |          |                    
|cash used by
        operating activity                 |         |                                |          |                    
|Accounts payable                                        |         | 23,286                         |          | 729                
|                                                        |         | --------------------           |          | -------------------
|                                                        |         |                                |          |                    
|NET CASH
        PROVIDED BY OPERATING ACTIVITIES       | (2,761) |                                | (23,225) |                    
|                                                        |         |                                |          |                    
|CASH FLOWS FROM
      INVESTING ACITIVITIES             | 0       |                                |          |                    
|                                                        |         |                                |          |                    
|CASH FLOWS FROM
      FINANCING ACTIVITIES              |         |                                |          |                    
|Sale of common
        stock                            |         | 64                             |          | 1,950              
|Paid-in capital                                         |         | 6,290                          |          | 17,650             
|Common stock
        sold subject to a rescission offer |         | (6,354)                        |          | 6,354              
|                                                        |         | ----------------------         |          | -------------------
|NET CASH
        PROVIDED BY FINANCING ACTIVITIES       | 0       |                                | 25,954   |                    
|                                                        |         |                                |          |                    
|NET INCREASE IN
        CASH                            |         | (2,761)                        |          | 2,729              
|                                                        |         |                                |          |                    
|CASH AT BEGINNING
      OF PERIOD                       |         | 2,761                          |          | 32                 
|                                                        |         | ----------------------         |          | -------------------
|CASH AT END OF
        PERIOD                           | $       | 0                              | $        | 2,761              
|                                                        |         | =============                  |          | ===========        

























The accompanying notes
are an integral part of

These financial
statements.



-5-





CAPSTONE INTERNATIONAL
CORPORATION

(A DEVELOPMENT STAGE
COMPANY)

NOTES TO THE FINANCIAL
STATEMENTS

DECEMBER 31, 2002 AND
DECEMBER 31, 2001



NOTE A SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES



> The Company was
>         incorporated on November 16, 2000 under the laws of the State of
>         Delaware. The business purpose of the Company is to acquire funeral
>         facilities and the selling of prepaid funeral programs.
>         
>         The Company will
>         adopt accounting policies and procedures based upon the nature of future
>         transactions.

NOTE B EARNING (LOSS)
PER SHARE



> Basic EPS is
>         determined using net income divided by the weighted average shares
>         outstanding during the period. Diluted EPS is computed by dividing net
>         income by the weighted average shares outstanding, assuming all dilutive
>         potential common shares were issued. Since the Company has no common
>         shares that are potentially issuable, such as stock options, convertible
>         securities, or warrants, basic and diluted EPS are the same.

NOTE C COMMON STOCK
ISSUES



> On November 20,
>         2000 the Company sold 100,000 shares of its common stock at $.01 per
>         share for $1,000. On May 9, 2001 the Company sold 400,000 shares of its
>         common stock at $.01 per share for $4,000. On May 14, 2001 the Company
>         sold 700,000 shares of its common stock at $.01 per share for $7,000. On
>         June 14, 2001 the Company sold 850,000 shares of its common stock at
>         $.01 per share of $8,500. On November 14, 2001 the Company sold 63,536
>         shares of its common stock at $.10 per share for $6,354, which expired
>         unexercised on July 15, 2002.

NOTE D GOING CONCERN



> The Company's
>         financial statements are prepared using generally accepted accounting
>         principles applicable to a going concern, which contemplates the
>         realization of assets and liquidation of liabilities in the normal
>         course of business. However, the Company has not generated any revenues
>         from its planned principal operations through December 31, 2002. Without
>         realization of additional capital, it would be unlikely for the Company
>         to continue as a going concern.

-7-





Item 8. Changes in and
Disagreements with Accountants on Accounting and Financial Disclosures.



None. Not applicable.



PART III



Item 9. Directors,
Executive Officers, Promoters and Control Persons; Compliance with Section 16(a)
of the Exchange Act



Darryl Mills, President,
Member of the Board of Directors, age 48. Mr. Mills graduated from the
University of Saskatchewan, in Saskatoon, Saskatchewan with a Bachelor of
Commerce Degree (1990) and from the University of Regina, in Regina Saskatchewan
with a Graduate Diploma in Government Administration. (1993)



Most of Mr. Mills'
career has been in public service. He spent nearly 20 years with the Province of
Saskatchewan in a variety of increasingly responsible roles. He has been: an
Assistant Director of Economic Development with the Department of Northern
Saskatchewan from 1972 to 1982; an Auditor with the Saskatchewan Workers
Compensation Board from 1982 to 1986; Executive Assistant to the Minister of
Finance from October 1992 to April 1993, and Executive Director of the
Saskatchewan Gaming Commission from May 1993 to December 1996.



From 1986 to 1990 Mr.
Mills held the position of Secretary Treasurer of the Kamsack School Division,
in Kamsack Saskatchewan. From 1990 to 1992 Mr. Mills attended the University of
Saskatchewan full time.

In addition to his time
spent with the Saskatchewan Government and the Kamsack School Division, Mr.
Mills also worked with the Canadian Institute of Chartered Accounts as British
Columbia Sales Manager for Professional Publications and Services from May 1997
to July 1999. He also held the position of Secretary and Director with Far East
Ventures, Inc from February to August of 2000. Since leaving Far East Ventures
in August of 2000 Mr. Mills has been doing private consulting work in the areas
of governmental relations, organization design and business development. Mr.
Mills continues to work as a private management consultant assisting emerging
companies in developing their business plans and management structure. He will
continue to operate his private consulting business until such time as the
responsibilities of Capstone necessitate a full time commitment to Capstone.



