U.S. SECURITIES AND EXCHANGE COMMISSION
                       WASHINGTON, D.C.  20549

                             FORM 10-KSB

     [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
          SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998.

     [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
          THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from               to
     Commission File No. 33-24138-D

                          CAPITAL GROWTH, INC.
            (Name of small business issuer in its charter)

          Nevada                               87-0463772
State or other jurisdiction of                         (I.R.S. Employer
incorporation or organization                     Identification No.)

 55 West 200 North, Provo, Utah                      84601
(Address of principal executive offices)                     (Zip Code)

Issuer's telephone number, including area code: (801) 377-1758

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

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

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

     Check if disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained herein and will not be
contained in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form [ ](not applicable)

     The aggregate market value of the common voting stock held
by non-affiliates as of May 31, 1999:  Not Determinable.

     Shares outstanding of the Issuer's common stock as of May
31, 1998:  24,500,000 shares.

The issuer had no revenues for the year ended December 31, 1998.


<PAGE>

                              PART I
ITEM 1.  DESCRIPTION OF BUSINESS.

     (A)  BUSINESS DEVELOPMENT.

     Capital Growth, Inc. (the "Issuer" or "Company"), was
incorporated under the laws of the State of Nevada on March 28,
1988.  The Issuer was organized to raise capital and to
investigate and acquire any suitable asset, property or other
business opportunity which management might believe had good
business potential.  No specific business or industry was
predetermined.

     In 1989, the Company registered an offering of Units
comprising shares of common stock and warrants.  The warrants
were subsequently allowed to expire without exercise and are no
longer outstanding.

     The Company has no business operations.  Other than continue
to search for a suitable business acquisition, the Company has
been inactive since its formation.  In May, 1999, (subsequent to
the end of the fiscal year for which this report is filed) the
Company reverse split it common stock on a 1 for 20 basis,
reducing the total outstanding from 50,000,000 to 2,500,000
shares.  Share amounts have been retroactively restated herein to
reflect the split. The Company then agreed to issue 22,000,000
post split shares for cash consideration of $44,000.  In
connection therewith, the sole officer/director resigned and
appointed new management.

     (B)  BUSINESS OF THE ISSUER.

GENERAL DISCUSSION

     The Company's business plan is to seek one or more potential
business ventures, anywhere in the United States, which, in the
opinion of management may warrant involvement by the Company.
The Company will only acquire businesses which can generate or
provide audited financial statements.  This will limit the types
of businesses which the Company could acquire to those firms
which have previously had audited financial statements.  The
Company recognizes that because of its limited financial,
managerial and other resources, the number of suitable potential
business ventures which may be available to it will be extremely
limited.  The Company's principal business objective will be to
seek long-term growth potential in the business venture in which
it participates rather than to seek immediate, short-term
<PAGE>
earnings.  In seeking to attain the Company's business objective,
it will not restrict its search to any particular business or
industry, but may participate in business ventures of essentially
any kind or nature, including, but not limited to, finance, high
technology, manufacturing, natural resources, service, research
and development, communications, insurance, brokerage,
transportation and others.  Management's discretion is
unrestricted and it may participate in any business venture
whatsoever, which may meet the business objectives discussed
herein.  It is emphasized that the business objectives discussed
are extremely general and are not intended to be restrictive upon
the discretion of management.

     The Company will seek one or more potential business
ventures from its known sources, but will rely heavily on
personal contacts of its officers and directors as well as
indirect associations between them and other business and
professional people.  It is not anticipated that the Company will
engage professional firms specializing in business acquisitions
or reorganizations.  In some instances, the Company may publish
notices or advertisements seeking a potential business venture in
financial or trade publications.

     The Company will not restrict its search for any specific
kind of firms, but may acquire a venture in its preliminary or
development stage, may participate in a business which is already
in operation or in a business in various stages of its corporate
existence.  It is impossible to predict at this stage the status
of any venture in which the Company may participate, in that the
venture may need additional capital, may merely desire to have
its shares publicly traded, or may seek other perceived
advantages which the Company may offer.

