<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                   FORM 10-K


     [X]       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

                                      OR

     [_]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
           FOR THE TRANSITION PERIOD FROM __________ TO ____________

                        COMMISSION FILE NUMBER: 0-28067

                              FIRST RESERVE, INC.
       (Exact name of small business issuer as specified in its charter)

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

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


      Registrant"s telephone number, including area code: (305) 667-8871

       Securities registered pursuant to Section 12(b) of the Act: None

          Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, no par value
                          --------------------------
                               (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes   X    No _____
                                       -----

Indicate by check mark if disclosure of delinquent filers in response to Item
405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K. [_]
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                              FIRST RESERVE, INC.


                               TABLE OF CONTENTS

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                                                         PART I


Item 1.          Business ............................................................................         1
Item 2.          Properties ..........................................................................         8
Item 3.          Legal Proceedings ...................................................................         8
Item 4.          Submission of Matters to a Vote of Security Holders .................................         8

                                                         PART II

Item 5.          Market for Registrant's Common Stock Equity and Related Stockholder Matters..........          9
Item 6.          Selected Financial Data..............................................................          9
Item 7.          Management"s Discussion and Analysis of Financial Condition and
                 Results of Operations ...............................................................          9
Item 7A.         Quantitative and Qualitative Disclosure about Market Risk............................         11
Item 8.          Financial Statements and Supplementary Data .........................................         11
Item 9.          Changes in and Disagreements with Accountants on Accounting
                      and Financial Disclosures ......................................................         11

                                                         PART III


Item 10.         Directors and Executive Officers of the Registrant ..................................         11
Item 11.         Executive Compensation ..............................................................         13
Item 12.         Security Ownership of Certain Beneficial Owners and Management ......................         14
Item 13.         Certain Relationships and Related Transactions ......................................         15

                                                         PART IV

Item 14.         Exhibits, Financial Statement Schedules and Reports on Form 8-K .....................         15
</TABLE>

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                                    PART I

ITEM 1.    BUSINESS

GENERAL

First Reserve, Inc. (the "Company" or "Registrant") is a holding company whose
primary operations are through Esslinger-Wooten-Maxwell, Inc. ("EWM"), a
wholly-owned subsidiary, and a general real estate brokerage firm. EWM was
originally founded in 1964. Allen C. Harper and Ronald A. Shuffield, the current
principals of the Company, purchased EWM in April 1984 through First Reserve,
Inc., a Florida corporation ("First Reserve Florida"), which was established for
the purpose of acquiring EWM. First Reserve Florida was a holding company that
wholly-owned EWM along with certain other related entities. In addition, a
growing amount of the Company's operations are conducted through its
wholly-owned subsidiaries, Embassy Financial Services, Inc. and Columbia Title
of Florida, Inc.

History

Pursuant to a Stock Purchase Agreement dated January 7, 1998, certain
shareholders of First Reserve Florida acquired 83.3% of the total shares of
common stock (5,000,000 shares) of Phoenix Financial Reporting Group, Inc.
("PFRG"), a public holding company with no operations. The PFRG shares were
acquired from four different shareholders for an aggregate purchase price of
$80,000. The remaining 1,000,000 shares of PFRG common stock were owned by 219
shareholders that owned shares in PFRG prior to the consummation of the Stock
Purchase Agreement. By acquiring 83.3% of PFRG, the shareholders of First
Reserve Florida acquired control of PFRG.

PFRG was organized under the laws of the State of Arizona on September 7, 1993
under the name El Squared, Inc. On August 31, 1994, El Squared, Inc. changed its
name to PFRG. On February 2, 1998, PFRG changed its name to First Reserve, Inc.
("FRI"). On June 17, 1998, the Company transferred it domicile from Arizona to
Florida, effectively becoming a Florida corporation. Our headquarters are
located at 1360 South Dixie Highway, Coral Gables, Florida 33146. Our telephone
number is (305) 667-8871 and the fax number is (305) 667-0781.

Subsequent to the above-described acquisition, FRI issued additional shares of
common stock. In addition, pursuant to an Agreement of Tax-Free Reorganization
(the "Exchange Merger Agreement"), dated as of April 1, 1998, the shareholders
of First Reserve Florida and the shareholders of Embassy Financial Services,
Inc. ("Embassy"), a licensed residential mortgage lender that originates loans
in an agency capacity on behalf of other mortgage lenders, exchanged all of the
shares of common stock of First Reserve Florida and Embassy respectively, for
shares of the Company"s common stock, with the result being that First Reserve
Florida and Embassy became wholly-owned subsidiaries of FRI. This exchange was
intended to qualify as a tax-free reorganization pursuant to Section 351 of the
Internal Revenue Code of 1986, as amended. After the completion of the share
exchange, First Reserve Florida was merged into FRI and all the assets of First
Reserve Florida became assets of FRI.

Effective May 1, 1998, EWM acquired Byrne-Rinehart & Co. ("Byrne"), a Miami,
Florida real estate brokerage operation. The acquisition was consummated through
a merger pursuant to a Plan of Reorganization and Merger Agreement dated as of
May 1, 1998 (the "Byrne Merger Agreement"). Pursuant to the Byrne Merger
Agreement, Byrne merged with and into EWM, with EWM being the surviving
corporation. The merger was structured as a reorganization to comply with the
terms of Section 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended.

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Under the terms of the Byrne Merger Agreement, all of the shares of common stock
of Byrne were converted into and exchanged for an aggregate of 400,000 shares of
common stock of the Company and $300,000 cash. In connection with the merger,
Thomas E. Byrne was hired as President of EWM"s Commercial Sales Division
pursuant to a three-year employment agreement and the sales associates of Byrne
were retained by EWM. As of May 1, 1998, all of Byrne"s pending real estate
transactions had been administered by EWM and EWM was entitled to the brokerage
proceeds therefrom.

Effective September 30, 1998, EWM acquired Gerard International Realty, Inc.
("Gerard"), a Miami Beach, Florida real estate brokerage operation. The
acquisition was consummated through a merger pursuant to a Plan of
Reorganization and Merger Agreement dated as of September 30, 1998 (the "Gerard
Merger Agreement"). Pursuant to the Gerard Merger Agreement, Gerard merged with
and into EWM, with EWM being the surviving corporation. The merger was
structured as a reorganization to comply with the terms of Section 368(a)(2)(D)
of the Internal Revenue Code of 1986, as amended.

Under the terms of the Gerard Merger Agreement, all of the shares of common
stock of Gerard were converted into and exchanged for up to 500,000 shares of
the Company"s common stock, in the ratio of (i) 3,000 shares of the Company"s
common stock for each share of Gerard common stock and (ii) 2,000 shares of the
Company"s common stock for each share of Gerard common stock, which shall be
subject to and released from escrow in accordance with the terms and conditions
set forth in the Gerard Merger Agreement. As of September 30, 1998, all of
Gerard"s pending real estate transactions had been administered by EWM and EWM
was entitled to the brokerage proceeds therefrom.

On March 31, 1999 the Company purchased all the stock of Columbia Title of
Florida, Inc. ("Columbia") in a business combination accounted for as purchase.
Columbia is a title company engaged in the business of closing real estate and
mortgage loan transactions, primarily in the South Florida area. Columbia has
two branches, Miami and Key Largo, Florida. Under the terms of the agreement,
the shareholder of Columbia received $100 for the stock of Columbia. The
agreement also provided for additional consideration if the assets of the Key
Largo branch were sold within ninety days of the acquisition date. If this
condition was met, the former shareholder of Columbia would receive eighty-five
percent (85%) of the net proceeds of the sale of the assets of the Key Largo
branch. If the sale did not effectuate within the ninety days, all the assets of
the Key Largo branch would be transferred back to the former shareholder of
Columbia. The sale of the assets of the Key Largo branch was made within the
ninety day period. As a result, additional consideration of $191,350 for the
acquisition of the stock was recorded. The total cost of the acquisition was
approximately $191,350. Goodwill of approximately $257,340 resulting from this
transaction is being amortized on the straight-line method over 20 years. As a
result of this merger, accounted for as a purchase, assets of $104,267, goodwill
of $257,340, and liabilities of $170,257 were recorded.

On September 30, 1999, the Company issued 200,000 shares of its common stock to
the former shareholders of Gerard. These shares were previously held in escrow
as discussed above. As a result, common stock and goodwill increased by
$200,000.

On September 1, 2000, EWM purchased substantially all the assets of Ross &
Associates, Inc. ("Ross") for $186,300 in stock of the Company. As a result of
this acquisition, accounted for as a purchase, property, plant and equipment of
$46,875, accounts receivable of $41,500 and other assets of $97,925 were
recorded. Ross was primarily engaged in the same activity as EWM. Under the
terms of the agreement, the Ross sole shareholder received 138,000 shares of
common stock of the Company on the date of the acquisition. An additional
112,000 "contingent" shares of common stock of the Company will be issued
pending future gross commission income to be generated by the former shareholder
of Ross from January 1, 2001 through

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December 31, 2001. At December 31, 2001, the former shareholder of Ross had met
the gross commission requirement. These additional 112,000 shares will be issued
during 2002. Due to the contingent nature of these shares, the Company will
record them as additional goodwill upon issuance of the shares. The total
cost of the acquisition, excluding the contingent shares, was $186,300.

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

The Company created a new subsidiary, First Reserve Insurance, Inc. ("FRINS") in
2000. FRINS is principally engaged in insurance brokerage. On September 13,
2000, FRINS signed an exclusive agreement with an insurance broker to market and
sell insurance products to the clients of EWM and the Company. These insurance
products include, but are not limited to, property and casualty, automobile,
life and health insurance policies.

Operations

Our primary operations are conducted through Esslinger-Wooten-Maxwell, Inc., our
wholly-owned subsidiary. EWM is a Florida licensed real estate brokerage firm
with eleven offices, which engages approximately 700 sales associates and
support staff, in Miami-Dade and Broward Counties. In 2001, EWM closed 4,210
real estate sale transactions and 782 rental transactions having a gross dollar
value of $1,510,000,000. The average home price was $326,000.

EWM is member of the Realtor Association of Greater Miami and the Beaches, the
Realtor Association of Dade County, the Realtor Association of Greater Ft.
Lauderdale and the Florida Keys Association of Realtors. EWM offers its services
in eleven southern Florida locations. EWM operates from eight offices located in
Miami Dade County, Florida: Coral Gables, Coconut Grove, Ponce de Leon, South
Miami, Miami Beach, Key Biscayne, the Brickell area and Pinecrest/Palmetto area;
and three offices located in Broward County, Florida: Plantation, Weston and Las
Olas/Ft. Lauderdale. EWM provides the following services:

                           .        Residential Brokerage
                           .        Commercial Brokerage
                           .        Relocation
                           .        Property Management and Leasing
                           .        International Brokerage
                           .        Business Brokerage

We believe that our expansion into Broward County will allow EWM to take
advantage of the burgeoning growth in the residential real estate market in
Broward as well as the much sought after relocation transferee market.

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Residential Brokerage

EWM acts as a broker or agent in residential real estate transactions. EWM
markets homes in every price range throughout Miami-Dade County, with a market
niche in luxury properties (over $500,000).

All customers who list their property for sale with EWM must sign an Exclusive
Right of Sale Listing Agreement, which provides that EWM shall be the exclusive
sales agent for a set period of time. Our residential brokerage services offered
to sellers of real estate include:

                           .   Pricing a property based on market knowledge and
                               current research
                           .   Preparation of Seller"s Net Sheet, setting forth
                               costs of sale and net profit
                           .   Suggestions for preparing a property for sale
                           .   Appointment options
                           .   Inclusion of all properties in the computerized
                               South Florida Regional
                           .   Pre-qualifying of potential buyers" ability to
                               purchase
                           .   General advice and assistance in preparing forms
                               and attending closing of transaction
                           .   Negotiating the terms and conditions of the sales
                               and purchase contract
                           .   Conducting "open houses" for properties
                           .   Obtaining tenants

In exchange for these services, the customer pays our commission which is
typically fixed at 6% of the sales price, of which 3% is paid to the "listing"
broker and 3% is paid to the "selling" broker, which amounts are then divided
between the Company and the participating sales associate.

EWM assists buyers of real estate by providing the following services:

                           .   Locating a property that meets personal and
                               financial objectives
                           .   Showing the buyer properties
                           .   Assistance with inspections, repairs, and
                               obtaining appraisals, etc.
                           .   Negotiating the terms and conditions of the sales
                               and purchase contract
                           .   Assisting the buyer in preparing for and
                               attending closing of transactions.

In exchange for these services, the customer pays our commission which is
generally fixed at 6% of the sales price.

The agreement usually executed by the customer (the buyer/seller) of residential
real estate is the form Contract for Sale and Purchase that is approved by the
Florida Association of Realtors and the Florida Bar and is customarily used in
the State of Florida. Under Florida real estate law, EWM does not represent the
buyer or seller directly, but rather operates as a "transaction" broker.

Commercial Brokerage

EWM"s commercial brokerage services provide specialized services to third
parties, including financial institutions, investors, developers and landowners.
EWM"s services include but are not limited to:


                           .   Commercial Sales and Leasing
                           .   Property Owner Representation
                           .   Tenant Representation

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                           .   Corporate Relocations
                           .   Project Management
                           .   Market Surveys
                           .   Project Feasibilities
                           .   Computer Financial Models
                           .   Construction and Permanent Loan Packaging
                           .   Land Acquisition and Assemblage
                           .   Workouts of Challenging Properties
                           .   Real Estate Consulting

Relocation

EWM has an extensive corporate relocation division, specializing in corporate
relocations. EWM is affiliated with several of the industry"s largest relocation
networks. In particular, EWM maintains a Strategic Alliance Agreement with the
Cendant Mobility Relocation Network (successor to PHH Relocation Network)
("Cendant"), which we believe is the nation"s largest relocation organization,
and provides EWM with membership in Cendant"s nationwide network of over 350
other suppliers of relocation services. Ronald A. Shuffield, EWM"s President,
served on the PHH National Advisory Council (predecessor to Cendant) from
1993-1996.

We believe the South Florida area is strongly positioned for corporate
relocations. The area serves as a hub for domestic and international business.
Because of the favorable geographic location of Miami-Dade County, coupled with
its trained commercial and industrial labor force, many Fortune 500 companies
have a Latin American and Caribbean base in Miami, Florida. According to
Miami-Dade County statistics obtained from the Miami-Dade County Beacon Council
(the county"s economic development council), in Coral Gables, Florida (our main
office location) the following corporations have operations: Texaco West
Africa/Latin America, Hilton Hotel-International, Apple Computer and IBM. In
addition, such major corporations as Burger King and Eastman Kodak have
significant South Florida operations. In order to capitalize on the growing need
to assist international executives, EWM has a division devoted solely to
assisting relocating executives.

