<PAGE>
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                       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 __________

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                              WESTECH CAPITAL CORP.
--------------------------------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)


         DELAWARE                                             13-3577716
--------------------------------------------------------------------------------
(State or other jurisdiction                                (IRS Employer
     of incorporation)                                    Identification No.)

                2700 Via Fortuna, Suite 400, Austin, Texas 78746
--------------------------------------------------------------------------------
               (Address of Principal Executive Offices) (Zip Code)

        Registrant's telephone number, including area code (512) 306-8222

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

                    Common Stock, par value $0.001 per share
                                (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 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 pursuant 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 . [X]

As of March 26, 2002 there were 1,512,024 shares of the Registrant's common
stock, $0.001 par value, outstanding. The aggregate market value of common stock
held by non-affiliates was $766,903 using a market price of $3.50 on that date.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                 Not Applicable




                                       1
<PAGE>



                                     PART I

ITEM 1.  BUSINESS

GENERAL

Westech Capital Corp., a Delaware corporation ("Westech"), is a holding company
whose only significant operating subsidiary is Tejas Securities Group, Inc., a
Texas corporation ("Tejas Securities"). Tejas Securities is engaged in the
business of providing brokerage and related financial services to institutional
and retail customers nationwide. References to the Company within the Form 10-K
are to Westech and its subsidiaries.

Westech was incorporated as a shell corporation in New York on July 18, 1990,
and made an initial public offering in November 1991. Westech was acquired by
Tejas Securities in a reverse merger effected on August 27, 1999. Pursuant to an
Agreement and Plan of Merger, Tejas Securities Group Holding Company, a Texas
corporation ("Tejas Holding"), holding approximately 81% of Tejas Securities,
became a wholly-owned subsidiary of Westech.

On August 29, 2001, the minority interest shareholders of Tejas Securities
exchanged their shares of Tejas Securities common stock for restricted stock of
Westech. As a result, Westech owns, directly or through Tejas Holding, 100% of
Tejas Securities as of December 31, 2001.

Effective June 29, 2001, Westech completed a 10-for-1 reverse stock split. As a
result of this stock split, earnings (loss) per share amounts and all share
amounts for prior periods have been restated to reflect the shares outstanding
as though the stock split had taken effect in the prior periods.

Tejas Securities' business is conducted from its headquarters at 2700 Via
Fortuna, Suite 400, Austin, Texas, with branch offices in Atlanta, Georgia and
Houston, Texas. Tejas Securities is a registered broker-dealer and investment
advisor offering: (i) brokerage services to retail and institutional customers;
(ii) high quality investment research to institutional and retail customers;
(iii) market-making activities in stocks traded on the Nasdaq National Market
System and other national exchanges; and (iv) investment banking services.


HISTORICAL DEVELOPMENT

Tejas Securities was formed as a Texas corporation in March 1994. Tejas
Securities' initial focus was to provide institutional money managers and mutual
funds high quality investment research covering large U.S. based companies which
were believed to be overly leveraged or which were in default or in bankruptcy.
Tejas believes these companies are not followed closely by a large number of
research analysts. Tejas Securities used this opportunity to establish itself as
a source of high quality research products and trading support. Tejas Securities
took advantage of its initial research success and expanded its research
coverage to special situation equities and began underwriting initial public
offerings of equity securities for a select group of companies in 1997. These
underwritings coupled with a demand for Tejas Securities' research by
individuals led to the expansion of our client base to include retail accounts.

During 1999, Tejas Securities formulated an aggressive expansion plan to
capitalize on the overall economic growth occurring within Texas and in the
United States.




                                       2
<PAGE>

In 2000, Tejas Securities began its expansion by leasing approximately 24,000
square feet of office space for its Austin headquarters. This space was needed
to support additional brokers, investment bankers, research analysts and support
personnel. Tejas Securities hired the additional personnel in an attempt to
provide the rapidly growing central Texas market with a locally based,
full-service brokerage firm, offering both institutional and retail products and
services. Most of the hired employees were added in an effort to increase retail
brokerage and market making activities. The fixed costs associated with our
growth quickly exceeded our revenue production, despite the overall market
appreciation during the first quarter of 2000. Many of these costs were incurred
through contracts of varying lengths for telecommunications services, broker
quotes and news services, as well for developing Tejas Securities brand
awareness. Additionally, Tejas Securities compensation costs increased due to
additional salaries and bonuses.

As the equity markets rapidly decreased beginning in the second quarter of 2000
through the remainder of the year, Tejas Securities realized a decreasing
commission revenue base and recognized substantial trading losses on securities
owned. In an effort to bring fixed costs of operations in line with projected
revenues, Tejas Securities undertook a company wide reorganization. This
reorganization included the elimination of redundant support personnel and
quarterly bonuses to management. Tejas Securities also downsized its market
making capabilities and investment banking presence through a reduction of
personnel and support services. While the reduction of personnel had an
immediate positive impact on fixed costs, many of the support services and
leases were for durations of between six months and two years. Tejas Securities
canceled all contracts that were eligible for cancellation and will continue to
cancel contracts in the future to eliminate unnecessary services. Tejas
Securities also entered sublease agreements for its office space and equipment
in Austin, thereby reducing additional fixed costs.

CURRENT OPERATIONS

The economic downturn during 2000 provided Tejas Securities with the opportunity
to further refine its business model and effectively manage its business. The
cost reductions implemented during 2000 began to provide positive cash flow
results during 2001 and allowed Tejas Securities to streamline its operations.
Additional cost reductions were realized as Tejas Securities refocused on its
core business of providing investment opportunities to institutions, and by
reducing costly research and market making support to an increasingly
conservative retail clientele base. The actions of the Federal Reserve during
2001 also provided stimulus for our government bond trading desk. As interest
rates continued to decline during 2001, many institutions found themselves
purchasing new mortgage-backed securities as their investment pools experienced
significant prepayments. This activity resulted in a positive reallocation of
our resources to the government bond sector.

BROKERAGE SERVICES

Tejas Securities provides brokerage services to approximately 5,000 retail
customers and 500 institutional customers. Tejas Securities offers a menu of
services and products to customers which includes the ability to buy and sell
securities, security options, mutual funds, index funds, fixed income products,
annuities and other investment securities. Tejas Securities' marketing strategy
has been to emphasize its high level of service and its unique knowledge of the
companies covered by its research department.

Currently, Tejas Securities provides its customers with the ability to receive
stock quotes, access research and customer account information on the Internet
through its website (www.Tejassec.com).

Tejas Securities generated $25,615,989, $16,818,686 and $25,291,212 in
commission revenues for the years ended 2001, 2000 and 1999, respectively, or
101%, 114% and 83% of total revenue, respectively.

RESEARCH

The cornerstone of Tejas Securities' business model is to develop opportunities
for its clients that focus on its research and trading capabilities. Tejas
Securities markets its products and services through traditional channels of
distribution.




                                       3
<PAGE>

Tejas Securities anticipates that it will continue to devote a substantial
portion of its resources to support its research department. Currently, the
research department consists of three analysts with proven expertise in special
situation equity research and in distressed securities. The analyst group has
the background to analyze many industries, but has a primary focus on
telecommunications and technology. Tejas Securities believes that the rapid
changes in each of these industries provide excellent investment opportunities.

MARKET MAKING

In August 1999, the NASD approved Tejas Securities to make markets in Nasdaq
securities. Making markets in securities facilitates the execution of security
transactions for Tejas Securities' customers. Tejas Securities acts as a market
maker for approximately 25 public corporations whose stocks are traded on the
Nasdaq National Market System.

Generally, Tejas Securities does not maintain inventories of securities for sale
to its customers. However, Tejas Securities does engage in certain principal
transactions where, in response to a customer order, Tejas Securities will go at
risk to the marketplace to attempt to capture the spread between the bid and
offer. Most of Tejas Securities' larger competitors are engaged in similar
market making activities through subsidiaries or receive order flow payments
from companies engaged in such market making activities. Tejas Securities
believes it can maintain better control and be assured of proper executions of
customer trades by providing these market making services directly to its
customers.

INVESTMENT BANKING

In the past, Tejas Securities raised capital for corporations through public and
private offerings of securities either as a syndicate member or as a managing
underwriter. Tejas Securities also provided advisory services for companies
involved in merger and acquisition activities. As a result of the economic
downturn during 2000 and 2001, the rate of business development in central Texas
and nationwide declined substantially from the 1999 rates, which has impacted
Tejas Securities' ability to generate investment banking revenues. Tejas
Securities continues to review investment banking opportunities from time to
time; however, the Company will not devote substantial resources to this
business segment unless there is a significant increase in investment banking
activities nationwide.

During 1999 and 2000, Tejas Securities was active in the private placement of
securities for an external client and the TSG Internet Fund I, Ltd. Tejas
Securities generated $316,927, $1,831,326 and $925,616 in investment banking
revenues for the years ended 2001, 2000 and 1999, respectively, or 1%, 12% and
3% of total revenue, respectively.

CUSTOMERS

Historically, Tejas Securities' customer base has been comprised of
predominately large nationally known institutional customers. These customers
demand high quality research and sophisticated trading capabilities. Tejas
Securities believes that it has served the needs of this segment of its customer
base well, resulting in increased trading volume. Tejas Securities believes that
the increase in the scope of its research services should increase customer
satisfaction and increase its revenues from institutional customers.

EMPLOYEES

On December 31, 2001, Tejas Securities had approximately 55 employees, which was
approximately the same number as on December 31, 2000. Of these employees, 39
work in sales, 5 in trading, 4 in research and investment banking and the
remaining employees perform management and administrative functions. It is Tejas
Securities' goal to use the sales support functions that are currently in place
to support additional sales staff. Tejas Securities believes that taking
advantage of the infrastructure currently in place will allow an increase in
productivity in the sales area with minimal additional support cost.



                                       4
<PAGE>

COMPETITION

All aspects of Tejas Securities' business are highly competitive. In its general
brokerage activities, Tejas Securities competes directly with numerous other
broker-dealers, many of which are large well-known firms with substantially
greater financial and personnel resources. Many of Tejas Securities' competitors
employ extensive advertising and actively solicit potential clients in order to
increase business. In addition, brokerage firms compete by furnishing investment
research publications to existing clients, the quality and breadth of which are
considered important in the development of new business and the retention of
existing clients. Tejas Securities also competes with a number of smaller
regional brokerage firms in Texas and the Southwest.

Some commercial banks and thrift institutions offer securities brokerage
services. Many commercial banks offer a variety of investment banking services.
Competition among financial services firms also exists for investment
representatives and other personnel.

The securities industry has become considerably more concentrated and more
competitive since Tejas Securities was founded, as numerous securities firms
have either ceased operations or have been acquired by or merged into other
firms. In addition, companies not engaged primarily in the securities business,
but with substantial financial resources, have acquired leading securities
firms. These developments have increased competition from firms with greater
capital resources than those of Tejas Securities.

Various legislative and regulatory developments have also tended to increase
competition within the industry or reduced profits for the industry. On November
12, 1999, the Gramm-Leach-Bliley Act (the "Act") became law. Under the Act, a
bank holding company that elects to become a financial holding company may
engage in any activity that the Federal Reserve Board, in consultation with the
Secretary of the Treasury, determines is financial in nature identical to any
such financial activity, or complementary to such financial activity, and which
does not pose a substantial risk to the safety or soundness of depositary
institutions or the financial system generally. The Act effectively repeals the
restrictive provisions of the 1933 Glass-Steagall Act. The Company anticipates
that these changes will result in an increase in the number, size and financial
strength of potential competitors.

The securities industry has experienced commission discounting by broker-dealers
competing for retail brokerage business. The continuation of such discounting
and an increase in the number of new and existing firms offering discounts could
adversely affect Tejas Securities' retail equity business. However, Tejas
Securities has historically derived the majority of its commission revenue from
institutional customers that tend to purchase larger blocks of securities than
individual customers. Transactions with institutional customers have not been
subject to the same level of discounting that brokerage firms experience with
retail customers due to the size of the transactions. In addition, Tejas
Securities has concentrated its research efforts on debt securities, which have
not experienced as significant of discounting as equity securities.



                                       5
<PAGE>

FEES ON MARGIN LOANS

Tejas Securities derives a portion of its income from fees generated on margin
loans made to Tejas Securities' customers and financed through our clearing
organization. A margin account allows the customer to deposit less than the full
cost of the securities purchased while the clearing organization lends the
balance of the purchase price to the customer, secured by the purchased
securities. Customers are charged interest on the amount borrowed to finance
their margin transactions ranging from 0.25% below to 2.75% above the broker
call rate, which is the rate at which brokers can generally obtain financing
using margined and firm owned securities as collateral. Tejas Securities earns a
fee equal to 50% of the interest charged on customer margin loans. As of
December 31, 2001, the total of all customer securities pledges on debit
balances and held in active margin accounts was approximately $1,500,000.

SECURITIES INDUSTRY PRACTICES

Tejas Securities is registered as a broker-dealer with the SEC and the NASD.
Tejas Securities is registered as a securities broker-dealer in 41 states and
the District of Columbia. Tejas Securities is also a member of the Securities
Investors Protection Corporation, which provides Tejas Securities' customers
with insurance protection for amounts of up to $500,000 each, with a limitation
of $100,000 on claims for cash balances. Tejas Securities has also acquired an
additional $1,500,000 in insurance coverage through Seabury & Smith, as added
protection for individual customers' securities, covering all clients of Tejas
Securities' institutional and retail customers.

Tejas Securities is subject to extensive regulation by federal and state laws.
The SEC is the federal agency charged with administration of the federal
securities laws. Much of the regulation of broker-dealers, however, has been
delegated to self-regulatory organizations, principally the NASD and the
national securities exchanges. These self-regulatory organizations adopt rules,
subject to approval by the SEC, which govern the industry and conduct periodic
reviews of member broker-dealers. Securities firms are also subject to
regulation by state securities commissions in the states in which they do
business. The SEC, self-regulatory organizations, and state securities
commissions may conduct administrative proceedings which can result in censure,
fine, suspension, or expulsion of a broker-dealer, its officers or employees.
The principal purpose of regulation and discipline of broker-dealers is the
protection of customers and the securities markets, rather than protection of
creditors and shareholders of broker-dealers. See "Forward-Looking Statements
and Risk Factors" below.

NET CAPITAL REQUIREMENTS

Tejas Securities is subject to SEC Rule 15c3-1, Net Capital Requirements For
Brokers or Dealers (the "Rule"), which establishes minimum net capital
requirements for broker-dealers. The Rule is designed to measure financial
integrity and liquidity in order to assure the broker-dealer's financial
stability within the securities market. The net capital required under the Rule
depends in part upon the activities engaged in by the broker-dealer.

In computing net capital under the Rule, various adjustments are made to exclude
assets not readily convertible into cash and to reduce the value of other
assets, such as a broker-dealer's position in securities. A deduction is made
against the market value of the securities to reflect the possibility of a
market decline prior to sale. Compliance with the Rule could require intensive
use of capital and could limit Tejas Securities' ability to pay dividends to the
Company, which in turn could limit the Company's ability to pay dividends to its
shareholders. Failure to comply with the Rule could require the Company to
infuse additional capital into Tejas Securities, could limit the ability of
Tejas Securities to pay its debts and/or interest obligations, and may subject
Tejas Securities to certain restrictions which may be imposed by the SEC, the
NASD, and other regulatory bodies. Moreover, in the event that the Company could
not or elected not to infuse the additional capital or otherwise bring Tejas
Securities into compliance, Tejas Securities would ultimately be forced to cease
operations. See "Forward-Looking Statements and Risk Factors" below.





                                       6
<PAGE>
At December 31, 2001 and 2000 Tejas Securities elected to use the alternative
method permitted by the Rule, which requires it to maintain minimum net capital,
as defined, equal to the greater of $250,000 in both 2001 and 2000 or 2% of
aggregate debit balances arising from customer transactions, as defined. At
December 31, 2001, Tejas Securities had net capital of $884,276, which was
$634,276 in excess of the minimum amount required. At December 31, 2000, Tejas
Securities had net capital of $1,094,469, which was $844,469 in excess of the
minimum amount required.

FORWARD-LOOKING STATEMENTS AND RISK FACTORS

We are including the following cautionary statement to take advantage of the
"safe harbor" provisions of the Private Securities Litigation Reform Act of 1995
for any forward-looking statement made by us. The factors identified in this
cautionary statement are important factors (but not necessarily all of the
important factors) that could cause actual results to differ materially from
those expressed in any forward-looking statement made by us. Where any
forward-looking statement includes a statement of the assumptions underlying the
forward-looking statement, we caution you that while we believe the assumptions
to be reasonable and make them in good faith, assumed facts almost always vary
from actual results, and the differences between assumed facts or bases and
actual results can be material, depending on the circumstances. Where, in any
forward-looking statement, we express an expectation or belief as to future
results, that expectation or belief is expressed in good faith and believed to
have a reasonable basis, but there is no assurance that the statement of
expectation or belief will result or be achieved or accomplished. Taking into
account the foregoing, we believe the following are important risk factors that
could cause actual results to differ materially from those expressed in any
forward-looking statement made by us, or on our behalf. If any of the following
risks actually occur, our business, financial condition or results of operations
could be materially adversely affected. In that case, the trading price of our
stock could decline.

FAILURE TO EFFECTIVELY MANAGE A CHANGING BUSINESS COULD RESULT IN OUTDATED
SERVICES.

Our business and operations have changed substantially since we began offering
brokerage services, and we expect the pace of change in the brokerage business
to continue. This rapid change places significant demands on our administrative,
operational, financial and other resources. Failure to properly manage these
changes could result in our services becoming outdated, which would have a
material adverse effect on our business, financial condition and operating
results.

FAILURE OF THIRD-PARTY VENDORS TO PROVIDE CRITICAL SERVICES COULD HARM OUR
BUSINESS.

We rely on a number of third parties to assist in the processing of our
transactions, including online and Internet service providers, back office
processing organizations, service providers and market makers. While we have
selected these third-party vendors carefully, we do not control their actions.
Any problems caused by these third parties could have a material adverse effect
on our business, financial condition and operating results.




                                       7
<PAGE>


WE ARE SUBJECT TO MARKET FORCES BEYOND OUR CONTROL WHICH COULD IMPACT US MORE
SEVERELY THAN OUR COMPETITORS.

We, like other securities firms, are directly affected by economic and political
conditions, broad trends in business and finance and changes in volume and price
levels of securities transactions. In recent years, the U.S. securities markets
have fluctuated considerably and a downturn in these markets could adversely
affect our operating results. In October 1987, October 1998, from April 2000
through March 2001 and in September 2001, the stock market suffered major
declines, as a result of which many firms in the industry suffered financial
losses. Additionally, the level of individual investor trading activity
decreased after these events. Reduced trading volume and prices have
historically resulted in reduced transaction revenues. When trading volume is
low, our profitability may be adversely affected because our overhead remains
relatively fixed, despite lower compensation costs associated with commission
revenues. Severe market fluctuations in the future could have a material adverse
effect on our business, financial condition and operating results. Although we
have diversified our product and service revenue streams, some of our
competitors with more diverse product and service offerings might withstand such
a downturn in the securities industry better than we would.

OUR CUSTOMERS MAY DEFAULT ON THEIR MARGIN ACCOUNTS, EFFECTIVELY PASSING THEIR
LOSSES ON TO US.

Our customers sometimes purchase securities on margin through our clearing
organization; therefore we are subject to risks inherent in extending credit.
This risk is especially great when the market is rapidly declining. In such a
decline, the value of the collateral could fall below the amount of a customer's
indebtedness. Specific regulatory guidelines mandate the amount that can be
loaned against various security types. We rigorously adhere to these guidelines
and in a number of instances exceed those requirements. Also, independent of our
review, our corresponding clearing organization independently maintains a credit
review of our customer accounts. If customers fail to honor their commitments,
the clearing organization would sell the securities held as collateral. If the
value of the collateral were not sufficient to repay the loan, a loss would
occur, which we may be required to fund. Any such losses could have a material
adverse effect on our business, financial condition and operating results.

WE ARE SUBJECT TO STRICT GOVERNMENT REGULATION AND THE FAILURE TO COMPLY COULD
RESULT IN DISCIPLINARY ACTIONS.

The securities industry in the U.S. is subject to extensive regulation under
both federal and state laws. See "- Securities Industry Practices" above.
Broker-dealers are subject to regulations covering all aspects of the securities
business.

The SEC, the NASD or other self-regulatory organizations and state securities
commissions can censure, fine, issue cease-and-desist orders or suspend or expel
a broker-dealer or any of its officers or employees. Our ability to comply with
all applicable laws and rules is largely dependent on our establishment and
maintenance of a compliance system to ensure such compliance, as well as our
ability to attract and retain qualified compliance personnel. We could be
subject to disciplinary or other actions due to claimed noncompliance in the
future, which could have a material adverse effect on our business, financial
condition and operating results.

