o The Company agreed to pay
approximately $138,000 and the Judgment Creditor agreed to an offset of $135,000
owed by the Judgment Creditor to one of Co-Defendants against the Consent
Judgment, reducing the Consent Judgment to approximately $836,000 as of the
effective date of the Settlement Agreement. The amount due under the Consent
Judgment (and the corresponding warehouse line of credit) pursuant to the
Settlement Agreement is secured by approximately $400,000 of face value of
Mortgages currently being serviced by AMSI. The proceeds of these Mortgages will
be used to reduce the warehouse line of credit, and, correspondingly, the amount
pursuant to the Settlement Agreement.

o The Company agreed to pay
$75,000 to a related party of the Judgment Creditor in partial satisfaction of
the Arbitration Award. Another related party of the Judgment Creditor has agreed
to indemnify the Company for any actions brought by the other related party of
the Judgment Creditor to enforce the Arbitration Award.

o A stockholder of the
Company and Co-Defendant agreed to pledge 750,000 shares of the Companys
common stock to the Judgment Creditor as security for the performance of the
obligations of the Company and Co-Defendants under the terms of the Settlement
Agreement.

o Under the terms of the
May Settlement Agreement, the Judgment Creditor delivered a non-recourse note to
the Company in exchange for 475,000 shares of stock in the Company. Under the
terms of the Settlement Agreement, the shares and the note were cancelled.

o The Company further
agreed to deliver to the related party of the Judgment Creditor for the benefit
of the Judgment Creditor a two-year warrant to purchase 330,000 shares of the
Companys common stock at an exercise price of $0.01 per share.

o The Company further
agreed to repurchase 300,000 shares of the Companys common stock from the
Judgment Creditor over a period of 30 months at an aggregate cost of $645,000.
In addition, the Company agreed that if certain property located in the state of
Georgia was sold prior to the repurchase obligation being fulfilled, the net
proceeds from the sale of the property would be used to pay the repurchase
obligations. o The Company further agreed to transfer to the Judgment Creditor
100,000 shares of the Companys common stock that was being held as
collateral under a pledge agreement.

o A total of 574,400 shares
of the Companys common stock were transferred or released to the Judgment
Creditor. The Judgment Creditor will apply any proceeds received from the sale
of these shares to reduce the amounts due pursuant to the Settlement Agreement.

o Any funds received by the
Judgment Creditor in excess of the amount due under the Settlement Agreement are
to be applied to the Companys obligation to repurchase the 300,000 shares.

o At such time as all of
the obligations under the settlement agreement are satisfied, the Judgment
Creditor will pay the Company $100,000, which amount may be reduced if the
Company defaults under its repurchase obligations.

`For         Against      Abstain
                                           ----------   ----------   ----------
ELECTED BY HOLDERS OF COMMON STOCK:

Election of Directors                      20,511,722     768,982       6,540
        Dan Moudy
        Joe McAdams
        Florian Homm
        Robert E. Altenbach
        David Colwell

Proposal 2 - Ratify the appointment        20,511,722     733,282       1,540
        of Moore Stephens Frost as
        independent accountants

Proposal 3 - Approval of Name Change       20,520,912     728,982         650

Proposal 4 - Approval of the amendment      9,870,988     829,707     240,650
        to the Stock Option Plan`

`High           Low
                                                     -------------  ------------

Fiscal Year Ended September 30, 2002
      Fourth Quarter                                     $  0.875       $ 0.475
      Third Quarter                                         1.440         0.625
      Second Quarter                                        0.840         0.350
      First Quarter                                         0.925         0.250
Fiscal Year Ended September 30, 2001
      Fourth Quarter                                     $  1.030       $ 0.550
      Third Quarter                                         1.030         0.660
      Second Quarter                                        1.720         0.750
      First Quarter                                         1.780         0.530`

`Year ended                 Year ended
                                                    September 30, 2002         September 30, 2001
                                                    ------------------      -----------------------


INCOME STATEMENT DATA

Revenue                                            $  19,101,013           $        24,653,161
Income (loss) from operations                      $  (1,089,200)          $         1,488,807
Income (loss) before income taxes                  $  (5,702,456)          $         2,626,753
Net income (loss)                                  $  (3,532,456)          $         3,086,753
Basic and diluted income (loss) per share          $       (0.12)          $              0.14


                                                    September 30, 2002          September 30, 2001
                                                   -------------------          -------------------
BALANCE SHEET DATA:

