SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

|X|      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

|_|      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                         Commission file number: 0-17232

                           CAPITAL RESERVE CORPORATION
                 (Name of small business issuer in its charter)

                  COLORADO                                84-0888594
       (State or other jurisdiction of                (I.R.S. Employer
        incorporation or organization)                Identification No.)

        #11-1861 BEACH AVENUE, VANCOUVER, BRITISH COLUMBIA V6G 1Z1 CANADA
          (Address of principal executive offices including zip code)

         Issuer's telephone number, including area code: (604) 687-4828

       Securities registered under Section 12(b) of the Exchange Act: NONE

         Securities registered under Section 12(g) of the Exchange Act:
               Title of class: CLASS A COMMON STOCK, NO PAR VALUE
                         COMMON STOCK PURCHASE WARRANTS

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 the filing requirements for the past 90 days. Yes X No

Check if disclosure  of delinquent  filers in response to Item 405 of 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]

           Issuer's revenues for its most recent fiscal year. $(4,068)

        Aggregate market value of the voting stock held by non-affiliates
           of the registrant as of April 14, 1999: $0.00 (See Item 5)

Number of shares outstanding of registrant's Class A Common Stock, no par value,
                         as of April 14, 1999: 1,411,045

                    Documents incorporated by reference: NONE

       Transitional Small Business Disclosure Format (check one): Yes__ No X

Exhibit index on consecutive page 10                          Page 1 of 35 Pages

<PAGE>



                                     PART I

ITEM 1.           DESCRIPTION OF BUSINESS.

GENERAL

         Capital Reserve  Corporation (the "Company") was incorporated under the
laws of the State of Colorado on August 3, 1982, for the purpose of operating as
a financial services holding company.

         Effective June 29, 1988, the Company  acquired 100% of the  outstanding
stock of First West Financial Services, Inc. and its subsidiary, First West Life
Insurance  Company  ("First West Life"),  in exchange for 100,000  shares of the
Company's  Common Stock with an estimated fair market value of $10.00 per share,
$931,304 cash, and a liability to the former  shareholders of First West Life of
$459,000 (the  "Exchange").  In addition,  in connection with the acquisition of
First West Life, the Company agreed to pay the former shareholders of First West
Life an additional  $150,000  ($50,000 to each of the three  shareholders)  if a
certain  price ($20.00 per share) and  marketability  of the stock issued in the
Exchange was not attained at the end of two years after the date of the Exchange
(June 29, 1990). See Item 3. Legal Proceedings,  Item 12. Certain  Relationships
and Related Transactions,  and Item 7. Financial Statements herein and the Notes
included  therein.  The Company also incurred  acquisition  costs of $26,585 for
legal and actuarial fees. This  transaction was accounted for using the purchase
method of accounting. See "Sale of First West Life" below.

         During the quarter  ended  September  30,  1988,  the Company  invested
$30,000 in 300,000 shares (100%) of the Class B common stock of Premier  Capital
Investment Corporation,  a Colorado corporation ("Premier").  The holders of the
shares of Class B common stock had the right to elect a majority of the Board of
Directors of Premier.  On August 31, 1990,  Premier completed a private offering
of its common  stock and common  stock  purchase  warrants,  resulting  in gross
proceeds of $1,272,500  and net proceeds of  $1,235,738.  It was proposed to use
such  capital to acquire  business  opportunities,  primarily  in the  financial
services  industry.  On June 10,  1992,  the  Company  sold 2,500  shares of its
ownership of Premier Class B common stock and  converted  the remaining  297,500
shares of Class B common stock into 2,677,500  shares of Class A common stock of
Premier  (approximately  34% of the total outstanding Class A common stock). See
Item 3. Legal  Proceedings and Item 6.  Management's  Discussion and Analysis or
Plan of Operation.

         Effective  December 31, 1988, First West Financial  Services,  Inc. was
merged into the Company, and First West Agency, Inc., a subsidiary of First West
Life, was merged into Capital Reserve Marketing Corp., an existing  wholly-owned
subsidiary of the Company.  On August 1, 1996,  Capital Reserve  Marketing Corp.
changed its name to Wall Street Investment Corp.

         During the quarter ended September 30, 1990,  First West Life Insurance
Company of New Mexico  ("FWLNM") was formed by First West Life as a wholly-owned
subsidiary.  FWLNM  applied for a  certificate  of authority to solicit life and
accident and health insurance on August 14, 1990. Final approval was received on
March 8, 1991. FWLNM offered the same kinds of insurance as First West Life.

         Effective  October 1, 1990, the Company  implemented a 1-for-10 reverse
stock split of the  Company's  Class A Common Stock and changed the par value of
both the Class A Common Stock and Class B Preferred Stock from $.01 par value to
no par value. The share amounts stated herein have been adjusted to reflect this
reverse stock split.

         On December 31, 1992,  the Company sold 50.2% of its  investment in the
common stock of First Guaranty  Income  Corporation  ("FGI")  (formerly  Capital
Reserve  Investment  Corporation)  to Premier  for  $1,760 of debt  forgiveness.
Accordingly,  the Company changed its method of accounting for its investment in
Premier and FGI to the equity method from that of consolidating  the accounts of
Premier  and FGI with the  accounts  of the  Company.  See Item 6.  Management's
Discussion and Analysis or Plan of Operation.



                                        2

<PAGE>



SALE OF FIRST WEST LIFE

         On October  14,  1994,  the  Company  sold the  issued and  outstanding
capital stock of First West Life to Old Reliance Insurance  Company,  an Arizona
domiciled  insurance  company  ("Old  Reliance")  for  $1,227,301  in cash.  The
purchase  price was the result of arm's length  negotiation  between the Company
and Old Reliance.  Old Reliance is not affiliated with Capital  Reserve,  any of
its affiliates, or any director or officer of Capital Reserve. The sale of First
West Life included the sale of FWLNM. As a condition to closing,  approvals were
obtained  from the  Department  of  Insurance  for the States of  Colorado,  New
Mexico, and Arizona.

         The Company  determined that it could not maintain  capital and surplus
requirements for First West Life and therefore sold First West Life for the best
price possible.  An  administrative  proceeding was initiated in May 1993 before
the Division of Insurance  for the State of Colorado  against First West Life to
determine  whether  its  license  should be revoked or  suspended.  Among  other
things,  it was alleged that First West Life failed to meet the minimum  capital
and surplus requirements  required by statute for life insurance companies as of
March 31, 1993. On October 6, 1993,  First West Life entered into a Confidential
Stipulation for Final Agency Order which allowed First West Life to increase its
capital  and  surplus  over  an  extended  period  of  time  to  meet  statutory
requirements.  Management  of First  West  Life  deemed  this  resolution  to be
favorable to the Company.

RENTAL OPERATIONS AND WALL STREET INVESTMENT CORP.