Our mode of operation and profitability may be directly affected by additional
legislation, changes in rules promulgated by the SEC, the NASD, the Board of
Governors of the Federal Reserve System, the various stock exchanges and other
self-regulatory organizations, or changes in the interpretation or enforcement
of existing laws and rules.

The NASD regulates all marketing activities by Tejas Securities. The NASD can
impose certain penalties for violations of its advertising regulations,
including censures or fines, suspension of all advertising, the issuance of
cease-and-desist orders or the suspension or expulsion of a broker-dealer or any
of its officers or employees. Tejas Securities' compliance officer reviews all
marketing materials prior to release to ensure compliance with NASD regulations.




                                       8
<PAGE>

There can be no assurance that other federal, state or foreign agencies will not
attempt to regulate our business. If such regulations are enacted, our business
or operations would be rendered more costly or burdensome, less efficient or
even impossible or otherwise have a material adverse effect on our business,
financial condition and operating results.

WE MUST MAINTAIN CERTAIN NET CAPITAL REQUIREMENTS THAT COULD SLOW OUR EXPANSION
PLANS OR PREVENT PAYMENTS OF DIVIDENDS.

The SEC, the NASD and various other regulatory agencies have stringent rules
with respect to the maintenance of specific levels of net capital by securities
broker-dealers. Net capital is the net worth of a broker or dealer (assets minus
liabilities), less deductions for certain types of assets. If a firm fails to
maintain the required net capital it may be subject to suspension or revocation
of registration by the SEC and suspension or expulsion by the NASD, and could
ultimately lead to the firm's liquidation. If such net capital rules are changed
or expanded, or if there is an unusually large charge against net capital,
operations that require the intensive use of capital would be limited. Such
operations may include trading activities and the financing of customer account
balances. Also, our ability to withdraw capital from Tejas Securities could be
restricted, which in turn could limit our ability to pay dividends, repay debt
and redeem or purchase shares of our outstanding stock. A large operating loss
or charge against net capital could adversely affect our ability to expand or
even maintain our present levels of business, which could have a material
adverse effect on our business, financial condition and operating results.

OUR TRADING SYSTEMS MAY FAIL, RESULTING IN SERVICE INTERRUPTIONS.

We receive and process trade orders through internal trading software and
touch-tone telephones and we depend heavily on the integrity of the electronic
systems supporting this type of trading. Heavy stress placed on our systems
during peak trading times could cause our systems to operate too slowly or fail.
If our systems or any other systems in the trading process slow down
significantly or fail even for a short time, our customers would suffer delays
in trading, potentially causing substantial losses and possibly subjecting us to
claims for such losses or to litigation claiming fraud or negligence. During a
systems failure, we may be able to take orders by telephone; however, only
associates with securities broker's licenses can accept telephone orders, and an
adequate number of associates may not be available to take customer calls in the
event of a systems failure. In addition, a hardware or software failure, power
or telecommunications interruption or natural disaster could cause a system
failure. Any systems failure that interrupts our operations could have a
material adverse effect on our business, financial condition and operating
results.

NO ACTIVE PUBLIC MARKET FOR OUR COMMON STOCK CURRENTLY EXISTS AND NONE MAY
DEVELOP.

An active public market for our common stock does not currently exist. We cannot
predict the extent to which investor interest in us will lead to the development
of a trading market or how liquid that market might become. The trading price of
our common stock could be subject to wide fluctuations in response to factors
unrelated to our operating results such as:

o        announcements of technological innovations, significant acquisitions,
         strategic alliance relationships, joint ventures or capital commitments
         by us or our competitors;

o        new products or services offered by us or our competitors;

o        changes in financial estimates by securities analysts;

o        additions or departures of key personnel; and

o        sales of our common stock by our stockholders.


                                       9
<PAGE>

ITEM 2.  PROPERTIES

The Company's headquarters are located at 2700 Via Fortuna, Suite 400, Austin,
Texas. The Company leases space for its offices in Austin and Houston, Texas and
Atlanta, Georgia, which consist of approximately 24,700 square feet, 5,400
square feet and 2,500 square feet, respectively. Future commitments associated
with the leases are included in the footnotes to the consolidated financial
statements. These leases are for terms of six years , two years and three years,
respectively, and contain renewal options. In December 2000, the Company
subleased approximately 60% of its space in the Austin location effective
January 1, 2001. In March 2001, the Company subleased approximately 15% of its
Houston office space.

ITEM 3.  LEGAL PROCEEDINGS

There are no material pending legal proceedings, other than litigation
incidental to the business, to which the Company or any of its subsidiaries is a
party or of which any of their property is the subject.

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

None.

                                     PART II

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

RECENT STOCK PRICES

The Company's common stock was cleared for trading on the NASDAQ electronic
bulletin board on March 10, 2000. The Company's common stock trades under the
symbol "WSTH." On December 31, 2001, there were in excess of 350 holders of
record of the Company's common stock and in excess of __ beneficial holders of
the Company's common stock. The following table sets forth for the periods
indicated the high and low market prices for the common stock, which reflect
inter-dealer prices, without retail mark-up, mark-down or commissions and my not
necessarily represent actual transactions. The Company has not paid cash or
stock dividends and has no present plan to pay any such dividends. The payment
of future dividends will be decided by the Board of Directors and will be based
upon the Company's future earnings, financial condition and capital
requirements.

<Table>
<Caption>
                            1st Qtr.    2nd Qtr.   3rd Qtr.    4th Qtr.

<S>                        <C>         <C>         <C>         <C>
2001:
Stock Price Range
       High                $   16.25   $   12.50   $   2.60    $   5.00
       Low                 $   11.25   $    2.00   $   2.50    $   3.25

2000:
Stock Price Range
       High                $  110.00   $  110.00   $  32.50    $  40.00
       Low                 $   18.70   $   25.00   $  27.50    $  11.87

</Table>

RECENT SALES OF UNREGISTERED STOCK

On August 29, 2001, the Company issued a total of 245,890 shares of Westech
common stock to 17 investors in exchange for 990,500 shares of Tejas Securities
common stock in a private placement.



                                       10
<PAGE>


ITEM 6.  SELECTED FINANCIAL DATA

The summary statement of operations data and the summary statement of financial
condition data as of and for each of the years in the five-year period ended
December 31, 2001 is as follows. Historical financial results may not be
indicative of future performance of the Company or its affiliates.

<Table>
<Caption>


                                                                  AS OF AND FOR THE YEAR ENDED DECEMBER 31,
                                                   2001              2000               1999              1998             1997

<S>                                          <C>               <C>                   <C>               <C>               <C>
STATEMENT OF OPERATIONS DATA:
Commissions                                  $   25,615,989    $   16,818,686        25,291,212        7,932,780         4,810,520
Investment banking                                  316,927         1,831,326           925,616        2,584,770           752,554
Trading income (loss)                              (630,687)       (4,076,629)        3,475,539         (272,811)          833,227
Other                                                25,920           135,902           740,342           23,530             9,248
Total revenue                                    25,328,149        14,709,285        30,432,709       10,268,269         6,405,549

Employee compensation                            18,666,284        13,954,116        19,992,928        7,397,860         4,459,420
Other expenses                                    5,352,183         7,618,831         4,802,555        3,431,631         1,453,086
Total expenses                                   24,018,467        21,572,947        24,795,483       10,829,491         5,912,506

Income (loss) before income taxes
and minority interest                             1,309,682        (6,863,662)        5,637,226         (561,222)          493,043
Income tax expense (benefit)                        495,474        (2,214,012)        2,201,598         (163,900)           19,008
Minority interest                                   (18,814)         (650,510)          297,285                0                 0

Net income (loss)                            $      833,022    $   (3,999,140)        3,138,343         (397,322)          474,035

Earnings (loss) per share:
Basic                                        $         0.62    $        (3.17)             2.51            (0.37)
Diluted                                      $         0.53    $        (3.17)             2.25            (0.37)
Weighted average shares
outstanding:
Basic                                             1,348,097         1,261,721         1,250,119        1,066,437
Diluted                                           1,546,112         1,261,721         1,529,197        1,066,437

STATEMENT OF FINANCIAL CONDITION DATA:
Cash and cash equivalents                    $      547,761    $      482,562         2,732,175          201,312           170,474
Deposit with clearing organization                  260,471           250,000           100,000          100,000           100,000
Receivable from clearing organization             1,905,338           735,616            63,620           37,224           116,859
Securities owned                                  3,011,667         2,433,022         6,207,748        1,539,424           634,419
Other assets                                      1,515,271         3,397,959         2,534,127          695,843           343,978
Total assets                                 $    7,240,508    $    7,299,159        11,637,670        2,573,803         1,365,730

Accounts payable, accrued
expenses and other liabilities               $    3,183,904    $    1,869,821         2,905,020          577,736           141,330
Securities sold, not yet purchased                  332,581           446,078           187,940                0                 0
Payable to clearing organization                          0           456,660         1,719,627           91,254                 0
Notes payable                                       500,000         2,250,000                 0                0                 0
Subordinated debt                                 1,000,000         1,000,000         1,000,000          500,000                 0
Total liabilities                                 5,016,485         6,022,559         5,812,587        1,168,990           141,330
Minority interest                                         0           377,382           976,725                0                 0

Common stock                                          1,512             1,266            12,537           11,615             9,580
Additional paid in capital                        2,222,281         1,730,744         1,669,473        1,461,456           937,298
Subscription receivable                                   0                 0                 0          (96,263)         (100,000)
Treasury stock                                            0                 0                 0                0           (47,805)
Retained earnings (deficit)                             230          (832,792)        3,166,348           28,005           425,327
Total stockholders' equity                        2,224,023           899,218         4,848,358        1,404,813         1,224,400

Total liabilities and
stockholders' equity                         $    7,240,508    $    7,299,159        11,637,670        2,573,803         1,365,730
</Table>




                                       11
<PAGE>



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

CRITICAL ACCOUNTING POLICIES

The Company has identified the policies set forth below as critical to the
Company's operations and the understanding of the Company's results of
operations. The impact of these policies is further discussed throughout
Management's Discussion and Analysis of Financial Condition and Results of
Operations, where these policies affect the Company's reported amounts. The
Company's significant accounting policies are described in Note 2 in the Notes
to Consolidated Financial Statements.

Fair Value of Securities

The Company routinely purchases and sells securities for its proprietary
accounts and its customers, including employees. Financial securities used in
the Company's trading activities are recorded at fair value, with unrealized
gains and losses reflected in investment income. Securities with readily
determinable market values are based on quoted market prices. Many of the
securities held are those of distressed companies in which there may be limited
market activity. The value of securities with limited market activity for which
quoted market values are not readily determinable are based on management's best
estimate, which may include dealer price quotations and price quotations for
similar instruments traded.

Receivable (Payable) to Clearing Organization

The Company utilizes its equity in securities owned at its clearing organization
to facilitate the purchase of additional securities for trading purposes. The
value of the equity at the clearing organization is primarily affected by
realized trading gains and losses, unrealized gains and losses, the purchase and
sale of accrued interest on debt securities, and cash withdrawals and deposits
at the clearing organization. As a result of this activity, including the
purchase and sale of securities, the Company may have either a receivable or
payable balance to the clearing organization. In the event that the Company has
a payable balance to the clearing organization, the Company may be restricted in
its ability to withdraw funds from the clearing organization to cover routine
operating expenses. Additionally, if the value of the equity at the clearing
organization is insufficient to cover the margin requirements on the value of
the securities borrowed, the Company may be required to either liquidate its
holdings at the clearing organization or provide additional funds to cover
margin requirements. For these reasons, the Company carefully monitors its
receivable or payable balance so that it can provide sufficient funds for
operations.

LIQUIDITY AND CAPITAL RESOURCES

A material portion of the Company's commission revenues are generated by the
brokering of securities from United States domiciled companies that are rated
below investment grade and classified as distressed. The Company dedicates the
majority of its in-house research to analyzing distressed companies, which, in
turn, helps facilitate the brokering of these distressed securities. The recent
economic slowdown in the domestic United States economy could increase the
opportunities in domestic distressed securities. Management expects that the
recent slow down in the United States economy will provide increased
opportunities for the Company to research and generate additional commission
revenues in the distressed bond market, however, there can be no assurance that
additional revenues will be realized.

As a broker-dealer, the Company is required to maintain a certain level of
liquidity or net capital in accordance with NASD regulations. Factors affecting
the Company's liquidity include the value of securities held in trading
accounts, the value of non-current assets, the amount of unsecured receivables,
and the amount of general business liabilities, excluding amounts payable to its
clearing broker and NASD approved subordinated debt.



                                       12
<PAGE>

The Company's inventory balance fluctuates daily based on the current market
value and types of securities held. The Company typically invests in securities
in which it provides research coverage. The types of securities may include
publicly traded debt, equity, options and private security issuances. As a
market maker, the Company provides bid and ask quotes on certain equity
securities on the NASDAQ market. The Company's ability to generate revenues from
market making activities may depend upon the level and value of securities held
in inventory.

Market values for some of the securities may not be easily determinable
depending upon the volume of securities traded on open markets, the operating
status of the companies or the types of securities issued by companies. If the
underlying securities of a company become illiquid, the Company's liquidity may
be affected depending on the value of the securities involved. During times of
general market declines, the Company may experience market value losses, which
ultimately affects the liquidity of the Company through its broker-dealer net
capital requirements. In addition, the Company may decide not to liquidate its
security holdings to increase cash availability if management believes a market
turnaround is likely in the near term or if management believes the securities
are undervalued in the current market.

The Company utilizes the receivable balance at its clearing organization to fund
operating and investing activities. The receivable balance at the clearing
organization is also used to secure temporary financing for the purchase of
investments in the Company's trading accounts. The receivable balance held at
the clearing organization may fluctuate depending on factors such as the market
valuation of securities held in the Company's trading accounts, realized trading
profits, commission revenue, cash withdrawals and clearing costs charged to the
Company for conducting its trading activities. As of December 31, 2001, the
receivable balance from the clearing organization was $1,905,338.

In December 2001, the Company entered into an agreement with Correspondent
Services Corporation ("CSC") to provide clearing services for the Company and
its customers. In February 2002, the Company began the process of transitioning
its business and its accounts to CSC. The Company expects the process to be
completed in March 2002 and does not anticipate any adverse effect on its
liquidity as a result of this transition.

In March 2002, the Company entered into an agreement with a bank to borrow
$2,500,050 for operating purposes at Tejas Securities. The loan is due and
payable on demand or by March 15, 2003 if no demand is made. The loan accrues
interest at a rate of 5.50% per annum and is to be paid on a monthly basis.
Tejas Securities has provided a certificate of deposit in a like amount as
collateral for the loan.

Cash Flows From Operating Activities

Net cash provided by (used in) operating activities was $1,897,460, $(4,191,924)
and $1,481,301 in 2001, 2000 and 1999, respectively. The net cash provided by
(used in) operating activities is impacted primarily by the brokerage operating
activities and changes in the brokerage-related assets and liabilities.

During 2001, the primary use of cash resulted from the $1,626,382 decrease in
the net payable to clearing organization. The Company's increased commission
revenue and decrease in investment losses allowed the Company to increase its
cash balances on deposit at First Clearing Corporation. In addition, the
increased revenues allowed the Company to increase its security holdings by
$578,645. The primary sources of cash related to the receipt of income tax
refunds for prior year carrybacks and the reduction in cash paid due to the
increase in accounts payable and accrued expenses related to year-end bonus
accruals. The net effect of these transactions on cash flows from operating
activities was $916,297 in cash availability, with the remaining $981,163
increase consisting of $833,022 in net income plus changes in other asset and
liability accounts.




                                       13
<PAGE>


The Company generated negative cash flows from operations in the year 2000 of
approximately $4.2 million. This use of cash was as a result of operating losses
incurred throughout the year. Management took several proactive steps to help
mitigate the negative cash flows from operations which included: reductions of
approximately 50% of staff primarily from non-revenue generating positions; the
sub-lease of approximately 60% of the Company's main corporate space; the change
to a new clearing organization in an effort to reduce clearing charges;
initiated a hiring freeze with the exception of revenue producers; and
reductions in redundant information systems. These and other cost control
measures were initiated beginning in May 2000.

In 2000, the most significant uses of cash were from the decrease in the payable
to the clearing organization and the increase in federal income taxes
receivable. The $1,934,963 decrease in the payable to the clearing organization
resulted from decreases in securities owned of $3,774,726, taking into account
market value adjustments. The increase in federal income taxes receivable
resulted from payment of 1999 accrued income taxes of $863,821 in 2000, and the
subsequent receivable balance of $1,808,214 due to operating losses incurred in
2000. The primary sources of cash related to the reduction of securities owned
of $3,774,726 and the reduction of other investments of $932,253. These
decreases represented the liquidation of investments needed to fund operating
expenses during the year. The net effect of these transactions was $99,981 in
cash proceeds, with the remaining $4,291,905 reduction consisting of $3,999,140
net loss plus changes in other assets and liability accounts.

In 1999, the most significant sources of cash related to the increase in the
payable to the clearing organization and the increase in accrued liabilities.
The $1,601,977 increased payable to the clearing organization corresponds to the
overall increase in securities owned of $4,668,324, taking into account market
value adjustments. The $2,327,284 increase in accounts payable, accrued expenses
and other liabilities related to the remaining 1999 estimated income tax
liability for the Company and employee compensation accruals. The primary uses
of cash included the increase in securities owned. Other significant uses of
cash related to the conversion of the $700,088 performance fee earned by the
manager of TSG Internet Fund I, Ltd. into equity of the fund, and the $500,955
increase in employee and shareholder receivables. The net cash effect of these
transactions was the use of $739,063 in cash, with the remaining $2,220,364
addition consisting of net income plus changes in other asset and liability
accounts.

The Company anticipates that a significant portion of the cash provided from
future operating activities of Tejas Securities might be used to reduce the
Company's overall debt structure. In addition, future operating cash flows may
be used to facilitate additional investing activities.

Cash Flows From Investing Activities

Net cash used in investing activities was $77,261, $358,856 and $318,918 in
2001, 2000 and 1999, respectively. During 2001, the Company purchased $77,261 of
furniture and equipment in the ordinary course of business. In 2000, the Company
purchased $422,540 in furniture, fixtures and leasehold improvements as it
expanded its corporate headquarters and established a presence in Houston,
Texas. In 1999, the Company advanced $116,004 to TSG Capital, LLC in conjunction
with the organization of the TSG Internet Fund I, Ltd., a private investment
fund managed by the Company (See Item 13 - "Certain Relationships and Related
Transactions"). The remaining cash uses in 1999 are directly the result of
capital expenditures for office expansion in Austin and Atlanta.

Cash Flows From Financing Activities

Net cash provided by (used in) financing activities was $(1,755,000), $2,301,167
and $1,368,480 in 2001, 2000 and 1999, respectively.



                                       14
<PAGE>


On March 6, 2001, the Company restructured its line of credit. The Company
secured the line of credit in June 2000 to facilitate its working capital needs.
Originally, the loan accrued interest at a rate of prime plus one percent, with
interest due on a quarterly basis. The Company pledged its ownership of
4,808,555 shares of Tejas Securities common stock and John Gorman, Chairman and
CEO, provided a personal guarantee. Additionally, the line of credit contained
loan covenants of $2,500,000 of minimum net worth and $1,500,000 of working
capital. The Company's shares of Tejas Securities common stock and John Gorman's
pledge remain as collateral for the line of credit. The bank agreed to
restructure the line of credit in February 2001 in exchange for a $500,000
principal reduction and current payments of interest. Upon modification, the
line of credit was converted into a term loan in the amount of $1,000,000. The
modified note matures on April 1, 2002 and requires monthly payments of $50,000
plus accrued interest with payments beginning April 1, 2001. Upon maturity of
the note on April 1, 2002, all unpaid principal plus interest will become due
and payable. Additionally, there are no financial covenants governing the loan.
As of December 31, 2001, the balance on the note was $500,000. The Company is
currently negotiating with the bank to extend the maturity date of the note to
November 1, 2002.