The services that EWM provides in connection with corporate relocations
includes, but is not limited to, sales and marketing of a transferred employee"s
existing properties, assisting relocated employees in finding new properties,
education and school placement counseling, rental assistance, area tours,
short-term housing, financial service assistance, mortgage prequalification,
assistance with coordination of moving personal property, and personal and
repair service professionals, including a list of pre-qualified baby sitters,
interior design consultants and home repair specialists.

A referral fee equal of 25% to 30% of the selling commission received by EWM is
paid to the referring party for any business referred to EWM. All outgoing
referral fees earned by EWM are split between the referring associate and the
Company. All outgoing referrals must be placed through the Relocation Network.

Property Management

The Property Management Division of EWM serves as an agent for the property
owner, overseeing all facets of the leasing and management process, including
customary landlord activities.

EWM provides property management for single family homes, condominiums, and
apartment complexes.

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Specific property management services include:

          .    Collecting rent
          .    Accounting and bookkeeping services
          .    Regular property inspections
          .    Coordination of regular maintenance (lawn pool, service
               contracts, etc.)
          .    Contract work (paint, repairs, etc.)
          .    Customer services for tenants
          .    Consistent owner contact
          .    Showing rental properties to prospective tenants.

Mortgage Lending Services

Embassy is a licensed residential mortgage lender that specializes in
conventional, FHA, and VA first mortgages primarily in the South Florida area.
Embassy originates loans in an agency capacity on behalf of other mortgage
lenders. Beginning in 1999, Embassy began funding loans to be made in connection
with its mortgage banking operations. Each loan is backed by a permanent loan
"take-out commitment" from a national lender of residential financing. The loans
are purchased by the national lender once permanent financing is secured.
Embassy does not service these loans. Since the acquisition of Embassy in 1998,
its operations have had an increasing positive effect on the overall financial
results of the Company.

Title Company Services

Columbia is a title company engaged in the business of closing real estate and
mortgage loan transactions, primarily in the South Florida area. At the time of
its acquisition by the Company, Columbia was involved in the title insurance
business in South Florida for over 35 years. Columbia's title business has been
profitable since its acquisition, and has continued to contribute to the cash
flow of the Company's overall operations.

Market

The rate of home sales in Miami-Dade County, Florida for 2001 showed a marked
improvement over 2000. Analysts believe that strong consumer confidence, low
interest rates, weak inflation and a continued increase of international buyers
contribute to a very strong real estate market in South Florida. However, the
effects of the events of September 11, 2001 along with general economic
conditions led to a slowdown in growth.

According to Multiple Listing Service data, there were 23,313 existing home
sales in Miami-Dade County in 2001, compared to 23,529 in 2000 representing a 1%
decrease in sales for 2001.

While homes under $200,000 accounted for 76% of all homes sold in Miami-Dade
County in 2001, luxury homes continue to sell well in the region. In the past
year, EWM was involved in 207 home sale transactions in Miami-Dade County
through the Multiple Listing Service in the price range over $500,000. This
equals 14.3% of the 1,448 total Miami-Dade County transactions in this price
range through the Multiple Listing Service.

Marketing

We intend to undertake an aggressive growth strategy by engaging additional
sales associates for our brokerage operations throughout Southeast Florida to
increase market presence, sales volume and our geographic base. We intend to
continue our expansion of our mortgage brokerage services and title company
services across Southeast Florida.

The Company's services are marketed in a variety of outlets throughout South
Florida. EWM's marketing efforts include, without limitation, advertising in all
major newspapers, full-color magazine pictorials, targeted mailings, press
releases and inclusion of all properties in the county-wide Multiple Listing
Systems. EWM targets new sellers and buyers of its properties by placing
advertisements for its properties in each Sunday's Miami Herald Real Estate
Guide. Further, EWM mails its "Open House Sundays" literature monthly to over
92,000 potential customers in Miami-Dade and Broward counties. EWM provides its
associates with advertising dollar value credits, based on their property's
sales price, for use in various advertising means.

In addition to the above described traditional avenues of sales and marketing,
we and our executives and associates are extremely active members of the
community. EWM is a sponsor of such South Florida charities as the American Red
Cross, United Way, Junior Orange Bowl, Junior Achievement, the College
Assistance Program and the local arts and crafts festivals, just to name a few.
Further, EWM is a member of all local Chambers of Commerce, and is a trustee for
chambers in Miami, Coral Gables, and Ft. Lauderdale, Florida and is a member of
the University of Miami Citizens Board.

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Competition

All of the businesses in which we are engaged are highly competitive, especially
residential real estate brokerage services. Many of our competitors, in
particular those who benefit by affiliated franchising organizations, have
substantially greater financial resources than the Company. Many of our
competitors are also undertaking a growth strategy. In 2001, EWM maintained its
top position in total dollar sales of transactions for Miami-Dade County for
homes based upon the South Florida Regional Multiple Listing System data. We
believe that our ability to specialize in higher priced properties, coupled with
the quality of our services, knowledge and relative strength in the South
Florida market, positions us well with our competitors. The substantial amount
of competition is expected to continue, which may have an adverse affect on our
operations.

EWM believes it has a higher average sales price than that of its major
competitors. Its average residential sales price substantially exceeds the
average sales prices in Miami-Dade County. EWM sales for 2001 including all
residential, commercial and rentals from existing operations and acquisitions
and newly opened offices was approximately $1,510,000,000, a 16% increase from
2000. The total number of residential transactions closed for 2001 was 4,210.

Economic Factors

Our operations are directly dependent on the South Florida economy in general,
and the South Florida real estate market in particular. South Florida's real
estate market has been historically cyclical. Downturns in South Florida's
economy will likely have adverse affects on our business and operations.

Regulatory Issues

Our operations are subject to various federal, state and local laws and
regulations. EWM is licensed by the State of Florida Department of Business and
Professional Regulation to sell real estate in the State of Florida. In
addition, each of our real estate associates must be licensed with the State of
Florida Department of Business and Professional Regulation as a real estate
broker or real estate sales person. The licenses must be updated every two years
by passing an administered examination. We have made, and will continue to make,
expenditures to comply with such laws and regulations. We believe that our
operations are in compliance with all applicable material laws and regulations.
We do not believe that any laws or regulations currently in existence, or, to
the best of our knowledge any laws which are being proposed or contemplated,
will have an adverse affect on our financial condition or our operations.

The subsequent adoption or modification of state and local laws and regulations
imposing environmental controls, disclosure rules, zoning and other land use
restrictions may materially and adversely affect the marketability of real
estate, which would likely have a negative effect on our financial condition and
our operations. Additionally, there are various licensing requirements imposed
on us and our sales associates. While based on our experiences to date, the cost
of compliance has not had, and is not expected to have, a material effect on our
operations; however, changes in laws and regulations may give rise to additional
compliance costs that could have a material adverse effect on such operations.
Further, licenses may be revoked for a variety of reasons, including the
violation of regulations and the failure to maintain certain financial
requirements. Revocation of licenses would also have material and adverse affect
on our operations.

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Employees

As of December 31, 2001, we employ 99 persons full time as support staff and
engage 600 persons as sales associates, who are independent contractors. Of the
sales associates, 190 are based in our two Coral Gables offices, 20 are based in
our Coconut Grove Office, 90 are based in our Pinecrest/Palmetto office, 85 are
based in our South Miami office, 80 are based in our Miami Beach office, 20 are
based in our Brickell office, 15 are based in our Key Biscayne office, 30 are
based in our Plantation office, 55 are based in our Weston office and 15 are
based in our Las Olas/Ft. Lauderdale office. All sales associates are
independent contractors rather than our employees , which is a standard
structure in the real estate brokerage industry. We require that each associate
sign an Independent Contractor Status Agreement that is a Florida Association of
Realtors standard form.

All of our sales associates are paid by commission solely on the basis of closed
sales transactions. Typically, the share of a total commission is split evenly
between the listing broker and the selling broker, with each broker entitled to
a commission of approximately 3% of the property sales price for residential
listings and 5% for commercial, business brokerage and rental listings.
Approximately 40% of EWM sales are "in-house," where EWM represents both the
buyer and seller and therefore receives the full brokerage commission.

Reports to Security Holders

We intend to provide all of our shareholders with an annual report of our
operations, including audited financial statements, for the 12 month period
ended December 31, 2001.

The public may read and copy any materials that we have on file with the
Securities and Exchange Commission ("SEC") at the SEC's Public Reference Room at
450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.

ITEM 2.  PROPERTIES

Our facilities consist of eleven offices: (1) 11,930 square feet leased at our
principal office at 1360 S. Dixie Highway, Coral Gables, Florida 33146; (2)
7,468 square feet leased at 12651 S. Dixie Highway, Miami, Florida 33156; (3)
5,000 square feet leased at 419 Arthur Godfrey Road, Miami Beach, Florida 33140;
(4) 5,000 square feet leased office at 6150 S.W. 76 Street, South Miami,
Florida; (5) 6,400 square feet leased at 8500 West Broward Boulevard,
Plantation, Florida 33324; (6) 5,600 square feet leased at 4410 Weston Road,
Weston, Florida 33331; (7) 5,000 square feet leased at 4689 Ponce de Leon Blvd.,
Coral Gables, Florida 33146; (8) 1,450 square feet leased at 606-A Crandon
Blvd., Key Biscayne, Florida 33149; (9) 1,350 square feet leased at 671 Brickell
Key Drive, Miami, Florida 33131; (10) 2,200 square feet leased at 3560 Main
Highway, Coconut Grove, Florida 33133; and (11) 1,600 square feet leased at 1700
E. Las Olas Boulevard, Ft. Lauderdale, Florida 33301. In addition, Embassy
maintains an office (approximately 3,000 square feet) at 1390 S. Dixie Highway,
Coral Gables, Florida 33146 and Columbia maintains an office (approximately
4,500 square feet) at 1826 Ponce de Leon Blvd., Coral Gables, Florida 33134.

ITEM 3.  LEGAL PROCEEDINGS

We are currently not a party to any material litigation which is not incidental
to the ordinary course of our business and operations.

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

No matters were submitted to a vote of our security holders, through the
solicitation of proxies or otherwise, during the quarter ended December 31,
2001.

                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock is not currently quoted on any national exchange or other
public trading market.

There were 177 shareholders of record of our common stock on December 31, 2001.

We have not paid any dividends on our common stock and intend to retain all
earnings for use in our operations and to finance the development and the
expansion of our business. We do not anticipate paying any dividends on the
common stock in the foreseeable future. The payment of dividends is within the
discretion of the our Board of Directors. Any future decision with respect to
dividends will depend on future earnings, future capital needs and the
registrant's operating and financial condition, among other factors.

Item 6.  SELECTED FINANCIAL DATA.

The following table sets forth a summary of the selected financial information
for the Company. The information below should be read in conjunction with the
audited financial statements and with the information presented in Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations.

<TABLE>
<CAPTION>
                                        2001           2000           1999
                                        ----           ----           ----
<S>                                   <C>            <C>           <C>
Total Revenues                        $41,291,197    $32,829,214   $25,908,304

Income from Continuing Operations       1,693,093      1,385,729       345,457

Basic Earnings per Common Share              0.18           0.20          0.08

Weighted Average Common Shares          6,633,858      6,768,847     6,618,009

Total Assets                            9,687,764      7,520,830     4,990,348

Long-Term Liabilities                     572,260        743,130       955,125
</TABLE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included herein should be read in conjunction with the Consolidated
Financial Statements of First Reserve, Inc. and subsidiaries, as of December 31,
2001, and the related notes to the Consolidated Financial Statements, along with
the Consolidated Financial Statements of First Reserve, Inc. and subsidiaries as
of December 31, 2000 and December 31, 1999, and the related Notes to
Consolidated Financial Statements. The Company's Financial Statements have been
prepared in accordance with accounting principles generally accepted in the
United States and have been audited by the Company's independent accountants.

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

Results of Operations

Revenues. The Company's revenues increased approximately 25.8% for the year
ended December 31, 2001, over those for the year ended December 31, 2000.
Approximately $548,000 of the increase in revenues is attributable to the
opening of new real estate offices in Coconut Grove and Las Olas/Ft. Lauderdale
during 2001. The percentage increase resulted from the following sources: (i)
new Las Olas/Ft. Lauderdale office and new Coconut Grove office (6.5%); (ii)
existing sales offices (81.3%); and (iii) mortgage and title company operations
(12.2%)

Operating Expenses. Operating expenses increased to approximately $39.60 million
for the year ended December 31, 2001 versus $31.44 million for the year ended
December 31, 2000. The significant components

                                       9
<PAGE>

of the Company's operating expenses are: commissions to real estate associates
(66%), officer and staff salaries (19%), office rental costs (4%), advertising
expenses (5%), promotional expenses (1%) and insurance (1%). The Company's
operating expenses also increased as a result of costs incurred by the Company
in connection with the pre-opening costs associated with the creation of its Las
Olas/Ft. Lauderdale sales offices.

Interest. Interest income increased from approximately $82,000 for the year
ended December 31, 2000 to approximately $213,000 for the year ended December
31, 2001 primarily due to higher average daily balances of unrestricted cash and
Embassy's mortgage banking operations.

Pre-tax Income from Continuing Operations and Net Income. The Company had
pre-tax income from operations of approximately $1,693,000 for the year ended
December 31, 2001 as compared to pre-tax income of approximately $1,386,000 for
the year ended December 31, 2000. This increase in pre-tax profit from
continuing operations resulted primarily from increased residential sales.

Liquidity and Capital Resources

Cash provided by operating activities was $55,500 for the year ended December
31, 2001. This was primarily due to an increase in revenue from sales
commissions.

Cash used for investing activities was approximately $261,800 for the year ended
December 31, 2001, primarily attributable to the purchase of property and
equipment, increase in deposits offset by an increase in proceeds from interest
bearing deposits during this period.

Cash provided from financing activities was approximately $1,658,000 for the
year ended December 31, 2001, principally due to the net proceeds received from
the Company's "warehouse" line of credit.

At December 31, 2001, the Company had long term notes payable of approximately
$500,000. The Company has a $3.5 million "warehouse" line of credit to fund
loans to be made in connection with its mortgage banking operations. Each
"warehouse" loan is fully backed by a permanent loan "take-out" commitment from
a national lender of residential financing. As of December 31, 2001, the balance
of this "warehouse" line of credit was approximately $3,377,400 with a
corresponding asset of "mortgage loans held for sale" of $3,422,025. Current
maturities of long term debt due in 2001 was approximately $400,000, exclusive
of the "warehouse" line of credit.