         During 1995 through June, 1996, the Company's  primary business was the
rental of real  property.  On July 3, 1996,  the Company sold its only property,
located at 7860 East Berry  Place,  Englewood,  Colorado,  for net  proceeds  of
$501,276.

         At December 31, 1998, the Company had one wholly-owned subsidiary, Wall
Street  Investment  Corp.  ("WSIC").  WSIC (as Capital Reserve  Marketing Corp.)
formerly  offered a cancer policy.  The Company,  through WSIC, had attempted to
start a financial consulting services company.

         On October 22, 1997, WSIC entered into a sub-contracting agreement with
Columbia Financial Group  ("Columbia")  pursuant to which WSIC agreed to provide
public relations  services in connection with Columbia's  contract with Winner's
Internet  Network,  Inc.  ("Winners").  In  consideration  for WSIC's  services,
Columbia agreed to transfer to WSIC stock purchase warrants for 50,000 shares of
Winner's  stock,  with a purchase price of $2.50 per share,  exercisable  for 12
months.  As of April 10, 1999, WSIC had not received the stock purchase warrants
from  Columbia.  Columbia  transferred  10,000  shares of free trading  Winner's
common stock to WSIC, but failed to make any subsequent  transfers.  As of April
10,  1999,  the Company  had sold all of the  Winner's  shares it received  from
Columbia.  The agreement with Columbia has been  terminated and management  does
not anticipate receiving any additional shares from Columbia.

         As of April 10, 1999, WSIC was no longer conducting operations.

CURRENT OPERATIONS

         As of the date of this report,  the Company has no  principal  business
and the Company is seeking a merger or acquisition opportunity.  The Company has
not identified any potential  acquisition targets, but it is anticipated that in
the future the Company will engage in an  extraordinary  corporate  transaction,
such as a merger,  reorganization  or liquidation.  Any such  transaction  would
result in a change of the Company's business and/or corporate structure.

EMPLOYEES

         As of  December  31,  1998,  the Company  and its  subsidiaries  had no
full-time  employees.  Effective  October,  6, 1998, the Company  entered into a
Management Agreement with Glen C. Loder, an officer and director of the Company,
pursuant to which Mr. Loder has agreed to serve as President and Chairman of the
Board of Directors of the Company. In addition,  Mr. Loder has agreed to provide
the Company with office space and necessary office equipment.

                                        3

<PAGE>



The Company pays Mr. Loder a consulting  fee of $5,000 per month in exchange for
his services,  plus reimbursement of reasonable  expenses.  Mr. Loder devotes as
much of his time to the Company as is reasonably needed.

ITEM 2.           DESCRIPTION OF PROPERTY.

         As of April 20, 1999, the Company was using the offices of Mr. Loder, a
director and President of the Company, as its principal offices, as set forth in
the  Management  Agreement  between the Company and Mr.  Loder dated  October 6,
1999. See Item 1. Description of Business - Employees.

ITEM 3.           LEGAL PROCEEDINGS.

         None.

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

         None.


                                     PART II

ITEM 5.           MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         The Company's Common Stock traded on the  over-the-counter  market from
July 25,  1988 until  April 4, 1997.  From May 30,  1989 to July 13,  1992,  the
Company's Common Stock was traded on NASDAQ, under the symbol "CRCOA". The range
of high and low bid  prices  for each  fiscal  quarter  for  1998 and  1997,  as
reported by the OTC Bulletin Board, is as follows:

<TABLE>
<CAPTION>

                                                                               BID OR TRADE PRICES
1998 FISCAL YEAR                                                       HIGH                           LOW

<S>                                                                     <C>                           <C>
Quarter Ending 03/31/98...................................              N/A                           N/A
Quarter Ending 06/30/98...................................              N/A                           N/A
Quarter Ending 09/30/98...................................              N/A                           N/A
Quarter Ending 12/31/98...................................              N/A                           N/A

<CAPTION>

1997 FISCAL YEAR                                                       HIGH                           LOW

<S>                                                                   <C>                           <C>
Quarter Ending 03/31/97...................................            $0.001                        $0.001
Quarter Ending 06/30/97...................................            $0.001                        $0.001
Quarter Ending 09/30/97...................................              N/A                           N/A
Quarter Ending 12/31/97...................................              N/A                           N/A

</TABLE>

         As of April 10,  1999,  there  were no market  makers in the  Company's
shares.  The last  reported  trade by the OTC  Bulletin  Board  was on
November, 19, 1996 at $ $0.015625 per share.

         The  above  quotations  reflect  inter-dealer  prices,  without  retail
mark-up,  mark-down,  or commission  and may not  necessarily  represent  actual
transactions.

         As of April 12, 1999,  there were 662 record  holders of the  Company's
Common Stock, including shares held by the Company as treasury shares.

         During the last two fiscal years,  no cash dividends have been declared
on the Company's Common Stock.


                                        4

<PAGE>



RECENT SALES OF UNREGISTERED SECURITIES

         From  November  1998 through  February  1999,  the Company  conducted a
private  placement of shares of the Company's Class A Common Stock, no par value
(the "Shares")  pursuant to Rule 506 of Regulation D. Sales were made to a total
of ten (10) Canadian citizens. A total of 865,000 shares were sold at a price of
$0.10 per share, for gross proceeds of $86,500.  The Company paid commissions of
10% to persons  assisting the Company with sales. As of December 31, 1998, Kerry
Loder,  the son of Glen C. Loder,  an officer and director of the  Company,  had
received  commissions of $2,000 in connection with the sale of shares.  See Item
12. Certain Relationships and Related Transactions.

         The Company is in the process of offering  rescission to the purchasers
of shares in the private  placement based upon statements by the Company that it
would  not pay  commissions  on sales of  shares  and  that  the  Company  would
terminate  the  offering  if it had not  received  subscriptions  for $50,000 by
December 31, 1998.

         The Company did not sell the minimum  subscription amount of $50,000 by
December 31, 1998,  and did not terminate the offering by such date. The Company
continued to offer the shares and  utilized  funds from the sale of shares prior
to  receiving  the minimum  subscription  amount of $50,000.  In  addition,  the
Company paid commissions of  approximately  10% to persons selling shares in the
offering.

ITEM 6.           MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

GENERAL

         The Company has essentially suspended all of its operations. Management
has disposed of most of the  Company's  assets and applied the proceeds from the
sale of those assets to decreasing the Company's outstanding liabilities.  As of
the date of this report the Company  had no source of income.  The Company  must
rely  entirely  upon the sale of stock to pay any expenses  the Company  incurs.
Therefore, the financial statements included in this report for the fiscal years
ended  December  31,  1998  and  1997,  are not  necessarily  indicative  of the
Company's future operations.

LIQUIDITY

         Cash flows from continuing  operations during 1998 and 1997 reflect net
cash used of $(42,703) and $(278,176),  respectively,  while cash flows provided
by  investing  activities  for  the  same  periods  were  $25,412  and  $57,549,
respectively.