On February 27, 2001, the Company restructured the $1,000,000 of subordinated
debt with Clark Wilson, which was originally issued in two $500,000 increments
in September 1998 and June 1999. The loan agreements were used to increase
equity capital for the Company's underwriting activities and to finance the
Company's expansion activities. The loans accrue interest at 11.5 percent per
annum and are considered equity capital for NASD purposes. As a condition of the
loan agreements, Tejas Securities issued warrants to the lender to purchase
225,000 shares of common stock of Tejas Securities (55,856 shares of the
Company's common stock giving effect to the Merger), exercisable at $2.65 per
share ($10.70 per share giving effect to the Merger). The warrants associated
with the September 1998 and June 1999 subordinated debt were canceled in 1999 in
an agreement with Clark Wilson. On January 1, 2000, the Company issued options
to purchase 55,856 shares of the Company's common stock to Clark Wilson. The
purchase price of the shares is $10.70 per share and expires four years from the
date of the grant. The options were intended to constitute non-qualified stock
options. Clark Wilson granted the Company an option to extend the maturity of
the subordinated debt at its discretion for a period of at least one year not to
exceed three years. In consideration for this option, the Company paid $20,000
to Clark Wilson. In November 2001, the Company exercised its option to extend
the maturity of the loan agreements through November 1, 2002.

Effective February 7, 2001, the Company restructured the short-term demand notes
to John Gorman, Chairman and Chief Executive Officer, and Charles Mayer,
President and Chief Operating Officer, into term notes with new maturity dates
of March 7, 2002. In November 2000, the Company entered short-term loan
agreements with John Gorman and Charles Mayer for $500,000 and $250,000,
respectively. These loans were secured to facilitate short-term working capital
needs and to satisfy certain regulatory requirements of Tejas Securities. The
demand loans accrued at the prime rate, with interest due on a quarterly basis,
and were unsecured. The $500,000 note to John Gorman was paid in full in May
2001, including accrued interest. The $250,000 note to Charles Mayer was paid in
full in June 2001, including accrued interest.

In May 2000, an employee of the Company exercised non-qualified stock options to
purchase 12,413 shares of the Company's common stock at $4.00 per share. During
November 2000, the Company issued $750,000 in short-term demand notes to John
Gorman and Charles Mayer as described above. In June 2000, the Company
established a line of credit for $1,500,000 with a bank as described above.

During 1999, the Company issued $500,000 of subordinated debt to Clark Wilson as
described above. In addition, the Company issued 269,842 shares of stock
(1,086,975 shares of Tejas Securities common stock before the exchange ratio)
with a value of $775,884 through a subscription program. In 1999, $750,164 of
the current and prior year subscriptions was collected. The 1999 stock issuance
to the Company's employees and management members was a means of recognizing
each individual's contribution to the Company and to expand the stockholder
base. Proceeds from the stock issuance were partially used to finance the Merger
and the expansion of the Company's infrastructure.




                                       15
<PAGE>


Results Of Operations

The following table presents additional information regarding the results of
operations as presented in Item 6.

<Table>
<Caption>
                                                        Year Ended December 31,
                                             2001                       2000                  1999
                                   ------------------------    ------------------------    ----------
                                     (000's)      % Change       (000's)      % Change       (000's)
                                   ----------    ----------    ----------    ----------    ----------

<S>                                <C>           <C>           <C>           <C>           <C>
Revenues:
Commissions                        $   25,616            52        16,819           (33)       25,291
Underwriting and
investment                                317           (83)        1,831            98           926
  banking
Net dealer inventory and
  investment income (loss)               (631)           85        (4,077)         (217)        3,476
Other income                               26           (81)          136           (82)          740
                                   ----------    ----------    ----------    ----------    ----------
                                   $   25,328            72        14,709           (52)       30,433

Expenses:
Commissions, employee
  compensation and benefits        $   18,666            34        13,954           (30)       19,993
Clearing and floor                        413           (57)          966            57           615
brokerage
Communications and
  occupancy                             1,646           (19)        2,033            64         1,242
Professional                            1,169           (37)        1,868            92           971
Other                                   2,124           (23)        2,752            39         1,974
                                   ----------    ----------    ----------    ----------    ----------
                                   $   24,018            11        21,573           (13)       24,795
</Table>


The increase in commission revenues during 2001 was due to an increase in
distressed securities and mortgage-backed securities transactions. As the
overall economy continued to struggle, more US companies experienced downgrades
in corporate debt ratings and bankruptcy filings. The increase in corporate
bankruptcy filings provided the Company with additional opportunities in the
distressed telecommunications sector. In addition, as the Federal Reserve
continued to lower interest rates, many institutions sought new mortgage-backed
securities as their inventories experienced significant prepayments. The
decrease in commission revenues during 2000 resulted from the overall downturn
in the equity markets during the year. The Nasdaq decreased approximately 50%
from its all time high achieved in March 2000. In addition, the Company reduced
the number of employees servicing its retail broker division as a result of the
downturn in the Nasdaq market.

Underwriting and investment banking revenues decreased during 2001 as the
Company no longer emphasized this aspect of its business, primarily due to
overall market conditions. Underwriting and investment banking revenues
increased in 2000 through the increase in advisory fee income and participation
in equity syndicates. In addition, the Company was involved in a secondary
placement of TSG Internet Fund I, Ltd. partnership interests along with one
other private placement.

Net dealer inventory and investment loss decreased during 2001 as the Company
increased its holdings in mortgage-backed securities and reduced its exposure to
riskier distressed debt securities. Net dealer inventory and investment losses
increased during 2000 primarily from the overall market decline and the losses
generated in proprietary positions. Many of the companies that the Company
followed through research are involved in the telecommunications industry, which
experienced substantial valuation declines. During 2000, the TSG Internet Fund
I, Ltd. generated substantial losses, thereby eliminating any performance fee
income for the Company, and reducing other income from the 1999 amounts.

                                       16
<PAGE>

Commissions, employee compensation and benefits increased during 2001 as a
function of increased commissions and profitability of the Company. The
Company's commission expense ratio was consistent with prior years, however, the
Company increased its bonus payments and year-end bonus accrual to reward
employees and management for the Company's improved financial performance.
Commissions, employee compensation and benefits decreased in 2000 due to market
declines. Commission revenues decreased significantly during the year, thereby
reducing commission expense to brokers. In addition, the Company eliminated
redundant administrative positions and reduced its bonus payments to
administrative and management personnel.

Clearing and floor brokerage costs decreased during 2001 as the Company reduced
its market making activities and institutional equity presence. In addition, the
Company began receiving order flow rebates from its remaining market making
activities. Clearing and floor brokerage costs increased in 2000 as the Company
aggressively expanded its market making activities and the number of retail
brokers during the first quarter of 2000. As the markets declined after the
first quarter, clearing and floor brokerage costs gradually declined due to
lower trading volume and a reduction in market making activities. In addition,
the Company sought to lower its future clearing charges by entering an agreement
with First Clearing Corporation to provide clearing services.

Communications and occupancy charges decreased during 2001 as the Company
subleased a substantial portion of its office space in Austin and Houston. In
addition, the Company continued to reduce redundant services to support its
brokers. Communications and occupancy charges increased significantly during
2000 due to three factors: the Company leased new office space for its corporate
headquarters in Austin, Texas, beginning in January 2000; the Company expanded
its presence in Texas through the addition of a Houston office; and as a result
of the expansion of its market making activities, the Company incurred
additional costs associated with telecommunications and support for a larger
sales force. During the second half of 2000, the Company undertook a careful
examination of its fixed costs associated with communications and occupancy
charges. Due to reduction in personnel and revenues, the Company sought to
sublease excess office space and discontinue services that were no longer
required.

Professional fees decreased during 2001 due to a reduction in legal and
accounting fees associated with the registration of the Company's common stock.
In addition, the Company was not involved in any significant legal proceedings
that resulted in adverse settlements. Professional fees increased during 2000
due to increases in legal expenses, accounting fees and consulting fees. In
2000, the Company incurred approximately $600,000 in legal fees associated with
the registration of the Company's common stock and legal fees for the settlement
of private equity transactions. In addition, the Company incurred approximately
$400,000 for settlements with clients and former employees. The Company also
incurred approximately $300,000 in marketing costs associated with developing
its Internet site and brand awareness. The Company also incurred additional
accounting costs associated with its annual reporting requirements and the
registration of its common stock.

The decrease in other expenses during 2001 is due to cost reductions implemented
during 2000 that began to yield significant savings in overhead costs. The
increase in other expenses during 2000 is attributed to the first quarter
increase in administrative services needed to support the expanding
infrastructure. In addition, the Company added equipment leases for the
expansion of the Austin office and the establishment of the Houston office.

Income tax expense increased in 2001 due to pre-tax earnings of $1.3 million.
The Company's effective tax rate was 38% for 2001. The income tax benefit
increased during 2000 due to the $6.9 million pre-tax loss incurred. The
Company's effective tax rate was 32% for 2000.

Minority interest in net income (loss) resulted from the minority stockholders
of Tejas Securities subsequent to the Merger on August 27, 1999. There are no
longer minority stockholders as of December 31, 2001.



                                       17
<PAGE>

Effects Of Inflation

The effects of inflation have been minimal on the results of operations and the
financial condition of the Company in recent years. However, the rising cost of
labor and competitive market for brokers could affect general and administrative
costs in the near term.

NEW ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and
Hedging Activities ("Statement 133"), and SFAS No. 138, Accounting for Certain
Derivative Instruments and Certain Hedging Activities, An Amendment of FASB
Statement No. 133. The Company was required to implement this Statement
effective with its 2001 fiscal year (after deferral by FASB Statement No. 137).
Statement 133 addresses the accounting for derivative instruments, including
certain instruments embedded in other contracts, and for hedging activities.
Under this Statement, the Company is required to recognize all derivative
instruments as either assets or liabilities in the statements of financial
condition and measure those at fair value. If certain conditions are met a
derivative may be specifically designated as a hedge, an unrecognized firm
commitment, an available-for-sale security, or a foreign-currency-dominated
forecasted transaction. The adoption of Statement 133 on January 1, 2001 had no
impact on the Company's consolidated financial position or results of
operations. The Company did not hold any derivatives as of December 31, 2001 and
2000.

In June 2001, FASB issued Statement No. 141 ("Statement 141"), Business
Combinations, and Statement No. 142 ("Statement 142"), Goodwill and Other
Intangible Assets. Statement 141 requires that the purchase method of accounting
be used for all business combinations initiated after June 30, 2001 as well as
all purchase method business combinations completed after June 30, 2001.
Statement 141 also specifies criteria intangible assets acquired in a purchase
business combination must meet to be recognized and reported apart from
goodwill. Statement 142 requires that goodwill no longer be amortized, but
instead tested for impairment at least annually in accordance with the
provisions of Statement 142. Statement 142 also requires that intangible assets
with estimable useful lives be amortized over their respective estimated useful
lives to their estimated residual values, and reviewed for impairment in
accordance with FASB Statement No. 121 (Statement 121), Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of or
Statement 144 upon its adoption (See Below).

The Company adopted the provisions of Statement 141 effective July 1, 2001 and
certain provisions of Statement 142 as required for goodwill resulting from
business combinations consummated after June 30, 2001. The remaining provisions
of Statement 142 are required to be adopted effective January 1, 2002. Goodwill
acquired after June 30, 2001, but before Statement 142 is adopted in full will
not be amortized, but will continue to be evaluated for impairment in accordance
with the appropriate pre-Statement 142 accounting literature, which includes
Statement 121. Financial Accounting Standards Board's Statement No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets ("Statement 144")
supercedes Statement 121 and is effective for fiscal years beginning after
December 15, 2001. The adoption of Statement 144 as of January 1, 2002 had no
impact on the Company's consolidated financial statements.

In connection with the transitional goodwill impairment evaluation, Statement
142 requires the Company to perform an assessment of whether there is an
indication that goodwill is impaired as of the date of adoption. To accomplish
this the Company must identify its reporting units and determine the carrying
value of each reporting unit by assigning the assets and liabilities, including
the existing goodwill to those reporting units as of the date of adoption. The
Company will have up to six months from the date of adoption to determine the
fair value of each reporting unit and compare it to the reporting unit's
carrying amount. To the extent a reporting unit's carrying amount exceeds its
fair value, an indication exists that the reporting unit's goodwill may be
impaired and the Company must perform the second step of the transitional
impairment test. In the second step, the Company must compare the implied fair
value of the reporting unit's goodwill, determined by allocating the reporting
unit's fair value to all of it assets (recognized and unrecognized) and
liabilities in a manner similar to a purchase price allocation in accordance
with Statement 141, to its carrying amount, both of which would be measured as
of the date of adoption. This second step is required to be completed as soon as
possible, but no later than the end of the year of adoption. Any transitional
impairment loss will be recognized as the cumulative effect of a change in
accounting principle in the Company's consolidated statements of operations.


                                       18
<PAGE>
The Company adopted the remaining provisions of Statement 142 as of January 1,
2002. As of January 1, 2002, the Company had unamortized goodwill in the amount
of $138,215, all of which is subject to the transition provisions of Statements
141 and 142. The goodwill recorded by the Company subsequent to June 30, 2001
was not amortized during 2001 in connection with the acquisition of the minority
interest of Tejas Securities. The Company does not believe the adoption of the
remaining provisions of Statement 142 will have a material impact on the
Company's consolidated financial statements. As of December 31, 2001, the
Company had no other intangible assets.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company's principal business activities are, by their nature, risky and
volatile and are directly affected by economic and political conditions and
broad trends in business and finance in the national and international markets.
Any one of these factors may cause a substantial decline in the securities
markets, which could materially affect the Company's business. Managing risk is
critical to the Company's profitability and to reducing the likelihood of
earnings volatility. The Company's risk management policies and procedures have
been established to continually identify, monitor and manage risk. The major
types of risk that the Company faces include credit risk, operating risk and
market risk.

Credit risk is the potential for loss due to a customer or counterparty failing
to perform its contractual obligation. The Company clears its securities
transactions through a clearing organization. Under the terms of the clearing
agreement, the clearing organization has the right to charge the Company for its
losses that result from its customers' failure to fulfill their contractual
obligations. In order to mitigate risk, the Company's policy is to monitor the
credit standing of its customers and maintain collateral to support customer
margin balances. Further, significant portions of the Company's assets are held
at its clearing organization, Correspondent Services Corporation. Therefore, the
Company could incur substantial losses if its clearing organization were to
become insolvent or otherwise unable to meet its financial obligations.
Correspondent Services Corporation has in excess of $200 million in capital and
has historically met all of its obligations to the Company.

Operating risk arises from the daily conduct of the Company's business and
relates to the potential for deficiencies in control processes and systems,
mismanagement of Company activities or mismanagement of customer accounts by its
employees. The Company relies heavily on computer and communication systems in
order to conduct its brokerage activities. Third party vendors, such as the
clearing organization and news and quote providers, provide many of the systems
critical to the Company's business. The Company's business could be adversely
impacted if any of these systems were disrupted. The Company mitigates the risk
associated with systems by hiring experienced personnel, and providing employees
with alternate means of acquiring or processing information. In order to
mitigate the risk associated with mismanagement of Company activities or
customer accounts, the Company utilizes compliance and operations personnel to
review the activities of administrative and sales personnel. In addition, the
activities of management are actively reviewed by other members of management on
a regular basis and by the Board of Directors.

The Company's primary market risk exposure is to market price changes and the
resulting risk of loss that may occur from the potential change in the value of
a financial instrument as a result of price volatility or changes in liquidity
for which the Company has no control. Securities owned by the Company are either
related to daily trading activity or the Company's principal investing
activities. Market price risk related to trading securities is managed primarily
through the daily monitoring of funds committed to the various types of
securities owned by the Company and by limiting exposure to any one investment
or type of investment.

The Company's trading securities were $3,011,667 in long positions and $332,581
in short positions at December 31, 2001. These trading securities may be
exchange listed, Nasdaq, other over-the-counter securities, or securities in
which there is limited market activity on both long and short positions. The
potential loss in fair value, using a hypothetical 10% decline in prices, is
estimated to be $334,000 as of December 31, 2001. A 10% hypothetical decline was
used to represent a significant and plausible market change.



                                       19
<PAGE>

The Company's investment securities are typically those reported on by the
Company's research analysts. These positions often consist of high-yield debt
securities and the related equity securities. The Company monitors this risk by
maintaining current operating and financial data on the companies involved, and
projecting future valuations based upon the occurrence of critical future
events. Any transactions involving the investment securities are typically based
upon the recommendations of the Company's research analysts versus current
market performance.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by Item 8 is set forth in Item 14 of this report.

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

None.
                                 PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following information sets forth certain information with respect to our
executive officers and directors. Each of the directors is elected to serve
until the next election of directors at a meeting of the stockholders. Their
respective backgrounds are described below.

<Table>
<Caption>
       NAME             AGE                     POSITION
-------------------     ---     ---------------------------------------
<S>                     <C>     <C>
John J. Gorman          41      Director, Chairman and Chief Executive
                                Officer
Charles H. Mayer        54      Director, President and Chief Operating
                                Officer
Robert E. Gillette      36      Secretary
A. Reed Durant          47      Director of Compliance
Kurt J. Rechner         41      Chief Financial Officer and Treasurer
John F. Garber          32      Director of Finance
Barry A. Williamson     43      Director
Clark N. Wilson         44      Director
</Table>

JOHN J. GORMAN. Mr. Gorman became our Chairman of the Board of Directors and
Chief Executive Officer in August 1999. He has been the Chairman and Chief
Executive Officer of Tejas Securities since July 1997. Mr. Gorman has over 17
years of experience in the brokerage industry. Mr. Gorman became a principal of
Tejas Securities on April 18, 1995. From 1988 until joining Tejas Securities,
Mr. Gorman worked at APS Financial Inc., most recently as a Senior Vice
President. Mr. Gorman served primarily in a broker capacity at APS Financial
Inc., a broker-dealer in Austin, Texas. Mr. Gorman has held positions at APS
Financial Inc., Landmark Group, Shearson Lehman and Dean Witter. In addition,
Mr. Gorman serves on the Board of Directors of Lincoln Heritage Corporation, a
publicly traded company. Mr. Gorman is the nephew of Charles H. Mayer through
marriage. Mr. Gorman received his B.B.A. from Southern Methodist University in
1983.

CHARLES H. MAYER. Mr. Mayer joined us in September 1999 as the Chief Operating
Officer and a Director. Mr. Mayer became our President in December 2000. From
1995 until he joined Tejas Securities, Mr. Mayer was self-employed and managed
personal investments in a number of companies not related to the securities
industry. From 1990 to 1995, Mr. Mayer was the Managing Director and Chief
Information Officer with CS First Boston. Other experience includes 21 years in
senior positions with Morgan Stanley, Tech Partners, Salomon Brothers, Lehman
Brothers and the Federal Reserve Bank of New York. Mr. Mayer earned a BBA and
MBA from Seton Hall University.




                                       20
<PAGE>


ROBERT E. GILLETTE. Mr. Gillette became Secretary and Treasurer in January 2000.
Mr. Gillette served as our Treasurer until September 2000. Mr. Gillette joined
Tejas Securities in March 1998 as Senior Vice President and manager of the
Atlanta branch office. Prior to joining Tejas Securities, Mr. Gillette was a
Vice President at Marion Bass Securities from April 1996 to December 1997, a
Vice President at Addison Securities from November 1994 to April 1996, a Vice
President at the GMS Group from July 1994 to November 1994 and a Vice President
at APS Financial Inc. from December 1993 to July 1994. Mr. Gillette graduated
from the University of Georgia with a B.A. in Political Science in 1988 and
received his J.D. degree with honors from the Atlanta Law School in 1993.

A. REED DURANT. Mr. Durant became our Director of Compliance in August 1999. Mr.
Durant joined Tejas Securities in November 1998 as the Compliance Director. From
January 1996 until joining Tejas Securities, Mr. Durant worked as Senior
Compliance Examiner for the NASD in the Regulation and Enforcement area. From
1988 until joining the NASD, Mr. Durant worked at Principal Financial
Securities. Mr. Durant brings over 20 years experience in the securities
industry, including 8 years as Compliance Director of a 400-broker, 30-branch
NYSE member firm. Mr. Durant graduated from Texas Tech University with a BA in
economics.

KURT J. RECHNER, CPA, CFA. Mr. Rechner became our Chief Financial Officer in
January 2000 and our Treasurer in September 2000. Mr. Rechner has spent the past
20 years in the financial services industry. Prior to joining Tejas Securities,
Mr. Rechner was employed from 1997 through 1999 as an Executive Vice President,
Finance & Operations, CFO for Xerox Federal Credit Union. From May 1995 to 1997
Mr. Rechner was the Chief Executive Officer for Prism Capital Management, LLC,
which managed a global fixed income hedge fund. From 1990 through May 1995, Mr.
Rechner was the Senior Vice President of Accounting and Finance for Security
Service Federal Credit Union. Mr. Rechner earned a B.S. in Business
Administration from the University of Illinois in 1984 and an M.B.A. from
Trinity University in 1985. Mr. Rechner also holds the professional designations
of Certified Public Accountant and Chartered Financial Analyst.