At December 31, 2001, the Company had shareholder equity of approximately
$4,864,400. For the year ended December 31, 2001 the Company's net working
capital (current assets minus current liabilities) increased to approximately
$2,080,600 from $1,452,000 for the year ended December 31, 2000, primarily as a
result of an increase in cash and mortgage loans held for sale offset by an
increase in the warehouse line of credit. The Company believes its current
working capital will be sufficient to support its presently-contemplated
strategy for the next 12 months.

The Company's new offices in Coconut Grove and Las Olas/Ft. Lauderdale were
completed in June 2001. The Company anticipates that these offices will increase
opportunities to substantially increase sales.

Seasonality

The Company's operations are principally based on the residential real estate
market in South Florida. These markets have historically been seasonal with
generally higher sales in the second and third fiscal quarters.

                                       10
<PAGE>

Therefore, the results of any interim period is not necessarily indicative of
the results that might be expected during a full fiscal year.

Forward Looking Statements

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

Item 7A.  Quantitative and Qualitative Disclosures about Market Risk.

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

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURES

None

                                   PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The executive officers and directors of the registrant are as follows:

NAME                         AGE        POSITION
----                         ---        --------

Allen C. Harper               57        Chairman of the Board of Directors/
                                        Chief Executive Officer

Ronald A. Shuffield           51        President/Chief Operating
                                        Officer/Director President of EWM

Thierry Manni                 35        Director

James E. Newmeyer             53        Secretary/Treasurer and Director
                                        President of Embassy Financial Services,
                                        Inc.

                                       11
<PAGE>

Louis Cossato                 73        Director

Management

A brief description of the key management of the Company is as follows:

Allen C. Harper
---------------

Since 1984 Allen C. Harper has been principally employed as the Chairman and
Chief Executive Officer and is a principal shareholder of the Company. Mr.
Harper has more than 30 years of business experience, primarily in the areas of
real estate management and development and rail transportation. He is still
active in a variety of businesses. Mr. Harper is currently the Chairman of the
Board of Directors, Chief Executive Officer and, with his wife, the owner of
American Heritage Railways, Inc., which owns and operates The Durango &
Silverton Narrow Gauge Railroad, in southwestern Colorado and The Great Smokey
Mountains Railways, in North Carolina. Since September 1989, Mr. Harper has
served as a Director on the Tri-County Rail Authority and has been chairman of
the board for two terms. He has also served as a director of Florida East Coast
Railway Co., a railroad company based in St. Augustine Florida, since May of
1994.

Ronald A. Shuffield
-------------------

Ronald A. Shuffield is the President and Chief Operating Officer of both the
Company and EWM, and a member of each entity's Board of Directors. He has been
the President of EWM since 1984. He acts as the chief operating officer and
supervises the day-to-day operations of the Company and EWM. Mr. Shuffield is a
licensed Florida real estate broker and certified general contractor. Mr.
Shuffield has been a member of the Realtor Association of Dade County since 1984
and has served in a variety of officer and director positions thereon. Mr.
Shuffield served on the National Advisory Council of the PHH Relocation Network
(now Cendant Mobility Servicers) from 1993-1996. Mr. Shuffield's community
memberships include the Coral Gables Chamber of Commerce (where he serves as
President from 1992-93 and where he was awarded the Robert B. Knight Outstanding
Citizen of Coral Gables Award), the Greater Miami Chamber of Commerce (where he
serves on the Board of Governors) and the Rotary Club of Coral Gables. Mr.
Shuffield received a Bachelor of Science degree in business administration from
the University of Tennessee.

M. Thierry Manni
----------------

Mr. Manni is Chairman and International Development Director of MECAPLAST
International. MECAPLAST International is a Monegasque corporation which
manufacturers plastic parts for the automobile industry. Mr. Manni is
responsible for that company's operations in Monaco and France.

James E. Newmeyer
-----------------

Mr. Newmeyer has been President of Embassy Financial Services, Inc. since 1996,
where he oversees all operations of the mortgage business. He is also
Secretary/Treasurer of the Company. Prior to joining Embassy, Mr. Newmeyer has
been an executive with numerous real estate mortgage companies for over twenty
years, including PHH Mortgage Services, Source One Mortgage Services
Corporation, MHSI/Chemical Residential Mortgage/ CenTrust Mortgage, Amerifirst
Mortgage and Southeast Mortgage Company. Mr. Newmeyer has a Bachelor of Arts
degree from Furman University and a Masters Degree from Florida International
University.

                                       12
<PAGE>

Louis Cossato
-------------

Mr. Cossato is President of Tilesman Italia SPA, an Italian corporation in the
energy industry which operations include energy field analysis. He has held this
position since 1986 and his responsibilities for such business include
management and operations.

ITEM 11.   EXECUTIVE COMPENSATION

Compensation

The following table sets forth information about the compensation paid or
accrued by the Company to the Company's named executive officers whose aggregate
compensation exceeded $100,000, for the last three completed fiscal years:

                          SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
                                                                                               Long-Term
                                                                                             Compensation
------------------------------------------------------------------------------------------------------------------
                                   Annual Compensation                                          Awards
                                   -------------------
------------------------------------------------------------------------------------------------------------------
             Name and                                                                    Securities Underlying
             --------                                                                    ---------------------
        Principal Position            Year          Salary               Bonus                  Options
        ------------------            ----          ------               -----                  -------
------------------------------------------------------------------------------------------------------------------
<S>                                   <C>          <C>                 <C>               <C>
 Allen C. Harper - Chief              2001         $150,000                ---                     ---
Executive Officer                     2000         $150,000                ---                     ---
                                      1999         $205,769                ---                     ---
------------------------------------------------------------------------------------------------------------------

 Ronald A. Shuffield -                2001         $320,000                ---                     ---
President, Chief Operating            2000         $320,000                ---                     ---
Officer;                              1999         $329,615                ---                     ---
 President of EWM
------------------------------------------------------------------------------------------------------------------

 James E. Newmeyer -                  2001         $200,400                ---                     ---
Secretary, Treasurer;                 2000         $145,187                ---                     ---
President of Embassy                  1999         $183,548                ---                     ---
Financial Services, Inc.
------------------------------------------------------------------------------------------------------------------

 Thomas E. Byrne,                     2001         $200,000            $53,468                     ---
President, EWM Commercial             2000         $200,000                ---                     ---
Sales Division                        1999         $217,685                ---                     ---
------------------------------------------------------------------------------------------------------------------
</TABLE>

Compensation of Directors

The Company reimburses members of the Board of Directors for their expenses
incurred in connection with

                                       13
<PAGE>

their services as directors. In addition, each director is paid $500 for every
directors meeting they attend and $100 for each committee meeting they attend
for directors' committees of which such director is a member.

Compensation of Officers - Employment Agreements

On March 5, 1998, the Company entered into employment agreements with Messrs.
Harper and Shuffield. The agreements memorialize the employment relationship
that have existed since 1984 between the respective individuals and the Company.
The agreements have an initial five year term, with an option for each employee
to extend for an additional five-year period. Mr. Shuffield's agreement provides
for his employment as President of EWM at a base salary of $320,000 per year
with a bonus of up to 7.5% of EWM's pre-tax net income. Mr. Harper's agreement
provides for his employment as Chairman and Chief Executive Officer of EWM at a
base salary of $150,000 per year with a bonus of up to 7.5% of EWM's pre-tax net
income. Each of the employment agreements provide that the base salary shall be
increased at least 10% per year during the term of the agreement. The Company
also pays for disability and life insurance for both Messrs. Harper and
Shuffield and provides each with full medical and health insurance coverage, a
401(K) plan and an automobile. Messrs. Harper and Shuffield have agreed to
receive salaries in lesser amounts than those set forth in their respective
employment agreements.

In connection with the purchase of Byrne, EWM also entered into an employment
agreement with Thomas E. Byrne dated as of May 1, 1998. Mr. Byrne's agreement
provides for his employment as President of EWM's Commercial Sales Division at a
base salary of $100,000 plus a commission and bonus incentives based on real
estate closings. In addition, EWM provides Mr. Byrne with full medical and
health insurance coverage and a 401(K) plan and an automobile. The agreement
provides for an initial term of five years.

Also, in connection with the purchase of Columbia, an employment agreement,
dated as of March 31, 1999, was entered into between Columbia and Marjorie
Schwartz. Mrs. Schwatrz's agreement provided for her employment as Senior Vice
President of Underwriting for Columbia at a base salary of $100,000 plus a car
allowance and insurance costs related thereto. Columbia also agreed to provide
Mrs. Schwartz with group health insurance during her employment period. Mrs.
Schwartz has since passed away.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information with respect to the securities
ownership of those persons who own more than five (5%) percent of the
registrant's outstanding common stock as of the date hereof, including shares
owned by its executive officers and directors:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                   Name and Address of                                         Percent of Class
                                   --------------------                                        ----------------
    Title of Class                  Beneficial Owners                     No. of Shares               (%)
    --------------                  -----------------                     -------------               ---
--------------------------------------------------------------------------------------------------------------------
<S>                                <C>                                    <C>                  <C>
Common Stock                       Thomas E. Byrne                           421,000                    6.5
                                   6150 S.W. 76th Street
                                   South Miami, FL 33143
--------------------------------------------------------------------------------------------------------------------

Common stock                       James E. Newmeyer                         314,700                   4.86
                                   1360 S. Dixie Highway
                                   Coral Gables, FL 33146
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       14
<PAGE>

<TABLE>
<S>                     <C>                                       <C>                       <C>
----------------------------------------------------------------------------------------------------
Common Stock            Allen C. Harper &                         1,113,501                 17.20
                        Carol Harper, JTWROS
                        1360 S. Dixie Highway
                        Coral Gables, FL 33146
----------------------------------------------------------------------------------------------------
Common Stock            Ronald A. Shuffield                       1,113,501                 17.20
                        1360 S. Dixie Highway
                        Coral Gables, FL 33146
----------------------------------------------------------------------------------------------------
Common Stock            Charles Manni                             2,160,001                 33.36
                        c/o 2601 S. Bayshore Drive
                        Suite 1600
                        Miami, FL 33133
----------------------------------------------------------------------------------------------------
Common Stock            Officers and directors, as a group        4,701,703                 72.61
                        (4 persons)
----------------------------------------------------------------------------------------------------
</TABLE>

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Pursuant to two First Reserve, Inc. Common Stock Purchase Warrants dated August
31, 1998 (collectively, the "Warrants"), the Company granted to VALORSEC
Vermaltungs & Treu-Anstalt, a Swiss company ("VALORSEC"), rights to purchase
Common Stock of the Company. M. Thierry Manni, a director of the Company, is a
director of VALORSEC. The first Warrant grants VALORSEC the right to purchase
500,000 shares of the Common Stock of the Company at the initial exercise price
of $3.50 per share. Due to various stock transactions, the exercise of the
warrants has decreased to $2.96 per share. The second Warrant grants VALORSEC
the right to purchase 500,000 shares of the Common Stock of the Company at the
initial exercise price of $3.00 per share. All Warrants may be exercised until
August 31, 2004. Because of various stock transactions, the exercise price of
the warrants has decreased to $2.57 per share.

Pursuant to a letter agreement, dated as of December 31, 1999, the following
entities and individuals have agreed to provide consulting services to the
Company for a period of 2 years: VALORSEC, Ronald A. Shuffield, Allen C. Harper,
James E. Newmeyer and Trenco. These consulting services include introducing
potential investors to the Company. In return for these services, the Company
will forgive (on a pro rata basis) the following obligations: (i) VALORSEC -
$35,909.57; (ii) Shuffield - $18,511.71; (iii) Harper - $18,511.71; (iv)
Newmeyer - $5,610.80; and (v) Trenco - $1,456.13. These obligations arose from
monies advanced in 1998 by the Company to the above-named entities and
individuals to purchase shares of PFRG, the shell corporation.

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)  Exhibits. The following exhibits are filed with or incorporated by
reference into this report. The exhibits which are marked by a single asterisk
(*) were previously filed as a part of, and are hereby incorporated by reference
from the Company's Registration Statement on Form 10SB, as filed with the
Securities and Exchange Commission on May 14, 1999. The exhibits which are
marked by a double asterisk

                                       15
<PAGE>

(**) were previously filed as part of, and are hereby incorporated by reference
from the Company's Form 10SB/A as filed with the Securities and Exchange
Commission on September 13, 1999. The exhibit numbers correspond to the exhibit
numbers in the referenced documents.

         3.1      Articles of Incorporation of the Company (f.k.a. El Squared,
                  Inc.).*

         3.2      Bylaws of First Reserve, Inc.*

         10.1     Articles of Merger of First Reserve, Inc. (a Florida
                  corporation) and First Reserve, Inc. (an Arizona
                  corporation).*

         10.2     Agreement and Plan of Merger dated April 1, 1998 by and
                  between First Reserve, Inc. (a Florida corporation) and First
                  Reserve, Inc. (an Arizona corporation).*

         10.3     Articles of Merger of Byrne-Rinehart & Co. (a Florida
                  corporation) and Esslinger-Wooten-Maxwell, Inc. (a Florida
                  corporation).*

         10.4     Articles of Merger of Gerard International Realty, Inc. (a
                  Florida corporation) and Esslinger-Wooten-Maxwell, Inc. (a
                  Florida corporation).*

         10.5     Employment Agreement dated March 5, 1998 by and between First
                  Reserve, Inc. and Allen C. Harper.*

         10.6     Employment Agreement dated March 5, 1998 by and between First
                  Reserve, Inc. and Ronald A. Shuffield.*

         10.7     Promissory Note for $1.2 million between First Reserve, Inc.
                  and R.T. Construction Interests, Inc., dated July 13, 1998.**

         10.8     Confidential Private Offering Memorandum, dated April 6,
                  1998.**

         10.9     Common Stock Purchase Warrant between the Company and
                  Valorsec, dated August 31, 1998.**

         10.10    Common Stock Purchase Warrant between the Company and
                  Valorsec, dated August 31, 1998.**

         10.11    Stock Purchase Agreement dated March 31, 1999 by and between
                  Marjorie Schwartz and First Reserve, Inc. (acquisition of
                  Columbia Title of Florida, Inc.).*

         21       Subsidiaries of the registrant.**

         23.1     Consent of McClain and Company, L.C.


(b)      REPORTS ON FORM 8-K

         None

                                       16
<PAGE>

                                  SIGNATURES

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


                                     FIRST RESERVE, INC.