         At December  31,  1998,  and 1997 the  Company  had working  capital of
$(1,471) and $(9,996), respectively. Since the Company has no significant source
of revenue,  working capital will continue to be depleted by operating expenses.
If the Company should generate an operating loss for 1999 comparable to the loss
incurred  for 1998,  it will have no cash or working  capital  remaining.  See "
Results of Operations"  below. The Company  presently has no external sources of
cash.

         During the last quarter of fiscal 1998 and the first  quarter of fiscal
1999 the Company  conducted a private  placement of shares of the  Corporation's
Class A Common Stock, no par value pursuant to Rule 506 of Regulation D. A total
of 865,000 shares were sold at a price of $0.10 per share, for gross proceeds of
$86,500.

ASSETS

         At December 31, 1998 the Company had total assets of $11,517,  compared
to total assets of $70,812 at December 31, 1997.  This  represents a decrease of
$59,295, which is attributable to the Company's loss for the fiscal year and the
sale of assets.  As of the date of this report,  management has disposed of most
of the  Company's  assets and applied the proceeds from the sale of those assets
to decreasing the Company's outstanding liabilities.


                                        5

<PAGE>



RESULTS OF OPERATIONS

         The Company has essentially suspended all of its operations.  As of the
date of this report the Company had no source of income.  The Company  must rely
entirely upon the sale of stock to pay any expenses the Company incurs.

         The Company's net operating  loss for 1998  decreased by  approximately
72% due to decreases in salaries, rent, insurance, entertainment, legal expenses
and  depreciation.  The Company's  loss from  continuing  operations in 1998 was
$43,331, compared to a loss of $153,917 in 1997.

         The Company's operating expenses were comprised primarily of consulting
expenses ($15,000);  legal expenses ($6,981);  accounting and actuarial expenses
($6,325);  and office  expenses  ($3,620).  Since the Company  currently  has no
source of revenue, the Company's working capital will continue to be depleted by
operating expenses.

         Management is in the process of seeking a viable  company to acquire or
with which to merge. Until such a company can be identified,  the Company has no
source of income and no viable operations.  There is no guaranty that management
will be able to  locate  any  such  company.  If the  Company  is able to find a
suitable merger or acquisition  candidate,  any such merger or acquisition would
most  likely  result  in our  having to issue a  substantial  amount of stock to
consummate the transaction.

         The Independent  Auditors'  Report and Note 8 of the Notes to Financial
Statements accompanying this report state that substantial doubt has been raised
about the  Company's  ability to  continue  as a going  concern.  The  Company's
present  business  operations do not generate  sufficient  revenues to cover its
operating  expenses.  The Company would have to obtain other business operations
or severely reduce its operating  expenses to remain viable, and there can be no
assurance that the Company will be able to do so.

ITEM 7.           FINANCIAL STATEMENTS.

         Please refer to pages beginning with F-1.

ITEM 8.           CHANGES IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS ON ACCOUNTING
                  AND FINANCIAL DISCLOSURE.

         Not Applicable.

                                    PART III

ITEM 9.           DIRECTORS,  EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
                  COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

         The following  table sets forth the names and ages of all directors and
executive officers of the Company as of the date of this report,  indicating all
positions and offices with the Company held by each such person:

<TABLE>
<CAPTION>

                 NAME                      AGE                                  POSITION
<S>                                        <C>    <C>
Glen C. Loder                              64     Chairman of the Board, President, Treasurer and Class B
                                                  Director.

Sharon M. Patmore                          58     Secretary and Class B Director

</TABLE>

         Sharon M. Patmore is the wife of Glen C. Loder.

         Class A directors are elected by the holders of the  Company's  Class A
Common  Stock.  As a class,  the  holders of the Common  Stock have the right to
elect one less than a majority of the  directors.  Class B directors are elected
by the holders of the Company's Class B Preferred Stock. As a class, the holders
of  Preferred  Stock  have  the  right  to elect a  majority  of the  directors.
Cumulative  voting for directors is not  permitted in either Class.  The term of
office of both

                                        6

<PAGE>



Class A directors  and Class B directors  of the Company ends at the next annual
meeting of the Company's  shareholders  or when the  successors  are elected and
qualify. The annual meeting of shareholders is specified in the Company's bylaws
to be held on the  fourth  Friday in August  of every  year and the last  annual
meeting was held on August 27,  1993.  The term of office of each officer of the
Company ends at the next annual  meeting of the  Company's  Board of  Directors,
expected  to  take  place   immediately   after  the  next  annual   meeting  of
shareholders,  or when  his  successor  is  elected  and  qualifies.  Except  as
otherwise  indicated  below,  no  organization  by which any officer or director
previously  has been  employed is an  affiliate,  parent,  or  subsidiary of the
Company.

         GLEN C. LODER has been the  Chairman of the Board of  Directors  of the
Company,  President and Treasurer  since October 6, 1998. Mr. Loder's  principal
occupation  is  as a  promoter.  Mr.  Loder  is  self-employed  through  Western
Depository Corp. whose address is the same as the Company's.

         SHARON M. PATMORE has been a director of the Company and the  Secretary
since October 6, 1998.  Ms. Patmore is the sole employee and President of Sharon
Patmore  Agencies,  which is located at the same  address  as the  Company.  Ms.
Patmore's  responsibilities  with  Sharon  Patmore  Agencies  include  sales and
corporate management. Ms. Patmore is the common law wife of Glen C. Loder.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         No directors,  officers,  or beneficial owners of more than ten percent
of securities of the Company reported to the Company any transactions  involving
the  securities  during the fiscal year ended  December 31,  1998.  Accordingly,
there is no disclosure of any such transactions contained in this report.

ITEM 10.          EXECUTIVE COMPENSATION.

         The  following  table sets forth  information  for the Chief  Executive
Officer  ("CEO") of the Company,  Ralph W.  Newton,  Jr. No  disclosure  need be
provided  for any  executive  officer,  other than the CEO,  whose total  annual
salary and bonus for the last  completed  fiscal  year did not exceed  $100,000.
Accordingly,  no other  executive  officers of the  Company are  included in the
table.

<TABLE>
<CAPTION>

                                                                                LONG TERM COMPENSATION
                                        ANNUAL COMPENSATION                      AWARDS               PAYOUTS
                                                                                      SECURITIES
                                                             OTHER      RESTRICTED    UNDERLYING
NAME AND                                                    ANNUAL         STOCK          OP-                       ALL OTHER
PRINCIPAL                                                   COMPEN-      AWARD(S)     TIONS/SARS        LTIP         COMPEN-
POSITION           YEAR       SALARY($)      BONUS($)     SATION ($)        ($)           ($)       PAYOUTS ($)    SATION ($)

<S>                <C>         <C>              <C>         <C>             <C>           <C>           <C>            <C>
Glen C.            1998          -0-            -0-         15,000          -0-           -0-           -0-            -0-
Loder,
Chairman,
President
and
Treasurer
(1)<F1>

Ralph W.           1998          -0-            -0-           -0-           -0-           (3)<F3>       -0-            -0-
Newton, Jr.        1997        $26,000          -0-           -0-           -0-           -0-           -0-            -0-
Chairman           1996        $100,000         -0-           -0-           -0-           -0-           -0-            -0-
and Presi
dent (2)<F2>

<FN>
<F1>
(1)      Pursuant to the  Management  Agreement  between the Company and Glen C.
         Loder dated October 6, 1998.  See Item 12.  Certain  Relationships  and
         Related Transactions.