JOHN F. GARBER, CPA. Mr. Garber became our Director of Finance in August 1999.
Mr. Garber joined Tejas Securities in October 1998 as Director of Finance. From
April 1999 until joining Tejas Securities, Mr. Garber was employed as the
Controller for Loewenbaum & Co. Inc., an Austin based broker-dealer. Prior to
joining Loewenbaum & Co., Inc. in April 1998, he was employed by KPMG LLP from
1995 to 1998 as a supervising auditor in the financial assurance department. Mr.
Garber graduated from the University of Florida in 1992 with a B.S.B.A. in
Finance. Mr. Garber holds the professional designation of Certified Public
Accountant.

BARRY A. WILLIAMSON. Mr. Williamson became a Director in October 1999. Mr.
Williamson was elected in 1992 as the 38th Texas Railroad Commissioner and
served from January 1993 to January 1999. He served as the Commission's Chairman
in 1995. During the late 1980's and early 1990's, Mr. Williamson served under
the Bush administration at the U.S. Department of Interior as the Director of
Minerals Management Service. Under President Bush, he managed mineral leases on
the nation's 1.4 billion-acre continental shelf and oversaw an annual budget of
almost $200 million. During the 1980's, Mr. Williamson served under the Reagan
administration as a principle advisor to the U.S. Secretary of Energy in the
creation and formation of a national energy policy. Mr. Williamson began his
career with the firm of Turpin, Smith, Dyer & Saxe, and in 1985 established the
Law Offices of Barry Williamson and founded an independent oil and gas company.
Mr. Williamson graduated from the University of Arkansas with a B.A. in
Political Science in 1979, and received his J.D. degree from the University of
Arkansas Law School in 1982.



                                       21
<PAGE>


CLARK N. WILSON. Mr. Wilson became a Director in October 1999. Mr. Wilson is the
President and Chief Executive Officer of Clark Wilson Homes, Inc., a subsidiary
of Capital Pacific Holdings. Previously, Mr. Wilson was the President of Doyle
Wilson Homebuilder, Inc., serving in that position in 1992. Mr. Wilson served as
Vice President of Doyle Wilson homebuilder, Inc. from 1986 to 1992. Mr. Wilson
took Doyle Wilson Homebuilder, Inc. through a turbulent market and formed Clark
Wilson Acceptance Corporation in 1989 as a finance corporation, personally
financing over $35,000,000 of construction loans for Doyle Wilson Homebuilder,
Inc. Mr. Wilson has won numerous MAX awards between 1994 and 1998, including the
MAX Award for Grand Builder of the Year and best Quality Project in 1994. Mr.
Wilson is a Life Member of the National Association of Homebuilders Spike Club.
Mr. Wilson attended Amarillo College and the University of Texas at Austin, and
has nearly twenty-five years of experience in the homebuilding industry.

BOARD COMMITTEES

The Compensation Committee consists of Barry A. Williamson and Clark N. Wilson.
The Compensation Committee administers the Westech Capital Corp. Stock Option
Plan. See "-Westech Capital Corp. 1999 Stock Option Plan." The Compensation
Committee's responsibilities include:

o    making recommendations to the board of directors regarding the Company's
     policies relating to, and the amounts and terms of all compensation to the
     Company's executive officers;

o    administering and discharging the employee stock plans, option plans and
     such other compensation plans that are established by the board of
     directors from time to time;

o    engaging any professional advisors as it deems appropriate; and

o    fulfilling such other powers and duties as determined and delegated by the
     board of directors from time to time.

The Audit Committee was formed in May 2000, and consists of Barry A. Williamson
and Clark N. Wilson. The Audit Committee's responsibilities include:

o    reviewing, with our independent auditors, the Company's consolidated
     financial statements and internal accounting controls and the plans and
     results of the audit engagement;

o    reviewing the independence of the Company's independent auditors;

o    reviewing the adequacy of the Company's internal accounting controls;

o    preparing an annual report on executive compensation for inclusion in the
     Company's proxy statement for the annual meeting of shareholders; and

o    fulfilling such other powers and duties as determined and delegated by the
     board of directors from time to time.

All of the members of both the Compensation Committee and the Audit Committee
have attended all of the meetings during the year.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No executive officer of the Company served as a member of the compensation or
similar committee or Board of Directors of any other entity, other than the
Company's subsidiaries or those described in Item 13 - Certain Relationships and
Related Transactions.

The Company engaged Barry Williamson to act as a consultant for the Company on a
month to month basis beginning in October 1999. Under the terms of the
agreement, the Company compensated Mr. Williamson for professional services
rendered at a rate of $12,500 per month, plus out of pocket expenses. In 2000,
the Company modified the agreement so that Mr. Williamson would receive $6,250
per month for professional services, plus out of pocket expenses. For the years
ended December 31, 2000 and 1999, the total amount paid for services was
approximately $113,000 and $29,000, respectively. No fees were paid to Mr.
Williamson in 2001.



                                       22
<PAGE>

ITEM 11.  EXECUTIVE COMPENSATION

EXECUTIVE OFFICER COMPENSATION

The following table sets forth information concerning compensation of our Chief
Executive Officer and other highly compensated executive officers whose salary
and bonuses exceeded $100,000 for the year ended December 31, 2001, the "named
executive officers."

<Table>
<Caption>
  NAME AND PRINCIPAL
       POSITION             YEAR      SALARY(1)        BONUS       FORGIVEN DEBT     COMMISSIONS
---------------------     ---------  ------------    ----------   ---------------  ---------------

<S>                          <C>       <C>           <C>         <C>                <C>
John J. Gorman              2001       $       0     $ 250,000      $       0       $3,348,259
Chairman and Chief          2000               0             0              0        1,983,699
Executive Officer           1999               0             0              0        5,850,050

Charles H. Mayer (2)        2001         225,000        15,000         50,000                0
President and Chief         2000         153,000       200,000              0                0
Operating Officer           1999          66,667        25,000              0                0

Robert Gillette (3)         2001          16,000             0          1,667          242,287
Secretary                   2000          80,000             0          5,000          244,771
                            1999          72,000             0              0          504,659

Kurt J. Rechner (3)         2001         150,000        65,000              0                0
Chief Financial Officer     2000         146,731        46,000              0                0
and Treasurer
</Table>

(1)      Does not include certain prerequisites and other personal benefits that
         are standard in the industry and have a total value of less than 10% of
         the total annual salary, bonus and commissions reported for the named
         executive officer.

(2)      Mr. Mayer became the President on December 14, 2000.

(3)      Mr. Gillette acted as the Treasurer from January 2000 to September 20,
         2000, at which point Mr. Rechner was appointed Treasurer.

OPTION GRANTS AND EXERCISES

The following table provides information concerning grants of options to
purchase our common stock made during the fiscal year ended December 31, 2001 to
the named executive officers. No stock appreciation rights were granted during
2001.

<Table>
<Caption>
                                                                                              Potential Realizable Value
                                                                                                  At Assumed Annual
                                                                                                 Rates of Stock Price
                                                                                                Appreciation for Option
                                               Individual Grants                                        Term(3)
                        ------------------------------------------------------------------    --------------------------
                          Number
                           of
                        Securities   % of Total Options
                        Underlying        Granted
                         Options      To Employees for   Exercise Price       Expiration
       Name             Granted(1)     Fiscal Year(2)       ($/share)            Date                 5%         10%
  ------------          ----------   ------------------  --------------      -------------         -------    --------

<S>                    <C>           <C>                  <C>                <C>                   <C>        <C>
  John J. Gorman         100,000           62.50%             $2.50          July 19, 2006         $69,070    $152,628
  Charles H. Mayer        50,000           31.25%             $2.50          July 19, 2006         $34,535    $ 76,314
  Kurt R. Rechner         10,000            6.25%             $2.50          July 19, 2006         $ 6,907    $ 15,263
  Robert E. Gillette          --              --                 --                     --              --          --
</Table>

------------------------------------

(1)      All of the options were immediately exercisable on July 19, 2001.

(2)      In 2001, we granted options to purchase an aggregate of 160,000 shares
         of common stock, all of which were issued under the 1999 Stock Option
         Plan.

(3)      The 5% and 10% assumed annual rates of compounded stock price
         appreciation are based on the assumption that the exercise price was
         the fair market value of the shares on the date of the grant.




                                       23
<PAGE>

         There is no assurance provided to any executive officer or any other
         holder of our securities that the actual price appreciation over the 5
         year option term will be at the assumed 5% and 10% levels or at any
         other defined level.

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES

The following table provides information concerning unexercised options held as
of December 31, 2001 by the named executive officers. No options were exercised
during this period.


<Table>
<Caption>
                                 NUMBER OF SECURITIES                VALUE OF UNEXERCISED
                                UNDERLYING UNEXERCISED                   IN-THE-MONEY
                             OPTIONS AT DECEMBER 31, 2001      OPTIONS AT DECEMBER 31, 2001(1)
                           ---------------------------------   ---------------------------------
          NAME              EXERCISABLE      UNEXERCISABLE     EXERCISABLE       UNEXERCISABLE
  ---------------------    --------------   ----------------   -------------    ----------------

<S>                        <C>              <C>                <C>              <C>
  John J. Gorman                 146,667             13,333    $ 250,000            $      --
  Charles H. Mayer               139,563              5,000    $ 187,063            $      --
  Kurt R. Rechner                 11,667              3,333    $  25,000            $      --
  Robert E. Gillette                  --                 --    $      --            $      --
</Table>


  ---------------------

  (1)    The amount set forth represents the difference between the fair market
         value of the underlying stock on December 31, 2001 and the exercise
         price of the option. The fair market value was determined by the
         closing price of $5.00 per share on December 31, 2001.

DIRECTOR COMPENSATION

As part of their incentive to join the Board of Directors, Mr. Wilson and Mr.
Williamson were each provided with options to purchase 10,000 shares of common
stock. The options are exercisable at $20.00 per share and expire on October 15,
2004. The options vested in three equal installments beginning on October 15,
1999. Currently no other directors receive any form of cash or non-cash
compensation for fulfilling their roles on the Board of Directors.

WESTECH CAPITAL CORP. 1999 STOCK OPTION PLAN

In October 1999, the Company adopted a stock option plan (the Stock Option Plan)
to strengthen its ability to attract, motivate, compensate and retain employees,
directors, and consultants by providing a means for such persons to acquire a
proprietary interest in the Company and to participate in its growth through
ownership of its common stock. The Compensation Committee of the Board of
Directors administers the Stock Option Plan, provided, however, that the Board
of Directors may also take all actions to administer the Stock Option Plan,
including granting options.

Shares Subject to the Plan

Under the Stock Option Plan, the Company can grant awards consisting of either
incentive stock options or nonqualified stock options not to exceed 400,000
shares of the Company's common stock. That number will be adjusted automatically
if the outstanding shares of common stock are increased or decreased or changed
into or exchanged for a different number of shares or kind of shares or other
securities of the Company or of another corporation, by reason of
reorganization, split, combination of shares, or a dividend payable in common
stock. Equitable adjustments to the number of shares subject to each award and
to the payment required to obtain such shares will also be made so that the same
proportion of shares will be subject to the award and the aggregate
consideration to acquire all shares subject to the award will remain as it was
prior to the re-capitalization.




                                       24
<PAGE>


For the year ended December 31, 2001, the Company granted options under the
Stock Option Plan to acquire 160,000 shares of common stock, none of which had
been exercised, forfeited or canceled during the year. The Company had 365,000
options outstanding under the Stock Option Plan as of December 31, 2001. For the
year ended December 31, 2000, the Company granted options under the Stock Option
Plan to acquire 151,500 shares of common stock, none of which had been exercised
during 2000 or 2001. Of the options granted, 39,000 options and 35,000 options
were canceled or forfeited during 2000 and 2001, respectively, due to employee
terminations. The Company had 240,000 options outstanding as of December 31,
2000. For the year ended December 31, 1999, the Company granted options under
the Stock Option Plan to acquire 142,500 shares of common stock, none of which
had been exercised during 1999, 2000 or 2001. Of the options granted, 15,000
options were canceled or forfeited during 2000 due to employee terminations.

Eligibility

All of the Company's and its subsidiaries' employees, directors and consultants
are eligible to receive awards under the Stock Option Plan, but only employees
are eligible to receive incentive stock options. The Compensation Committee, as
administrator of the Stock Option Plan, determines the persons to whom stock
option awards are to be granted; whether an option shall be an incentive stock
option or nonqualified stock option or both; the number of shares of our common
stock subject to each grant; and the time or times at which stock option awards
will be granted and the time or times of the exercise period, which shall not
exceed the maximum period described below.

Types of Awards

Options granted under the Stock Option Plan may be either options that are
intended to qualify for treatment as "incentive stock options" under Section 422
of the Internal Revenue Code or options that are not, which are "nonqualified
stock options". The exercise price of incentive stock options must be at least
the fair market value of a share of the common stock on the date of grant, and
not less than 110% of the fair market value in the case of an incentive stock
option granted to an optionee owning 10% or more of the common stock. The
aggregate fair market value of common stock (calculated on the date of grant)
with respect to which incentive stock options are exercisable for the first time
by an optionee during any calendar year shall not exceed $100,000. The term of
an option may not exceed ten years (or five years in the case of an incentive
stock option granted to an optionee owning 10% or more of the Company's common
stock).

Termination of Awards

The Stock Option Plan limits the time during which a holder of an option can
exercise an option to no more than ten years. In addition, an optionee who
leaves the Company's employment will generally have no more than three months to
exercise an option, reduced to no days after employment is terminated for cause,
and additional rules apply to cases of death and disability. Upon the occurrence
of certain events which constitute a change of control, all granted options
shall become exercisable during the period beginning on the date of the
occurrence of the change of control and ending sixty days later. The
Compensation Committee may, however, override the Stock Option Plan's rules,
other than the ten year limit. The Company cannot grant additional options under
the Stock Option Plan after October 15, 2009, the tenth anniversary of its
adoption.

Amendments to our Stock Option Plan

The Board of Directors may amend or terminate the Stock Option Plan, as long as
no amendment or termination affects options previously granted. However, the
plan requires stockholder approval of any amendment that increases the number of
shares available under the plan which may be issued as incentive stock options
or that modify the requirements as to eligibility to receive incentive stock
options under the plan. On October 3, 2000, stockholders of the Company approved
the board of directors' recommendation to increase the number of options
available under the Stock Option Plan from 300,000 to 400,000 shares.



                                       25
<PAGE>

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table provides information with respect to ownership of the
Company's common stock at February 28, 2002 by each beneficial owner of five
percent or more of the common stock; each director; each of the named executive
officers; and all directors and officers as a group.

Except as indicated on the footnotes to this table, the persons named in the
table have sole voting and investment power with respect to all shares of common
stock shown as beneficially owned by them. Options exercisable on or before
February 28, 2002, are included as shares beneficially owned. For purposes of
calculating percent ownership as of February 28, 2002, 1,512,024 shares were
issued and outstanding and for any individual who beneficially owns shares
represented by options exercisable on or before February 28, 2002, these shares
are treated as if outstanding for that person but not for any other person.

<Table>
<Caption>

                                                                           PERCENT
               NAME AND ADDRESS OF                                       BENEFICIALLY
                BENEFICIAL OWNER                       NUMBER               OWNED
  ----------------------------------------------   ----------------    -----------------
<S>                                                <C>                 <C>
  John J. Gorman (1)(2)                                 752,576              45.19%
  Charles H. Mayer (1)(3)                               185,291              11.20%
  Kurt J. Rechner (1)(4)                                 13,344                  *
  Jay W. Van Ert (1)(5)                                 152,050               9.81%
  Joseph F. Moran (1)(6)                                264,928              17.33%
  John R. Ohmstede (7)                                   78,944               5.22%
  Barry A Williamson(8)                                  10,000                  *
  Clark N. Wilson(8)(9)                                  65,856               4.17%
  All owners of more than five percent,               1,509,645              77.39%
  officers and directors as a group (11 total)
</Table>

-----------------------------

* Less than 1%.

(1)  The address for Messrs. Gorman, Mayer, Rechner, Van Ert and Moran is 2700
     Via Fortuna, Suite 400, Austin, Texas 78746.

(2)  Includes 153,334 shares of common stock issuable pursuant to options
     granted under the 1999 Plan, which are immediately exercisable as of
     February 28, 2002.

(3)  Includes 80,000 shares of common stock issuable pursuant to options granted
     under the 1999 Plan, which are immediately exercisable as of February 28,
     2002. Includes 62,063 shares of common stock issuable pursuant to an option
     granted outside the 1999 Plan, which is immediately exercisable as of
     February 28, 2002.

(4)  Includes 13,334 shares of common stock issuable pursuant to options granted
     under the 1999 Plan, which are immediately exercisable as of February 28,
     2002.

(5)  Includes 37,500 shares of common stock issuable pursuant to options granted
     under the 1999 Plan, which are immediately exercisable as of February 28,
     2002.

(6)  Includes 16,666 shares of common stock issuable pursuant to options granted
     under the 1999 Plan, which are immediately exercisable as of February 28,
     2002.

(7)  The address for Mr. Ohmstede is 5905 Overlook Drive, Austin, Texas 78731.

(8)  Includes 10,000 shares of common stock issuable pursuant to options granted
     under the 1999 Plan which are immediately exercisable as of February 28,
     2002.

(9)  Includes 55,856 shares of common stock issuable pursuant to an option
     granted outside the 1999 Plan, which is immediately exercisable as of
     February 28, 2002.




                                       26
<PAGE>


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

SALE LEASEBACK

In September 1997, Tejas Securities entered into a sale-leaseback transaction
with Sandy Hook Management, a company owned by Charles Mayer, a member of the
Board of Directors. Sandy Hook Management purchased the assets for $204,268 from
the Company. The Company purchased the assets from June 1995 through September
1997 for a total cost of $272,072. The book value of the assets as of the date
of the transaction was determined in accordance with accounting principles
generally accepted in the United States of America, including depreciation
calculated by the straight-line method. The previous Chief Financial Officer of
the Company made the determination of the book value. Under the terms of this
transaction, the Company agreed to lease the furniture and fixtures commencing
in October 1998 through September 2000.

LINE OF CREDIT

The Company received a $1,500,000 line of credit from its bank in June 2000. In
exchange for the line of credit, John Gorman provided the bank with a personal
guarantee, as collateral should the Company default on its obligation. The
transaction is described in Item 7 - "Liquidity and Capital Resources."

NOTES PAYABLE

The Company issued term short-term demand notes in November 2000 in exchange for
$500,000 from John Gorman, Chairman and Chief Executive Officer and $250,000
from Charles Mayer, President and Chief Operating Officer. The transactions are
described in Item 7 - "Liquidity and Capital Resources."

SUBORDINATED DEBT

The Company issued subordinated debt in September 1998 in exchange for $500,000
from Clark Wilson, a current member of the Board of Directors. The transaction
is described in Item 7 - "Liquidity and Capital Resources."

The Company completed the second issuance of subordinated debt in June 1999 in
exchange for $500,000 from Clark Wilson. The transaction is described in Item 7
- "Liquidity and Capital Resources."

TSG INTERNET FUND I, LTD.

In April 1999, John Gorman, Jay Van Ert, Joseph Moran and Clark Wilson, along
with three other owners of less than 5% of the Company, established TSG Capital,
LLC (the "General Partner"), a Texas limited liability company, for the purpose
of acting as general partner of TSG Internet Fund I, Ltd. (the "Fund"). In
addition to the investment in the General Partner, Messrs. Gorman, Van Ert,
Moran and Wilson invested as limited partners in the Fund. Their contributions
were as follows: Mr. Gorman $200,000; Mr. Van Ert $120,520; Mr. Moran $200,000;
and Mr. Wilson $100,000. John Ohmstede, a beneficial owner of more than 5% of
the Company, also invested $200,000 in the Fund as a limited partner through a
Trust. The total capital contribution by the General Partner was less than
$50,000.

TSG Capital, LLC acted as the General Partner of the Fund and had no other
operations. The managers and principal executive officers included two officers
of the Company. The General Partner received a management fee equal to .375% of
the average monthly net asset value of the Fund after the end of a fiscal
quarter. In addition, the General Partner received a performance fee equal to
20% of the annual net profits of the Fund after the end of each fiscal year.
These fees were in turn paid to the Company in exchange for providing services
to the General Partner for investment management, compliance and accounting and
reporting.



                                       27
<PAGE>


The Company recognized $734,154 of income during 1999 from the Fund comprised of
management fees of $34,066 and a performance fee of $700,088. The Company
converted the $700,088 performance fee to an additional equity ownership in the
Fund as of December 31, 1999. During 2000, the Company recognized approximately
$79,000 in management fees. The General Partner did not earn a performance fee
in 2000.