Date:    March 30, 2002              By:    /s/ Allen C. Harper
                                     Title: Chairman and Chief Executive Officer


                                     By:    /s/ Ronald A. Shuffield
                                     Title: Director and President


                                     By:    /s/ James E. Newmeyer
                                     Title: Director, Secretary/Treasurer

                                       17
<PAGE>

                         INDEPENDENT AUDITORS' REPORT


The Officers and Directors
First Reserve, Inc. and Subsidiaries
Coral Gables, Florida


We have audited the accompanying consolidated balance sheets of First Reserve,
Inc. and Subsidiaries (the "Company"), as of December 31, 2001 and 2000, and the
related consolidated statements of income, stockholders' equity and cash flows
for the years ended December 31, 2001, 2000 and 1999.  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 audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 presentation. 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 consolidated financial position of First Reserve,
Inc. and Subsidiaries, as of December 31, 2001 and 2000, and the consolidated
results of their operations and their cash flows for the years ended December
31, 2001, 2000, and 1999 in conformity with accounting principles generally
accepted in the United States of America.



McClain & Company, L.C.

February 13, 2002
Miami, Florida

                                      F-1
<PAGE>

                          CONSOLIDATED BALANCE SHEETS
                          DECEMBER 31, 2001 AND 2000
                     FIRST RESERVE, INC. AND SUBSIDIARIES


                                     ASSETS


                                                2001          2000
                                         -----------   -----------
CURRENT ASSETS
  Cash                                   $ 2,333,012   $   881,258
  Interest-bearing deposit with bank               -       225,000
  Receivables                                409,551       800,315
  Mortgage loans held for sale             3,422,025     2,059,016
  Prepaid expenses and other                 167,160       264,013
                                         -----------   -----------

    Total current assets                   6,331,748     4,229,602
                                         -----------   -----------


PROPERTY AND EQUIPMENT
  Furniture and fixtures                   1,378,055     1,233,021
  Office equipment                           921,348       928,329
  Transportation equipment                    20,000        20,000
  Leasehold improvements                      35,730       690,244
  Equipment held under capital leases        779,830        35,730
                                         -----------   -----------
                                           3,134,963     2,907,324
  Less accumulated depreciation           (1,249,088)   (1,085,269)
                                         -----------   -----------

    Net property and equipment             1,885,875     1,822,055
                                         -----------   -----------


OTHER ASSETS
  Goodwill, net                            1,224,922     1,286,660
  Deposits and other                         245,219       182,513
                                         -----------   -----------

    Total other assets                     1,470,141     1,469,173
                                         -----------   -----------

    Total assets                         $ 9,687,764   $ 7,520,830
                                         ===========   ===========


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

                                      F-2
<PAGE>

                     LIABILITIES AND STOCKHOLDERS' EQUITY


                                                       2001          2000
                                                 ----------   -----------
CURRENT LIABILITIES
 Accounts payable and accrued expenses           $  390,988   $   546,576
 Bank overdraft                                           -       108,360
 Deferred mortgage fee income                        64,296        58,625
 Reserves on deposits                                10,414        63,820
 Warehouse line of credit - bank                  3,377,379     1,788,324
 Current portion of obligations under capital
   leases                                             8,049         7,012
 Current maturities of long-term debt, net
   of unamortized discount                          400,000       204,985
                                                 ----------   -----------

     Total current liabilities                    4,251,126     2,777,702
                                                 ----------   -----------

LONG-TERM LIABILITIES
 Obligations under capital leases                     9,238        17,287
 Note payable, net of unamortized discount          500,000       725,843
 Deferred tax liability                              63,022             -
                                                 ----------   -----------

     Total long-term liabilities                    572,260       743,130
                                                 ----------   -----------

     Total liabilities                            4,823,386     3,520,832
                                                 ----------   -----------

STOCKHOLDERS' EQUITY
 Common stock, no par value, 100,000,000
   authorized shares, 6,915,050 shares
   issued, 6,475,050 and 6,715,050 shares
   outstanding at December 31, 2001 and
   2000, respectively                             6,139,307     6,139,307
 Accumulated deficit                               (680,929)   (1,869,309)
 Less treasury stock, 440,000 and 200,000
   common shares, no par value, at cost at
   December 31, 2001 and 2000,
   respectively                                    (594,000)     (270,000)
                                                 ----------   -----------


     Total stockholders' equity                   4,864,378     3,999,998
                                                 ----------   -----------
     Total liabilities and stockholders' equity  $9,687,764   $ 7,520,830
                                                 ==========   ===========

                                      F-3
<PAGE>

                       CONSOLIDATED STATEMENTS OF INCOME
             FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
                     FIRST RESERVE, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>



                                                                 2001          2000          1999
                                                          -----------   -----------   -----------
<S>                                                       <C>           <C>           <C>
REVENUES
  Real estate management and brokerage                    $37,555,259   $30,252,462   $24,279,056
  Mortgage                                                  2,015,642     1,493,631     1,128,555
  Title fees                                                1,704,810     1,081,051       500,693
  Insurance                                                    15,486         2,070             -
                                                          -----------   -----------   -----------

      Total revenues                                       41,291,197    32,829,214    25,908,304
                                                          -----------   -----------   -----------

COST AND EXPENSES
  Commissions, fees and other incentives:
    Real estate                                            26,208,216    20,915,737    16,622,396
    Mortgage                                                1,257,568       906,511       570,459
    Title                                                     546,864       309,758       118,201
    Insurance                                                       -             -             -
  General and administrative expenses                      11,177,524     8,956,187     7,962,389
  Depreciation and amortization                               407,932       355,292       280,102
  Legal and other settlements                                       -             -         9,300
                                                          -----------   -----------   -----------

      Total costs and expenses                             39,598,104    31,443,485    25,562,847
                                                          -----------   -----------   -----------

      Income from operations before income taxes
        and other income and expenses                       1,693,093     1,385,729       345,457
                                                          -----------   -----------   -----------

OTHER INCOME AND (EXPENSES)
  Interest income                                             213,453        81,514        56,381
  Other income                                                 74,429        64,002        63,898
  Interest expense                                           (170,984)     (142,242)     (131,022)
  Other expenses                                                    -             -        (1,600)
  (Loss) gain on disposition of property and equipment         (4,715)        4,537       222,365
                                                          -----------   -----------   -----------

      Total other income and (expenses)                       112,183         7,811       210,022
                                                          -----------   -----------   -----------

      Income before income taxes                            1,805,276     1,393,540       555,479

PROVISION FOR INCOME TAX                                      616,896        16,362             -
                                                          -----------   -----------   -----------

      Net income                                          $ 1,188,380   $ 1,377,178   $   555,479
                                                          ===========   ===========   ===========

EARNINGS PER COMMON SHARE:
  BASIC EARNINGS PER COMMON SHARE                         $      0.18   $      0.20   $      0.08
                                                          ===========   ===========   ===========

  WEIGHTED AVERAGE COMMON SHARES                            6,633,858     6,768,847     6,618,009
                                                          ===========   ===========   ===========

  DILUTED EARNINGS PER COMMON SHARE                       $      0.18         $0.20   $      0.08
                                                          ===========   ===========   ===========

  WEIGHTED AVERAGE DILUTED COMMON
    SHARES                                                  6,634,165     6,768,847     6,727,016
                                                          ===========   ===========   ===========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these consolidated statements.

                                      F-4
<PAGE>

                     FIRST RESERVE, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
             FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999

<TABLE>
<CAPTION>
                                               Common       Common                                          Total
                                                Stock        Stock        Treasury     Accumulated  Stockholders'
                                               Shares       Amount           Stock         Deficit         Equity
                                             ----------   ----------     ---------     -----------  -------------
<S>                                          <C>          <C>            <C>           <C>          <C>
BALANCE, January 1, 1999                      6,567,050   $5,739,507     $      --                   $(3,801,966)

No par value stock issued from acquisition
 of Gerard International Realty, Inc.
 previously held as contingent shares           200,000      200,000            --              --       200,000

Net income                                           --           --            --                       555,479
                                             ----------   ----------     ---------     -----------   -----------
BALANCE, December 31, 1999                    6,767,050    5,939,507            --              --    (3,246,487)

No par value stock issued for the
 acquisition of assets of Ross &
 Associates, Inc.                               138,000      186,300            --              --       186,300

No par value stock issued for the
 acquisition of assets of Daniels
 Group, Inc.                                     10,000       13,500            --              --        13,500

Acquisition of treasury stock                  (200,000)          --      (270,000)             --      (270,000)

Net income                                           --           --            --       1,377,178     1,377,178
                                             ----------   ----------     ---------     -----------   -----------
BALANCE, December 31, 2000                    6,715,050    6,139,307      (270,000)     (1,869,309)    3,999,998

Acquisition of treasury stock                  (240,000)          --      (324,000)             --      (324,000)

Net income                                           --           --            --       1,188,380     1,188,380
                                             ----------   ----------     ---------     -----------   -----------
BALANCE, December 31, 2001                    6,475,050   $6,139,307     $(594,000)    $  (680,929)  $ 4,864,378
                                             ==========   ==========     =========     ===========   ===========
</TABLE>

The accompanying notes to the consolidated financial statements are an integral
part of this consolidated statement.

                                      F-5
<PAGE>

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
               INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
             FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
                     FIRST RESERVE, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                     2001           2000           1999
                                                                 ------------   ------------   ------------
<S>                                                              <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Cash received from customers                                   $ 41,700,756   $ 32,585,528   $ 25,976,747
  Interest received                                                   213,453         81,514         50,567
  Interest paid                                                      (170,984)      (150,706)      (144,875)
  Cash paid to suppliers and employees                            (39,428,506)   (30,887,749)   (25,473,970)
  Settlements paid                                                   (422,691)      (177,588)      (170,487)
  (Payments to borrowers) receipts from lenders, net               (1,363,009)    (1,120,036)      (830,620)
  Income taxes paid                                                  (473,500)       (37,113)             -
                                                                 ------------   ------------   ------------
      Net cash provided by (used in) operating activities              55,519        293,850       (592,638)
                                                                 ------------   ------------   ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Advances to employees                                                (7,583)       (11,600)        (5,924)
  Net (increase) decrease in deposits                                 (97,479)       (20,977)        28,743
  Purchases of property and equipment                                (381,746)      (698,569)      (987,699)
  Payment for purchase of acquired
    companies; net of cash received                                         -              -       (185,297)
  Purchase of interest-bearing deposit
    with bank, net of maturities                                            -       (100,000)      (125,000)
  Proceeds from disposition of property
    and equipment                                                           -          4,537        225,000
  Proceeds from interest-bearing deposits with bank                   225,000              -              -
                                                                 ------------   ------------   ------------
      Net cash used in investing activities                          (261,808)      (826,609)    (1,050,177)
                                                                 ------------   ------------   ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from borrowings on loan payable                            400,000              -        500,000
  Net proceeds from warehouse line of credit                        1,589,055        967,642        820,682
  Payment on loan payable                                                   -         (4,646)          (575)
  Payment of capital lease obligation                                  (7,012)        (6,109)        (5,322)
  Acquisition of treasury stock                                      (324,000)      (270,000)             -
                                                                 ------------   ------------   ------------
      Net cash provided by financing activities                     1,658,043        686,887      1,314,785
                                                                 ------------   ------------   ------------

      Net increase (decrease) in cash                               1,451,754        154,128       (328,030)

CASH, beginning of period                                             881,258        727,130      1,055,160
                                                                 ------------   ------------   ------------
CASH, end of period                                              $  2,333,012   $    881,258   $    727,130
                                                                 ============   ============   ============
</TABLE>

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

                                      F-6
<PAGE>

               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
               INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
             FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
                     FIRST RESERVE, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                             2001          2000         1999
                                                          -----------   -----------   ---------
<S>                                                       <C>           <C>           <C>
RECONCILIATION OF NET INCOME TO NET CASH
  PROVIDED BY (USED IN) OPERATING ACTIVITIES:
    Net income                                            $ 1,188,380   $ 1,377,178   $ 555,479
    Adjustments to reconcile net income to net
      cash provided by (used in) operating activities:
        Depreciation                                          313,211       273,628     211,392
        Amortization                                           94,721        81,664      68,710
        Gain on disposition of property and equipment               -        (4,537)   (222,365)
        Loss on abandonment of property
          and equipment                                         4,715             -           -
        Decrease (increase) in prepaid expenses and
          other assets                                        106,226       (69,820)     64,975
        Decrease (increase) in receivables                    390,764      (402,484)    (23,104)
        Increase in mortgage loans held for sale           (1,363,009)   (1,228,396)   (830,620)
        (Decrease) increase in accounts and notes
          (operating) payable and accrued expenses           (646,277)       63,461    (442,060)
        (Decrease) increase in bank overdraft                (108,360)      108,360           -
        Increase in deferred mortgage fee income                5,671        35,885      22,740
        (Decrease) increase in reserves on deposit            (53,406)       58,911       2,215
        Increase in income tax liability                      122,883             -           -
                                                          -----------   -----------   ---------
            Net cash provided by (used in)
              operating activities                        $    55,519   $   293,850   $(592,638)
                                                          ===========   ===========   =========
</TABLE>

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

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

On March 31, 1999, the Company purchased all the stock of Columbia Title of
Florida, Inc. ("Columbia"), for $191,350.  As a result of this merger, accounted
for as a purchase, assets of $104,267, goodwill of $257,340, and liabilities of
$170,257 were recorded.

On September 30, 1999, the Company issued 200,000 shares of common stock of the
Company to the former shareholders of Gerard International Realty, Inc.
("Gerard").  These shares were previously held in escrow as "contingent" shares
as further discussed in Note 1.  As a result, common stock and goodwill
increased by $200,000.

In 1999, the Company expensed $80,000 of shareholders' loan receivables that
were previously advanced to certain shareholders for services performed in the
current year.

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

                                      F-7
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FIRST RESERVE, INC. AND SUBSIDIARIES


NOTE  1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          PRINCIPLES OF CONSOLIDATION AND COMBINATION
          The accompanying consolidated financial statements include the
          accounts of First Reserve, Inc. and its wholly-owned subsidiaries,
          Esslinger, Wooten & Maxwell, Inc. ("EWM"), First Reserve Realty, Inc.
          ("FRRI"), First Reserve Management, Inc., First Reserve Equities,
          Inc., Embassy Financial Services, Inc. ("Embassy"), Columbia Title of
          Florida, Inc. ("Columbia"), and First Reserve Insurance, Inc.
          (collectively the "Company"). During 2000, the Company created a new
          subsidiary, First Reserve Insurance, Inc. ("FRINS"). The results of
          operations for FRINS are included in the consolidated statements of
          income for the period from September 13, 2000 to December 31, 2000.
          Columbia was acquired on March 31, 1999, accordingly, Columbia's
          activity as part of the consolidated group for the year ended December
          31, 1999 is for the period from March 31, 1999 to December 31, 1999.