<F2>
(2)      Ralph W. Newton  resigned  effective  October 6, 1998,  pursuant to the
         terms of the Stock Purchase  Agreement between Mr. Newton,  Patricia L.
         Newton  and  Glen C.  Loder.  See Item 12.  Certain  Relationships  and
         Related

                                        7

<PAGE>



         Transactions.  On  February  3, 1999,  Mr. and Mrs.  Newton  sold their
         140,000  shares of Class B  Preferred  Stock to Mr.  Loder,  giving Mr.
         Loder  control  over the  Company's  Board of  Directors.  See Item 12.
         Certain  Relationships and Related  Transactions and Item 9. Directors,
         Executive  Officers,  Promoters and Control  Persons;  Compliance  with
         Section 16(a) of the Exchange Act.

<F3>
(3)      The  Company  has issued  options to Ralph W.  Newton and  Patricia  L.
         Newton to acquire up to 200,000 shares of the Company's Common Stock at
         a price of $0.25 per share on or before February 3, 2001. See Item 10.
         Executive Compensation - Options.

</FN>
</TABLE>

         The Company does not pay  non-officer  directors for their  services as
such,  with the  exception of Mr. Loder (See Item 1.  Description  of Business -
Employees) nor does it pay any director's fees for attendance at meetings. Direc
tors are  reimbursed for any expenses  incurred by them in their  performance as
directors.

OPTIONS

         On  February  3, 1999,  the Company  issued  stock  options to Ralph W.
Newton and Patricia L. Newton to acquire up to 200,000  shares of the  Company's
Common  Stock at a price of $0.25 per share on or before  February  3, 2001 (the
"Options").  Patricia L. Newton is the wife of Ralph W. Newton. The Options were
issued in connection with the Stock Purchase  Agreement  between the Newtons and
Glen C.  Loder,  the  President  and CEO of the  Company.  See Item 12.  Certain
Relationships  and Related  Transactions.  The value of the Options has not been
included in the Executive Compensation Table, above, because i) the Options were
issued  during  1999,  and ii) there is no  established  value for the shares of
Common Stock. Therefore, the value of the Options is unknown.

STOCK OPTION PLANS

         The Company has adopted an  Incentive  Stock  Option Plan  ("ISOP") and
Non-Qualified  Stock Option Plan  ("Non-Qualified  Plan"). Both the ISOP and the
Non-Qualified  Plans  permit the Board of  Directors or a committee of directors
(the  "Committee")  to grant stock  options to key  management  employees of the
Company.  Such individuals will be selected from employees  (excluding directors
who are not full-time employees of the Company) who have techni cal, managerial,
supervisory, or professional responsibilities.

         It is intended that all options  granted under the ISOP will qualify as
incentive stock options under Section 422A of the Internal Revenue Code of 1986,
as amended.  Options for up to 18,000 shares of Common Stock may be issued under
the ISOP. If any such options are issued,  they may be exercised at a price that
is not less  than  110% of the  fair  market  value of the  stock on the day the
option is granted.

         Options  granted  under the  Non-Qualified  Plan  which  are  presently
exercisable,  are not intended to qualify as incentive  stock option plans under
the Internal Revenue Code of 1986, as amended. The aggregate number of shares of
Common  Stock which may be subject to options  under the  Non-Qualified  Plan is
18,000.  If any such options are issued,  they are to be exercised at a price of
$5.00 per share.

         As of the date of this  Annual  Report,  no options  have been  granted
under either plan.

         Under  both  Plans,  the  Board of  Directors  grants  options  only to
individuals  who,  in the  judgment  of the  Committee,  have  made  significant
contributions to the Company.  There is no formula for determining the number of
options to be granted under the Plans.  Options are anticipated to be granted on
the basis of annual performance  reviews. Any grants of options will reflect the
Committee's  judgment  (in its sole  discretion)  of the  relative  value of the
contribution of the grantee in respect to such matters as revenue production and
expense control.

COMPENSATION OF DIRECTORS

         Effective  October,  6, 1998,  the Company  entered  into a  Management
Agreement with Glen C. Loder,  an officer and director of the Company,  pursuant
to which Mr. Loder has agreed to serve as President and Chairman of the Board

                                        8

<PAGE>



of  Directors of the  Company.  The Company  pays Mr. Loder a consulting  fee of
$5,000 per month in exchange for his services,  plus reimbursement of reasonable
expenses.  During 1998, Mr. Loder earned $15,000,  of which $5,000 is still owed
to Mr. Loder, and has been accounted for as Accounts Payable - Related Party, on
the Company's Balance Sheet. See Item 7. Financial Statements.

ITEM 11.          SECURITY   OWNERSHIP   OF   CERTAIN   BENEFICIAL   OWNERS  AND
                  MANAGEMENT.

         The following table sets forth information,  as of April 12, 1999, with
respect to the beneficial  ownership of the Company's Common Stock and Preferred
Stock by each  person  known by the Company to be the  beneficial  owner of more
than five percent of the outstanding  Common Stock and Preferred  Stock, by each
of the Company's  officers and  directors,  and by the officers and directors of
the  Company  as a group.  Information  is also  provided  regarding  beneficial
ownership  of Common Stock if the  Preferred  Stock is converted to Common Stock
(at a ratio of .8 shares of Common Stock for every share of Preferred Stock):

<TABLE>
<CAPTION>

                                                                                               IF ALL SHARES OF PREFERRED
                                                                                               STOCK ARE CONVERTED TO COM-
                                       COMMON STOCK                  PREFERRED STOCK                 MON STOCK (1)

                                 NUMBER OF      PERCENT OF      NUMBER OF       PERCENT OF      NUMBER OF      PERCENT OF
BENEFICIAL OWNER                  SHARES        CLASS (2)         SHARES        CLASS (3)        SHARES        CLASS (4)

<S>                               <C>             <C>          <C>                <C>            <C>             <C> 
Glen C. Loder                       -0-             --         140,000 (5)        56.0%          112,000          7.0%
#11-1861 Beach Avenue
Vancouver, British Columbia
V6G 1Z1, CANADA

Harding, Shultz & Downs             -0-             --            74,125          29.7%           59,300          3.7%
800 Lincoln Square
121 South 13th Street
Lincoln, Nebraska 68501

Ralph W. Newton and               200,000         12.4%            -0-              --           200,000         11.0%
Patricia L. Newton (6)
One Cleek Way
Littleton, Colorado 80123

Officers and Directors as a         -0-             --           140,000          56.0%          112,000          7.0%
  group (2 persons)
---------------

<FN>
<F1>
(1)      As of the date of this Annual Report, no shares of Preferred Stock have
         been converted.