The Fund engaged the Company to solicit subscriptions for the initial $2,500,000
private placement of limited partnership interests in the Fund. In exchange for
acting as the placement agent, the Company received a placement agent fee equal
to 5% of the total initial capital contributions to the Fund. The total
placement agent fee equaled approximately $136,000 and was paid in May 1999. In
2000, the Fund once again engaged the Company to solicit subscriptions for a
secondary private placement of limited partnership interests. In exchange for
acting as the placement agent, the Company received placement fees totaling
approximately $230,000 for the year ended December 31, 2000.

On December 1, 2000, the General Partner elected to dissolve and liquidate the
Fund effective December 15, 2000.

OFFICER AND DIRECTOR RECEIVABLES

During 1999, Tejas Securities received a $200,000 note from Charles Mayer in
conjunction with his employment agreement. The note bears no interest and was
due on demand if Mr. Mayer resigned as an employee of the Company prior to
December 31, 2000. In October 2000, the note was transferred to Westech at cost.
In January 2001, Mr. Mayer's employment agreement was modified to allow the
Company to forgive the $200,000 note in equal installments of $50,000 per year
for the years 2001, 2002, 2003 and 2004, as long as Mr. Mayer remains an
employee. Additionally, Mr. Mayer forfeited his guaranteed annual bonus of
$200,000 for the year 2000.

SALE OF STOCK TO EMPLOYEES

In April 1999, the Company issued 249,932 shares of its common stock (1,006,975
shares of Tejas Securities common stock before the exchange ratio) with a value
of $704,000 to employees and management of the Company. Of the shares issued,
24,825 shares (100,000 shares of Tejas Securities) were issued to a director and
executive officer of the Company. An additional 90,000 shares of Tejas
Securities common stock were issued to executive officers of the Company. The
shares were converted to Company shares of common stock in August 2001. The
transaction was recorded as a stock subscription receivable, and was collected
in full by August 1999. The following reflects the April 1999 issuance of common
stock to directors or executive officers of the Company:

<Table>
<Caption>
   DIRECTOR/EXECUTIVE      TEJAS SECURITIES    COMPANY SHARES
         OFFICER          SHARES SUBSCRIBED       CONVERTED      SUBSCRIPTION PRICE
  -------------------     -----------------    ---------------   ------------------
<S>                       <C>                   <C>              <C>
  John J. Gorman               100,000             24,825             $70,000
  Robert E. Gillette            40,000              9,930             $28,000
  A. Reed Durant                25,000              6,206             $17,500
  John F. Garber                25,000              6,206             $17,500
</Table>

FIRSTMARK CORP.

In November 2001, John Gorman and Charles Mayer were named to the board of
directors of Firstmark Corp. Additionally, Kurt Rechner was appointed the Chief
Financial Officer of Firstmark Corp. Currently John Gorman owns and controls
common stock in Firstmark Corp. with a value in excess of $220,000. In addition,
John Gorman may be deemed to control stock in Firstmark worth approximately
$390,000, which is owned directly by the Company. In November 2001, the Company
entered into a Service Agreement with Firstmark Corp. to provide management
support services for $5,000 per month for an initial term of one year. See Note
21 in the accompanying Notes to Consolidated Financial Statements.




                                       28
<PAGE>


GRO-VEST MANAGEMENT

In October 2001, John Gorman acquired the right to receive payment of a
liability of the Company in the amount of $121,000 originally payable to
Gro-Vest Management. The liability originated from the Merger.

                                     PART IV

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

(A)      1.       Financial Statements
                  See Financial Statements attached hereto.

         2.       Exhibits

                  Incorporated by reference to the Exhibit Index at the end of
                  this report.

(B)      Reports on Form 8-K

                  None.



                                       29
<PAGE>



                                   SIGNATURES

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

                                                 WESTECH CAPITAL CORP.


                                                 By: /s/ CHARLES H. MAYER
                                                    ----------------------------
                                                    Charles H. Mayer, President

Date: March 29, 2002


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons in the capacities and on
the date indicated:

<Table>
<Caption>

             SIGNATURE                                     TITLE                        DATE
             ---------                                     -----                        ----



<S>                                                  <C>                             <C>
/s/ JOHN J. GORMAN                                   Chief Executive Officer,         March 29, 2002
--------------------------------------------         Chairman of the Board
John J. Gorman


/s/ CHARLES H. MAYER                                 President, Chief Operating
--------------------------------------------         Officer and Director             March 29, 2002
Charles H. Mayer


/s/ KURT J. RECHNER                                  Chief Financial Officer and
--------------------------------------------         Treasurer                        March 29, 2002
Kurt J. Rechner


/s/ JOHN F. GARBER                                   Director of Finance (Principal
--------------------------------------------         Accounting Officer)              March 29, 2002
John F. Garber


/s/ BARRY A. WILLIAMSON                              Director
--------------------------------------------
Barry A. Williamson                                                                   March 29, 2002


/s/ CLARK N. WILSON                                  Director
--------------------------------------------
Clark N. Wilson                                                                       March 29, 2002
</Table>




                                       30
<PAGE>

                     WESTECH CAPITAL CORP. AND SUBSIDIARIES

                        Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999

                   (With Independent Auditors' Report Thereon)


<PAGE>



                     WESTECH CAPITAL CORP. AND SUBSIDIARIES



<Table>
<Caption>

                                      INDEX
                                                                                                               PAGE


<S>                                                                                                            <C>
Independent Auditors' Report                                                                                     1

FINANCIAL STATEMENTS:
Consolidated Statements of Financial Condition as of December 31, 2001 and 2000                                  2

Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999                       3

Consolidated Statements of Stockholders' Equity for the years ended December 31, 2001, 2000
   and 1999                                                                                                      4

Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999                       5

Notes to Consolidated Financial Statements                                                                       7
</Table>












<PAGE>

                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
Westech Capital Corp.:

We have audited the consolidated financial statements of Westech Capital Corp.
and subsidiaries (the Company) as listed in the accompanying index. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Westech Capital
Corp. and subsidiaries as of December 31, 2001 and 2000, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States of America.

                                                  /s/ KPMG LLP

Austin, Texas
March 21, 2002








                                       1
<PAGE>

                     WESTECH CAPITAL CORP. AND SUBSIDIARIES

                 Consolidated Statements of Financial Condition

                           December 31, 2001 and 2000


<Table>
<Caption>

                                ASSETS                                  2001           2000
                                                                    ------------   ------------

<S>                                                                 <C>            <C>
Cash and cash equivalents                                           $    547,761        482,562
Deposit with clearing organization, restricted                           260,471        250,000
Receivable from clearing organization                                  1,905,338        735,616
Receivables from employees and stockholders                              494,106        334,200
Federal income taxes receivable                                              973      1,808,214
Securities owned, at market value                                      3,011,667      2,433,022
Property and equipment, net                                              478,086        540,477
Deferred tax asset, net                                                   84,915        471,552
Prepaid expenses and other assets                                        457,191        243,516
                                                                    ------------   ------------

           Total assets                                             $  7,240,508      7,299,159
                                                                    ============   ============

                     LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable, accrued expenses and other liabilities            $  3,183,904      1,869,821
Securities sold, not yet purchased                                       332,581        446,078
Payable to clearing organization                                              --        456,660
Federal income taxes payable                                                  --             --
Note payable                                                             500,000      1,500,000
Notes payable to stockholders                                                 --        750,000
Subordinated debt                                                      1,000,000      1,000,000
                                                                    ------------   ------------
           Total liabilities                                           5,016,485      6,022,559
                                                                    ------------   ------------

Minority interest in subsidiary                                               --        377,382

Commitments and contingencies

Stockholders' equity:
     Common stock, $0.001 par value
        50,000,000 shares authorized; 1,512,024 and
        1,266,134 issued and outstanding at December 31, 2001
        and 2000, respectively                                             1,512          1,266
     Additional paid-in capital                                        2,222,281      1,730,744
     Retained earnings (accumulated deficit)                                 230       (832,792)
                                                                    ------------   ------------
           Total stockholders' equity                                  2,224,023        899,218
                                                                    ------------   ------------

           Total liabilities and stockholders' equity               $  7,240,508      7,299,159
                                                                    ============   ============
</Table>


See accompanying notes to consolidated financial statements.



                                       2
<PAGE>


                     WESTECH CAPITAL CORP. AND SUBSIDIARIES

                      Consolidated Statements of Operations

              For the Years Ended December 31, 2001, 2000 and 1999


<Table>
<Caption>


                                                          2001            2000            1999
                                                     ------------    ------------    ------------

Revenue:
<S>                                                  <C>             <C>             <C>
     Commissions                                     $ 25,615,989      16,818,686      25,291,212
     Underwriting and investment banking income           316,927       1,831,326         925,616
     Net dealer inventory and investment income
        (loss), net of trading interest expense of
        $120,976, $151,946 and $516,975,
        respectively                                     (630,687)     (4,076,629)      3,475,539
     Other income                                          25,920         135,902         740,342
                                                     ------------    ------------    ------------
           Total revenue                               25,328,149      14,709,285      30,432,709
                                                     ------------    ------------    ------------

Expenses:
     Commissions, employee compensation
        and benefits                                   18,666,284      13,954,116      19,992,928
     Clearing and floor brokerage                         412,819         965,889         615,273
     Communications and occupancy                       1,645,693       2,033,463       1,242,370
     Professional fees                                  1,169,474       1,868,244         971,250
     Interest                                             229,226         194,503          97,029
     Other                                              1,894,971       2,556,732       1,876,633
                                                     ------------    ------------    ------------
           Total expenses                              24,018,467      21,572,947      24,795,483
                                                     ------------    ------------    ------------

           Income (loss) before income tax expense
              (benefit) and minority interest           1,309,682      (6,863,662)      5,637,226

Income tax expense (benefit)                              495,474      (2,214,012)      2,201,598
                                                     ------------    ------------    ------------

           Income (loss) before minority interest         814,208      (4,649,650)      3,435,628

Minority interest                                         (18,814)       (650,510)        297,285
                                                     ------------    ------------    ------------

           Net income (loss)                         $    833,022      (3,999,140)      3,138,343
                                                     ============    ============    ============

Earnings (loss) per share:
     Basic                                           $       0.62           (3.17)           2.51
                                                     ============    ============    ============

     Diluted                                         $       0.53           (3.17)           2.25
                                                     ============    ============    ============

Weighted average shares outstanding:
     Basic                                              1,348,097       1,261,721       1,250,119
                                                     ============    ============    ============

     Diluted                                            1,546,112       1,261,721       1,529,197
                                                     ============    ============    ============
</Table>


See accompanying notes to consolidated financial statements.




                                       3
<PAGE>


                     WESTECH CAPITAL CORP. AND SUBSIDIARIES

                 Consolidated Statements of Stockholders' Equity

              For the Years Ended December 31, 2001, 2000 and 1999


<Table>
<Caption>
                                                                                             RETAINED
                                                            ADDITIONAL                       EARNINGS
                                                 COMMON      PAID-IN     SUBSCRIPTIONS     (ACCUMULATED       TREASURY
                                    SHARES       STOCK       CAPITAL       RECEIVABLE        DEFICIT)           STOCK       TOTAL
                                  ----------   ----------   ----------  ---------------  ------------------  ----------  ----------


<S>                                <C>         <C>           <C>        <C>              <C>                 <C>         <C>
Balance at December 31, 1998       1,161,599   $    1,162    1,471,909          (96,263)             28,005          --   1,404,813

Stock issuances                      279,629          279      828,490         (775,884)                 --          --      52,885

Contributed capital                       --           --       94,613               --                  --          --      94,613

Treasury stock purchases             (70,834)         (71)          --               --                  --    (174,376)   (174,447)

Treasury stock sales                  70,007           70           --               --                  --     172,044     172,114

Subscription collected                    --           --           --          750,164                  --          --     750,164

Subscription cancelled                  (414)          --      (31,166)          31,166                  --          --          --

Effect of reverse merger (Note 1)   (186,266)        (186)    (683,090)          90,817                  --       2,332    (590,127)

Net income                                --           --           --               --           3,138,343          --   3,138,343
                                  ----------   ----------   ----------  ---------------  ------------------  ----------  ----------

Balance at December 31, 1999       1,253,721        1,254    1,680,756               --           3,166,348          --   4,848,358

Stock issuances                       12,413           12       49,988               --                  --          --      50,000

Net loss                                  --           --           --               --          (3,999,140)         --  (3,999,140)
                                  ----------   ----------   ----------  ---------------  ------------------  ----------  ----------

Balance at December 31, 2000       1,266,134        1,266    1,730,744               --            (832,792)         --     899,218

Acquisition of minority interest     245,890          246      491,537               --                  --          --     491,783

Net income                                --           --           --               --             833,022          --     833,022

                                  ----------   ----------   ----------  ---------------  ------------------  ----------  ----------
Balance at December 31, 2001       1,512,024   $    1,512    2,222,281               --                 230          --   2,224,023
                                  ==========   ==========   ==========  ===============  ==================  ==========  ==========
</Table>



See accompanying notes to consolidated financial statements.




                                       4
<PAGE>


                     WESTECH CAPITAL CORP. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

              For the Years Ended December 31, 2001, 2000 and 1999

<Table>
<Caption>


                                                                        2001           2000           1999
                                                                    -----------    -----------    -----------

<S>                                                                 <C>             <C>             <C>
Cash flows from operating activities:
     Net income (loss)                                              $   833,022     (3,999,140)     3,138,343
     Adjustments to reconcile net income (loss) to net cash
        provided by (used in) operating activities:
        Deferred tax expense (benefit)                                  386,637       (417,466)       124,414
        Depreciation and amortization expense                           139,652        141,660         74,506
        Non-cash compensation expense                                    86,500         75,000             --
        Loss on disposition of property and equipment                        --             --         14,011
        Performance fee converted to equity interest                         --             --       (700,088)
        Minority interest                                               (18,814)      (650,510)       297,285
        Increase in deposit with clearing organization                  (10,471)      (150,000)            --
        (Increase) decrease in payable to clearing organization,
           net of receivable from clearing organization              (1,626,382)    (1,934,963)     1,601,977
        (Increase) decrease in receivable from employees
           and stockholders                                            (246,406)       268,254       (500,955)
        Decrease (increase) in federal income taxes receivable        1,807,241     (1,808,214)            --
        (Increase) decrease in securities owned                        (578,645)     3,774,726     (4,668,324)
        (Increase) decrease in prepaid expenses and other assets        (75,460)       353,537       (415,092)
        Decrease in other investments                                        --        932,253             --
        Increase (decrease) in accounts payable, accrued
           expenses and other liabilities                             1,314,083       (171,378)     2,327,284
        (Decrease) increase in securities sold, not yet purchased      (113,497)       258,138        187,940
        Decrease in federal income taxes payable                             --       (863,821)            --
                                                                    -----------    -----------    -----------
           Net cash provided by (used in) operating activities        1,897,460     (4,191,924)     1,481,301
                                                                    -----------    -----------    -----------

Cash flows from investing activities:
     Advances to limited partnership                                         --             --       (116,004)
     Proceeds from sale of property and equipment                            --         63,684             --
     Purchase of property and equipment                                 (77,261)      (422,540)      (202,914)
                                                                    -----------    -----------    -----------
           Net cash used in investing activities                        (77,261)      (358,856)      (318,918)
                                                                    -----------    -----------    -----------

Cash flows from financing activities:
     (Repayment of) proceeds from note payable                       (1,000,000)     1,500,000             --
     (Repayment of) proceeds from notes payable to stockholders        (750,000)       750,000             --
     Net change in subordinated debt                                         --             --        500,000
     Sale of treasury stock                                                  --             --        172,114
     Purchase of treasury stock                                              --             --       (174,447)
     Subscription collected                                                  --          1,167        750,164
     Capital contribution from acquired enterprise                           --             --          3,115
     Capital contribution from minority interest                             --             --         64,649
     Purchase of minority interest shares                                (5,000)            --             --
     Proceeds from stock issuances                                           --         50,000         52,885
                                                                    -----------    -----------    -----------
           Net cash provided by (used in) financing activities       (1,755,000)     2,301,167      1,368,480
                                                                    -----------    -----------    -----------

</Table>



                                       5
<PAGE>


                     WESTECH CAPITAL CORP. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

              For the Years Ended December 31, 2001, 2000 and 1999


<Table>

<S>                                                         <C>                    <C>                 <C>
           Net increase (decrease) in cash and cash
              equivalents                                   $        65,199        (2,249,613)         2,530,863

Cash and cash equivalents at beginning of year                      482,562         2,732,175            201,312
                                                            ---------------   ---------------    ---------------

Cash and cash equivalents at end of year                    $       547,761           482,562          2,732,175
                                                            ===============   ===============    ===============

Supplemental disclosures:
     Interest paid                                          $       360,352           336,299            614,004
     Taxes paid                                             $       127,500         1,003,749          1,110,407
</Table>

Summary of non-cash transactions:

In August 2001, the minority interest shareholders of Tejas Securities Group,
     Inc. exchanged their shares of Tejas Securities common stock for those of
     the Company at a ratio of .24825 to one. As a result, the Company issued a
     total of 245,890 shares of its common stock and Tejas Securities became an
     indirect wholly owned subsidiary. In addition, the Company recognized
     $138,215 in goodwill, which is included in prepaid expenses and other
     assets.

In March 2001, the Company restructured its line of credit with a bank. In
     exchange for a $500,000 principal reduction and interest being brought
     current, the line of credit was converted into a term loan in the amount of
     $1,000,000. (Note 10)

During 2001 and 2000, the Company forgave $86,500 and $25,000, respectively, of
     receivables from employees and stockholders which has been recorded as
     compensation expense. During 2000, the Company forgave $50,000 of common
     stock subscription receivable related to shares issued by Tejas Securities
     in 1999. The subscription receivable was from a former employee and has
     been recorded as compensation expense. (Note 4)

TSG Capital, LLC (General Partner), a wholly owned subsidiary, acted as the
     general partner of TSG Internet Fund I, Ltd. (the Fund). The Fund was
     liquidated effective December 15, 2000. The Company recognized $700,088 of
     income during 1999 related to a performance fee paid by the Fund. The
     Company converted the full amount of the performance fee to an equity
     ownership of the Fund as of December 31, 1999. (Note 6)

The Company also received a non-cash contribution in 1999 totaling $116,161,
     representing the general partner owners of the general partnership interest
     of TSG Capital, LLC. These individuals also have an ownership interest in
     the Company. Of this amount, $21,549 was allocated to minority
     interest. (Note 6)

The Company received a non-cash capital contribution in 1999 totaling $590,127
     in association with the Merger (Note 1). Of this amount, $90,817 and $2,325
     of subscriptions receivable and treasury stock, respectively, which existed
     as of the date of the Merger, was allocated to minority interest
     since these rights were not converted at the time of the Merger.


See accompanying notes to consolidated financial statements.



                                       6


<PAGE>



                     WESTECH CAPITAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999

(1)    ORGANIZATION AND BASIS OF PRESENTATION

       Westech Capital Corp., a Delaware corporation, is a holding company whose
       primary operating subsidiary is Tejas Securities Group, Inc., a Texas
       corporation ("Tejas Securities"). Tejas Securities is engaged in the
       business of providing brokerage and related financial services to
       institutional and retail customers nationwide.

       Westech Capital Corp. was incorporated as a shell corporation in New York
       on July 18, 1990, and made an initial public offering in November 1991.
       Westech Capital Corp. was acquired by Tejas Securities in a reverse
       merger effected on August 27, 1999. Pursuant to an Agreement and Plan of
       Merger, Tejas Securities Group Holding Company ("Tejas Holding"), a Texas
       corporation holding approximately 81% of Tejas Securities, became a
       wholly owned subsidiary of Westech Capital Corp. In April 2001, Westech
       Capital Corp. reincorporated from New York to Delaware. On August 29,
       2001, the minority interest shareholders of Tejas Securities exchanged
       their shares of Tejas Securities common stock for restricted stock of
       Westech Capital Corp. As a result, Westech Capital Corp. owns, directly
       or through Tejas Holding, 100% of Tejas Securities as of December 31,
       2001.

       Effective June 29, 2001, Westech Capital Corp. completed a 10-for-1
       reverse stock split. As a result of this stock split, earnings (loss) per
       share amounts and all share amounts for prior periods have been restated
       to reflect the shares outstanding as though the stock split had taken
       effect in the earliest year presented.