Total assets                                       $ 142,200,996           $        91,096,256
Total debt                                         $ 129,592,938           $        77,616,799
Total liabilities                                  $ 133,690,972           $        80,388,663
Stockholders' equity (deficit)                     $   8,510,024           $        10,707,593
Total liabilities and stockholder's
            equity (deficit)                       $ 142,200,996           $        91,096,256`

`ASSETS                                                        2002                 2001
                                                                 ------------         ------------

Cash                                                             $   258,562          $    850,665
Real estate held for sale                                          6,221,587             7,995,000
Real estate held for development                                          --               255.169
Mortgage loans held for sale, net                                124,042,286            72,221,049
Property and equipment, net                                        1,264,439               633,571
Accounts Receivable                                                3,982,001             1,975,662
Investment securities                                                     --             1,872,405
Due from related party                                                 9,037                47,224
Goodwill, net                                                      3,504,716             4,342,777
Deferred income tax benefit                                        2,500,000               460,000
Other assets                                                         418,368               442,734
                                                                ------------          ------------
Total assets                                                    $142,200,996          $ 91,096,256
                                                                ============          ============

        LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
   Accounts payable and accrued expenses                        $  3,825,398          $  1,539,096
   Accrued interest payable                                          272,636             1,232,768
   Notes payable - warehouse line                                125,767,938            71,265,897
   Notes payable                                                          --             6,230,902
   Notes payable related parties and stockholders                  3,825,000               120,000
                                                                ------------          ------------
         Total liabilities                                       133,690,972           80,388,663
                                                                ------------          ------------
Stockholders' equity:
   Preferred series B convertible stock, 2,000,000 shares
     authorized, 1,650,000 shares issued and outstanding           1,650,000             1,650,000
   Common stock, no par value; 800,000,000 shares
     authorized, 33,677,306 and 24,856,283 shares issued
     and outstanding respectively                                         --                    --
   Additional paid-in capital                                     10,200,390             9,113,402
   Accumulated equity (deficit)                                   (3,340,366)              (55,809)
                                                                ------------           ------------
         Total stockholders' equity                                8,510,024            10,707,593
                                                                ------------           ------------
         Total liabilities and stockholders' equity             $142,200,996           $91,096,256
                                                                ============           ============`

`2002                 2001
                                                                 ------------         ------------

Revenue:
 Mortgage service income                                         $ 19,384,305         $ 22,491,419
 Sales of real estate                                                 550,000            2,161,742
                                                                 ------------         ------------
Total revenue                                                      19,934,305           24,653,161
                                                                 ------------         ------------
Operating expenses:
 Commissions                                                        3,562,317           10,301,450
 Salaries and employee benefits                                     6,725,634            5,004,258
 General and administrative                                         8,154,692            5,391,067
 Cost of real estate sold                                              81,000               60,982
 Professional fees                                                    751,250              935,383
 Occupancy expense                                                  1,226,136              863,542
 Amortization of goodwill                                                  --              328,441
 Writedown of goodwill on Cross Keys                                  758,061                   --
 Depreciation and amortization                                        129,404              213,903
 Property taxes                                                        15,173               65,328
                                                                 ------------         ------------
Total operating expenses                                           21,403,667           23,164,354
                                                                 ------------         ------------
Operating income (loss)                                            (1,469,362)           1,488,807
                                                                 ------------         ------------
Other income (expense):
 Writedown of real estate held for sale                            (2,497,582)                  --
 Writedown of investment securities                                (1,872,405)                  --
 Other income, net                                                    609,422            1,716,282
 Interest expense                                                     (94,630)            (578,336)
                                                                 ------------         ------------
                                                                   (3,855,195)           1,137,946
                                                                 ------------         ------------
Income (loss) before income tax provision (benefit)                (5,324,557)           2,626,753

Income tax provision (benefit)                                     (2,040,000)            (460,000)
                                                                 ------------         ------------
Net income (loss)                                                $ (3,284,557)         $ 3,086,753
                                                                 ============         ============

Basic and diluted income (loss) per common share                 $      (0.11)         $      0.14
                                                                 ============         ============

Weighted average common shares outstanding -
 basic and diluted                                                 29,301,889           22,326,512
                                                                 ============        =============`

`Preferred     Additional
                                                  Common        Shares          Paid-in         Accumulated
                                                  Shares        and Amount      Capital            Deficit           Total
                                                ----------    ----------    -------------     -------------    -------------