<F2>
(2)      Based on 1,411,045 shares of Common Stock outstanding.

<F3>
(3)      Based on 250,000 shares of Preferred Stock outstanding.

<F4>
(4)      Based on 1,611,045  shares of Common Stock  outstanding,  which assumes
         the conversion of all shares of Preferred Stock at a ratio of .8 shares
         of Common Stock for every share of Preferred Stock.

<F5>
(5)      Sharon M.  Patmore  is the wife of Glen C.  Loder.  Mr.  Loder has sole
         voting and  dispositive  power with  respect to his  140,000  shares of
         Preferred Stock. For this reason, the shares of Mr. Loder have not been
         attributed to Ms. Patmore.

<F6>
(6)      On  February  3, 1999,  the Company  issued  stock  options to Ralph W.
         Newton and  Patricia L.  Newton to acquire up to 200,000  shares of the
         Company's  Common  Stock  at a price of $0.25  per  share on or  before
         February  3, 2001 (the  "Options").  Patricia  L. Newton is the wife of
         Ralph W. Newton.  The Options were issued in connection  with the Stock
         Purchase Agreement between the Newtons and Glen C. Loder, the President
         and CEO of the Company. See Item 12. Certain  Relationships and Related
         Transactions.  The value of the  Options  has not been  included in the
         Executive Compensation Table, above, because i) the Options were issued
         during 1999,  and ii) there is no  established  value for the shares of
         Common Stock. Therefore, the value of the Options is unknown.

</FN>
</TABLE>

CHANGES OF CONTROL

         Management is in the process of seeking a viable  company to acquire or
with which to merge. Until such a company can be identified,  the Company has no
source of income and no viable operations.  There is no guaranty that management
will be able to  locate  any  such  company.  If the  Company  is able to find a
suitable merger or acquisition

                                        9

<PAGE>



candidate,  any such  merger or  acquisition  would  most  likely  result in the
Company  having  to  issue a  substantial  amount  of stock  to  consummate  the
transaction.

ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         On October 6, 1998, Ralph P. Newton,  Jr., and Patricia L. Newton,  the
wife of Ralph P. Newton,  Jr.,  entered into a Stock Purchase  Agreement to sell
their combined  140,000 shares of Class B Preferred  Stock to Glen C. Loder.  At
the time of the  transaction,  Mr.  Newton was a director  and  President of the
Company. Mr. Loder paid the Newtons $40,000 for the shares ($0.35 per share).

         Pursuant  to the terms of the Stock  Purchase  Agreement,  the  Company
conducted a private  placement of 865,000 shares of the Company's Class A Common
Stock,  no par value (the  "Shares"),  pursuant to Rule 506 of Regulation D at a
price of $0.10 per share. The first $40,000 from the sale of the Shares was paid
by the Company to Mr.  Loder.  On February 3, 1999,  Mr.  Loder paid the Mr. and
Mrs. Newton $40,000 to complete the acquisition of their shares.  Mr. Loder also
has caused the Company to grant the Newtons stock options, pursuant to which the
Newtons may acquire up to 200,000  shares of the Company's  Class A Common Stock
at a price of $0.25 per share on or before February 3, 2001.

         In connection  with the agreement by Mr. and Mrs.  Newton to sell their
shares,  Mr. Newton and Linda M. Opfer resigned as officers and directors of the
Company. On October 6, 1998, Mr. Loder was appointed as the President, Treasurer
and a director,  and Sharon M.  Patmore was  appointed  as the  Secretary  and a
director of the Company.

         From  November  1998 through  February  1999,  the Company  conducted a
private  placement of shares of the Company's Class A Common Stock, no par value
(the  "Shares")  pursuant to Rule 506 of Regulation D. A total of 865,000 shares
were sold at a price of $0.10 per share,  for gross  proceeds  of  $86,500.  The
Company paid  commissions  of 10% to persons  assisting  the Company with sales.
Kerry Loder,  the son of Glen C. Loder,  an officer and director of the Company,
had received commissions of $2,000 in connection with the sale of shares.


ITEM 13.          EXHIBITS AND REPORTS ON FORM 8-K.
<TABLE>

         (a)      Exhibits:
<CAPTION>

    REGULATION                                                                                        CONSECUTIVE
    S-B NUMBER                                         EXHIBIT                                        PAGE NUMBER
       <S>          <C>                                                                                   <C>
       2.1          Stock Purchase Agreement dated July 29, 1994 (1)<F1>                                  N/A
       3.1          Articles of Incorporation, as amended (2)<F2>                                         N/A
       3.2          Amended Bylaws (9)<F9>                                                                N/A
       4.1          Form of Warrant Agreement (3)<F3>                                                     N/A
       10.1         Stock Exchange Agreement dated April 29, 1988, between the Company                    N/A
                    and the selling shareholders of First West Financial Services, Inc. and First
                    West Life Insurance Company (4)<F4>
       10.2         Supplemental Agreement dated June 17, 1988, between the Company and                   N/A
                    the selling shareholders of First West Financial Services, Inc. (4)<F4>
       10.3         Order of John Kezer, Insurance Commissioner of the State of Colorado                  N/A
                    dated June 29, 1988 (4)<F4>
       10.4         Supplemental  Agreement (A) dated June 21, 1988, between the
                    Company  N/A and the  selling  shareholders  of  First  West
                    Financial (4)<F4>


                                       10

<PAGE>

<CAPTION>

    REGULATION                                                                                        CONSECUTIVE
    S-B NUMBER                                         EXHIBIT                                        PAGE NUMBER
       <S>          <C>                                                                                   <C>
       10.5         Promissory Note payable to Joseph T. Flynn, Dennis G. Haley, and Donald               N/A
                    Yee (5)<F5>
       10.6         Promissory Note payable to the Company from Joseph T. Flynn and                       N/A
                    Jacqueline M. Flynn (5)<F5>
       10.7         Real estate conveyance documents for purchase of 7860 E. Berry Place (6)<F6>          N/A
       10.8         Stock Purchase Agreement with Philip A. Bates dated December 1, 1993                  N/A
                    (7)<F7>
       10.9         Settlement Agreement and Mutual General Release by and between Joseph                 N/A
                    T. Flynn, Jacqueline M. Flynn, Capital Reserve Corporation,  and Ralph
                    Newton (8)<F8>
      10.10         Contract to Buy and Sell Real Estate for sale of 7860 East Berry Place.               N/A
                    (10)<F10>
      10.11         Settlement Agreement (11)<F11>                                                        N/A
      10.12         Sub-Contracting Agreement with Columbia Financial Group (12)<F12>                     N/A
      10.13         Management Agreement with Mr. Loder                                                    27
        27          Financial Data Schedule                                                                34
----------------------------
<FN>
<F1>
(1)      Incorporated by reference to the Exhibits filed with the Company's Form 8-K dated October 14, 1994.