       Tejas Securities is registered as a broker and dealer in securities with
       the National Association of Securities Dealers, Inc. and clears its
       transactions on a fully disclosed basis through First Clearing
       Corporation. Tejas Securities' headquarters are located in Austin, Texas.
       In June 2000, Tejas Securities dissolved its wholly owned operating
       subsidiary, Tejas Securities Group - East, LLC ("Tejas - East"), a
       Georgia limited liability company. The operations of the Atlanta, Georgia
       office are included as a division of Tejas Securities subsequent to June
       2000. TSG Capital, LLC, a wholly owned subsidiary of Tejas Securities,
       was formed in 1999 to be the general partner in TSG Internet Fund I, Ltd
       (the "Fund"), an investment hedge fund managed by Tejas Securities. TSG
       Capital, LLC elected to liquidate the Fund effective December 15, 2000
       and TSG Capital, LLC ceased to be an operating entity as of December 31,
       2000.

       Westech Capital Corp. was previously a shell corporation and had no
       substantial operations. Tejas Securities is the operating enterprise and
       is the acquiring enterprise for financial reporting purposes. The
       historical financial statements of Tejas Securities (accounting acquirer)
       are presented as the historical financial statements of the combined
       enterprise prior to August 27, 1999. The results of operations of Westech
       Capital Corp. (the acquired enterprise) are included in the financial
       statements of the combined enterprise only from the date of acquisition.


                                       7
<PAGE>

                     WESTECH CAPITAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


       The equity of Tejas Securities was presented as the equity of the
       combined enterprise giving effect to the minority interest in Tejas
       Securities at August 27, 1999, however, the common stock account of Tejas
       Securities was adjusted to reflect the par value of the outstanding
       stock of Westech Capital Corp. after giving effect to the number of
       shares used in the business combination. The difference between the
       common stock account of Tejas Securities and the common stock account of
       Westech Capital Corp. (presented as the common stock account of the
       combined enterprise) was recorded as an adjustment to additional
       paid in capital of the combined enterprise. For periods prior to August
       27, 1999, the equity of the combined enterprise is the historical equity
       of Tejas Securities prior to the merger retroactively restated to reflect
       the number of shares received in the business combination. Earnings
       (loss) per share for periods prior to the business combination have been
       restated to reflect the post merger number of shares outstanding.

       References to the Company within the accompanying notes to the
       consolidated financial statements are to Westech Capital Corp. and
       subsidiaries, which are the historical amounts for Tejas Securities prior
       to the reverse merger.

(2)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       (a)    PRINCIPLES OF CONSOLIDATION

              The accompanying consolidated financial statements reflect the
              consolidated accounts of the Company and its first and second tier
              subsidiaries, Tejas Securities Group Holding Company and Tejas
              Securities Group, Inc. All significant intercompany accounts and
              transactions have been eliminated in consolidation.

       (b)    SECURITIES TRANSACTIONS

              Securities transactions and the related commission revenue and
              expense are recorded on a trade date basis.

              The Company does not carry or clear customer accounts, and all
              customer transactions are executed and cleared with other brokers
              on a fully disclosed basis. These brokers have agreed to maintain
              such records of the transaction effected and cleared in the
              customers' accounts as are customarily made and kept by a clearing
              broker pursuant to the requirements of Rules 17a-3 and 17a-4 of
              the Securities and Exchange Commission, and to perform all
              services customarily incident thereto.

              The Company routinely executes securities transactions on behalf
              of its employees and officers, and management considers those
              transactions to be executed at arms' length.

       (c)    INVESTMENT BANKING

              Investment banking revenues include gains, losses, and fees, net
              of syndicate expenses, arising from securities offerings in which
              the Company acts as an underwriter or agent. Investment banking
              revenues also include fees earned from providing
              merger-and-acquisition and advisory services. Investment banking
              management fees are recorded on offering date, sales concessions
              on settlement date, and underwriting fees at the time the
              underwriting is completed and the income is reasonably
              determinable.

       (d)    CASH AND CASH EQUIVALENTS

              Cash and cash equivalents include cash and highly liquid
              investments with a maturity at date of purchase of ninety days or
              less.


                                                                     (Continued)
                                       8
<PAGE>


                     WESTECH CAPITAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999

              A certificate of deposit was pledged by the Company as security on
              an irrevocable letter of credit issued in conjunction with the
              Atlanta office lease in the amount of approximately $92,000 and
              $88,000 for the years ended December 31, 2001 and 2000,
              respectively.

       (e)    SECURITIES OWNED AND SECURITIES SOLD, NOT YET PURCHASED

              Long and short positions in securities are reported at fair value.
              Securities with readily determinable market values are based on
              quoted market prices. Securities with limited market activity for
              which quoted market values are not readily determinable are based
              on management's best estimate, which may include dealer price
              quotations and price quotations for similar traded instruments.
              The difference between cost and fair value has been included in
              net dealer inventory and investment income (loss). These
              investments are subject to the risk of failure of the issuer and
              the risk of changes in market value based on the ability to trade
              such securities on the open market.

       (f)    PROPERTY AND EQUIPMENT

              Property and equipment are stated at cost. Depreciation is
              provided using the straight-line method over the estimated useful
              lives of the respective assets. Estimated useful lives for
              property and equipment approximate those used for Federal income
              tax purposes and range from 3 to 7 years. Leasehold improvements
              are amortized using the straight-line method over the shorter of
              the estimated useful lives of the improvements or the terms of the
              related leases.

       (g)    GOODWILL

              The Company recorded goodwill in the amount of $138,215 as a
              result of its acquisition of the minority interest of Tejas
              Securities in August 2001, which is included in prepaid expenses
              and other assets as of December 31, 2001. Goodwill represents the
              excess of the purchase price over the fair value of the net assets
              acquired. Goodwill is reviewed for impairment whenever events or
              changes in circumstances indicate that the carrying amount may not
              be recoverable. If the sum of the expected future undiscounted
              cash flows is less than the carrying amount of the goodwill, a
              loss is recognized for the difference between the discounted cash
              flows and carrying value of the goodwill. See Note 1(k)

       (h)    REPURCHASE AND RESALE AGREEMENTS

              Repurchase and resale agreements are treated as financing
              transactions and are carried at the amounts at which the
              securities will be subsequently reacquired or resold as specified
              in the respective agreements. There were no repurchase or resale
              agreements outstanding at December 31, 2001 or 2000.



                                                                     (Continued)
                                       9
<PAGE>

                     WESTECH CAPITAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


       (i)    FEDERAL INCOME TAXES

              Income taxes are accounted for under the asset and liability
              method. Deferred tax assets and liabilities are recognized for the
              future tax consequences attributable to differences between the
              financial statement carrying amounts of existing assets and
              liabilities and their respective tax bases and operating loss and
              tax credit carryforwards. Deferred tax assets and liabilities are
              measured using enacted tax rates expected to apply to taxable
              income in the years in which those temporary differences are
              expected to be recovered or settled. The effect on deferred tax
              assets and liabilities of a change in tax rates is recognized in
              income in the period that includes the enactment date.

       (j)    ESTIMATES

              The preparation of financial statements in conformity with
              accounting principles generally accepted in the United States of
              America requires management to make estimates and assumptions that
              affect the 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.

       (k)    NEW ACCOUNTING PRONOUNCEMENTS

              The Financial Accounting Standards Board (FASB) issued Statement
              of Financial Accounting Standards (SFAS) No. 133, Accounting for
              Derivative Instruments and Hedging Activities ("Statement 133"),
              and SFAS No. 138, Accounting for Certain Derivative Instruments
              and Certain Hedging Activities, An Amendment of FASB Statement No.
              133. The Company was required to implement this Statement
              effective with its 2001 fiscal year (after deferral by FASB
              Statement 137). Statement 133 addresses the accounting for
              derivative instruments, including certain instruments embedded in
              other contracts, and for hedging activities. Under this Statement,
              the Company is required to recognize all derivative instruments as
              either assets or liabilities in the statements of financial
              condition and measure those at fair value. If certain conditions
              are met a derivative may be specifically designated as a hedge, an
              unrecognized firm commitment, an available-for-sale security, or a
              foreign-currency-dominated forecasted transaction. The adoption of
              Statement 133 on January 1, 2001 had no impact on the Company's
              consolidated financial position or results of operations. The
              Company did not hold any derivatives as of December 31, 2001 and
              2000.

              In June 2001, FASB issued Statement No. 141 ("Statement 141"),
              Business Combinations, and Statement No. 142 ("Statement 142"),
              Goodwill and Other Intangible Assets. Statement 141 requires that
              the purchase method of accounting be used for all business
              combinations initiated after June 30, 2001 as well as all purchase
              method business combinations completed after June 30, 2001.
              Statement 141 also specifies criteria intangible assets acquired
              in a purchase business combination must meet to be recognized and
              reported apart from goodwill. Statement 142 requires that goodwill
              no longer be amortized, but instead tested for impairment at least
              annually in accordance with the provisions of Statement 142.
              Statement 142 also requires that intangible assets with estimable
              useful lives be amortized over their respective estimated useful
              lives to their estimated residual values, and reviewed for
              impairment in accordance with FASB Statement No. 121 (Statement
              121), Accounting for the Impairment of Long-Lived Assets and for
              Long-Lived Assets to Be Disposed Of or Statement 144 upon its
              adoption (See Below).


                                                                     (Continued)
                                       10
<PAGE>

                     WESTECH CAPITAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999

              The Company adopted the provisions of Statement 141 effective July
              1, 2001 and certain provisions of Statement 142 as required for
              goodwill resulting from business combinations consummated after
              June 30, 20001. The remaining provisions of Statement 142 are
              required to be adopted effective January 1, 2002. Goodwill
              acquired after June 30, 2001, but before Statement 142 is adopted
              in full will not be amortized, but will continue to be evaluated
              for impairment in accordance with the appropriate pre-Statement
              142 accounting literature, which includes Statement 121. Financial
              Accounting Standards Board's Statement No. 144, Accounting for
              the Impairment or Disposal of Long-Lived Assets ("Statement 144")
              supercedes Statement 121 and is effective for fiscal years
              beginning after December 15, 2001. The adoption of Statement 144
              as of January 1, 2002 had no impact on the Company's consolidated
              financial statements.

              In connection with the transitional goodwill impairment
              evaluation, Statement 142 requires the Company to perform an
              assessment of whether there is an indication that goodwill is
              impaired as of the date of adoption. To accomplish this the
              Company must identify its reporting units and determine the
              carrying value of each reporting unit by assigning the assets and
              liabilities, including the existing goodwill to those reporting
              units as of the date of adoption. The Company will have up to six
              months from the date of adoption to determine the fair value of
              each reporting unit and compare it to the reporting unit's
              carrying amount. To the extent a reporting unit's carrying amount
              exceeds its fair value, an indication exists that the reporting
              unit's goodwill may be impaired and the Company must perform the
              second step of the transitional impairment test. In the second
              step, the Company must compare the implied fair value of the
              reporting unit's goodwill, determined by allocating the reporting
              unit's fair value to all of it assets (recognized and
              unrecognized) and liabilities in a manner similar to a purchase
              price allocation in accordance with Statement 141, to its carrying
              amount, both of which would be measured as of the date of
              adoption. This second step is required to be completed as soon as
              possible, but no later than the end of the year of adoption. Any
              transitional impairment loss will be recognized as the cumulative
              effect of a change in accounting principle in the Company's
              consolidated statements of operations.

              The Company adopted the remaining provisions of Statement 142 as
              of January 1, 2002. As of January 1, 2002, the Company had
              unamortized goodwill in the amount of $138,215, all of which is
              subject to the transition provisions of Statements 141 and 142.
              The goodwill recorded by the Company subsequent to June 30, 2001
              was not amortized during 2001 in connection with the acquisition
              of the minority interest of Tejas Securities. The Company does not
              believe the adoption of the remaining provisions of Statement 142
              will have a material impact on the Company's consolidated
              financial statements. As of December 31, 2001, the Company had no
              other intangible assets.

       (l)    STOCK-BASED COMPENSATION

              The Company has adopted the disclosure-only provisions of
              Statement of Financial Accounting Standards No. 123, Accounting
              for Stock Based Compensation ("Statement 123"), but applies
              Accounting Principles Board Opinion No. 25, Accounting for Stock
              Issued to Employees ("APB 25"), in accounting for its stock option
              plan.

       (m)    RECLASSIFICATIONS

              Certain reclassifications have been made to amounts presented in
              previous years to be consistent with the 2001 presentation.



                                                                     (Continued)
                                       11
<PAGE>

                     WESTECH CAPITAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


(3)    RECEIVABLES FROM AND PAYABLES TO CLEARING ORGANIZATION

       At December 31, 2001 and 2000, the Company had receivables from and
       payables to its clearing organization consisting of the following:

<Table>
<Caption>
                                                    2001         2000
                                                 ----------   ----------

<S>                                              <C>          <C>
Receivable

     Receivable from clearing organization       $1,232,038           --
     Fees and commissions receivable                673,300      735,616
                                                 ----------   ----------

     Total receivable                            $1,905,338      735,616
                                                 ==========   ==========

Payable

     Payable to clearing organization            $       --      456,660

                                                 ==========   ==========
</Table>



(4)    RECEIVABLES FROM EMPLOYEES AND STOCKHOLDERS

       The Company makes advances to certain employees in months when their
       commission payout does not meet a predetermined amount. As of December
       31, 2001 and 2000, approximately $320,000 and $71,000, respectively, had
       been advanced to employees and officers under this agreement. These
       receivables are to be repaid through reductions of future commissions or
       bonuses.

       During 2001, the Company forgave $4,000 in advances receivable from
       employees and stockholders. During 2000, the Company forgave
       approximately $25,000 in receivable from employees and stockholders. The
       amounts forgiven are included in compensation expense in the accompanying
       consolidated statements of operations.

       During 1999 the Company received a $200,000 note from an officer of the
       Company. The note bears no interest and was due on demand if the officer
       resigned as an employee of the Company prior to December 31, 2000. Under
       the terms of the note, matured unpaid principal and interest shall bear
       interest at the lesser of 5.55% per annum or the maximum rate allowed by
       law from the earlier of December 31, 2000 or the officer's voluntary
       termination. Effective January 1, 2001, the Company agreed to forgive the
       note in $50,000 increments beginning in December 2001 and continuing
       through December 2004, as long as the officer remains an employee of the
       Company. Forgiven amounts are included in compensation expense in the
       accompanying consolidated statements of operations. The balance of the
       note was $150,000 as of December 31, 2001.

       During 1999, the Company received a $50,000 note from an employee and
       stockholder of the Company to supplement the employee's commission payout
       during 1999. The note bears interest of 8% per annum, and was due and
       payable on August 27, 2000. The maturity date of the note was extended
       for one year in August 2000, and again in August 2001. During 2001, the
       Company forgave $25,000 of the note, which is included in compensation
       expense in the accompanying consolidated statements of operations. The
       note is secured by a stock pledge agreement for the employee's shares
       issued by the Company. The balance of the note was approximately $23,000
       as of December 31, 2001.


                                                                     (Continued)
                                       12
<PAGE>

                     WESTECH CAPITAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


       The Company had notes receivable, and related interest accrued, from
       other employees and related parties of the Company totaling $7,500 as of
       December 31, 2000. The notes had terms which either required settlement
       by pre-determined dates or which allowed the notes to be forgiven based
       on pre-determined conditions, which were based on employee compensation
       arrangements. The remaining balance of $7,500 was forgiven during 2001.

       In April 1999, the Company issued 1,006,975 shares of Tejas Securities
       common stock (249,982 shares of the Company's common stock giving effect
       to the Merger) for $704,833 in both cash and subscriptions receivable to
       employees of the Company. Subsequent to this issuance, the Company issued
       another 30,000 shares of Tejas Securities common stock (7,448 shares of
       the Company's common stock giving effect to the Merger) to an employee
       under the terms of the April 1999 offering for $27,000. Of the 1,036,975
       shares of Tejas Securities issued under the April 1999 common stock
       offering, the Company collected $723,550 in cash. In 1999, the Company
       canceled a subscription for 1,667 shares of Tejas Securities common stock
       (414 shares of the Company's common stock giving effect to the Merger)
       valued at $1,166 upon the termination of employment by an employee. In
       2000, the Company collected an additional $1,167 from subscriptions
       receivable related to shares issued in 1999.

       In 1997, the Company received a $100,000 note from an employee in
       consideration for the issuance of Tejas Securities common stock for $1
       per share. The note was non interest bearing and was originally due and
       payable on December 31, 1999. This amount was recorded as a stock
       subscription receivable. During 1998, the Company collected $3,737 of the
       subscription receivable, resulting in a balance of $96,263 as of December
       31, 1998. In April 1999, the terms of the note were restructured so that
       the employee could purchase the original 100,000 shares of Tejas
       Securities common stock (24,825 shares of the Company's common stock
       giving effect to the Merger) at the April 1999 offering price of $0.70
       per share. This restructuring resulted in the reduction of the
       subscription receivable and common stock balances by $30,000. The
       remaining balance was collected in 1999.

       During 1999, the Company received a $50,000 note from an employee for
       50,000 shares of Tejas Securities common stock (12,413 shares of the
       Company's common stock giving effect to the Merger). The note accrued no
       interest and was due and payable on June 1, 2000. In June 2000, the
       Company forgave the $50,000 note and included the amount in compensation
       expense in the accompanying consolidated statement of operations.

       During 1999, the Company received a $100,000 note from an employee for
       100,000 shares of Tejas Securities common stock (24,825 shares of the
       Company's common stock giving effect to the Merger). The note accrued no
       interest and was due in two installments, beginning with a $25,000
       payment on October 1, 1999 and the remaining $75,000 on August 23, 2001.
       The first installment of $25,000 was collected in 1999. The remaining
       balance of the note was secured by a stock pledge agreement for the
       shares issued by the Company as of December 31, 2000. In 2001, the former
       employee relinquished his right to the 100,000 shares of Tejas Securities
       common stock. As a result, Tejas Securities received 25,000 shares of
       treasury stock and canceled the remaining 75,000 shares of Tejas
       Securities common stock and the note.


                                                                     (Continued)
                                       13
<PAGE>

                     WESTECH CAPITAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


(5)    SECURITIES OWNED AND SECURITIES SOLD, NOT YET PURCHASED

       At December 31, 2001 and 2000, securities owned and sold, not yet
purchased consisted of the following:

<Table>
<Caption>
                                      2001                           2000
                            ---------------------------   ---------------------------
                                              SOLD,                          SOLD,
                                             NOT YET                        NOT YET
                               OWNED        PURCHASED        OWNED         PURCHASED
                            ------------   ------------   ------------   ------------

<S>                         <C>            <C>            <C>              <C>
State and municipal
  obligations               $     86,200             --      1,497,469        119,628
US Government bonds              395,784             --          4,979             --

Corporate bonds and notes      1,462,566         93,240        428,220        230,000



Equity securities              1,067,117        239,341        502,354         96,450
                            ------------   ------------   ------------   ------------

                            $  3,011,667        332,581      2,433,022        446,078
                            ============   ============   ============   ============
</Table>

(6)    OTHER INVESTMENTS

       In 1999, certain owners and directors of the Company established TSG
       Capital, LLC, a Texas limited liability company, for the purpose of
       acting as general partner of TSG Internet Fund I, Ltd. (the "Fund"), a
       Texas Limited Partnership. On December 28, 1999, the Company purchased
       TSG Capital, LLC through the conversion of liabilities owed to the
       Company by TSG Capital, LLC. In addition, the Company received a capital
       contribution from the former owners of TSG Capital, LLC in the amount of
       $116,161 in conjunction with the purchase. Of this amount, $94,613 was
       included in contributed capital, with the remaining $21,549 included in
       minority interest.

       TSG Capital, LLC acted as the General Partner of the Fund and had no
       other operations. TSG Capital, LLC (the "General Partner") received a
       management fee equal to 0.375% of the average monthly net asset value of
       the Fund after the end of a fiscal quarter. In addition, the General
       Partner received a performance fee equal to 20% of the annual net profits
       of the Fund after the end of each fiscal year. These fees were in turn
       paid to the Company in exchange for providing services to the General
       Partner for investment management, compliance and accounting and
       reporting. The Company recognized $734,154 of income during 1999 from the
       Fund comprised of management fees of $34,066 and a performance fee of
       $700,088 which is included in other income in the accompanying
       consolidated statements of operations. The Company converted the $700,088
       performance fee to an additional equity ownership in the Fund as of
       December 31, 1999 as disclosed in the summary of non-cash transactions in
       the accompanying consolidated statements of cash flows. During 2000, the
       Company recognized $79,154 in management fees, which is included in other
       income in the accompanying consolidated statements of operations. The
       General Partner did not earn a performance fee in 2000.