Balance at September 30, 2000                   15,305,763     $      --    $    (116,535)     $(3,142,562)    $  (3,259,097)


Common stock issued - purchase of
United Capital                                   1,389,430            --        1,665,437               --         1,665,437

Common stock and warrants issued in connection
with partial modification agreement - UCMC         409,000            --        1,741,603               --         1,741,603

Issuance of common stock - purchase
of Cross Keys                                      655,172            --          426,533               --           426,533

Common stock subscriptions receivable              700,000            --               --               --                --

Common stock redemption period expired           1,550,000            --               --               --                --

Common stock issued in settlement of debt        3,337,918            --        3,483,215               --         3,483,215

Common stock exchanged in payment of services      209,000            --          913,149               --           913,149

Common stock redemption period expired -
Paradigm                                           300,000            --               --               --                --

Preferred stock issued                                  --      1,650,000              --               --         1,650,000

Cancellation of subscription receivable          1,000,000            --        1,000,000               --         1,000,000

Net income                                              --            --               --        3,086,753         3,086,753
                                               -----------     ----------   -------------      -----------     -------------
Balance at September 30, 2001                   24,856,283     $1,650,000    $  9,113,402      $   (55,809)    $  10,707,593

Common stock issued - GCA settlement             1,600,000            --          602,480               --           602,480

Common stock issued as collateral for note       2,400,000            --               --               --                --

Common stock issued in connection with
  repricing agreement on UCMC acquisition          566,364            --               --               --                --

Common stock issued persuant debt conversion     2,017,438            --          984,508               --           984,508

Common stock issued in connection with prior
  year severance agreement                       1,137,221            --               --               --                --

Common stock received in satisfaction of debt     (400,000)           --         (500,000)              --          (500,000)

Net loss                                                --            --               --       (3,284,557)       (3,284,557)
                                               -----------     ----------    ------------      -----------     -------------
Balance at September 30, 2002                   33,677,306     $1,650,000    $ 10,200,390      $(3,340,366)    $   8,510,024
                                               ===========     ==========    ============      ===========     =============`

`2002                   2001
                                                                               ----------             ----------

Cash Flows from Operating Activities:
  Net income                                                                  $  (3,284,557)         $  3,086,753
  Adjustments to reconcile operating income to net cash
   provided by operating activities
    Depreciation and amortization                                                   129,404               542,344
    Writedown of real estate held for sale                                        2,497,582                    --
    Writedown of investment securities                                            1,872,405                    --
    Writedown of goodwill on Cross Keys                                             758,061                    --
    Gain on sale of real estate                                                    (469,000)                   --
    Loss on sale of property and equipment                                          158,126               129,384
    Issuance of common stock for services                                                --             4,153,320
    Gain on forgiveness of debt                                                    (192,700)                   --
    Deferred income tax benefit                                                  (2,040,000)             (460,000)
    Gain (loss) on  sale of subsidiary                                                   --            (1,166,872)
    Changes in assets and liabilities:
      Receivables                                                                (2,006,339)           (1,363,107)
      Due from related party                                                         38,187                10,592
      Other assets                                                                   24,366            (1,118,308)
      Accounts payable and accrued expenses                                       2,336,302            (1,302,842)
      Accrued interest payable                                                     (825,624)              626,777
      Deferred revenue                                                                   --               (65,710)
                                                                              -------------         -------------
Net cash used in operating activities                                            (1,003,787)            4,239,203
                                                                              -------------         -------------
Cash Flows from Investing Activities:
    Mortgage loans held for sale                                                (51,821,237)          (48,617,203)
    Purchase of property and equipment                                             (838,398)              (79,104)
    Advances on notes receivable                                                         --              (309,248)
    Acquisition of United Capital Mortgage                                               --              (717,193)
    Sale of Accent Mortgage Services, Inc.                                               --              (181,674)
    Proceeds from sale of real estate                                                    --               133,500
    Development cost                                                                     --               (33,533)
                                                                              -------------         -------------
Net cash provided by investing activities                                       (52,659,635)          (49,804,455)
                                                                              -------------         -------------

Cash Flows from Financing Activities:
    Proceeds from issuance of notes payable                                      49,869,179            47,678,889
    Repayment of notes payable                                                    3,202,140            (1,535,269)
                                                                               -------------          ------------
Net cash provided by financing activities                                        53,071,319            46,143,620
                                                                              -------------          ------------