<F2>
(2)      Incorporated  by reference to the  Exhibits  previously  filed with the
         Company's Annual Report on Form 10-K for the fiscal year ended December
         31, 1990.

<F3>
(3)      Incorporated  by  reference to the  Exhibits  filed with the  Company's
         Registration Statement on Form S-18, Registration No. 33-21118-D.

<F4>
(4)      Incorporated by reference to the Exhibits filed with the Company's Form 8-K dated June 30, 1988.

<F5>
(5)      Incorporated  by reference to the  Exhibits  previously  filed with the
         Company's Annual Report on Form 10-K for the fiscal year ended December
         31, 1988, as amended by Form 8 Amendment No. 1, dated May 15, 1989.

<F6>
(6)      Incorporated  by reference to the  Exhibits  previously  filed with the
         Company's Annual Report on Form 10-K for the fiscal year ended December
         31, 1991.

<F7>
(7)      Incorporated  by reference to the  Exhibits  previously  filed with the
         Company's  Annual  Report on Form  10-KSB  for the  fiscal  year  ended
         December 31, 1993.

<F8>
(8)      Incorporated  by reference to the  Exhibits  previously  filed with the
         Company's  Quarterly  Report on Form 10- QSB for the quarter ended June
         30, 1996.

<F9>
(9)      Incorporated  by reference to the  Exhibits  previously  filed with the
         Company's  Annual  Report on Form  10-KSB  for the  fiscal  year  ended
         December 31, 1994.

<F10>
(10)     Incorporated  by reference to the  Exhibits  previously  filed with the
         Company's  Quarterly  Report  on Form  10- QSB  for the  quarter  ended
         September 30, 1996.

                                       11

<PAGE>


<F11>
(11)     Incorporated  by reference to the  Exhibits  previously  filed with the
         Company's  Annual  Report  on Form 10-  KSB/A  Amendment  No. 1 for the
         fiscal year ended December 31, 1996.

<F12>
(12)     Incorporated  by reference to the  Exhibits  previously  filed with the
         Company's  Quarterly  Report  on Form  10- QSB  for the  quarter  ended
         September 30, 1997.

</FN>
</TABLE>

         (b)      The  following  reports on Form 8-K were filed during the last
                  quarter of the period covered by this report:

                  1.       Form 8-K dated  October 6, 1998  reporting  the Stock
                           Purchase  Agreement between Mr. Loder, Mr. Newton and
                           Mrs. Newton,  under Item 1. Changes in Control of the
                           Registrant.



                                       12

<PAGE>



                                   SIGNATURES

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



Dated: April 14, 1999                   By:/S/GLEN C. LODER
                                               Glen C. Loder, President

         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/GLEN C. LODER                                              April 14, 1999
Glen C. Loder, Chairman of the Board of
Directors and President (Principal Executive,
Financial and Accounting Officer)



/S/SHARON M. PATMORE                                          April 14, 1999
Sharon M. Patmore, Director and Secretary


20397.1


                                       13

<PAGE>












                            FINANCIAL STATEMENTS

                                    AND

                        INDEPENDENT AUDITORS' REPORT

                        CAPITAL RESERVE CORPORATION

                             December 31, 1998


                                       F-1

<PAGE>









                              C O N T E N T S


                                                                    PAGE

Independent Auditors' Report                                        F-3

Consolidated Financial Statements

      Balance Sheet                                                 F-4

      Statements of Operations                                      F-5

      Statements of Stockholders' Equity                            F-6

      Statements of Cash Flows                                      F-7

Notes to Consolidated Financial Statements                          F-8 to F-13


                                      F-2

<PAGE>








                        INDEPENDENT AUDITORS' REPORT


Board of Directors
Capital Reserve Corporation


      We have audited the  accompanying  consolidated  balance  sheet of Capital
Reserve  Corporation  as of December  31,  1998,  and the  related  consolidated
statements of operations,  stockholders'  equity, and cash flows for each of the
two years in the period ended December 31, 1998. These financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

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

      In our opinion, the financial statements referred to above present fairly,
in all material respects,  the financial position of Capital Reserve Corporation
as of December 31, 1998,  and the results of its  operations  and its cash flows
for each of the two years in the period ended  December 31, 1998,  in conformity
with generally accepted accounting principles.

      The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial  statements,
the Company  incurred a net loss from  operations of $43,331 for 1998 and it has
incurred  substantial  net losses for each of the past two years. As of December
31, 1998, the Company had no source of operating revenues. These factors and the
others discussed in Note 8, raise  substantial doubt about the Company's ability
to continue as a going  concern.  The  financial  statements  do not include any
adjustments  relating  to the  recoverability  and  classification  of  recorded
assets, or the amounts and classification of liabilities that might be necessary
in the event the Company cannot continue in existence.





                                             /S/MILLER AND MCCOLLOM


Denver, Colorado
March 31, 1999

                                       F-3
<PAGE>


                           CAPITAL RESERVE CORPORATION
                           CONSOLIDATED BALANCE SHEET
                             DECEMBER 31, 1998

                                     ASSETS

CURRENT ASSETS
  Cash and cash equivalents (Note 1)                                  $ 11,517

      Total current assets                                              11,517
                                                                    ------------

      Total assets                                                    $ 11,517
                                                                    ============

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
  Accounts payable                                                     $ 4,614
  Accounts payable - related party (Note 2)                              8,374
                                                                    ------------

      Total current liabilities                                         12,988
                                                                    ------------


COMMITMENTS AND CONTINGENCIES (Note 3)


STOCKHOLDERS' DEFICIT (Notes 1, 4 and 5)
  Class A common stock - authorized 20,000,000 shares
   of no par value; issued and outstanding
   796,045 shares                                                    3,158,162
  Class B preferred stock - authorized 250,000 shares
   of no par value; issued and outstanding
   250,000 shares                                                       50,000
  Accumulated deficit                                               (3,209,633)
                                                                    ------------

      Total stockholders' deficit                                       (1,471)
                                                                    ------------

Total liabilities and stockholders' deficit                           $ 11,517
                                                                    ============

      The accompanying notes are an integral part of these statements.