                                                                     (Continued)
                                       14
<PAGE>



                     WESTECH CAPITAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


       The Fund engaged the Company to solicit subscriptions for the initial
       $2,500,000 private placement of limited partnership interests in the
       Fund. In exchange for acting as the placement agent, the Company received
       a placement agent fee equal to 5% of the total initial capital
       contributions to the Fund. The total placement agent fee equaled
       approximately $136,000 and was paid in May 1999. In 2000, the Fund once
       again engaged the Company to solicit subscriptions for a secondary
       private placement of limited partnership interests. In exchange for
       acting as the placement agent, the Company received placement fees
       totaling approximately $230,000 for the year ended December 31, 2000.
       Placement fees are included in underwriting and investment banking income
       in the accompanying consolidated statements of operations.

       On January 1, 2000, the Company elected to withdraw $100,000 of its
       investment in the Fund. As of June 30, 2000, the Company elected to
       withdraw its remaining investment holdings in the Fund valued at
       $521,527. The Company recorded a loss of $310,726 during 2000 related to
       its investment in the Fund. On December 1, 2000, the General Partner
       elected to dissolve and liquidate the Fund effective December 15, 2000.

(7)    PROPERTY AND EQUIPMENT

       Property and equipment consists of the following:

<Table>
<Caption>
                                                    DECEMBER 31,
                                            ----------------------------
                                                2001            2000
                                            ------------    ------------

<S>                                         <C>             <C>
Furniture and equipment                     $    423,812         413,947
Leasehold improvements                           353,088         363,361
                                            ------------    ------------
                                                 776,900         777,308
Accumulated depreciation and amortization       (298,814)       (236,831)
                                            ------------    ------------
                                            $    478,086         540,477
                                            ============    ============
</Table>

(8)    ACCRUED COMMISSIONS AND BONUSES

       Accrued commissions and bonuses are included in accounts payable, accrued
       expenses and other liabilities in the accompanying consolidated
       statements of financial condition. As of December 31, 2001 and 2000, the
       Company has accrued $1,280,128 and $426,411, respectively, in commissions
       payable. The Company pays bonuses to its employees and officers at
       interim periods and at year-end. Accrued bonuses as of December 31, 2001
       were $1,000,000, which consisted of both contractual and discretionary
       amounts and are reflected in accounts payable, accrued expenses and other
       liabilities in the accompanying consolidated statements of financial
       condition. Of the $1,000,000, an officer of the Company received
       approximately $200,000 as part of his contractual compensation. Both
       contractual and discretionary amounts are reviewed by management of the
       Company, with discretionary amounts approved by the Compensation
       Committee of the Company. The amount accrued for bonuses was
       approximately $317,000 at December 31, 2000, and was subsequently paid
       during the first quarter of 2001.


                                                                     (Continued)
                                       15
<PAGE>

                     WESTECH CAPITAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


(9)    LINE OF CREDIT AND NOTE PAYABLE

       The Company had a $1,500,000 line of credit with a bank at December 31,
       2000. Advances made under the line of credit were secured by the common
       stock of Tejas Securities, as well as the personal guaranty of an officer
       of the Company. Funds advanced under the agreement were $1,500,000 at
       December 31, 2000. The average interest rate on amounts outstanding under
       this agreement at December 31, 2000 was approximately 10.5%. All interest
       was to be paid quarterly and any outstanding principal was to be paid at
       maturity in February 2001. The credit agreement contained certain
       affirmative covenants including maintenance of certain financial balances
       as defined in the agreement.

       On March 6, 2001, the Company restructured its line of credit with a
       bank. In exchange for a $500,000 principal reduction and interest being
       paid to the restructure date, the line of credit was converted into a
       term loan in the amount of $1,000,000. The modified note matures April 1,
       2002 and requires monthly payments of $50,000 plus accrued interest with
       payments beginning April 1, 2001 through maturity of the note on April 1,
       2002 when all unpaid principal plus interest becomes due and payable. The
       collateral securing the loan consists of the stock of Tejas Securities
       owned by the Company and the personal guaranty of an officer of the
       Company. Additionally, there are no financial covenants governing the
       loan. The balance of the note was $500,000 as of December 31, 2001. The
       Company is currently negotiating with the bank to extend the maturity
       date of the note to November 1, 2002.

       The Company paid approximately $86,000 and $69,000 in interest related to
       this debt for the years ended December 31, 2001 and 2000, respectively.

(10)   NOTES PAYABLE TO STOCKHOLDERS

       During 2000, the Company issued an unsecured short-term demand note to an
       officer of the Company in return for $500,000. Also in 2000, the Company
       issued an additional unsecured short-term demand note to another officer
       of the Company in return for $250,000. The short-term demand notes bore
       interest of 9.50% per annum and were due and payable, with accrued
       interest, on February 7, 2001. The Company incurred approximately $6,700
       and $3,400, respectively, in interest related to these debts for the year
       ended December 31, 2000. Effective February 7, 2001, the Company
       restructured the short-term demand notes into term notes with new
       maturity dates of March 7, 2002. The restructured short-term demand notes
       bore interest at 9% per annum, with payment due upon maturity. The
       $500,000 note was paid in full in May 2001. The $250,000 note was paid in
       full in June 2001. The Company incurred approximately $19,000 and
       $10,000, respectively, in interest related to these debts for the year
       ended December 31, 2001.

(11)   SUBORDINATED DEBT

       The Company had $1,000,000 in debt subordinated to claims of general
       creditors as of December 31, 2001 and 2000. The subordinated debt was
       originally due November 1, 2001, accrues interest at 11.5% and is owed to
       a director of the Company. Interest is paid monthly. On February 27,
       2001, the Company's subordinated debt was restructured. The holder of the
       debt granted the Company an option to extend the maturity of the
       subordinated debt at its discretion for a period of at least one year not
       to exceed three years. In consideration for this option, the Company paid
       $20,000 to the holder of the debt. In November 2001, the Company
       exercised its option to extend the maturity of the subordinated debt
       through November 1, 2002.



                                                                     (Continued)
                                       16
<PAGE>

                     WESTECH CAPITAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


       As a condition of the original subordinated debt agreements, Tejas
       Securities issued to the lender warrants to purchase 112,500 shares of
       common stock of Tejas Securities (27,928 shares of the Company's common
       stock giving effect to the Merger) in 1998 and additional 112,500 shares
       (27,928 shares of the Company's common stock giving effect to the Merger)
       in 1999. The warrants were exercisable at a price of $2.65 per share of
       common stock ($10.70 giving effect to the Merger) and were to expire on
       November 12, 2003. As of December 31, 1999, the warrants were canceled by
       Tejas Securities' board of directors and subsequently replaced with the
       Company's options with an effective date of January 1, 2000. The options
       were granted outside of the Company's stock option plan adopted in 1999
       as the warrants were originally granted in conjunction with the
       subordinated debt. This transaction was accounted for as a
       non-substantive exchange and the options are reflected as outstanding for
       computing diluted earnings per share for the year ended December 31,
       1999.

       The Company incurred $115,000, $115,315 and $90,582 in interest related
       to this debt for the years ended December 31, 2001, 2000 and 1999,
       respectively.

(12)   FAIR VALUE OF FINANCIAL INSTRUMENTS

       Substantially all of the Company's financial assets and liabilities are
       carried at market value or at amounts which, because of their short-term
       nature or because they carry market rates of interest, approximate
       current fair value. The Company's short-term borrowings, notes payable
       and subordinated debt, if recalculated based on current interest rates,
       would not significantly differ from the amounts recorded at December 31,
       2001 and 2000.

(13)   INCOME TAXES

       The Company files a consolidated tax return. Income tax expense (benefit)
consists of the following:

<Table>
<Caption>

                               2001          2000         1999
                          -----------    ----------    ---------

<S>                       <C>            <C>           <C>
   Federal
     Current              $    72,780    (1,767,531)   1,941,198
     Deferred                 361,204      (394,270)     103,855
   State
     Current                   36,057       (29,015)     135,986
     Deferred                  25,433       (23,196)      20,559
                          -----------    ----------    ---------

                          $   495,474    (2,214,012)   2,201,598
                          ===========    ==========    =========
</Table>

                                                                     (Continued)
                                       17
<PAGE>

                     WESTECH CAPITAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


       A reconciliation of expected income tax expense (benefit) (computed by
       applying the statutory income tax rate of 34% to income (loss) before
       income tax expense (benefit) and minority interest) to total tax expense
       (benefit) in the accompanying consolidated statements of operations
       follows:

<Table>
<Caption>

                                                          2001          2000         1999
                                                   -----------    ----------    ---------


<S>                                                <C>            <C>           <C>
       Expected federal income expense (benefit)   $   445,292    (2,333,645)   1,916,657
       Meals and entertainment                          19,486        27,578       84,634
       State income tax                                 40,583       (34,459)     103,320
       Change in valuation allowance                        --        48,902           --
       Other, net                                       (9,887)       77,612       96,987
                                                   -----------    ----------    ---------

                                                   $   495,474    (2,214,012)   2,201,598
                                                   ===========    ==========    =========
</Table>

       The tax effects of temporary differences that give rise to significant
       portions of the deferred tax assets and liabilities at December 31, 2001
       and 2000 are as follows:

<Table>
<Caption>

                                                                 2001        2000
                                                               ---------    --------

Deferred tax assets:

<S>                                                            <C>           <C>
  Net operating loss and capital loss carryforwards            $  50,644     278,445
  Accrued expenses                                                32,037      89,394
  Other                                                           51,136     152,615
                                                               ---------    --------
  Gross deferred tax assets                                      133,817     520,454
  Valuation allowance                                            (48,902)    (48,902)
                                                               ---------    --------
Net deferred tax asset                                            84,915     471,552
                                                               =========    ========
</Table>

       In assessing the realizability of deferred tax assets, management
       considers whether it is more likely than not that some portion or all of
       the deferred tax assets will not be realized. The ultimate realization of
       deferred tax assets is dependent upon the generation of future taxable
       income during the periods in which those temporary differences become
       deductible. Management considers the scheduled reversal of deferred tax
       liabilities, projected future taxable income, and tax planning strategies
       in making this assessment. Based upon the level of historical taxable
       income and projections for future taxable income over the periods which
       the deferred tax assets are deductible, management believes it is more
       likely than not the Company will realize the benefits of these deductible
       differences net of the existing valuation allowances at December 31, 2001
       and 2000. For the year ended December 31, 2001, the Company did not
       recognize a change in valuation allowance for capital loss carryforwards.
       At December 31, 2001, the Company had capital loss carryforwards of
       approximately $146,000.

(14)   PROFIT SHARING AND STOCK OPTION PLANS

       PROFIT SHARING PLAN

       In January 1997, Tejas Securities instituted a profit sharing plan under
       section 401(k) of the Internal Revenue Code. The plan allows all
       employees who are over 21 years old to defer a predetermined portion of
       their compensation for federal income tax purposes. Contributions by
       Tejas Securities are discretionary. No contributions were made for 2001,
       2000 and 1999.


                                                                     (Continued)
                                       18

<PAGE>

                     WESTECH CAPITAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


       STOCK OPTION PLANS

       Tejas Securities had a stock option plan for employees, which was
       rescinded on October 26, 1999. Under the plan, Tejas Securities had
       agreed to sell stock to employees at specified prices. As provided by
       Statement 123, Tejas Securities elected to continue to apply APB 25
       and related interpretations in accounting for its stock option plans.


       During 1997, an employee was granted options, vesting in 1997, to
       purchase up to 5 percent of the total shares issued and outstanding of
       Tejas Securities on the grant date. In 1997, one-half of the 5 percent
       option (or 2.5 percent) was exercised resulting in the issuance of
       100,000 shares of Tejas Securities common stock (24,825 shares of the
       Company's common stock giving effect to the Merger). The remaining
       options totaled 100,000 shares of Tejas Securities common stock (24,825
       shares of the Company's common stock giving effect to the Merger) and
       expired in September 1999. No compensation cost was recognized for the
       options granted.

       During 1999, options totaling 300,000 shares of Tejas Securities common
       stock (74,475 shares of the Company's common stock giving effect to the
       Merger) were granted to employees. The option price was $1 per share
       ($4.00 giving effect to the Merger). The options were not exercised in
       1999 and were canceled by Tejas Securities' board of directors prior to
       December 31, 1999 and subsequently replaced with the Company's options
       with substantially the same terms and an effective date of January 1,
       2000. The options were granted outside of the Company's stock option plan
       adopted in 1999 as they were originally granted under Tejas Securities'
       option plan. This transaction was accounted for as a non-substantive
       exchange and the options are reflected as outstanding for computing
       diluted earnings per share for the year ended December 31, 1999.

       In May 2000, an employee of the Company exercised non-qualified stock
       options to purchase 12,412 shares of the Company's common stock at $4.00
       per share.

       The Company established the Westech Capital Corp. 1999 Stock Option Plan
       ("the 1999 Plan") for employees, directors and consultants of the Company
       and its subsidiaries on October 15, 1999. Under the 1999 Plan, the
       Company was originally authorized to grant up to 300,000 shares of the
       Company's common stock through incentive stock options or nonqualified
       stock options. In August 2000, the board of directors of the Company
       amended the 1999 Plan to increase the number of shares available to
       400,000 shares of the Company's common stock. The exercise price of each
       incentive stock option is determined by the Option Committee of the
       Company, and shall not be less than 100% of the fair market value of the
       stock on the grant date. Incentive stock options awarded to ten-percent
       owners of the Company's common stock shall not have an exercise price of
       less than 110% of the fair market value of the stock on the grant date.
       Incentive stock options may only be granted to employees of the Company
       or a subsidiary.

       Options become exercisable as determined at the date of the grant by the
       Option Committee or the Board, in the case of non-employee directors. No
       option under the 1999 Plan shall be exercisable after the expiration of
       ten years from the date of the grant. Options granted to a ten-percent
       owner of the Company shall not be exercisable after the expiration of
       five years from the date of the grant. The aggregate fair market value of
       stock purchased under the 1999 Plan by an employee during any calendar
       year shall not exceed $100,000. In the event that the purchased stock
       exceeds $100,000, the excess amount shall constitute a nonqualified stock
       option.


                                                                     (Continued)
                                       19
<PAGE>

                     WESTECH CAPITAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


       During 1999, options totaling 142,500 shares were granted to employees
       under the 1999 Plan. The options vest ratably over two years, and expire
       five years from the date of the grant. The purchase price of the common
       stock ranges from $20.00 to $22.00 per share. As there was no active
       public market for the Company's stock, fair value was determined by the
       Board of Directors. No options were exercised in 1999.

       During 2000, options totaling 151,500 shares were granted to employees
       under the 1999 Plan. The options vest ratably over two years, and expire
       five years from the date of the grant. The purchase price of the common
       stock ranges from $20.00 to $50.00 per share. The options were granted at
       or above the market value of the Company's common stock.

       During 2001, options totaling 160,000 shares were granted to employees
       under the 1999 Plan. The options vest immediately, and expire five years
       from the date of the grant. The purchase price of the common stock is
       $2.50 per share. The options were granted at or above the market value of
       the Company's common stock.

       The Company has adopted the disclosure-only provisions of Statement 123,
       but applies APB 25, in accounting for its stock option plans. No cost
       from stock-based compensation awards was recognized in 2001, 2000 and
       1999. If the Company had elected to recognize compensation cost of
       options granted based on the fair value at the grant dates, consistent
       with Statement 123, net income (loss) and earnings (loss) per share would
       have changed to the pro forma amounts indicated below:

<Table>
<Caption>

                                                       YEAR ENDED DECEMBER 31,
                                                 2001           2000            1999
                                             ------------   ------------    ------------

<S>                                          <C>              <C>              <C>
Net income (loss) as reported
  for basic (Note 15)                        $    833,022     (3,999,140)      3,138,343

Net income (loss) as reported
   for diluted (Note 15)                          814,208     (3,999,140)      3,435,628

Pro forma net income (loss)
   for basic                                      654,247     (4,139,740)      3,053,589

Pro forma net income (loss)
   for diluted                                    635,433     (4,139,740)      3,350,874

Earnings (loss) per share as Reported:
    Basic                                    $       0.62          (3.17)           2.51
    Diluted                                  $       0.53          (3.17)           2.25

Pro forma earnings (loss) per Share:
    Basic                                    $       0.49          (3.28)           2.44
    Diluted                                  $       0.41          (3.28)           2.19
</Table>



                                                                     (Continued)
                                       20
<PAGE>

                     WESTECH CAPITAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


       The fair value of the options used to compute the pro forma amounts is
       estimated using the Black Scholes option-pricing model with the following
       assumptions:

<Table>
<Caption>
                                                                  2001                      2000                   1999
                                                            ----------------          ---------------         --------------

<S>                                                         <C>                       <C>                      <C>
       Risk-free interest rate                                    4.54%                     5.51%                    5.75%
       Expected holding period                                  3 years                   3 years                  3 years
       Expected volatility                                         .001                      .001                     .001
       Expected dividend yield                                    0.00%                     0.00%                    0.00%
</Table>

       A summary of the Company's stock option and warrant activity, and related
       information for the years ended December 31, follows. As of December 31,
       1999, Tejas Securities' board of directors canceled options to purchase
       300,000 shares of Tejas Securities' common stock (74,475 shares of the
       Company's common stock giving effect to the Merger) and warrants to
       purchase 225,000 shares of Tejas Securities' common stock (55,856 shares
       of the Company's common stock giving effect to the Merger). Options to
       purchase 130,331 shares of the Company's common stock were subsequently
       reissued by the Company on January 1, 2000. Stock option and warrant
       activity associated with the subordinated debt prior to August 27, 1999
       has been adjusted giving effect to the Merger.

<Table>
<Caption>
                                           2001                     2000                        1999
                                 ------------------------   ------------------------   ------------------------
                                                WEIGHTED                    WEIGHTED                  WEIGHTED
                                                AVERAGE                     AVERAGE                   AVERAGE
                                                EXERCISE                    EXERCISE                  EXERCISE
                                  OPTIONS        PRICE        OPTIONS        PRICE       OPTIONS        PRICE
                                 ----------    ----------   ----------    ----------   ----------    ----------

<S>                              <C>           <C>          <C>           <C>          <C>           <C>
Outstanding -
  beginning of year                 357,919    $    12.80      142,500    $    20.04       24,825    $    20.00
Granted                             160,000    $     2.50      281,831    $    15.20      216,975    $    14.80
Exercised                                --    $     0.00      (12,412)   $     4.00           --    $     0.00
Forfeited                           (30,000)   $    22.50         (500)   $    20.00      (24,825)   $    20.00
Canceled                             (5,000)   $    50.00      (53,500)   $    20.00      (74,475)   $     4.00
Outstanding - end of
  year                              482,919    $    11.45      357,919    $    16.90      142,500    $    20.04
                                 ==========    ==========   ==========    ==========   ==========    ==========
Exercisable - end of
  year                              431,252    $    10.22      202,919    $    12.80       47,500    $    20.40
                                 ==========    ==========   ==========    ==========   ==========    ==========
</Table>


                                                                     (Continued)
                                       21
<PAGE>

                     WESTECH CAPITAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999




<Table>
<Caption>

                                            1999
                                 ----------------------------
                                                   WEIGHTED
                                                   AVERAGE
                                                   EXERCISE
                                   WARRANTS          PRICE
                                 ------------    ------------

<S>                             <C>              <C>
Outstanding - beginning
    of year                            27,928    $      10.70
Granted                                27,928    $      10.70
Canceled                              (55,856)   $      10.70
Outstanding - end of year                  --    $       0.00
                                 ============    ============

Exercisable - end of year                  --    $       0.00
                                 ============    ============
</Table>

       The weighted average fair value of Company stock options, calculated
       using the Black Scholes option pricing model, granted during the years
       ended December 31, 2001, 2000, and 1999 were $1.36, $2.10 and $2.80 per
       option, respectively.

       The following table summarizes the Company's options outstanding and
       exercisable options at December 31, 2001:

<Table>
<Caption>
                                                                                        STOCK OPTIONS
                                               STOCK OPTIONS OUTSTANDING                EXERCISABLE
                                           -------------------------------      ------------------------------
                                               AVERAGE           WEIGHTED                          WEIGHTED
                                              REMAINING          AVERAGE                           AVERAGE
                                             CONTRACTUAL        EXERCISE                           EXERCISE
    EXERCISE PRICE           SHARES             LIFE              PRICE           SHARES             PRICE
    --------------        -------------    ---------------   -------------      ------------    --------------

<S>                       <C>              <C>                <C>              <C>               <C>
       $ 2.50                   160,000          4.4 years          $ 2.50           160,000           $ 2.50
       $ 4.00                    62,063          3.0 years          $ 4.00            62,063           $ 4.00
       $10.70                    55,856          2.0 years          $10.70            55,856           $10.70
       $20.00                   140,000          2.8 years          $20.00           115,000           $20.00
       $22.00                    55,000          2.8 years          $22.00            35,000           $22.00
       $27.50                    10,000          3.7 years          $27.50             3,333           $27.50
                          -------------    ---------------   -------------      ------------    --------------
                                482,919                                              431,252
                          =============                                         ============
</Table>


                                                                     (Continued)
                                       22
<PAGE>
                     WESTECH CAPITAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


(15)   EARNINGS (LOSS) PER SHARE

       After the completion of the Merger, the Company had 1,253,721 shares of
       common stock issued and outstanding. Prior to the Merger, the Company
       completed a stock split in the form of a stock dividend by issuing
       .228767 new shares of the Company's common stock for each one share of
       the Company's common stock outstanding to stockholders of record on
       August 13, 1999, resulting in 59,997 shares outstanding immediately
       following the stock split. Under the terms of the Merger, stockholders of
       Tejas Holding exchanged their shares for shares of the Company at a ratio
       of .24825 to one. The effect of this exchange was to issue an additional
       1,193,724 shares of the Company's stock in exchange for 100% of the
       outstanding stock of Tejas Holding.