          All significant intercompany accounts and transactions have been
          eliminated in the consolidated financial statements.

          NATURE OF OPERATIONS
          EWM and FRRI are primarily engaged in the brokerage and management of
          residential and commercial real estate in South Florida. During 1999,
          FRRI ceased operating and became a dormant corporation.

          Embassy is a licensed residential mortgage lender that specializes in
          conventional, FHA, and VA first mortgages primarily in the South
          Florida area. In 1999, Embassy began funding loans to be made in
          connection with its mortgage banking operations. Each loan is backed
          by a permanent loan "take-out commitment" from a national lender of
          residential financing. The loans are purchased by the national lender
          once permanent financing is secured. Embassy does not service these
          loans.

          Columbia is a title company engaged in the business of closing real
          estate and mortgage loan transactions, primarily in the South Florida
          area.

          FRINS is primarily engaged in insurance brokerage. On September 13,
          2000, FRINS signed an exclusive agreement with an insurance broker to
          market and sell insurance products to the clients of EWM and the
          Company. These insurance products include, but are not limited to,
          property and casualty, automobile, life, and health insurance
          policies.

          First Reserve Management, Inc. and First Reserve Equities, Inc. were
          dormant corporations and were dissolved in 2000.

                                      F-8
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FIRST RESERVE, INC. AND SUBSIDIARIES


NOTE  1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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

          On September 1, 2000, EWM acquired substantially all of the assets of
          The Daniels Group, Inc. ("Daniels"), in a business combination
          accounted for as a purchase. Daniels was primarily engaged in the same
          activity as EWM. Under the terms of the agreement, Daniels' sole
          shareholder received 10,000 shares of common stock of the Company on
          the date of the acquisition. Additional cash consideration to the
          former shareholder of Daniels may be paid, pending the achievement of
          certain commission levels during four separate one-year periods,
          ending on August 31, 2004. If these commission levels are not achieved
          during these four separate one-year periods, no additional cash
          consideration will be paid. Due to the contingent nature of this cash
          consideration, the Company will record this transaction as additional
          compensation to the former shareholder of Daniels achieving the
          required commission levels. Based on recent trading of the Company's
          stock, the fair value of the Company's stock price on the acquisition
          date was $1.35 per share. The total cost of the acquisition was
          approximately $13,500. The results of operations for Daniels are
          included in the consolidated statements of income for the beginning
          September 1, 2000.

          On March 31, 1999, the Company acquired all the stock of Columbia in a
          business combination accounted for as a purchase. Columbia is a title
          company engaged in the business of closing real estate and mortgage
          loan transactions, primarily in the South Florida area. At the time of
          acquisition, Columbia had two branches located in Miami and Key Largo,
          Florida. Under the terms of the agreement, the former shareholder of
          Columbia (seller) received $100 for the stock of Columbia. The
          agreement also provided for additional consideration if the assets
          (including goodwill) of the Key Largo branch were sold within 90 days
          after the acquisition date. If this condition was met, the seller
          would receive eighty-five percent (85%) of the net proceeds of the
          sale of the assets of the Key Largo branch.

                                      F-9
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FIRST RESERVE, INC. AND SUBSIDIARIES


NOTE  1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          BUSINESS COMBINATIONS (CONTINUED)
          If the sale did not effectuate within the 90 days, all the assets of
          the Key Largo branch office would be transferred back to the seller.
          The sale of the Key Largo branch was made within the 90-day period. As
          a result, additional consideration of $191,250 for the acquisition of
          the stock was recorded. The total cost of the acquisition was
          approximately $191,350. Goodwill of $257,340 resulting from this
          transaction is being amortized on the straight-line method over 20
          years. The results of operations of Columbia are included in the
          consolidated statements of income for the period beginning March 31,
          1999.

          REVENUE RECOGNITION
          EWM and FRRI earn commissions from the sale of commercial and
          residential real estate and from the management of rental properties.
          Revenues are recorded when the real estate sale is closed and the
          management fees are earned. All fees and revenues are included as
          "real estate management and brokerage" in the financial statements.
          Commission, fees, and other expenses related to these revenues are
          included as "commission, fees, and other incentives - real estate" in
          the financial statements.

          Embassy charges its customers for loan fees, ancillary fees, and
          interest related to mortgages for the purchase and refinancing of
          their homes. Mortgage loan origination revenues, offset by direct loan
          origination costs, are deferred and the net amount is recognized as a
          component of gain on sale of mortgage loans when the sale of the loan
          has been consummated. Mortgage loan origination revenue consists
          primarily of loan origination, application, and other fees paid by the
          borrowers and service release premiums paid by the investors. Embassy
          recognizes these fees when the related loan is delivered to the third
          party purchaser. All fees and revenues are included as "mortgage
          revenues" in the financial statements. Direct loan origination costs
          consist of commissions paid to Embassy's mortgage consultants,
          appraisal fees, and credit report fees paid to third parties. These
          costs are expensed when the loan is delivered to third party purchaser
          and are included in the financial statements as "commission, fees, and
          other incentives - mortgage." Interest on mortgage loans held for sale
          is recorded in income as earned when incurred.

          Columbia charges its customers title search, recording, and other
          ancillary fees related to mortgages for the purchase and refinancing
          of their homes. Columbia records revenues when the mortgage is
          "closed." All revenues are included as "title fees" in the financial
          statements. Commission, fees, and other expenses related to these
          revenues are included as "commission, fees, and other incentives -
          title" in the financial statements.

          FRINS records revenue as of the effective date of the insurance
          policy. Contingent revenue is recorded in income when received. All
          revenues are included as "insurance revenue" in the financial
          statements.

          Expenses for all companies are recorded when they are incurred.

                                      F-10
<PAGE>

                  Notes To Consolidated Financial Statements
                     FIRST RESERVE, INC. AND SUBSIDIARIES


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         DIRECT ACQUISITION COSTS
         Direct acquisition costs are amortized on the straight-line method over
         five years. Direct acquisition costs are reflected in other assets and
         amounted to $20,818 and $34,217, net of accumulated amortization at
         December 31, 2001 and 2000, respectively. Amortization expense charged
         to operations for the years ended December 31, 2001, 2000, and 1999
         were $13,399, $13,399, and $13,398, respectively.

         CASH AND CASH EQUIVALENTS
         For purposes of the statement of cash flows, the Company considers all
         highly liquid debt instruments purchased with a maturity of three
         months or less to be cash equivalents, excluding cash held in trust.

         INTEREST-BEARING DEPOSIT WITH BANK
         At December 31, 2000, interest-bearing deposit with bank consists of a
         certificate of deposit held at a financial institution bearing interest
         at 7% per annum. This certificate of deposit matured in October 2001.

         CASH HELD IN TRUST
         The Company maintains separately designated Trust accounts for home
         buyers' earnest money, property owners, tenants, and other third
         parties. The Company holds such funds until sold properties are closed
         and leases have expired. Funds are disbursed in accordance with the
         settlement instructions or rental management agreements. These funds
         are not recorded in the Company's financial statements as they are held
         in a fiduciary capacity. At December 31, 2001 and 2000, the Company
         held $7,109,038 and $6,234,158 of funds in trust, respectively.

         PROPERTY AND EQUIPMENT
         Property and equipment are stated at cost and depreciated using
         straight-line and

                                     F-11
<PAGE>

    accelerated methods over the following estimated useful lives of the assets:

      Furniture and fixtures        5 - 10 years
      Office equipment              5 - 7 years
      Transportation equipment      5 years
      Leasehold improvements        Shorter of the life of the underlying lease
                                    or the estimated useful life of the
                                    improvement
      Equipment held under capital  Shorter of the life of the underlying lease
      leases                        or the estimated useful life of the
                                    equipment

    Depreciation expense charged to operations for the years ended December 31,
    2001, 2000, and 1999, was $313,211, $273,628, and $211,392, respectively.

                                     F-12
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FIRST RESERVE, INC. AND SUBSIDIARIES


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         INCOME TAXES
         Deferred income tax assets and liabilities are computed annually for
         differences between the financial statements and tax bases of assets
         and liabilities that will result in taxable or deductible amounts in
         the future, based on enacted tax laws and rates applicable to the
         periods in which the differences are expected to affect taxable income.

         Valuation allowances are established when necessary to reduce deferred
         tax assets to the amount expected to be realized. Income tax expense is
         the tax payable or refundable for the period, minus the changes during
         the period in deferred tax assets and liabilities.

         Income taxes are provided for on all taxable income included in the
         consolidated financial statements in the period in which the income is
         reported for financial statement purposes. Accordingly, deferred income
         taxes (benefits) are provided for timing differences between financial
         and tax reporting. The principal items comprising these differences are
         the deferred recognition of operating losses for tax purposes,
         goodwill, and property and equipment.

         LONG-LIVED ASSETS
         The Company reviews its long-lived assets for impairment whenever
         events or changes in circumstances indicate that the carrying amount of
         an asset may not be recoverable.

         USE OF ESTIMATES
         The preparation of financial statements in conformity with accounting
         principles generally accepted in the United States requires management
         to make estimates and assumptions that affect the reported amounts of
         assets and liabilities and disclosure of contingent assets and
         liabilities at the date of the financial statements and the reported
         amounts of revenues and expenses during the reporting period. Actual
         results could differ from those estimates.

         BUSINESS PROMOTION AND ADVERTISING
         Advertising and promotional costs are expensed as incurred. Total
         advertising and promotional expense for the years ended December 31,
         2001, 2000, and 1999 amounted to $1,594,949, $1,296,702, and
         $1,212,445, respectively.

         NON-COMPETITION AND CONSULTING AGREEMENTS
         Costs related to non-competition agreements entered into as part of the
         Company's acquisition of the assets of Ross and Daniels are being
         amortized over the period of the respective agreements, which is five
         years. Amortization expense charged to operations for the years ended
         December 31, 2001 and 2000, amounted to $19,585 and $6,528,
         respectively.

                                     F-13
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FIRST RESERVE, INC. AND SUBSIDIARIES


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         RECENT PRONOUNCEMENTS
         In June 2001, the Financial Accounting Standards Board issued SFAS 142,
         Goodwill and Other Intangible Assets. Under SFAS 142, goodwill and
         intangible assets with indefinite lives are no longer amortized, but
         are reviewed at least annually for impairment. The amortization
         provisions of SFAS 142 apply to goodwill and intangible assets acquired
         after June 30, 2001. The Company is required to adopt SFAS 142
         effective January 1, 2002. The Company is in the process of reviewing
         these assets for impairment.

         During 2000, the Company adopted SFAS No. 133, Accounting for
         Derivative Instruments and Hedging Activities. This statement
         establishes accounting and reporting standards for derivative
         instruments and for hedging activities.

         It requires that an entity recognizes all derivatives as either assets
         or liabilities in the balance sheet, and measure those instruments at
         fair value. The Company did not own any derivative instruments nor
         participate in any hedging activities. The adoption of SFAS No. 133
         will have no effect on the Company's financial condition or results of
         operations.

         During 2000, the Company adopted the Securities and Exchange
         Commission's ("SEC") Staff Accounting Bulletin ("SAB") No. 101,
         "Revenue Recognition," which summarized the SEC staff's views regarding
         the recognition and reporting of revenues in financial statements and
         requires companies to comply with the SAB no later than the fourth
         fiscal quarter of the fiscal year. The adoption of this SAB did not
         have an effect on the Company's financial condition or results of
         operations.

         During 1999, the Company adopted SFAS No. 134, Accounting for Mortgage-
         Backed Securities Retained after the Securitization of Mortgage Loans
         Held for Sale by a Mortgage Banking Enterprise. It requires an entity
         engaged in mortgage banking activities to classify the resulting
         mortgage-backed securities or other retained interests based on its
         ability and intent to sell or hold those investments. The adoption of
         SFAS 134 will have no effect on the Company's financial condition or
         results of operations.

         RECLASSIFICATIONS
         For comparative purposes, certain items in the December 31, 1999
         financial statements have been reclassified to conform with the
         December 31, 2001 presentation.

NOTE 2 - RECEIVABLES
         Receivables consist primarily of open trade accounts that have not been
         reduced by an allowance for doubtful accounts, as management considers
         all receivables to be fully collectible.

                                     F-14
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FIRST RESERVE, INC. AND SUBSIDIARIES


NOTE 3 - MORTGAGE LOANS HELD FOR SALE
         Mortgage loans held for sale consist primarily of residential mortgage
         loans made in connection with Embassy's mortgage banking operations and
         are reported at the lower of cost or market value. The method used to
         determine this amount is the commitment price from national lenders
         utilizing the individual loan method. Net unrealized losses, if any,
         are recognized through a valuation allowance by charges to income. Each
         loan is fully backed by a permanent loan "take-out commitment" from a
         national lender of residential financing. The mortgage loans are
         purchased by the national lender once permanent financing is secured,
         usually within 30 days of original funding.

NOTE 4 - GOODWILL
         The Company has accounted for the excess of the acquisition costs of
         certain subsidiaries over the fair value of identifiable assets as
         goodwill. This goodwill is being amortized over periods ranging from 15
         to 40 years. Amortization expense charged to operations for the years
         ended December 31, 2001, 2000, and 1999, were $61,737, $61,737, and
         $54,676, respectively.

NOTE 5 - FAIR VALUE OF FINANCIAL INSTRUMENTS
         Financial Accounting Standards Board Statement No. 107, Disclosures
         about Fair Value of Financial Instruments (SFAS 107), requires the
         Company to disclose the fair value of financial instruments for which
         it is practicable to estimate that value. SFAS 107 also requires the
         entity to disclose the method(s) and significant assumptions used to
         estimate the fair value of financial instruments.

         The following assumptions were used to estimate the fair value of each
         class of financial instruments for which it is practicable to estimate
         that value:

           Cash and Cash Equivalents
           -------------------------
           The carrying amounts of cash and cash equivalents approximate their
           fair value.

           Interest-Bearing Deposit with Bank
           ----------------------------------
           The carrying amount of interest-bearing deposit with bank
           approximates its fair value.

           Mortgage Loans Held for Sale
           ----------------------------
           Fair values of mortgage loans held for sale are based on the
           outstanding commitment price from investors. The carrying amount
           approximates their fair value.

           Commitment to Extend Credit
           ---------------------------
           The fair value of mortgage commitments (see Note 12) to extend credit
           is estimated by comparing Embassy's cost to acquire mortgages to the
           current price for similar mortgage loans, taking into account the
           terms of the commitments and creditworthiness of the counter parties.
           At December 31, 2001 and 2000, there were no commitments outstanding.