                                    F-4

<PAGE>


                           CAPITAL RESERVE CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                 Year Ended December 31,
                                                 -------------------------
                                                    1998         1997
                                                 -----------  ------------

Revenue
  Insurance residuals                              $ 2,692      $ 17,938
  Interest and dividends                                28         1,776
  Investment gain (losses)                          (2,294)       27,565
  Loss on sale of fixed assets                     (13,813)      (13,397)
  Other                                              9,319        19,888
                                                 -----------  ------------

      Total revenues                                (4,068)       53,770
                                                 -----------  ------------

Expenses
  General and administrative (Notes 2 and 3)        39,263       207,687
                                                 -----------  ------------

      Total expenses                                39,263       207,687
                                                 -----------  ------------

      (Loss) before income taxes                   (43,331)     (153,917)
      Income taxes                                       -             -
                                                 -----------  ------------


Net (loss)                                       $ (43,331)   $ (153,917)
                                                 ===========  ============

Net (loss) per common share (Note 1)
  Continuing operations                           $  (.05 )     $   (.28)
                                                 ===========  ============


        The accompanying notes are an integral part of these statements.

                                       F-5

<PAGE>

<TABLE>

                           CAPITAL RESERVE CORPORATION
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                     YEARS ENDED DECEMBER 31, 1998, AND 1997


<CAPTION>
                                Class A                    Class B
                                 Stock                      Stock
                                 Common                   Preferred
                        -------------------------  ------------------------
                                                                             Accumulated
                          Shares       Amount       Shares       Amount        Deficit

<S>                     <C>          <C>            <C>         <C>          <C>         
December 31, 1996          546,045   $  3,138,102     250,000     $ 50,000    $(3,012,385)
Net (loss)                       -              -           -            -       (153,917)
                        -----------  -------------  ----------  -----------  --------------

December 31, 1997          546,045      3,138,102     250,000       50,000     (3,166,302)
Issuance of common
  stock net of
offering
    cost of $4,940         250,000         20,060           -            -              -
Net (loss)                       -              -           -            -        (43,331)
                        -----------  -------------  ----------  -----------  --------------

December 31, 1998          796,045    $ 3,158,162     250,000     $ 50,000    $(3,209,633)
                        ===========  =============  ==========  ===========  ==============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       F-6

<PAGE>


                           CAPITAL RESERVE CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                       Year Ended December 31,
                                                      --------------------------
                                                         1998          1997
                                                      ------------  ------------

Operating activities:
  Net (loss) from continuing operations                $ (43,331)   $ (153,917)
                                                      ------------  ------------
  Reconciling adjustments
   Depreciation and amortization                             964         9,947
   Loss on equipment sales                                13,813        13,397
   (Gain) loss on investments                              2,294       (27,565)
   Partnership loss                                       11,175             -

   Changes in operating assets and liabilities
     Current assets                                          351        76,840
     Accounts payable and accrued liabilities            (27,969)     (196,878)
                                                      ------------  ------------

      Total adjustments                                      628      (124,259)
                                                      ------------  ------------

      Net cash (used for) continuing operations          (42,703)     (278,176)
                                                      ------------  ------------

Investing activities:
  Purchase of investments                                 (1,893)      (47,545)
  Proceeds from sale of investments                       21,462        96,703
  Purchase of property and equipment                           -        (8,109)
  Proceeds from sale of equipment                          5,843        16,500
                                                      ------------  ------------

   Net cash (used for) provided by
     investing activities                                 25,412        57,549
                                                      ------------  ------------

Financing activities:
  Issuance of common stock                                25,000             -
  Offerring costs                                         (4,940)
                                                      ------------  ------------

      Net cash (used for) financing activities            20,060             -
                                                      ------------  ------------

Net change in cash and cash equivalents                    2,769      (220,627)
Cash and cash equivalents at beginning of year             8,748       229,375
                                                      ------------  ------------

Cash and cash equivalents at end of year                $ 11,517      $  8,748
                                                      ============  ============

        The accompanying notes are an integral part of these statements.

                                       F-7


<PAGE>


                           CAPITAL RESERVE CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1998

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant  accounting  policies of Capital Reserve Corporation
(CRC)  is  presented  to  assist  in  understanding   the  Company's   financial
statements.  The  financial  statements  and  notes are  representations  of the
Company's  management who is responsible  for their  integrity and  objectivity.
These accounting  policies conform to generally accepted  accounting  principles
and  have  been  consistently  applied  in  the  preparation  of  the  financial
statements.

ORGANIZATION

The Company was  incorporated  in Colorado in 1982,  and  operated an  insurance
agency and a life insurance  company.  The insurance  business was sold in 1994.
The life insurance agency was retained, but is currently inactive.

The  Company  has  minimal  operating  revenues  after  the  sale of its  rental
property.  Management  had attempted to start a financial  consulting and public
relations business.  The Company entered into its first consulting  agreement in
January 1997.  (See Note 9.) Management is also  exploring  various other future
business opportunities.

USE OF ESTIMATES

The  preparation  of the  Company's  financial  statements  in  conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions that affect the amounts  reported in these financial  statements
and accompanying notes. Actual results could differ from those estimates.

BASIS OF CONSOLIDATION

The  consolidated  financial  statements  include  CRC,  and  its  wholly  owned
subsidiary,  Wall Street Investment  Corporation (Wall Street).  All significant
intercompany accounts and transactions have been eliminated.

DEPRECIATION

Depreciation  has been  provided  in amounts  sufficient  to relate the costs of
depreciable  assets to operations over their estimated useful lives  principally
on  the  straight-line  method.  Real  estate  is  depreciated  over  thirty  to
thirty-nine years, and other property is depreciated over three to seven years.

CASH AND CASH EQUIVALENTS

For purposes of the statements of cash flows,  the Company  considers all highly
liquid debt instruments with an original  maturity of three months or less to be
cash equivalents.


                                       F-8


<PAGE>


                           CAPITAL RESERVE CORPORATION
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                                DECEMBER 31, 1998

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

MARKETABLE SECURITIES

The Company's  securities  investments  that are bought and held principally for
the  purpose  of  selling  them in the  near  term  are  classified  as  trading
securities.  Trading  securities  are  recorded on the balance  sheet in current
assets at their  fair  value as quoted by the  broker.  The change in fair value
during the year is included in earnings.

TREASURY STOCK

Treasury  stock  has been  treated  as  common  stock  redeemed  and  cancelled,
consistent with the Colorado Revised Statutes.

EARNINGS (LOSS) PER SHARE

Earnings  (loss) per share of common  stock is  computed  based on  796,045  and
546,045  weighted average number of common shares  outstanding  during the years
ended December 31, 1998, and 1997 respectively. Fully diluted earnings per share
are not presented because they are anti-dilutive.

NOTE 2 - TRANSACTIONS - RELATED PARTY

CHANGE IN CONTROL

On October 6, 1998,  Glen C. Loder  entered into an agreement  with Ralph W.
Newton,  Jr.,  the  former  president  and  director  of  the  Company,  and
Patricia L.  Newton,  Mr.  Newton's  wife to  purchase  their  ownership  of
140,000  Class B Preferred  Stock for $40,000 plus options to purchase up to
200,000  shares of the  Company's  common stock at a price of $.25 per share
which Mr.  Loder will cause the  Company to issue.  The option was issued in
1999.  Mr.  Loder  agreed  to cause  the  Company  to  engage  in a  private
placement of its common stock,  of which the first  $40,000  raised would be
used  to  pay a  management  fee to Mr.  Loder.  Mr.  Loder  then  used  the
management  fee to pay the  purchase  price.  This  amount was paid in 1999.
(See Note 5.)