Net increase (decrease) in cash                                                    (592,103)              578,368

Cash, at beginning of the year                                                      850,665               272,297
                                                                              -------------          ------------

Cash, at end of the year                                                      $     258,562         $     850,665
                                                                              =============         =============`

`2002                   2001
                                                                                ----------           ----------


Supplemental disclosure of cash flow information:
    Cash paid during the period for interest                                    $ 3,531,274        $  2,047,477
                                                                                ============        ============`

| | a.
Organization and nature of operations - UCAP, Incorporated and Subsidiaries (the
Company) is a multi-state provider of mortgage lending and
brokerage services to consumers and also holds certain investments in real
estate. Prior to July 18, 2002, the Company operated under the name of Lahaina
Acquisitions, Inc. Effective as of that date, the stockholders of the Company
voted to change the name of the Company to UCAP, Incorporated. During the year
ended September 30, 2002, the Companys operations consisted of a mortgage
lending division (United Capital Mortgage Corporation or
UCMC)and a real estate investment division (UCMC Real Estate I
or UCMC REI). UCMC is a residential mortgage lender, providing
mortgage lending services to consumers through a total of twelve traditional
offices located in Colorado, Nevada and Florida as well as through its wholesale
operations in New York, Florida, Nevada, Colorado and New Mexico. AMSI was a
residential mortgage broker, providing mortgage brokerage services to consumers
through several branch offices located primarily in the Atlanta, Georgia
metropolitan area. During the year ended September 30, 2001, AMSI had
approximately 30 branches. UCMC REI is a real estate investment organization
engaged in the sale of real estate. Effective September 30, 2001, subject to
certain consents and approvals, as further discussed in Note 3, the Company sold
its mortgage brokerage division.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b.
Principles of consolidation - The consolidated financial statements of the
Company include the accounts of its wholly-owned subsidiaries. All intercompany
transactions and balances have been eliminated in consolidation.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c.
Basis of presentation and uses of estimates - The consolidated balance sheet has
been prepared in conformity with accounting principles generally accepted in the
United States of America. In preparing the consolidated financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ significantly from those
estimates.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | d.
Revenue recognition - UCMCs, and previously AMSIs, revenues are
primarily derived from fee income from the origination of residential mortgage
loans, and such revenues are recognized when the loans are sold to an investor
and the Company has no further obligation to fulfill. To date, all of the loans
originated have been sold (or will be sold in the case of loans held for sale)
with the servicing released. Gains and losses on loan sales are recognized at
the time of the sale and are determined by the difference between net sale
proceeds and the carrying value of the loans sold. Prior to September 4, 2002,
ARG owned parcels of land that it intended to develope and sell. Effective as of
that date, the Company established UCMC Real Estate I (Real Estate
I), a wholly-owned subsidiary of UCMC, and transferred all of its real
estate holdings to Real Estate I in connection with the refinancing of the
outstanding indebtedness on these properties.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Sales
of lots are recognized when the required down payments are received, continuing
investment and continuing involvement criteria are met, and title is connveyed
to the buyer. Sales of real estate generally are accounted for under the full
accrual method. Under that method, gain is recognized when the collectibility of
the sales price is reasonably assured and the earnings process is complete. When
a sale does not meet the requirements for income recognition, gain is deferred
until those requirements are met. Some sales of real estate are accounted for
under the cost recovery method. Under that method, the gain on sale is generally
deferred until the total payments by the buyer exceed the cost of the property
sold. However, a portion of the deferred gain is recognized as income to the
extent that the deferred gain exceeds the note receivable from the buyer plus
the maximum continent liability to the Company for other debt on the property.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | e.
Cash equivalents - The Company considers all highly liquid instruments purchased
with an original maturity of three months or less to be cash equivalents.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------