                                     F-15
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FIRST RESERVE, INC. AND SUBSIDIARIES

NOTE 5 - FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

           Notes Payable
           -------------
           The fair values of the noninterest-bearing note payable is estimated
           based upon the present value of future payments using an imputed rate
           of interest of 10.175%. The fair values of the interest-bearing notes
           payable are estimated based upon current rates offered to the Company
           for debt of the same remaining maturities. Carrying amounts of the
           interest-bearing notes payable are reasonable estimates of their fair
           values.

           Capital Leases
           --------------
           The carrying amounts of capital leases approximate their fair value.

         The estimated fair values of the Company's financial instruments at
         December 31, 2001 and 2000, were as follows:

<TABLE>
<CAPTION>
                                                        December 31, 2001          December 31, 2000
                                                     -------------------------    ------------------
                                             Carrying          Fair         Carrying         Fair
                                              Amount          Value          Amount         Value
                                            ----------      ----------     ----------     ----------
           <S>                              <C>             <C>            <C>            <C>
           Cash and cash equivalents        $2,333,012      $2,333,012     $  881,258     $  881,258
           Interest-bearing deposit with
              bank                          $        -      $        -     $  225,000     $  225,000
           Mortgage loans held for sale     $3,422,025      $3,422,025     $2,059,016     $2,059,016
           Notes payable                    $4,277,379      $4,277,379     $2,719,152     $2,719,152
           Capital leases                   $   17,287      $   17,287     $   24,299     $   24,299
</TABLE>

NOTE 6 - BUSINESS SEGMENT INFORMATION
         The Company's operations are principally managed on a product services
         basis and are comprised of five reportable segments: Esslinger, Wooten
         & Maxwell, Inc. ("EWM"), Embassy Financial Services, Inc. ("Embassy"),
         Columbia Title of Florida, Inc. ("Columbia"), and First Reserve
         Insurance, Inc. ("FRINS"). EWM's product services consist of
         residential and commercial real estate brokerage and relocation
         services. Embassy's product services have been in the capacity of a
         mortgage lender and mortgage broker in the South Florida area,
         specializing in conventional, FHA, and VA mortgages. Columbia's product
         has been in the capacity of a title company. FRINS has been in the
         capacity of insurance broker. First Reserve's capacity has been as a
         holding company. Revenue, net income (loss) EBITDA, which is defined as
         earnings before interest, taxes, depreciation and amortization, and
         identifiable assets for these segments are as follows:

<TABLE>
<CAPTION>
                                                            Year ended December 31, 2001
                                                            ----------------------------
                                                                                         First
                                    Esslinger,         Embassy           Columbia       Reserve       First
                                     Wooten &          Financial         Title of      Insurance     Reserve
                                   Maxwell, Inc.    Services, Inc.     Florida Inc.       Inc.         Inc          Total
                                   -------------    --------------     ------------    ---------    ---------    ------------
           <S>                     <C>              <C>                <C>             <C>          <C>          <C>
           Revenue                  $37,555,259       $2,015,642       $1,704,810       $15,486     $       -     $41,291,197
           EBITDA                   $ 2,044,941       $  236,943       $  209,999       $11,757     $(119,448)    $ 2,384,192
           Net income (loss)        $   968,063       $   62,229       $  171,929       $ 7,082     $ (20,923)    $ 1,188,380
           Identifiable assets
             at year end            $ 5,506,278       $3,676,133       $  303,358       $17,726     $ 184,269     $ 9,687,764
</TABLE>

                                     F-16
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      FIRST RESERVE, INC. AND SUBSIDIARIES


NOTE  6 -  BUSINESS SEGMENT INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
                                                                     Year ended December 31, 2000
                                         -------------------------------------------------------------------------------------

                                          Esslinger,        Embassy        Columbia    First Reserve    First
                                           Wooten &        Financial        Title of     Insurance     Reserve
                                         Maxwell, Inc.   Services, Inc.   Florida Inc.      Inc.         Inc          Total
                                         --------------  ---------------  -------------  ----------  ------------  -----------
         <S>                             <C>             <C>              <C>            <C>         <C>           <C>
         Revenue                            $30,252,462      $1,493,631      $1,081,051  $   2,070   $         -   $32,829,214
         EBITDA                             $ 1,890,985      $  164,313      $   58,875  $   1,501   $  (224,600)  $ 1,891,074
         Net income (loss)                  $ 1,582,083      $   72,565      $   44,393  $   1,501   $  (323,364)  $ 1,377,178
         Identifiable assets
          at year end                       $ 4,595,612      $2,420,673      $  232,447  $   3,025   $   269,073   $ 7,520,830
</TABLE>

<TABLE>
<CAPTION>
                                                                   Year ended December 31, 1999
                                         --------------------------------------------------------------------------
                                            Esslinger,       Embassy        Columbia
                                             Wooten &       Financial        Title of        First
                                           Maxwell, Inc.   Services, Inc.   Florida Inc.  Reserve, Inc.    Total
                                         --------------    --------------   ----------    ------------- -----------
<S>                                      <C>               <C>              <C>           <C>           <C>
         Revenue                           $24,263,977      $1,128,555      $  500,693      $  15,079   $25,908,304
         EBITDA                            $ 1,079,721      $   24,721      $  135,341      $(273,180)  $   966,603
         Net income (loss)                 $   840,535      $  (16,368)     $  128,459      $(397,147)  $   555,479
         Identifiable assets
          at year end                      $ 3,479,439      $1,115,331      $  147,850      $ 247,728   $ 4,990,348
</TABLE>

NOTE  7 -  NOTES PAYABLE
         At December 31, 2001 and 2000, Embassy has a warehouse line of credit
         with a local bank in the amount of $3,500,000 and $1,800,000,
         respectively, to provide financing for mortgage loans that it
         originates.  The line of credit is collateralized by the mortgage loans
         held for sale.  Advances on the line of credit can only be drawn with
         evidence of a committed residential mortgage loan.  The line of credit
         cannot be used to fund any single residential mortgage in excess of
         $650,000.  The note is due on demand, bears interest at prime less
         3.75%, but no less than 4.5% (4.5% and 5.75% at December 31, 2001 and
         2000, respectively), and is payable in monthly installments of interest
         only on the unpaid principal balance.  The Company had approximately
         $122,000 and $12,000 available for additional mortgage loan financing
         at December 31, 2001 and 2000, respectively.

         At December 31, 2001 and 2000, notes payable consisted of the
         following:

<TABLE>
<CAPTION>
                                                           December 31, 2001
                                               ----------------------------------------
                                                            Unamortized
                                               Principal      Discount        Total
                                               ----------  --------------  ------------
<S>                                            <C>         <C>             <C>
Note payable with an unrelated third party,
 interest at 7.5% per year, payable in
 interest only monthly installments of
 $2,500, principal due on demand
 unsecured, personally guaranteed by a
 shareholder of the Company.                   $  400,000  $        -      $   400,000
</TABLE>

                                     F-17
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FIRST RESERVE, INC. AND SUBSIDIARIES


NOTE 7 - NOTES PAYABLE (CONTINUED)

<TABLE>
<CAPTION>
                                                                    December 31, 2001
                                                     -------------------------------------------
                                                                      Unamortized
                                                        Principal       Discount        Total
                                                     ------------     ----------     -----------
<S>                                                  <C>              <C>            <C>
Note payable with an unrelated third party
 lender, interest at 9.5% per year,
 payable in interest only monthly
 installments of $3,958, principal due on
 January 31, 2003, unsecured,
 personally guaranteed by a shareholder
 of the Company.                                        $ 500,000             -      $ 500,000
                                                        ---------      --------      ---------
                                                          900,000             -        900,000
 Less current portion                                     400,000             -        400,000
                                                        ---------      --------      ---------

                                                        $ 500,000      $      -      $ 500,000
                                                        =========      ========      =========
</TABLE>

<TABLE>
<CAPTION>
                                                                   December 31, 2000
                                                           --------------------------------
                                                                       Unamortized
                                                           Principal     Discount    Total
                                                           ---------     --------   -------
<S>                                                        <C>         <C>          <C>
Operating note payable to third party,
 noninterest-bearing, payable in annual
 installments of $237,500, matures July
 13, 2002, unsecured, personally
 guaranteed by a shareholder of the
 Company (unamortized discount is
 based on imputed interest rate of
 10.175%).                                               $ 430,828   $ 44,172   $ 475,000


Note payable with an unrelated third
 party lender, interest at 9.5% per
 year, payable in interest only monthly
 installment of $3,958, principal due on
 January 31, 2002, unsecured,
 personally guaranteed by a
 shareholder of the Company.                               500,000          -     500,000
                                                         ---------   --------   ---------
                                                           930,828     44,172     975,000
Less current portion                                      (204,985)   (32,515)   (237,500)
                                                         ---------   --------   ---------

                                                         $ 725,843   $ 11,657   $ 737,500
                                                         =========   ========   =========
</TABLE>

                                     F-18
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FIRST RESERVE, INC. AND SUBSIDIARIES


NOTE 7 -  NOTES PAYABLE (CONTINUED)

          Principal payments and amortized discount on the notes payable for the
          next year and in the aggregate are as follows:

                                         Principal
                                         ---------
               2002                       $400,000
               2003                        500,000
                                           -------

                                          $900,000
                                           =======

          Total interest expense under these notes for the years ended December
          31, 2001 and 2000, was approximately $168,000 and $138,400,
          respectively.

NOTE 8 -  CAPITAL LEASES

          During 1999, the Company entered into a lease of certain equipment
          under a capital lease expiring in the year 2003. The assets and
          liabilities under the capital lease are recorded at the lower of the
          present value of the minimum lease payments or the fair value of the
          asset and are included in net property and equipment. The assets are
          depreciated over the lesser of their estimated useful lives or the
          term of the lease. Depreciation of assets under capital leases is
          included in depreciation expense for the years ended December 31, 2001
          and 2000.

          Minimum future lease payments under the capital lease for the next two
          years and in the aggregate are as follows:

               2002                                             $ 9,947
               2003                                               9,947
                                                                -------
                  Total minimum lease payments                   19,894
               Less amount representing interest                  2,607
                                                                -------

                  Present value of net minimum lease payment     17,287
               Less current portion                               8,049
                                                                -------

                                                                $ 9,238
                                                                =======

          Interest rate on the capitalized lease is 13.9% and is imputed based
          on the lower of the Company's incremental borrowing rate at the
          inception of the lease or the lessor's implicit rate of return.
          Imputed interest expense for the years ended December 31, 2001, 2000,
          and 1999, was approximately $2,900, $3,800, and $4,600, respectively.

NOTE 9 -  EMPLOYMENT AGREEMENTS

          The Company has employment agreements with two executives. These
          agreements provide for base salaries to be increased annually by at
          least 10%, plus bonuses and benefits at the discretion of the
          Company's Board of Directors. The terms of the contracts are for five
          years, expiring on December 2003, and may be terminated for cause. In
          the event of termination without cause, the Company is liable for all
          salary, payments, and benefits for the remaining terms of the
          agreement.

                                     F-19
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FIRST RESERVE, INC. AND SUBSIDIARIES


NOTE 9 -  EMPLOYMENT AGREEMENTS (CONTINUED)

          EWM has an employment agreement with the president of its Commercial
          Sales Division. This agreement provides for a base salary, commission,
          and bonus incentives based on real estate closings, and additional
          bonus and benefits at the discretion of the Company's Board of
          Directors. The term of the contract is for five years, expiring on
          April 2003, and may be terminated for cause. In the event of
          termination without cause, EWM is liable for all salary, payments, and
          benefits for the remaining term of the agreement.

          During 2001, Embassy entered into an agreement with an officer
          guaranteeing said officer a minimum salary during the first year of
          employment. As of December 31, 2001, approximately $29,000 of this
          commitment remains.

          On March 31, 1999, Columbia entered into an employment agreement with
          its Senior Vice President of Underwriting. This agreement provides for
          a base salary and other benefits. The term of the contract is for two
          years.

          Minimum future commitment under these employment agreements are as
follows:

                  2002                   $745,840
                  2003                    114,059
                                         --------
                                         $859,899
                                         ========

          The total commitment, excluding incentives and bonuses, for the years
          ended December 31, 2001, 2000, and 1999 was $791,230, $770,516, and
          $825,272, respectively.

NOTE 10 - OPERATING LEASES

          The Company had entered into several real estate, automobile, and
          equipment leases accounted for as operating leases. These leases
          expire in various years through 2009. As a result of the mergers with
          Byrne, Gerard, Columbia, and Ross and Daniels, the Company assumed
          operating lease agreements expiring at various dates.

          Certain of the real estate leases are subject to annual escalation
          based on a Price Index, annual increases in operating expenses, or a
          fixed percentage increase.

          Minimum future lease payments under all operating leases for the next
          five years and in the aggregate are as follows:

            Years ending
            December 31,
            ------------
               2002           $1,746,950
               2003            1,620,273
               2004            1,329,228
               2005            1,123,705
               2006              502,764
               Beyond          1,672,340
                              ----------
                              $7,995,260
                              ==========

          Rent expense under these leases for the years ended December 31, 2001,
          2000, and 1999 was $1,716,388, $1,294,238, and $1,123,469,
          respectively.

                                     F-20
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FIRST RESERVE, INC. AND SUBSIDIARIES


NOTE 11 - NON-COMPETITION AND CONSULTING AGREEMENTS

          In connection with the acquisition of the assets of Ross and Daniels,
          the Company entered into non-competition, consulting, and cooperation
          agreements that expire at various dates through 2005. Future payments,
          as called for in the agreements, are contingent upon the fulfillment
          of the terms of these agreements by the sellers and provide for
          certain percentage payments of the net commission income of various
          sales office locations.

NOTE 12 - COMMITMENTS AND CONTINGENCIES WITH OFF-BALANCE SHEET RISK

          The Company has experienced credit risk in connection with its bank
          accounts. At various times during the year, it maintained deposits
          with financial institutions in excess of amounts insured by the FDIC.
          The exposure to the Company is solely dependent on daily bank balances
          and the financial strength of the respective institutions.

          The Company sells its services to homeowners and buyers. The Company
          is affected by the cyclical nature of the residential real estate
          industry and the availability of financing for the home buyer.

          The Company conducts most of its business in the South Florida area
          and is affected by the cyclical nature of the residential real estate
          industry in this region.

          Embassy is a party to financial instruments with off-balance sheet
          risk in the normal course of business to meet the financing needs of
          its customers. These financial instruments include commitments to
          extend credit to customers and forward commitments to sell mortgage
          loans to investors. The instruments involve to varying degrees,
          elements of credit and interest rate risk in excess of the amount
          recognized in the financial statements.