     Firms which seek the Company's participation in their
operations through a reorganization, asset acquisition, or some
other means may desire to do so to avoid what such firms may deem
to be adverse factors related to undertaking a public offering.
Such factors include substantial time requirements and legal
costs, along with other conditions or requirements imposed by
various state laws.

     To a large extent, a decision to participate in a specific
business endeavor may be made upon management's analysis of the
quality of the other firm's management and personnel, the
anticipated acceptability of new products or marketing concepts,
the merit of technological changes, and numerous other factors
which are difficult, if not impossible, to analyze through the
application of any objective criteria.  In many instances, it is
anticipated that the results of a specific firm to date may not
<PAGE>
necessarily be indicative of the potential for the future because
of the requirement to substantially shift marketing approaches,
expand significantly, change product emphasis, change or
substantially augment management, and other factors.  Because the
Company may participate in business endeavors with newly
organized firms or with firms which are entering a new phase of
their growth, it should be emphasized that the Company will incur
further risks since management in many instances will not have
proved its abilities or effectiveness, the eventual market of
such firm's product or services will likely not be established,
and the profitability of the firm will be unproved and cannot be
predicted.

     The analysis of new business endeavors will be undertaken by
or under the supervision of the officers and directors, none of
whom is a professional business analyst.  No member of management
has any significant business experience or expertise in any type
of business which is likely to be investigated by the Company.
Thus, management will have to rely on their own common sense and
business judgment as well as upon the advice of consultants to
examine the factors described herein.  The mention of various
factors to be looked at by management with regard to potential
business endeavors should not be read as implying any experience
or expertise on behalf of management.  These are merely
guidelines which stockholders should know that management will go
by as they attempt to examine potential business ventures.  In
analyzing prospective business endeavors, management will
consider such matters as the available technical, financial and
managerial resources, the working capital and other financial
requirements, the history of operations, if any; prospects for
the future; the nature of present and expected competition; the
quality and experience of management services which may be
available and the depth of that management; the potential for
further research, development or exploration; risk factors; the
potential for growth and expansion; the potential for profit, the
perceived public recognition or acceptance of products, services,
trade or service marks; name identification; and other relevant
factors.

     Generally, the Company will analyze all available factors in
the circumstances and make a determination based upon a composite
of available facts, without reliance upon any single factor as
controlling.

     It is anticipated that business endeavors will be available
to the Company from various sources, including its officers and
directors, professional advisors, securities broker-dealers,
venture capitalists, members of the financial community, and
others who may present unsolicited proposals.  In certain
<PAGE>
circumstances, the Company may agree to pay a finder's fee or to
otherwise compensate investment banking or other services
provided by persons who are unaffiliated with the Company but who
submit a potential business endeavor in which the Company
participates.  No such finder's or other fees will be paid to any
person who is an officer, director, owner of record or, to the
knowledge of the Company the owner beneficially of 10% or more of
the Company's issued and outstanding stock, unless approval is
received by majority vote of disinterested shareholders.

     The Company may acquire a business venture by conducting a
reorganization involving the issuance of securities in the
Company. Due to the requirements of certain provisions of the
Internal Revenue Code of 1986 (as amended) in order to obtain
certain beneficial tax consequences in such reorganizations, the
number of shares held by all of the present shareholders of the
Company prior to such transaction or reorganization, including
persons purchasing shares in this offering, may be substantially
less than the total outstanding shares held by such shareholders
in any reorganized entity.  As noted above, such a transaction
may be based upon the sole determination of management without
any vote or approval by the shareholders of the Company.  The
result of any such reorganization could be additional dilution to
the shareholders of the Company prior to such reorganization.  If
the Company were to issue substantial additional securities in
any such reorganization, or otherwise, such issuance may have an
adverse effect on any trading market which may develop in the
Company's securities in the future.