| | f.
Mortgage loans held for sale - Mortgage loans originated and intended for sale
in the secondary market are carried at the lower of cost or estimated market
value in the aggregate. Net unrealized losses are recognized through a valuation
allowance by charges to income.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | g.
Concentration of credit risk - The Company is subject to concentration of credit
risk with respect to the portfolio of mortgage loans receivable as changes in
the economic environment might adversely impact the borrowers ability or
willingness to repay such mortgages. Additionally, the value of such mortgages
can be impacted by fluctuations in interest rates and the credit markets.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company presently sells the mortgage loan it originates to a limited number of
investors. Although the Company is presently dependent upon these investors
continuing to purchase these mortgages, the Company believes that it could
replace these investors, if required to, at similar terms.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | h.
Asset impairment - The Company has adopted SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets. This statement requires
that long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of carrying amount of an asset to
future net cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount exceeds the fair value of the assets. Assets
to be disposed of are reported at the lower of the carrying amount or fair value
less costs to sell.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | j.
Foreclosed real estate - Foreclosed real estate is reported at the lower of cost
or fair value less estimated disposal costs, determined on the basis of current
appraisals, comparable sales, and other estimates of value obtained principally
from independent sources.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | k.
Investement securities - As of September 30, 2001, investment securities
consisted of the preferred and common stock of AMSI that the Company received in
connection with its conditional sale of AMSI as of that date (Note 11). These
securities were recorded at their original cost with management believed
approximated their values at that date. During the fourth quarter of fiscal
2002, the Company evaluated the realizability of these investment securities and
determined that these investments should be written off. Accordingly a writedown
of these securities is reflected in the financial statements as of September 30,
2002.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | l.
Goodwill - Goodwill represents the excess of cost over the net assets of
acquired businesses. Effective October 1, 2001, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 142 Goodwill and Other
Intangible Assets which eliminated the requirement for systematic
amortization of goodwill and replaces it with a requirement to evaluate goodwill
for impairment on at least an annual basis. Prior to October 1, 2001, goodwill
was being amortized by the straight-line method over periods ranging from ten to
fifteen years. Amortization expense on goodwill was $328,441 for the year ended
September 30, 2001.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the year ended September 30, 2001, the Company recorded goodwill of
approximately $3,645,000 and $812,000, respectively, in connection with its
acquisitions of United Capital Mortgage and Cross Keys Capital. During the same
period, the Company recorded approximately $208,200 in goodwill to account for
additional consideration for the acquisition of AMSI. In connection with the
Companys annual evaluation of goodwill as of September 30, 2002,
management determined that the unamortized goodwill associated with Cross Keys
Capital should be written off. Accordinglyl, an impairment writedown of $758,061
is reflected in the accompanying financial statements for the year ended
September 30, 2002.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | m.
Income per common share - Basic income per common share is computed based on net
income divided by the weighted average number of common shares outstanding.
Diluted income per common share is computed based on net income divided by the
weighted average number of common and potential common shares. Common share
equivalents include those related to stock options, convertible notes, and
warrants; however, such common share equivalents are anti-dilutive and therefore
are excluded for purposes of calculating dilutive income per common share.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | n.
Stock option plan - The Company accounts for its stock option and employee stock
purchase plans in accordance with Accounting Principles Board Opinion No. 25,
Accounting For Stock Issued to Employees (APB 25). In
accordance with APB 25, no compensation expense has been recognized because the
exercise price of the Companys stock options equals the market value of
the underlying stock on the date of the grant. The Company has adopted the
disclosure only provisions of SFAS No. 123, Accounting for Stock-Based
Compensation. Note 9 to the consolidated financial statements contains a
summary of the pro forma effects to reported net income and net income per share
for the years ended September 30, 2002 and 2001 as if the Company had elected to
recognize compensation cost based on the fair value of the options granted as
prescribed by SFAS No. 123.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | n.
Income taxes - The Company utilizes the liability method of accounting for
income taxes. This method requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
recognized in the financial statements or tax returns. Under this method,
deferred tax assets or liabilities are determined based upon the difference
between the values of the assets and liabilities as reflected in the financial
statements and their related tax basis at enacted tax rates in effect for the
year in which the differences are expected to be recovered or settled.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`2002           2001
                                                    ----           ----

        Real estate held for sale               $6,221,587       $ 7,995,000
                                                ----------       -----------
        Land held for development               $       --       $    91,605
        Cost to develop land                            --           163,564
                                                ----------       -----------
                                                $       --       $   255,169
                                                ----------       -----------
                                                $6,221,587       $ 8,250,169
                                                ==========       ===========`

`Cost
                              Sales       Deferred         Net       real estate
                              price        revenue       revenue         sold
                              -----       ---------      --------        ----

        Tennessee Property  $1,150,000   $  890,781     $  259,219    $  259,219
        Swiss Air            3,400,000      600,000      2,800,000       975,481
                            ----------   ----------     ----------    ----------
        Totals              $4,550,000   $1,490,781     $3,059,219    $1,234,700
                            ==========   ==========     ==========    ==========`