          Embassy uses the same credit policies in making commitments and
          conditional obligations as it does for making loans. In the opinion of
          management, Embassy's outstanding commitments do not reflect any
          unusual risk.

          Commitments to extend credit are agreements to lend to a customer as
          long as there is no violation of any condition established in the
          contract. Commitments generally have fixed expiration dates or other
          termination clauses and may require payment of a fee. Since many of
          the commitments are expected to expire without being drawn upon, the
          total commitment amounts do not necessarily represent future cash
          requirements. Loan applications must be approved by the Company's
          underwriting department, before a commitment is issued, for compliance
          with underwriting criteria of the Federal National Mortgage
          Association ("FNMA"), the Federal Home Loan Mortgage Corporation
          ("FHLMC"), or other investors. There were no commitments outstanding
          at December 31, 2001 and 2000.

          Embassy customarily sells, without recourse, all of its mortgage loans
          to a third party lender.

                                     F-21
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FIRST RESERVE, INC. AND SUBSIDIARIES


NOTE 12 - COMMITMENTS AND CONTINGENCIES WITH OFF-BALANCE SHEET RISK (CONTINUED)

          Embassy does not engage in any direct efforts to manage the interest
          rate risk associated with the time a loan is originated to the time it
          is sold to the third party lender. However, since loans are sold
          within 30 days of funding, management believes any interest rate
          fluctuations during this period would not be material to the financial
          statements.

          At December 31, 2001 and 2000, Embassy had obtained a permanent loan
          "take-out commitment" from one national lender of residential
          financing in the amount of $3,422,025 and $2,059,016. These
          commitments comprised 100% of Embassy's mortgage loans held for sale.
          Embassy sells all of its loans held for sale to this national lender.
          Management believes that the risk associated with these loans is
          reduced because each loan is backed by a permanent loan "take-out
          commitment" from this lender prior to originating the loan.

          Columbia underwrites title insurance primarily with one national title
          company. Management believes that should the title company not be able
          to underwrite policies, it can select other title companies it has
          relationships with.

          FRINS has an exclusive agreement with a local insurance broker to
          market and sell insurance products to the clients of EWM and the
          Company. Management believes that should the broker be unable to
          fulfill its obligations, it can enter into similar agreements with
          other brokers.

          During 2001, EWM entered into a sales contract to acquire real estate
          located in Key Biscayne, Florida for approximately $990,000.

NOTE 13 - INCOME TAXES

          Provision (benefit) is made for the tax effects of timing differences
          as described in Note 1. The provision for income taxes for the years
          ended December 31, 2001, 2000, and 1999, is based upon current
          statutory rates and is summarized as follows:

                                           December 31, 2001
                                  ------------------------------------
                                  Current       Deferred       Total
                                  --------      --------      --------
             Florida              $ 85,944      $  9,082      $ 95,026
             Federal               467,930        53,940       521,870
                                  --------      --------      --------
                                  $553,874      $ 63,022      $616,896
                                  ========      ========      ========

                                           December 31, 2000
                                  ------------------------------------
                                   Current      Deferred         Total
                                  --------      --------      --------
             Florida              $     25      $      -      $     25
             Federal                16,337             -        16,337
                                  --------      --------      --------
                                  $ 16,362      $      -      $ 16,362
                                  ========      ========      ========

                                     F-22
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FIRST RESERVE, INC. AND SUBSIDIARIES


NOTE 13 - INCOME TAXES (CONTINUED)

                                            December 31, 1999
                                      ----------------------------
                                      Current    Deferred    Total
                                      -------    --------    -----
             Florida                  $     -    $      -    $   -
             Federal                        -           -        -
                                      -------    --------    -----
                                      $     -    $      -    $   -
                                      =======    ========    =====

          Deferred tax assets have been provided for deductible temporary
          differences related to net operating losses. Deferred tax liabilities
          have been provided for taxable temporary differences related to
          accumulated depreciation and amortization. Deferred income taxes
          related to the following at December 31, 2001, 2000, and 1999:

<TABLE>
<CAPTION>
                                                             2001         2000          1999
                                                        ---------    ---------    ----------
             <S>                                        <C>           <C>          <C>
             Deferred tax assets (liabilities):
               Net operating loss                       $  71,594    $  82,005    $  347,402
               Non-compete agreement                        6,551          856             -
               Property and equipment                     (89,705)     (31,079)       (9,541)
               Goodwill                                   (32,791)     (10,821)       (7,394)
                                                        ---------    ---------    ----------
                                                          (44,351)      40,961       330,467
             Less valuation allowance                     (18,671)     (40,961)     (330,467)
                                                        ---------    ---------    ----------

                 Net deferred tax asset (liability)     $ (63,022)   $       -    $        -
                                                        =========    =========    ==========
</TABLE>

          The provision for income taxes computed differed from the amount
          obtained by applying the federal and state statutory income tax rates
          to income before income taxes. The sources and tax effects of the
          difference are as follows:

<TABLE>
<CAPTION>
                                                             2001         2000          1999
                                                        ---------    ---------    ----------
            <S>                                         <C>          <C>         <C>
             Federal and state statutory rate
               applied to pre-tax income                $ 619,900    $ 473,804    $  188,863
             Other                                         19,286     (167,666)      (60,404)
             Change in valuation allowance                (22,290)    (289,506)     (128,459)
                                                        ---------    ---------    ----------

                                                        $ 616,896    $  16,632    $        -
                                                        =========    =========    ==========
</TABLE>

          At December 31, 2001, the Company's net operating loss ("NOL")
          carryforwards for income tax purposes amounted to approximately
          $190,257, and are available to offset future taxable income through
          the year 2015. However, the amount of NOL that can be utilized is
          limited to approximately $9,000 per year.

NOTE 14 - PROFIT SHARING PLAN

          The Company has a deferred tax savings plan, which qualifies under
          section 401(k) of the Internal Revenue Code. The plan covers all
          employees having at least one year of service during which they have
          worked at least 1,000 hours, provided they have attained the age of
          21. The plan allows the Company to make voluntary

                                     F-23
<PAGE>

          contributions to the plan for eligible participants.

                                     F-24
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FIRST RESERVE, INC. AND SUBSIDIARIES


NOTE 14 - PROFIT SHARING PLAN (CONTINUED)

          Participants are 100% vested in their contributions to the plan and
          vest in the Company's contribution as follows:

             Years of Total Service                  Vesting Percentage
             ----------------------                  ------------------
               Less than  2                                     0%
                          2                                    20%
                          3                                    40%
                          4                                    60%
                          5                                    80%
                          6 or more                           100%

          For the years ended December 31, 2001, 2000, and 1999, employer
          contributions to the plan were $19,203, $14,583, and $8,579,
          respectively.

          The Company is deemed to be a controlled group under the Employee
          Retirement Income Security Act of 1974 ("ERISA") regulations. As such,
          all employees of all the subsidiaries of the Company, not just EWM,
          must be covered under the Plan. All non-EWM employees were admitted to
          the Plan in 2000. Management believes that additional contributions,
          if any, that the Company would have to make on behalf of all non-
          covered employees will not be material to the financial statements.

NOTE 15 - LEGAL AND OTHER SETTLEMENTS

          In February 1995, the Company and a majority shareholder of the
          Company, as guarantor, entered into an agreement with an unrelated
          third party to guarantee that the Company would be responsible for
          certain portions of the obligations on a building managed by a
          subsidiary of the Company, First Reserve Equities, Inc., provided that
          such building was sold after December 31, 1995. In the event that the
          building was sold after 1995, the Company would be obligated to pay to
          the third party any shortfall between the Net Sales Proceeds and the
          balance of the note owed on the building, up to a maximum of
          $1,000,000. The building was sold subsequent to December 31, 1995, but
          no notice had been given to the Company, nor had any collection
          proceedings been initiated against the Company until mid 1998. On July
          13, 1998, a settlement agreement was reached with the third party in
          the amount of $1,200,000 covering the $1,000,000 guarantee and an
          additional $200,000 for paying late. The Company paid $250,000 on the
          date the agreement was signed and the remaining balance of $950,000
          was financed under a promissory note over four years bearing no
          interest.

          The $200,000 was treated as imputed interest and will be amortized
          over the life of the note under the interest method using an effective
          rate of 10.175%. For the years ended December 31, 2001, 2000, and
          1999, total interest expense related to this note amounted to $17,310,
          $51,448, and $68,629, respectively. The Company paid off this note at
          a discount in July 2002, which resulted in a gain of $8,137.

          Also, included in legal and other settlements are costs incurred by
          EWM in settling various disputes arising with customers or tenants in
          the ordinary course of business. These costs amounted to $0, $0, and
          $9,300 for the years ended December 31, 2001, 2000, and 1999.

                                     F-25
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FIRST RESERVE, INC. AND SUBSIDIARIES


NOTE 16 - STOCKHOLDERS' EQUITY

          CONTINGENT SHARES

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

          WARRANTS

          During 1998, the Company re-issued 1,000,000 warrants ("new warrants")
          to a majority shareholder in exchange for 1,000,000 warrants
          previously issued by the Company on November 30, 1997 ("original
          warrants"). These original warrants were issued as part of an
          agreement with the shareholder of the Company to convert preferred
          shares and accrued dividends into common shares. The original warrants
          were exercisable from the date of issuance and expire on November 30,
          2002. No other consideration was given to the Company for these
          warrants. The original warrants were canceled and new warrants were
          issued on August 31, 1998. All terms and conditions of the original
          warrants remained the same with the exception of the expiration date,
          which was changed from November 30, 2002 to August 31, 2003.

          The first warrant grants this majority shareholder the right to
          purchase 500,000 shares of the Company's common stock at the initial
          exercise price of $3 per share. The second warrant grants the same
          majority shareholder the right to purchase another 500,000 shares of
          the Company's common stock at the initial exercise price of $3.50 per
          share. The warrants are valid, beginning on August 31, 1998, for a
          period of five years and expire on August 31, 2003.

          In accordance with the warrant agreement, the exercise price of these
          warrants are to be adjusted each time the Company sells shares of
          common stock for a consideration per share less than the warrant
          exercise price per share, or issue any shares of common stock as a
          stock dividend, or subdivide or combine the outstanding shares of
          common stock into a greater or lesser number of shares. In no event
          shall the exercise price be adjusted in excess of the exercise price
          in effect immediately prior to such repricing. As a result of this
          provision in the warrant agreement, during 1998, the warrants'
          exercise price had been adjusted. The first warrant has an adjusted
          exercise price of $2.57 per share, and the second warrant has an
          adjusted exercise price of $2.96 per share.

                                     F-26
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FIRST RESERVE, INC. AND SUBSIDIARIES


NOTE 16 - STOCKHOLDERS' EQUITY (CONTINUED)
          The following is a summary of the activity of the Company's warrants
          for the years ended December 31, 2001, 2000, and 1999:

<TABLE>
<CAPTION>
                                                               Year ended December 31, 2001
                                                          ---------------------------------
                                                                                   Weighted
                                                            Number of            Average of
                                                             Warrants        Exercise Price
                                                          -----------        --------------
          <S>                                            <C>                <C>
          Outstanding at beginning of year                  1,000,000                 $2.77
          Granted                                                                         -
          Canceled                                                  -                 $
          Exercised                                                 -                 $
                                                          -----------
          Outstanding at end of year                        1,000,000                 $2.77
                                                          ===========                 =====

          Exercisable at end of year                        1,000,000

            Weighted average fair value of warrants
             outstanding at December 31, 2001                                $  .42

<CAPTION>
                                                               Year ended December 31, 2000
                                                          ---------------------------------
                                                                                   Weighted
                                                            Number of            Average of
                                                             Warrants        Exercise Price
                                                          -----------        --------------
          <S>                                             <C>               <C>
          Outstanding at beginning of year                  1,000,000                 $2.77
          Granted                                                   -                 $   -
          Canceled                                                  -                 $   -
          Exercised                                                 -                 $   -
                                                           ----------                 -----
          Outstanding at end of year                        1,000,000                 $2.77
                                                           ==========                 =====

          Exercisable at end of year                        1,000,000

            Weighted average fair value of warrants
             outstanding at December 31, 2000                                $  .47

<CAPTION>
                                                               Year ended December 31, 1999
                                                          ---------------------------------
                                                                                   Weighted
                                                            Number of            Average of
                                                             Warrants        Exercise Price
                                                          -----------        --------------
          <S>                                             <C>               <C>
          Outstanding at beginning of year                  1,000,000                 $2.77
          Granted                                                   -                 $   -
          Canceled                                                  -                 $   -
          Exercised                                                 -                 $   -
                                                           ----------                 -----
          Outstanding at end of year                        1,000,000                 $2.77
                                                           ==========                 =====

           Exercisable at end of year                       1,000,000

            Weighted average fair value of warrants
             outstanding at December 31, 1999                                $  .38
</TABLE>

                                     F-27
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FIRST RESERVE, INC. AND SUBSIDIARIES


NOTE 16 - STOCKHOLDERS' EQUITY (CONTINUED)
          The weighted average fair value was estimated using the Black-Scholes
          option pricing model based on the weighted average market price at
          date of grant of $1.35, $1.35, and $1.00 for 2001, 2000, and 1999,
          respectively. The following assumptions were used to estimate fair
          value of the options for 2001, 2000, and 1999, risk-free interest rate
          of 5.2%, expected volatility of 80%, and an estimated life of the
          options of five years.

          The following is a summary of the status of the stock warrants
          outstanding at:

     December 31, 2001
     -----------------

                                      Weighted Average   Weighted
                                             Remaining    Average
                           Number          Contractual   Exercise         Number
               Price    Outstanding               Life      Price    Exercisable
               -----    -----------   ------------------------------------------
               $2.57        500,000          1.7 years      $2.57        500,000
               $2.96        500,000          1.7 years      $2.96        500,000
                        -----------
                          1,000,000                         $2.77
                        ===========

     December 31, 2000
     -----------------

                                      Weighted Average   Weighted
                                             Remaining    Average
                           Number          Contractual   Exercise         Number
               Price    Outstanding               Life      Price    Exercisable
               -----    -----------   ------------------------------------------
               $2.57        500,000          2.7 years      $2.57        500,000
               $2.96        500,000          2.7 years      $2.96        500,000
                        -----------
                          1,000,000                         $2.77
                        ===========

     December 31, 1999
     -----------------

                                      Weighted Average   Weighted
                                             Remaining    Average
                           Number          Contractual   Exercise         Number
               Price    Outstanding               Life      Price    Exercisable
               -----    -----------   ------------------------------------------
               $2.57        500,000          3.7 years      $2.57        500,000
               $2.96        500,000          3.7 years      $2.96        500,000
                        -----------
                          1,000,000                         $2.77
                        ===========

          TREASURY STOCK
          In October 2000, the Company entered into an agreement with a
          shareholder to purchase 200,000 shares of common stock owned by this
          shareholder at $1.35 per share for a total purchase price of $270,000.