     It is anticipated that the investigation of specific
business endeavors and the negotiation, drafting and execution of
relevant agreements, disclosure documents and other instruments
will require substantial management time and attention and
substantial costs for accountants, attorneys and others.  If a
decision is made not to participate in a specific business
endeavor, the costs theretofore incurred in the related
investigation would not be recoverable. Furthermore, even if an
agreement is reached for the participation in a specific business
venture, the failure to consummate that transaction may result in
the loss to the Company of the related costs incurred.

     The Issuer has not yet engaged in any business activities.
The Company has no formal business plan or any particular area of
business in which it intends to engage.  Management of the
Company will attempt to acquire on behalf of the Company assets,
properties and/or ongoing businesses which it believes have
potential for successful development.  This may include
businesses or assets related to manufacturing, retail and
wholesale sales, industrial development, and natural resource
<PAGE>
development or any other field of business or endeavor which
Management of the Company may encounter. Management of the
Company have not adopted any formal business plan or conducted
any market studies with respect to any business or industry.  No
representation is made that Management of the Company have any
particular expertise in connection with the proposed activities
of the Company or any particular industry or business field.
Management of the Company may rely on independent experts or
consultants in any business field in connection with their
examination and investigation of potential acquisitions.

     Management intends to send a letter to its stockholders
every time the Company is involved in a transaction or which
relates to an event deemed by management to be material to the
Company.  This would include a change in management, acquisition
of substantial assets, or other similar matters such as would
also be disclosed by the Company on Form 8-K and/or 10-QSB filed
with the Securities and Exchange Commission.

     Management of the Company presently have no specific assets,
properties or business operation which it has in mind for
potential acquisition nor does it have any particular areas of
business or industry in which it intends to look for such
business acquisitions.

     In the acquisition of any given business the Company may
incur substantial indebtedness which will substantially change
the capital structure of the Company and would most likely expose
the Company's stockholders to a greater risk of loss in the event
of financial difficulty.

ITEM 2.  PROPERTIES.

     The Issuer has no material assets.

OFFICE FACILITIES AND EMPLOYEES

     The Company has no office facilities of its own or
employees. The Company uses the offices of the Company's
president.

ITEM 3.  LEGAL PROCEEDINGS.

     There are not currently any material pending legal
proceedings, to which the registrant is a party or of which any
of its property is subject and no such proceedings are known to
the registrant to be threatened or contemplated by or against it.

<PAGE>
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     No matter was submitted to a vote of the security holders,
through solicitation of proxies or otherwise during the 4th
quarter of the fiscal year covered by this report.

                              PART II

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

     (A)  MARKET INFORMATION.

     The registrant's common stock has never been actively
traded, however the common stock is eligible for quotation on the
electronic bulletin board.

     (B)  HOLDERS.

     The approximate number of record holders of the registrant's
common stock as of May 31, 1999 was 312.

     (C)  DIVIDENDS.

     The registrant has not paid any cash dividends to date and
does not anticipate or contemplate paying dividends in the
foreseeable future.  It is the present intention of management to
utilize all available funds for the development of the Company's
business.

     The Company is authorized by its certificate of
incorporation to issue up to 2,500,000 shares of common stock,
$.001 par value.

     One-third of the outstanding shares of the Company's common
stock must be present at a duly called shareholders' meeting in
order to have a quorum.  However, under Nevada law, amendments to
the Company's articles of incorporation and certain other matters
require an affirmative vote of at least a majority of all
outstanding shares.

     All shares of stock, when issued, will be fully-paid and
nonassessable.  All shares are equal to each other with respect
to voting, liquidation and dividend rights.  Holders of shares of
common stock are entitled to one vote for each share they own at
any stockholders' meeting.  Holders of shares of common stock are
entitled to receive such dividends as may be declared by the
Board of Directors out of funds legally available therefor, and
<PAGE>
upon liquidation are entitled to participate pro-rata in a
distribution of assets available for such a distribution to
stockholders.  There are no conversion, pre-emptive or other
subscription rights or privileges with respect to any shares.
Reference is made to the Company's Articles of Incorporation
together with the Amendments thereto and its By-Laws as well as
to the applicable statutes of the State of Nevada for a more
complete description of the rights and liabilities of holders of
common stock.  The common stock of the Company does not have
cumulative voting rights which means that the holders of more
than 50% of the shares voting for the election of directors may
elect all of the directors if they choose to do so.  In such
event, the holders of the remaining shares aggregating less than
50% will not be able to elect any directors.