       Basic earnings (loss) per share are based on the weighted average shares
       outstanding without any dilutive effects considered. Diluted earnings
       (loss) per share reflects dilution from all contingently issuable shares,
       including options issued during 2001, 2000 and 1999. Contingently
       issuable shares are not included in the weighted average number of shares
       when the inclusion would increase net income per share or decrease the
       loss per share. Earnings (loss) per share for the periods prior to the
       Merger have been restated to reflect the number of acquired shares
       received by the accounting acquirer (Note 1).

       The following calculations give effect to the Merger on August 27, 1999.

<Table>
<Caption>


                                                              2001          2000         1999
                                                          -----------    ----------    ---------

<S>                                                       <C>            <C>           <C>
Basic earnings (loss) per share:
Net income (loss)                                         $   833,022    (3,999,140)   3,138,343
Weighted average shares outstanding                         1,348,097     1,261,721    1,250,119

Basic earnings (loss) per share                           $      0.62         (3.17)        2.51
                                                          ===========    ==========    =========

Diluted earnings (loss) per share:
Net income (loss)                                         $   833,022    (3,999,140)   3,138,343
   Income impact of assumed conversion of
     subsidiary stock and recognition of minority
     interest income                                          (18,814)           --      297,285
                                                          -----------    ----------    ---------
   Income available to common stockholders after
   assumed conversions                                    $   814,208    (3,999,140)   3,435,628
                                                          ===========    ==========    =========

Weighted average shares outstanding                         1,348,097     1,261,721    1,250,119
Effect of dilutive securities:
   Options                                                     21,489            --       21,284
   Assumed conversion of subsidiary stock                     167,641            --      235,204
   Application of treasury stock method to
     subscriptions receivable                                   8,885            --       22,590
                                                          -----------    ----------    ---------
Weighted average shares outstanding                         1,546,112     1,261,721    1,529,197
                                                          ===========    ==========    =========

Diluted earnings (loss) per share                         $      0.53         (3.17)        2.25
                                                          ===========    ==========    =========
</Table>


                                                                     (Continued)
                                       23
<PAGE>


                     WESTECH CAPITAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


       The Company has included the dilutive effect of 160,000 and 130,331
       shares of the Company's common stock for the years ended December 31,
       2001 and 1999, respectively, in the computation of diluted earnings
       (loss) per share. The 130,331 options included in the computation of
       diluted earnings (loss) per share for the year ended December 31, 1999
       were issued by the Company on January 1, 2000 as a non-substantive
       exchange of Tejas Securities' options and warrants, which were canceled
       by the board of directors as of December 31, 1999. Of the 160,000 and
       130,331 options issued by the Company, 21,489 and 21,284 options are
       included as dilutive securities on a weighted average basis for the years
       ended December 31, 2001 and 1999, respectively. Options to purchase
       322,919, 357,919 and 142,500 shares of the Company's common stock for the
       years ended December 31, 2001, 2000 and 1999, respectively, were not
       included in the computation of diluted earnings (loss) per share because
       the options were antidilutive.

       The Company has included the dilutive effects of shares of Tejas
       Securities' common stock for the year ended December 31, 2001. Tejas
       Securities had 990,500 shares of its common stock issued and outstanding
       as of August 29, 2001 that were exchanged for common stock of the Company
       at a ratio of .24825 to one (245,890 shares). For the year ended December
       31, 2000, the Company did not include the dilutive effect of shares of
       Tejas Securities' common stock that were convertible into the Company's
       common stock because they were antidilutive. For the year ended December
       31, 1999, the Company included the dilutive effect of shares of Tejas
       Securities' common stock that were convertible into the Company's common
       stock. Tejas Securities had 965,333 shares of its common stock issued and
       outstanding at December 31, 1999 that were convertible into common stock
       of the Company at the ratio of .24825 to one (239,644 shares). The
       Company has included the dilutive effect of Tejas Securities'
       subscriptions receivable based on the treasury stock method for the years
       ended December 31, 2001 and 1999. The Company has not included the
       dilutive effect of Tejas Securities' subscriptions receivable for the
       year ended December 31, 2000 because they are antidilutive.

(16)   OFF STATEMENT OF FINANCIAL CONDITION RISK

       The Company is responsible to its clearing organization for payment of
       all transactions executed both on its behalf and on behalf of its
       customers. Therefore, the Company is exposed to off statement of
       financial condition risk in the event a customer cannot fulfill its
       commitment and the clearing organization must purchase or sell a
       financial instrument at prevailing market prices. The Company and its
       clearing organization seek to control risk associated with customer
       transactions through daily monitoring to assure margin collateral is
       maintained under regulatory and internal guidelines.

       The Company's receivable from clearing organization represents amounts on
       deposit with First Clearing Corporation. The Company is exposed should
       First Clearing Corporation be unable to fulfill its obligations for
       securities transactions. First Clearing Corporation requires the Company
       to maintain $250,000 in its account at all times.

       The Company deposits its cash with financial institutions. Periodically
       such balances exceed applicable FDIC insurance limits.

                                                                     (Continued)
                                       24
<PAGE>


                     WESTECH CAPITAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


(17)   INDUSTRY SEGMENT DATA


       The Company has two reportable segments: brokerage services and
       investment banking. The primary operating segment, brokerage services,
       includes sales, trading and market-making activities of the Company and
       encompasses both retail and institutional customer accounts. These
       segments require the commitment of significant human capital and
       financial resources, as well as industry specific skills. The investment
       banking segment participates in underwriting of corporate securities as
       managing underwriter and as a syndicate member, and provides advisory
       services to companies. Income or loss associated with other investments
       accounted for under the equity method is included in other segment
       activity in 1999 and 2000.

       The accounting policies of the segments are the same as those described
       in the summary of significant accounting policies. The Company evaluates
       performance based on profit or loss from operations before income taxes.

       The following table presents segment revenues, profits from operations
       before income taxes and minority interest, and assets for the year ended
       December 31, 2001.

<Table>
<Caption>
                                                                          INVESTMENT
                                              BROKERAGE      BANKING         OTHER              TOTAL
                                             -----------   -----------    -----------   -----------

<S>                                          <C>           <C>             <C>          <C>
       Revenues from external customers      $25,070,061       316,927             --    25,386,988
       Interest revenue                           62,137            --             --        62,137
       Interest expense                          350,202            --             --       350,202
       Depreciation and amortization             139,652            --             --       139,652
       Segment profit                          1,373,072       (63,390)            --     1,309,682

       Segment assets                          7,240,508            --             --     7,240,508
       Capital expenditures                       77,261            --             --        77,261
</Table>

       The following table presents segment revenues, profits (losses) from
       operations before income taxes and minority interest, and assets for the
       year ended December 31, 2000.

<Table>
<Caption>
                                                                          INVESTMENT
                                                       BROKERAGE           BANKING             OTHER              TOTAL
                                                     ---------------    ---------------    ---------------    ---------------

<S>                                              <C>                    <C>                <C>                <C>
       Revenues from external customers          $       12,742,620          1,831,326            135,902         14,709,848
       Interest revenue                                     151,383              -                  -                151,383
       Interest expense                                     346,449              -                  -                346,449
       Depreciation and amortization                        141,660              -                  -                141,660
       Segment profit (loss)                            (8,310,719)          1,311,155            135,902        (6,863,662)

       Segment assets                                     7,299,159              -                  -              7,299,159
       Capital expenditures                                 422,540              -                  -                422,540
</Table>



                                                                     (Continued)
                                       25
<PAGE>

                     WESTECH CAPITAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


       The following table presents segment revenues, profits and assets for the
year ended December 31, 1999.

<Table>
<Caption>
                                                             INVESTMENT
                                              BROKERAGE        BANKING        OTHER       TOTAL
                                             -----------     -----------     -------    ----------

<S>                                          <C>               <C>           <C>        <C>
       Revenues from external customers      $29,110,979       925,616       734,154    30,770,749
       Interest revenue                          178,935            --            --       178,935
       Interest expense                          614,004            --            --       614,004
       Depreciation and amortization              74,506            --            --        74,506
       Segment profit                          4,156,319       765,835       715,072     5,637,226

       Segment assets                         10,705,417            --       932,253    11,637,670
       Capital expenditures                      202,914            --            --       202,914
</Table>

(18)   LEASE COMMITMENTS

       The Company leases its office facilities and certain office equipment
       under operating leases. The future minimum payments due under these
       operating leases as of December 31, 2001 are as follows:

<Table>

<S>                                                                <C>
       2002                                                        $     1,674,000
       2003                                                              1,335,000
       2004                                                              1,023,000
       2005                                                                773,000
       2006                                                                735,000
       Thereafter                                                          184,000
                                                                   ---------------
                                                                   $     5,724,000
                                                                   ===============
</Table>


       Rent expense amounted to approximately $1,421,000, $1,765,000 and
       $885,000 for the years ended December 31, 2001, 2000 and 1999,
       respectively.

       On December 22, 2000, the Company subleased a portion of its Austin
       headquarters, furniture and equipment effective January 1, 2001. Under
       the terms of these sublease agreements, the future minimum payments to be
       received are approximately $544,000 and $167,000 during 2002 and 2003,
       respectively.

       In September 1997, Tejas Securities entered into a sale-leaseback
       transaction with Sandy Hook Management, a company owned by an officer of
       the Company. Sandy Hook Management purchased the assets for $204,268 from
       the Company. The Company purchased the assets from June 1995 through
       September 1997 for a total cost of $272,072. The book value of the assets
       as of the date of the transaction was determined in accordance with
       accounting principles generally accepted in the United States of America,
       including depreciation calculated by the straight-line method. The
       previous Chief Financial Officer of the Company made the determination of
       the book value. Under the terms of this transaction, the Company agreed
       to lease the furniture and fixtures commencing in October 1998 through
       September 2000.

(19)   CONTINGENCIES

       The Company is involved in various claims and legal actions that have
       arisen in the ordinary course of business. It is management's opinion
       that liabilities, if any, arising from these actions will not have a
       significant adverse effect on the consolidated financial position or
       results of operations of the Company.




                                                                     (Continued)
                                       26
<PAGE>

                     WESTECH CAPITAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


(20)   NET CAPITAL REQUIREMENTS

       Tejas Securities, as a registered fully licensed broker and dealer in
       securities, is subject to the Securities and Exchange Commission Uniform
       Net Capital Rule (Rule 15c3-1). Under this rule, Tejas Securities is
       required to maintain a minimum "net capital" to satisfy rule 15c3-1. At
       December 31, 2001, the minimum "net capital" requirement for Tejas
       Securities was $250,000. "Net capital" at December 31, 2001 aggregated
       $884,276. Tejas Securities' ratio of aggregate indebtedness to net
       capital was 3.86 to 1 at December 31, 2001.

(21)   OTHER RELATED PARTY TRANSACTIONS

       The Company engaged a director to act as a consultant for the Company on
       a month to month basis beginning in October 1999. Under the terms of the
       agreement, the Company compensated the consultant for professional
       services rendered at a rate of $12,500 per month, plus out of pocket
       expenses. In 2000, the Company modified the agreement so that the
       director would receive $6,250 per month for professional services, plus
       out of pocket expenses. For the years ended December 31, 2000 and 1999,
       the total amount paid for services was approximately $113,000 and
       $29,000, respectively. No fees were paid to the consultant in 2001.

       In November 2001, the Company entered into a service agreement with
       Firstmark Corp. ("Firstmark"), a publicity traded corporation, to provide
       management support services for $5,000 per month for an initial term of
       one year. The Company owns shares in Firstmark with a fair value of
       approximately $458,000 as of December 31, 2001, which are included in
       securities owned in the accompanying consolidated statements of financial
       condition. Additionally in November 2001, two officers of the Company
       were named to the board of directors of Firstmark, and an additional
       officer was appointed as an officer of Firstmark.

       In October 2001, an officer of the Company purchased for cash a liability
       of the Company in the amount of $121,000 originally payable to Gro-Vest
       Management. The liability originated from the Merger.

(22)   SUBSEQUENT EVENT

       In March 2002, the Company entered into an agreement with a bank to
       borrow $2,500,050 for operating purposes at Tejas Securities. The loan is
       due and payable on demand or by March 15, 2003 if no demand is made. The
       loan accrues interest at a rate of 5.50% per annum, and is to be paid on
       a monthly basis. Tejas Securities has purchased a certificate of deposit
       in a like amount as collateral for the loan.


                                                                     (Continued)
                                       27
<PAGE>

                     WESTECH CAPITAL CORP. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


(23)   QUARTERLY RESULTS (UNAUDITED)

       The following tables set forth selected quarterly consolidated statements
       of operations information for the years ended December 31, 2001 and 2000.

<Table>
<Caption>
                                                  FIRST           SECOND          THIRD          FOURTH
       2001                                      QUARTER          QUARTER         QUARTER        QUARTER
       ----                                   ------------       ---------       ---------       ---------

<S>                                           <C>                <C>             <C>             <C>
Total revenue                                 $  6,208,276       5,419,276       5,868,349       7,832,248

Income before income tax expense
  and minority interest                            222,277          71,029         503,511         512,865
Net income                                          76,345          19,981         416,114         320,582
Basic earnings per share
     Net income                                       0.06            0.02            0.31            0.23
Diluted earnings per share:
     Net income                                       0.06            0.02            0.22            0.23
</Table>


<Table>
<Caption>

                                                  FIRST           SECOND          THIRD          FOURTH
       2000                                      QUARTER          QUARTER         QUARTER        QUARTER
       ----                                   ------------       ---------       ---------       ---------

<S>                                           <C>                <C>             <C>             <C>
Total revenue                                 $  9,703,600       1,573,153       1,543,992       1,888,540
Income (loss) before income tax expense
  (benefit) and minority interest
                                                 1,373,372      (3,469,453)     (2,356,783)     (2,410,798)
Net income (loss)                                  658,325      (1,909,630)     (1,363,178)     (1,384,657)
Basic earnings (loss) per share:
     Net income (loss)                                0.51            1.51           (1.08)          (1.09)
Diluted earnings (loss) per share:
     Net income (loss)                                0.51            1.51           (1.08)          (1.09)
</Table>


                                       28


<PAGE>

<Table>
<Caption>

      EXHIBIT
      NUMBER                 DESCRIPTION OF EXHIBITS
      -------                -----------------------
<S>                   <C>
       2.1            Agreement and Plan of Merger (Incorporated herein by
                      reference to Exhibit 1.1 to the registrant's Current
                      Report on Form 8-K/A filed on October 22, 1999)

       2.2            Agreement and Plan of Merger, dated as of April 30, 2001,
                      by and between Westech Capital Corp., a New York
                      corporation, and Westech Capital Corp., a Delaware
                      corporation (Incorporated herein by reference to Exhibit
                      2.1 of the registrant's Current Report on Form 8-K filed
                      on May 2, 2001

       3.1            Certificate of Incorporation (Incorporated herein by
                      reference to Exhibit 3.1 to the registrant's Registration
                      Statement on Form 10-12(g) (File No. 000-29235))

       3.2            Bylaws (Incorporated herein by reference to Exhibit 3.2 to
                      the registrant's Registration Statement on Form 10-12(g)
                      (File No. 000-29235))

       3.3            Certificate of Amendment to Certificate of Incorporation
                      (Incorporated herein by reference to the registrant's
                      Current Report on Form 8-K filed on June 25, 2001)

       4.1            NASD Subordinated Loan Agreement, Form SL-1, dated October
                      13, 1998, between Clark N. Wilson and the Company
                      (Incorporated herein by reference to Exhibit 4.1 to the
                      registrant's Registration Statement on Form 10-12(g) (File
                      No. 000-29235))

       4.2            NASD Subordinated Loan Agreement, Form SL-1, dated June 4,
                      1999, between Clark N. Wilson and the Company
                      (Incorporated herein by reference to Exhibit 4.2 to the
                      registrant's Registration Statement on Form 10-12(g) (File
                      No. 000-29235))

       4.3            Shareholder Agreement, dated November 23, 1999, between
                      John Ohmstede, John Glade, Michael Hidalgo, Jon McDonald,
                      Britt Rodgers, Bob Sternberg, Mike Wolf, Greg Woodby and
                      the Company (Incorporated herein by reference to Exhibit
                      4.3 to the registrant's Registration Statement on Form
                      10-12(g) (File No. 000-29235))

       4.4            Certificate of Incorporation (Incorporated herein by
                      reference to Exhibits 3.1 and 3.3 above)

       4.5            Bylaws (Incorporated herein by reference to Exhibit 3.2
                      above)

      10.1            Agreement, dated May 19, 2000, with First Clearing
                      Corporation (Incorporated herein by reference to Exhibit
                      10.13 to the registrant's Quarterly Report on Form 10-Q
                      for the quarter ended June 30, 2000

      10.2            Promissory note agreement, dated November 9, 2000, between
                      Charles H. Mayer and the Company (Incorporated herein by
                      reference to Exhibit 10.14 to the registrant's Quarterly
                      Report on Form 10-Q for the quarter ended September 30,
                      2000)

      10.3            Promissory note agreement, dated November 9, 2000, between
                      John J. Gorman and the Company (Incorporated herein by
                      reference to Exhibit 10.15 to the registrant's Quarterly
                      Report on Form 10-Q for the quarter ended September 30,
                      2000)

      10.4            Promissory note agreement, dated February 7, 2001, between
                      Charles H. Mayer and the Company (Incorporated herein by
                      reference to Exhibit 10.16 to the registrant's Annual
                      Report on Form 10-K for the year ended December 31, 2000)

      10.5            Promissory note agreement, dated February 7, 2001, between
                      John J. Gorman and the Company (Incorporated herein by
                      reference to Exhibit 10.17 to the registrant's Annual
                      Report on Form 10-K for the year ended December 31, 2000)

      10.6            Promissory note agreement, dated June 7, 2000, between
                      First United Bank and the Company (Incorporated herein by
                      reference to Exhibit 10.18 to the registrant's Annual
                      Report on Form 10-K for the year ended December 31, 2000)

      10.7            Modification of employment agreement between Charles H.
                      Mayer and Tejas Securities Group, Inc., dated January 1,
                      2001 (Incorporated herein by reference to Exhibit 10.19 to
                      the registrant's Annual Report on Form 10-K for the year
                      ended December 31, 2000)

      10.8            Promissory note agreement, dated March 6, 2001, between
                      First United Bank and the Company (modification to Exhibit
                      10.6) (Incorporated herein by reference to Exhibit 10.20
                      to the registrant's Annual Report on Form 10-K for the
                      year ended December 31, 2000)

      10.9*           Agreement, dated December 3, 2001, with Correspondent
                      Services Corporation

      10.10*          Promissory note agreement, dated March 15, 2002, between
                      First United Bank and the Company

      99.1            Articles of Incorporation of Tejas Securities Group, Inc.
                      (Incorporated herein by reference to Exhibit 99.1 to the
                      registrant's Registration Statement on Form 10-12(g) (File
                      No. 000-29235))

      99.2            Bylaws of Tejas Securities Group, Inc. (Incorporated
                      herein by reference to Exhibit 99.2 to the registrant's
                      Registration Statement on Form 10-12(g) (File No.
                      000-29235))
</Table>




<PAGE>


<Table>



<S>                   <C>

       99.3           Articles of Incorporation of Tejas Securities Group
                      Holding Company (Incorporated herein by reference to
                      Exhibit 99.3 to the registrant's Registration Statement on
                      Form 10-12(g) (File No. 000-29235))

       99.4           Bylaws of Tejas Securities Group Holding Company
                      (Incorporated herein by reference to Exhibit 99.4 to the
                      registrant's Registration Statement on Form 10-12(g) (File
                      No. 000-29235))
 </Table>


*        Filed herewith.