          In January 2001, the Company entered into an agreement with a
          shareholder to purchase 25,000 shares of common stock owned by this
          shareholder at $1.35 per share for a total purchase price of $33,750.

          In July 2001, the Company entered into an agreement with a shareholder
          to purchase 15,000 shares of common stock owned by this shareholder at
          $1.35 per share for a total of $20,250.

          In September 2001, the Company entered into an agreement with a
          shareholder to purchase 200,000 shares of common stock owned by this
          shareholder at $1.35 per share for a total of $270,000.

                                     F-28
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FIRST RESERVE, INC. AND SUBSIDIARIES


NOTE 17 - EARNINGS PER SHARE
          Basic earnings per share ("EPS") was computed by dividing net income
          by the weighted average number of common shares outstanding during the
          period. Diluted EPS were determined on the assumption that the
          contingent shares were exercised at the beginning of the period, or at
          time of issuance, if later.

          The following is the calculation of earnings per share for the years
          ended December 31, 2001, 2000, and 1999:

                                                                      Year ended
                                                               December 31, 2001
                                                               -----------------
          Basic earnings per common share:
             Numerator
               Net income before extraordinary items
                  applicable to common stockholders            $       1,188,380
               Extraordinary items, net                                       --
                                                               -----------------
               Income applicable to common stockholders                1,188,380
                                                               =================
             Denominator
               Weighted average common shares                          6,633,858
                                                               -----------------

               Basic EPS                                       $            0.18
                                                               =================

                                                                      Year ended
                                                               December 31, 2000
                                                               -----------------
          Basic earnings per common share:
             Numerator
               Net income before extraordinary items
                  applicable to common stockholders            $       1,377,178
               Extraordinary items, net                                       --
                                                               -----------------
               Income applicable to common stockholders                1,377,178
                                                               =================
             Denominator
               Weighted average common shares                          6,768,847
                                                               -----------------

               Basic EPS                                       $            0.20
                                                               =================

                                                                      Year ended
                                                               December 31, 1999
                                                               -----------------
          Basic earnings per common share:
             Numerator
               Net income before extraordinary items
                  applicable to common stockholders            $         555,479
               Extraordinary items, net                                       --
                                                               -----------------
               Income applicable to common stockholders                  555,479
                                                               =================
             Denominator
               Weighted average common shares                          6,618,009
                                                               -----------------

               Basic EPS                                       $            0.08
                                                               =================

                                     F-29
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FIRST RESERVE, INC. AND SUBSIDIARIES

NOTE 17 - EARNINGS PER SHARE (CONTINUED)
                                                                      Year ended
                                                               December 31, 2001
                                                               -----------------
          Diluted earnings per common share:
             Numerator
               Net income before extraordinary items
                  applicable to common stockholders            $       1,188,380
               Extraordinary items, net                                       --
                                                               -----------------
               Income applicable to common stockholders        $       1,188,380
                                                               =================
             Denominator
               Weighted average common shares                          6,633,858
               Weighted average contingent common shares                     307
                                                               -----------------
                  Total                                                6,634,165
                                                               -----------------

                  Diluted EPS                                  $            0.18
                                                               =================

                                                                      Year ended
                                                               December 31, 2000
                                                               -----------------
          Diluted earnings per common share:
             Numerator
               Net income before extraordinary items
                  applicable to common stockholders            $       1,377,178
               Extraordinary items, net                                       --
                                                               -----------------
               Income applicable to common stockholders        $       1,377,178
                                                               =================
             Denominator
               Weighted average common shares                          6,768,847
               Weighted average contingent common shares                      --
                                                               -----------------
                  Total                                                6,768,847
                                                               -----------------

                  Diluted EPS                                  $            0.20
                                                               =================

                                                                      Year ended
                                                               December 31, 1999
                                                               -----------------
          Diluted earnings per common share:
             Numerator
               Net income before extraordinary items
                  applicable to common stockholders            $         555,479
               Extraordinary items, net                                       --
                                                               -----------------
               Income applicable to common stockholders        $         555,479
                                                               =================

          Denominator
               Weighted average common shares                          6,618,009
               Weighted average contingent common shares                 109,007
                                                               -----------------
                  Total                                                6,727,016
                                                               =================

                  Diluted EPS                                  $            0.08
                                                               =================

                                     F-30
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FIRST RESERVE, INC. AND SUBSIDIARIES


NOTE 17 - EARNINGS PER SHARE (CONTINUED)
          For the years ended December 31, 2001, 2000, and 1999, warrants to
          purchase 500,000 shares of common stock at $2.58, $2.58, and $2.57 per
          share, respectively, and 500,000 shares of common stock at $2.99,
          $2.98, and $2.96 per share, respectively, were outstanding, but were
          not included in the computation of diluted EPS because the warrants'
          exercise price was greater than the average market price of the common
          shares. The warrants, which expire on August 31, 2003, were still
          outstanding at the end of the year.

NOTE 18 - RELATED PARTY TRANSACTIONS
          Related parties consist of entities associated by common ownership or
          controlled by officers or directors of the Company.

          Columbia rents an office building from an employee. The lease is for a
          period of five years expiring on March 31, 2004, with an option to
          renew for two five-year terms. The lease calls for an annual rent of
          $72,000 plus all applicable sales tax, with an annual rental increase
          based on the Consumer Price Index, with a ceiling of 5%.

          EWM rents an office building from a corporation owned by a minority
          shareholder. The lease is on a month-to-month basis and calls for a
          monthly rental of $6,440.

          EWM rents an office building from a corporation owned by minority
          shareholders. The lease is for a period of ten years expiring in March
          2009, with an option to renew for two successive five-year terms. The
          lease calls for an annual rent of $95,480, plus all applicable sales
          taxes, with an annual increase in rent of 3% per year over the prior
          year's base rent.

          EWM rents an office building from a minority shareholder. The lease is
          for a period of five years expiring in 2005, with an option to renew
          for two five-year terms. The lease calls for an annual rent of
          $60,000, plus all applicable sales tax, with an annual rental increase
          based on the Consumer Price Index, with a ceiling of 3%.

          EWM charges $5,000 per month for administrative fees to a corporation
          owned by a shareholder of the Company.

          EWM receives referral fee income from a corporation owned by two
          shareholders of the Company. These fees are net of commissions and
          other expenses incurred from listings referred to EWM by this
          corporation. The Company had the following balances and transactions
          with related parties for the years ended December 31, 2001, 2000, and
          1999:

<TABLE>
<CAPTION>
                                       Year ended         Year ended          Year ended
                                December 31, 2001  December 31, 2000   December 31, 1999
                                -----------------  -----------------   -----------------
            <S>                 <C>                <C>                 <C>
            Prepaid and other
              current assets             $ 25,000           $ 15,000            $  5,000
            Revenues                     $ 22,037           $ 28,438            $ 17,762
            Other income                 $ 60,000           $ 60,000            $ 55,000
            Expenses                     $348,119           $274,165            $217,902
</TABLE>

                                     F-31
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FIRST RESERVE, INC. AND SUBSIDIARIES


NOTE 19 - UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
          The assets and liabilities of Columbia, and the assets of Ross and
          Daniels (the "acquired companies"), are reflected in the accompanying
          consolidated financial statements. The results of operations of the
          acquired companies are included in the consolidated results from March
          31, 1999 for Columbia, and September 1, 2000 for Ross and Daniels. The
          following pro forma consolidated statement of income gives effect to
          the acquisitions of all of the outstanding shares of January 1, 1999
          Columbia, and Ross and Daniels as if they had occurred on January 1,
          1999 after giving effect to certain adjustments, including increased
          amortization of goodwill generated from the acquisitions. The pro
          forma adjustments are based upon available information and certain
          assumptions that the Company believes are reasonable.

          This unaudited pro forma condensed consolidated information does not
          purport to represent what the actual results of operations would have
          been assuming the acquisitions had taken place on the dates assumed
          above, nor do they purport to predict the results of operations in
          future periods:

                                                 Year ended           Year ended
                                          December 31, 2000    December 31, 1999
                                          -----------------    -----------------

            Total revenue                       $33,567,735          $28,986,194
                                                ===========          ===========
            Net income                          $ 1,298,652          $   725,144
                                                ===========          ===========
            Earnings per share:
               Basic                            $      0.19          $      0.11
                                                ===========          ===========
               Weighted average shares            6,768,847            6,618,009
                                                ===========          ===========
               Diluted                          $      0.19          $       011
                                                ===========          ===========
               Weighted average shares            6,768,847            6,727,016
                                                ===========          ===========

NOTE 20 - SELECTED QUARTERLY DATA (UNAUDITED)
          Following is a summary of the Company's quarterly results of
          operations for the years ended December 31, 2001, 2000 and 1999.
          Earnings Before Interest, Taxes, Depreciation and Amortization
          ("EBITDA") is defined as net income (loss) before income taxes,
          interest expense, depreciation and amortization.

<TABLE>
<CAPTION>
                                     First       Second        Third      Fourth
                                     Quarter     Quarter      Quarter     Quarter       Year
                                   ----------  -----------  -----------  ----------  -----------
          <S>                      <C>         <C>          <C>          <C>         <C>
          Calendar Year 2001
          ------------------
             Revenues              $9,512,420  $10,917,062  $11,076,229  $9,785,486  $41,291,197
             EBITDA                $  342,092  $ 1,039,925  $   739,345  $  262,830  $ 2,384,192
             Operating income
               (loss)              $  197,683  $   853,197  $   556,311  $   85,902  $ 1,693,093
             Net income (loss)     $  171,876  $   549,562  $   388,373  $   78,569  $ 1,188,380

             Earnings per share
               Basic               $     0.03  $      0.08  $      0.06  $     0.01  $      0.18
                                   ==========  ===========  ===========  ==========  ===========
               Weighted average
                  shares            6,694,772    6,690,050    6,674,778   6,535,920    6,633,858
                                   ==========  ===========  ===========  ==========  ===========
               Diluted             $     0.03  $      0.08  $      0.06  $     0.01  $      0.18
                                   ==========  ===========  ===========  ==========  ===========
               Weighted average
                  shares            6,806,772    6,690,050    6,674,778   6,537,137    6,634,165
                                   ==========  ===========  ===========  ==========  ===========
</TABLE>

                                     F-32
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FIRST RESERVE, INC. AND SUBSIDIARIES


NOTE 20 - SELECTED QUARTERLY DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                     First      Second        Third      Fourth
                                     Quarter    Quarter      Quarter     Quarter      Year
                                   ----------  ----------  ----------  ----------  -----------
          <S>                      <C>         <C>         <C>         <C>         <C>
          Calendar Year 2000
          ------------------
             Revenues              $5,860,272  $9,463,680  $8,140,384  $9,364,878  $32,829,214
             EBITDA                $  (52,450) $  873,400  $  630,241  $  439,883  $ 1,891,074
             Operating income
               (loss)              $ (149,772) $  755,586  $  504,264  $  275,651  $ 1,385,729
             Net income (loss)     $ (158,803) $  740,502  $  490,502  $  304,977  $ 1,377,178

             Earnings per share
               Basic               $    (0.02) $     0.11  $     0.07  $     0.04  $      0.20
                                   ==========  ==========  ==========  ==========  ===========
               Weighted average
                  shares            6,767,050   6,767,050   6,783,314   6,768,847    6,768,847
                                   ==========  ==========  ==========  ==========  ===========
               Diluted             $    (0.02) $     0.11  $     0.07  $     0.04  $      0.20
                                   ==========  ==========  ==========  ==========  ===========
               Weighted average
                  shares            6,767,050   6,767,050   6,783,314   6,768,847    6,768,847
                                   ==========  ==========  ==========  ==========  ===========

<CAPTION>
                                     First      Second        Third      Fourth
                                     Quarter    Quarter      Quarter     Quarter      Year
                                   ----------  ----------  ----------  ----------  -----------
          <S>                      <C>         <C>         <C>         <C>         <C>
          Calendar Year 1999
          ------------------
             Revenues              $5,022,329  $6,832,790  $6,742,950  $7,310,235  $25,908,304
             EBITDA                $  (29,899) $  642,127  $  317,618  $   36,757  $   966,603
             Operating income
               (loss)              $   80,888  $  174,637  $  224,376  $ (134,444) $   345,457
             Net income (loss)     $  (93,366) $  529,423  $  204,670  $  (85,248) $   555,479

             Earnings per share
               Basic               $     (.01) $      .08  $      .03  $     (.02) $       .08
                                   ==========  ==========  ==========  ==========  ===========
               Weighted average
                  shares            6,567,050   6,567,050   6,567,783   6,617,593    6,618,009
                                   ==========  ==========  ==========  ==========  ===========
               Diluted             $     (.01) $      .08  $      .03  $     (.02) $       .08
                                   ==========  ==========  ==========  ==========  ===========
               Weighted average
                  shares            6,651,629   6,720,625   6,712,792   6,725,502    6,727,016
                                   ==========  ==========  ==========  ==========  ===========
</TABLE>

NOTE 21 - REGULATORY MATTERS

             HUD Requirements
             ----------------
             Embassy is a nonsupervised loan correspondent for purposes of the
             U.S. Department of Housing and Urban Development ("HUD"). As such,
             24 - CFR Part 202 of the HUD handbook requires Embassy to have an
             Adjusted Net Worth of at least $100,000. Embassy is in compliance
             with this requirement.

                                     F-33
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FIRST RESERVE, INC. AND SUBSIDIARIES


NOTE 21 - REGULATORY MATTERS (CONTINUED)

            State of Florida Requirements
            ------------------------------
            On July 1, 1999, Embassy became a licensed mortgage lender under
            Chapter 494 of the State of Florida. As such, Embassy is required to
            have a minimum net worth of $250,000. Embassy is in compliance with
            this requirement.

NOTE 22 - SUBSEQUENT EVENT
          On January 18, 2002, EWM acquired commercial real estate located in
          Key Biscayne, Florida to be used as an office by EWM for approximately
          $990,000. EWM obtained a loan from an unrelated third party in the
          amount of $500,000. This loan along with First Reserve's $400,000 loan
          became a mortgage loan on this real estate.

                                     F-34
<PAGE>

                                 Exhibit Index

Exhibit No.         Description

23.1                Consent of McClain and Company, L.C.