In working with
Capstone, Mr. Mills will be responsible for business development, as well as
corporate and governmental relations. His primary function will be to secure an
insurance and annuity supplier and work with that supplier to develop suitable
products and services. This will include primary responsibility for developing
training materials and customer service support. He will also have the ongoing
responsibility to maintain good relations with the supplier and to handle any
regulatory issues that may arise. Mr. Mills will provide whatever time is
necessary to effectively carry out his duties. He is currently devoting seventy
five percent (75%) of his time on Capstone responsibilities; however, he expects
that to grow to one hundred percent (100%) over the next several months.



Rodney Veremy,
Secretary/Treasurer, Member of the Board of Directors, age 25. In 1997,
Mr. Veremy graduated from Grant McEwen Community College in Edmonton, Alberta
with a Diploma in Business Administration.



In June 1997, after
attending Business College, Mr. Veremy was hired by Future Transportation
Systems Ltd. (FTSL), as Assistant General Manager. FTSL is a medium sized
trucking firm. In 1999 Mr. Veremy was promoted to general manager. Mr. Veremy
left his position with FTSL on August 15, 2000.



In April of 2000, Mr.
Veremy started his own trucking company, which he called Green Leaf Enterprises
Ltd. Green Leaf employs 16 drivers. Mr. Veremy is the President and General
Manager of Green Leaf Trucking and in that capacity is responsible for the
entire operation of the company. In addition to doing private hauling, Green
Leaf has 7 permanent contracts and 1 temporary contract.



Mr. Veremy's
responsibilities with Capstone will be in the areas of financial management and
accounting. He is currently devoting ten percent (10%) of his time to Capstone
responsibilities. He is prepared to give Capstone up to 50 percent (50%) of his
time in the long term, and as much as 75 percent (75%) for during the critical
first 6 months of operations.



Until March 8, 2002, Mr.
Brian Koehn served as the President and a member of the Board of Directors of
the Company. After due investigation regarding past activities, the Board of
Directors requested that Mr. Koehn resign as President and as a member of the
Board of Directors. Mr. Koehn resigned both his appointment as a Board member
and position as President on March 8, 2002. Mr. Koehn had no disagreements with
the Company on any matter relating to the operations, policies or practices of
the Company.



Item 10. Executive
Compensation.



Capstone's Executive
officers do not currently receive and are not accruing any compensation.



Item 11. Security
Ownership of Certain Beneficial Owners and Management.



The following is a table
detailing the current shareholders of our stock who own 5% or more of the common
stock, and shares owned by our Directors and Officers:



|Title of
      Class | Name and Address
      of Beneficial Owner                                                                                    | Amount and
      Nature of
      Beneficial
      Ownership | Percent
      of Class
|-------------------- | ----------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------- | ----------------------
|Common               | Darryl Mills
      President,
      Director
      6966 Coach Lamp
      Dr., Chilliwack B.C., Canada, V2R 2X6                | 100,000                                                     | 4.8%                  
|Common               | Rod Veremy
      Secretary/Treasurer,
      Director
      4; 19; 67; 32; NW,
      County of Athabasca, No. 12, A.B., Canada | 100,000                                                     | 4.8%                  
|Common               | Directors and
      officers as a group (2)                                                                                   | 200,000                                                     | 9.6%                  



Item 12. Certain
Relationships and Related Transactions.



No persons who may, in
the future, be considered a promoter will receive or expect to receive assets,
services or other consideration from us. No assets will be or are expected to be
acquired from any promoter on behalf of our company. We have not entered into
any agreements that require disclosure to our shareholders.



Item 13. Exhibits and
Reports on Form 8-K



Exhibits



|Exhibit No. | Document                        | Location        
|----------- | ------------------------------- | ----------------
|3.1         | Articles of
      Incorporation | Previously Filed
|3.2         | Bylaws                          | Previously filed
|23          | Consent of Auditor              | Included        



Reports on Form 8-K



No reports on Form 8-K
have been filed during the last quarter of the year ended December 31, 2002.



Signatures



In accordance with
Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.



CAPSTONE INTERNATIONAL
CORPORATION





/s/ Darryl Mills

Darryl Mills, President

Dated: April 15, 2003





In accordance with the
Exchange Act, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.





/s/ Darryl Mills

Darryl Mills, President,
Director

Dated: April 15, 2003





/s/ Rod Veremy

Rod Veremy,
Secretary/Treasurer, Director

Dated: April 15, 2003



CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Darryl Mills, certify that:

1. I have reviewed this annual report on Form 10-KSB of Capstone
International Corporation for the year ended December 31, 2002;

2. Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by
this annual report;

3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this annual report.

4. The registrant's other certifying offering officers and I
are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and we have: a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being prepared; b)
evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and c) presented in this annual report
our conclusions about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons performing
the equivalent function): a) all significant deficiencies in the design or
operation of internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in internal
controls; and b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have
indicated in this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

Date: April 15, 2003



/s/ Darryl Mills

Darryl Mills

President



CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Rod Veremy, certify that:

1. I have reviewed this annual report on Form 10-KSB of Capstone
International Corporation for the year ended December 31, 2002;

2. Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by
this annual report;

3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this annual report.

4. The registrant's other certifying offering officers and I
are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and we have: a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being prepared; b)
evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and c) presented in this annual report
our conclusions about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons performing
the equivalent function): a) all significant deficiencies in the design or
operation of internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in internal
controls; and b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have
indicated in this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

Date: April 15, 2003



/s/ Rod Veremy

Rod Veremy

Secretary/Treasurer