On October 6, 1998,  the Company  entered into a management  agreement  with Mr.
Loder.  The  agreement  provides  that Mr.  Loder shall serve as Chairman of the
Board of Directors and President of the Company, until terminated by the Company
or Mr. Loder.  Under the terms of the  agreement,  Mr. Loder will receive $5,000
per month plus expenses.

During 1997,  the Company sold an automobile to a former  officer of the Company
and recognized a loss on this transaction.

                                       F-9

<PAGE>


                           CAPITAL RESERVE CORPORATION
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                                DECEMBER 31, 1998

NOTE 3 - COMMITMENTS AND CONTINGENCIES

The Company leased office space under a  non-cancellable  operating  lease which
was to expire July 1998. In December 1997,  the Company and the landlord  agreed
to terminate  the lease on February  28, 1998.  Rent expense for the years ended
December 31, 1998, and 1997 was $2,806 and $15,757.

NOTE 4 - STOCKHOLDERS' EQUITY

The holders of the shares of Class A common  stock and Class B  preferred  stock
are  entitled  to one vote per  share,  and each  class  shares  equally  in any
dividends  declared.  Neither class of stock has preemptive rights. In the event
of dissolution  or liquidation of the Company,  the holders of shares of Class A
common  stock  shall be paid a  liquidation  price of $.10 per share  before any
assets are distributed to the holders of shares of Class B preferred  stock. Any
remaining  amount shall be distributed pro rata to the holders of shares of both
Class A common stock and Class B preferred stock. The holders of shares of Class
B preferred  stock shall have the right to elect a  conversion  into .8 share of
Class A common stock (with  appropriate  adjustment of the conversion  ratio for
any stock splits,  stock dividends,  or  recapitalization)  at the option of the
holders of the majority of the Class B preferred stock.

NOTE 5 - PRIVATE PLACEMENT OF COMMON STOCK

The Company offerred for sale up to 5,000,000 shares of its Class A common stock
at $0.10 per  share.  The  offering  provided  for a $50,000  minimum  on a best
efforts basis  through its officers and directors on such sales.  As of December
31, 1998, the Company had sold 250,000 shares for $25,000 and incurred $4,940 in
commission and offering expense.  As of March 1999, the Company had sold a total
of 865,000  shares.  The Company  used the  proceeds of the stock sales prior to
meeting the $50,000  minimum as provided for the private  placement  summary and
therefore certain buyers have the right to rescind their purchase of stock.



                                      F-10

<PAGE>


                           CAPITAL RESERVE CORPORATION
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                                DECEMBER 31, 1998

NOTE 6 - INCOME TAXES

There is no  federal  or state  income tax  expense  related  to the  continuing
operations  of the Company  for the years ended  December  31,  1998,  and 1997.
Capital loss carryforwards of $20,000 were used for 1997 and 1996.
The Company has loss carryforwards as follows:

                                                         Net
                                        Capital       Operating
                                        Losses         Losses
                                      ------------   ------------

Expiration Years

      1999                            $ 1,100,000      $       -
      2000-2004                                 -        900,000
      2005-2009                                 -        200,000
      2010                                      -        200,000
      2011                                      -        400,000
      2012                                      -        150,000
      2013                                      -         43,000
                                      ------------   ------------

                                      $ 1,100,000    $ 1,893,000
                                      ============   ===========

As  discussed  in Note 2, the Company had a change in  ownership  in 1999.  This
change could limit the amount of net operating  losses that could be utilized by
the Company.

The net deferred tax assets due to loss carryforwards are as follows:

                                         1998           1997
                                      ------------   ------------

Deferred tax asset                    $1,070,000     $1,055,000
Valuation allowance                   (1,070,000)    (1,055,000)
                                      ------------   ------------

                                         $     -        $     -
                                      ============   ============



                                      F-11

<PAGE>


                           CAPITAL RESERVE CORPORATION
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                                DECEMBER 31, 1998

NOTE 7 - FINANCIAL INSTRUMENTS

MARKETABLE SECURITIES

The carrying amount of marketable  trading  securities in common stocks is equal
to their fair value.  Cost,  for  purposes of  calculating  gains or losses,  is
determined by specific identification.

                                                       1998         1997
                                                     ----------  -----------

Investment (losses) gains are detailed as follows:

Realized gains (losses) on common stock              $ (2,294)     $ 24,384
Increase in unrealized gains (losses)
  on common stock                                           -         3,181
                                                     ----------  -----------

Investment gains (losses)                            $ (2,294)     $ 27,565
                                                     ==========  ===========

OTHER INVESTMENTS

The carrying amount of other investments approximates fair value as estimated by
management.

NOTE 8 - GOING CONCERN

The  accompanying  financial  statements  have been prepared in conformity  with
generally accepted accounting principles, which contemplates continuation of the
Company as a going  concern.  However,  the  Company has  sustained  substantial
operating  losses in recent  years.  In addition,  the Company has no sources of
operating revenues as of December 31, 1998.  Management is currently looking for
an  operating  company to merge with and  raising  funds by selling  stock via a
private placement. (See Note 5.)

NOTE 9 - SUBCONTRACTING AGREEMENT

On October 22, 1997, Wall Street entered into a  sub-contracting  agreement with
Columbia Financial Group (Columbia)  pursuant to which Wall Street has agreed to
provide public  relations  services in connection with Columbia's  contract with
Winner's Internet Network,  Inc.  (Winners).  In consideration for Wall Street's
services, Columbia has agreed to transfer to Wall Street stock purchase warrants
for 50,000 shares of Winner's  stock,  with a purchase price of $2.50 per share,
exercisable  for 12 months.  The Company  has not  received  the stock  purchase
warrants from Columbia.  Columbia has transferred  10,000 shares of free trading
Winner's common stock to Wall Street.  Columbia must also transfer an additional
6,000 shares of Winner's common stock to Wall Street,  at a rate of 1,000 shares
every thirty days, beginning December 6, 1997.

                                      F-12

<PAGE>


                           CAPITAL RESERVE CORPORATION
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                                DECEMBER 31, 1998

NOTE 9 - SUBCONTRACTING AGREEMENT, CONTINUED

Wall Street has  received  only  10,000  shares of Winner's  Common  Stock,  the
agreement was terminated and the Company later sold the stock.

NOTE 10 - YEAR 2000 COMPLIANCE

The only software program the Company utilizes is a general ledger program.  The
Company does not anticipate any compliance  problems with its software  programs
or vendors.





                                      F-13


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