`2002                2001
                                                    ----                ----

        Residential mortgage loans              $ 124,042,286       $ 67,760,549
        Construction financing                             --          6,460,500
                                                -------------       ------------
                                                $ 124,042,286       $ 72,221,049
                                                =============       ============`

`2002              2001
                                                    ----              ----

        Leasehold improvements                  $    67,929       $    67,236
        Furniture and equipment                   1,937,096         1,297,054
                                                -----------       -----------
        Property and equipment, at cost           2,005,025         1,364,290
        Less accumulated depreciation               740,586           730,719
                                                -----------       -----------
        Property and equipment, net             $ 1,264,439       $   633,571
                                                ===========       ===========`

`2002                 2001
                                                                      ----------           ----------

Notes payable:

Note payable to a bank; interest at prime;
secured by a first mortgage on a residence.                           $       --          $ 2,228,814

9% Convertible Note due April 2003.  Company may elect
to pay the note, plus accrued interest, with stock or
cash.  If the note is not paid on or before the due date, the
Holder may require conversion.  The note is secured by shares
of the Company's common stock equal to the number of shares
issuable upon conversion.                                                     --              600,000

Note payable secured by certain parcels of land held for
development, due June 7, 2000.  Interest at 9%.                               --              550,000

8% Promissory note due August 25, 2000. The note is secured
by shares of the Company's common stock.                                      --              500,000

Note payable to a bank secured by residential property,
payable on demand or if no demand, April 2002.  Interest
at prime plus 2%.                                                             --              495,000

9% Promissory Note, secured by a second mortgage on certain
parcels of real estate, due January 31, 2001. Interest only
payable quarterly in arrears.                                                 --              459,586

8% Note payable due September 25, 2000. Company may elect to pay
the note, plus accrued interest, with stock or cash. If the note
is not paid on or before the due date, the Holder may require
conversion.  The note is secured by shares of the Company's
common stock equal to the number of shares issuable upon conversion.          --              425,000

8% Note payable due December 26, 2000. Company may elect to
pay the note, plus accrued interest, with stock or cash. If
the note is not paid on or before the due date, the Holder may
require conversion. The note is secured by shares of the Company's
common stock equal to the number of shares issuable upon conversion.          --              425,000

Note payable secured by certain parcels of real estate, due
September 2004. Principal and interest payable monthly at a
rate of 15%.                                                                  --              329,802

Note payable with no interest unless default at which time
interest accrues at 12%, due December 15, 2001.  Secured
by real estate.                                                               --              150,000

Note payable secured by residential property, payable on
demand.  Interest is payable monthly at a rate of 12%.                        --               67,700

                                                                    ------------         ------------
Total notes payable                                                           --            6,232,903
                                                                    ------------         ------------

6.  Notes Payable (cont.)
    -------------
Notes payable related parties:

Note payable to stockholder; interest at 7.5%;
cue September 10, 2003; secured by mortgages
on real estate                                                      $  1,850,000                   --

Note payable to stockholder; interest at LIBOR
plus 5.0%; due December 17, 2003; convertible
to Company stock; subordinated in payment to
the Company's warehouse line of credit                                 1,000,000                   --

Note payable to a stockholder; interest at 7.0%;
due February 14, 2003; unsecured                                         625,000                   --

Note payable to a stockholder; interest at 7.5%;
due August 21, 2003; secured by second
mortgage on real estate                                                  350,000                   --

Unsecured note payable to a stockholder, interest
at 7%, due on demand.                                                         --              120,000

                                                                    ------------          ------------
     Total notes payable related parties                               3,825,000              120,000
                                                                    ------------          ------------
Total notes payable                                                 $  3,825,000          $ 6,352,903
                                                                    ============          ============`

| | Scheduled
maturities of the Companys notes payable and notes payable - related
parties and stockholders at September 30, 2002 are as follows:
| | ----------------------------------------------------------------------------------------------------------------------------------------------

`Year Ending September 30,

                2003                    $ 3,491,667
                2004                        333,333
                                        -----------
                Total                   $ 3,825,000
                                        ===========`

| | As
of September 30, 2001, the Company had certain convertible notes outstanding.
The terms of the 8% convertible notes issued by the Company for general
corporate indebtedness stated that the notes may be converted by the holder at
any time, and contain certain other conversion provisions. The conversion price
of these notes was equal to 110% of the average closing bid price for the five
(5) trading days immediately prior to the original issuance of the note. During
the year ended September 30, 2002, the holders of these notes elected to convert
resulting in the issuance of 2,017,438 common shares.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At
September 30, 2002, the Company had $124,042,286 outstanding under a warehouse
line of credit. This line is a $100,000,000 line with a $25,000,000 overline
which bears interest at LIBOR plus 2.125%. At September 30, 2001, the Company
had $65,146,225 outstanding under a warehouse line of credit. This line was a
$30,000,000 line with a $65,000,000 overline which bore interest at LIBOR plus
2.125%.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At
September 30, 2001, the Company also had $6,119,672 outstanding under a separate
revolving line of credit, the proceeds of which had been used to fund
construction financing loans. During the year then ended, this line was
suspended due to a failure to paydown the outstanding balance on the line.
During the year ended September 30, 2002, proceeds from sales of construction
loans were applied to pay off this outstanding balance.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Companys provision for income taxes varies from the statutory federal tax
rate primarily due to the effect of certain non-deductible expenses and the
valuation allowance which reduces the benefit of the net operating loss
carryforwards.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Deferred
income tax assets and the related valuation allowances result principally from
the potential tax benefits of net operating loss carryforwards.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------

| | Analysis
of the net deferred tax benefit at September 30, 2002 and 2001 is as follows:
| | --------------------------------------------------------------------------------------

| | The
net change in the deferred tax valuation allowance was a decrease of $346,443
and $1,465,784 for the years ended September 30, 2002 and 2001, respectively.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At
September 30, 2002, the Company has net operating loss carryforwards available
for Federal and state income tax purposes totaling approximately $5,684,000.
Unless utilized, the carryforwards will begin expiring in 2020.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the year ended September 30, 2000, warrants were issued by the Company that
enabled the holders to purchase the Companys common stock at any time up
to three years from the date of original issuance of the respective note. The
warrant price is equal to 110% of the average closing bid price of the
Companys common shares for the five (5)trading days immediately prior to
the original issuance of the note. Warrant prices for the $525,000, $500,000 and
$475,000 notes are $2.75, $3.77 and $2.03, respectively. During the year ended
September 30, 2002, these warrants were exercised resulting in the issuance of
2,047,138 shares. At September 30, 2001, warrants to acquire a total of
4,400,000 shares of the Companys common stock were outstanding. The
weighted average exercise price relating to these 4,400,000 warrants is
approximately $.10 per share.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | A
summary of the Companys stock warrant activity and related information for
the years ended September 30, 2002 and 2001 is as follows:
| | ----------------------------------------------------------------------------------------------------------------------------------------

`Number of
                                                                 Warrants
                                                                ----------


       Balance at September 30, 2000                               400,000
            Granted                                              4,000,000
            Exercised                                                   --
            Cancelled                                                   --
                                                               -----------
       Balance at September 30, 2001                             4,400,000
            Granted                                                400,000
            Exercised                                                   --
            Cancelled                                                   --
                                                               -----------
       Balance at September 30, 2002                             4,800,000
                                                               ===========`

`Weighted
                                                                                 Average
                                                                Number of        Exercise
                                                                 Options           Price
                                                                ---------       ----------


       Balance at September 30, 2001                           4,751,182            1.05
                                                              ==========
       Exercisable at September 30, 2001                       3,562,870            0.93
                                                              ==========
       Exercisable at September 30, 2002                       4,503,450            0.52
                                                              ==========
       Shares available for grant at September 30, 2001          303,343
                                                              ==========
       Shares available for grant at September 30, 2002        1,830,397
                                                              ==========`

| | The
following table summarizes information about the Companys stock options
outstanding and exercisable by price range at September 30, 2002:
| | ----------------------------------------------------------------------------------------------------------------------------------------------

`Weighted
      Options         Average                           Options
    Outstanding      Remaining                      Exercisable at
    at September    Contractual          Exercise    September 30
       2002             Life               Price         2002
    -----------   ----------------      --------    ------------

       678,880        3.76 years           1.50          243,033
        97,917        2.70 years           1.42          135,417
        25,000        1.47 years           1.20           25,000
       500,000        4.00 years           0.85          500,000
     2,000,000        3.82 years           0.54        2,000,000
     1,200,000        9.50 years           0.52        1,200,000
       400,000        4.50 years           0.40          400,000
    -----------                                       ----------
     4,901,797                                         4,503,450
    ===========                                       ==========`

| | a.
Pro Forma Information - Pro forma disclosure information regarding net income
(loss) and income (loss) per common share is required by Statement 123, and has
been determined as if the Company had accounted for its stock options and the
Stock Purchase Plan under the fair value method of that Statement.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | For
purposes of pro forma disclosures only, the estimated fair value of the options
is amortized to expense over the options vesting period. The fair value
for all options was estimated at the date of grant using the Black-Scholes
option valuation model with the following assumptions:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`Cash and cash equivalents               $     135,132
        Receivables                                   674,910
        Loans held for sale                        15,424,698
        Property and equipment                        723,760
        Other assets                                2,416,816
        Notes payable                             (15,257,691)
        Accounts payable and other liabilities     (1,067,625)
                                                --------------
                                                $   3,050,000
                                                ==============`

`Receivables                             $      50,672
        Loans held for sale                         8,179,148
        Property and equipment                         49,990
        Other assets                                  816,370
        Notes payable                              (8,255,272)
        Accounts payable and other liabilities       (154,003)
        Interest payable                             (261,905)
                                                --------------
                                                $     425,000
                                                ==============`

`Mortgage        Real Estate
                                    Services           Division       Corporate          Total
                                  -------------     -------------    -------------    -------------


Revenues                          $  19.384,305     $    550,000     $         --     $  19,934.205

Operating profit (loss)                 246,919          466,583       (2,182,864)       (1,469,362)

Depreciation and amortization           887,465               --               --           887,465

Identifiable assets                 133,573,206        6,221,587        2,406,203       142,200,996

Capital expenditures                    838,398          550,000               --         1,388,398`

`Mortgage        Real Estate
                                    Services           Division       Corporate          Total
                                  -------------     -------------    -------------    -------------
>

Revenues                          $  22,716,419     $  1,936,742     $         --     $  24,653,161

Operating profit (loss)               1,579,365        1,696,211       (1,786,769)        1,488,807

Depreciation and amortization           517,119               --           25,225           542,344

Identifiable assets                  80,874,801          938,926        9,282,529        91,096,256

Capital expenditures                     79,104              --                --            79,104`

`2002            2001


     Numerator:
           Net income (loss)                                  $(3,284,557)  $  3,086,753
                                                              ===========   ============

     Denominator:
           Denominator for basic loss per share-weighted
           average shares (including outstanding shares of
           redeemable common stock)                             29,301,889    22,326,512

    Effect on dilutive  securities:
           Employee  stock  options                              2,810,756           --
           Stock  purchase warrants                              4,800,000           --
                                                              ------------  ------------
              Denominator for diluted loss per share
               adjusted weighted                                36,912,645    22,326,512
                                                              ============  ============

         Net income (loss) per share - basic and diluted      $      (0.11) $       .014
                                                              ============  ============`

| | Consolidated
Statements of Cash Flows for the year ended September 30, 2002 and for the year
ended September 30, 2001
| | ---------------------------------------------------------------------------------------------------------------------

`SIGNATURE                                    TITLE                                    DATED
          ----------------                            ---------------                            -----------

         /s/ Dan E. Moudy             President, Chief Executive Officer, Chairman            January 13, 2003
         --------------------         Director (Principal Executive Officer)
         Dan E. Moudy


         /s/ H. Lee Hasting, III      Director                                                January 13, 2003
         -----------------------
         H. Lee Hastings, III


         /s/ Charles Hakala           Director                                                January 13, 2003
         --------------------
         Charles Hakala


         /s/ Robert E. Altenbach      Director                                                January 13, 2003
         ----------------------
         Robert E. Altenbach


         /s/ Joe McAdams              Director                                                January 13, 2003
         ---------------------
         Joe McAdams

         /s/ David Colwell            Director                                                January 13, 2003
         ---------------------
         David Colwell

         /s/ Florian Homm             Director                                                 January 13, 2003
         ---------------
         Florian Homm`

We consent to the inclusion
of our report dated December 20, 2002, with respect to the consolidated balance
sheets of UCAP, Incorporated and Subsidiaries as of September 30, 2002 and
September 30, 2001 and the related consolidated statements of operations,
stockholders equity, and cash flows for the years then ended, which report
has been included in the Form 10 KSB of UCAP, Incorporated.