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

     The Company was incorporated March 28, 1988, for the purpose
of investing in any and all types of assets, properties, and
businesses.  In 1989, the Company completed a public stock
offering which was registered on Form S-18 with the Securities
and Exchange Commission.  The Company's only business activity,
to date, has been its formation, the registration of its
securities and the investigation of potential investments and
acquisitions.

       The Company's plan of operation is to pursue a business
combination with an existing business operation.  The Company
presently has no business combination contemplated but intends to
seek such a combination.

ITEM 7.  FINANCIAL STATEMENTS.

       See attached financial statements.

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

       During the two most recent fiscal years, there has not
been any change in the principal independent accountant for the
registrant, and there has been no disagreement on any matter of
accounting principles or practices, financial statement
disclosure, or auditing scope or procedure.

<PAGE>
                             PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS.

     (A) IDENTIFY DIRECTORS AND EXECUTIVE OFFICERS.

      The current sole director of the registrant, who will serve
until the next annual meeting, or until his successors are
elected or appointed and qualified, is set forth below:

                         YEAR FIRST ELECTED
     NAME           AGE    AS DIRECTOR        POSITION

David N. Nemelka    34   Since May, 1999     President, Secretary
                                             -Treasurer &Director

     David N. Nemelka, founded and has been President of McKinley
Capital, a financial consulting firm, since 1994. He worked in
brand management for Proctor & Gamble (1993-94) where he
developed the marketing plan for a budgeted $20 million new
product launch.  He received a B.S. degree in business finance
from Brigham Young University and his M.B.A. from Wharton
Business School at the University of Pennsylvania.

     Except as described herein none of the registrant's
directors, nor any person nominated or chosen to become a
director holds any other directorships in any other company with
class of securities registered pursuant to Section 12 of the
Exchange Act or subject to the requirements of Section 15(d) of
such Act or any company registered as an investment company under
the Investment Company Act of 1940.

     (B) IDENTIFY SIGNIFICANT EMPLOYEES: Same as above.

     (C) FAMILY RELATIONSHIPS: None.

     (D) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS.

     None of the officers or directors have been involved in any
material legal proceedings which occurred within the last five
years of any type described in Section 401(d) of Regulation S-B.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT: Not applicable

<PAGE>

ITEM 10.  EXECUTIVE COMPENSATION.

     During the last three fiscal years none of the persons then
serving as officers or directors individually received any
salary, wage or other compensation.  $100 per month was accrued
for use of office facilities and accounting services, to the
accounting firm of the Company's former president. During 1998
and each of the two preceding years a total of $1,200 was accrued
pursuant to this arrangement.  During the current fiscal year the
registrant has no present plans to pay any other compensation to
officers or directors.

     There are presently no ongoing pension or other plans or
arrangements pursuant to which remuneration is proposed to be
paid in the future to any of the officers and directors of the
registrant.

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

     The following table sets forth the beneficial stock
ownership of all persons known by the registrant to own more than
5% of the outstanding common stock, and the officers and
directors, both individually and as a group.
<TABLE>
<S>              <C>           <C>                  <C>
 Name and Address  of BeneficialAmount and Nature   Percent
     Owner       Position with   of Beneficial        of
                    Company        Ownership         Class
David N. Nemelka
                 President,    22,000,000 shares     89.8%
                 Secretary/
                 Treasurer &
                 Director
Robert W. Mann,
Trustee, Robert W.Mann Retirement 2,250,000 shares    9.2%
Trust                          (approx)






</TABLE>
All officers and directors as
a group (1 person)                  22,000,000 shares       89.8%

     The foregoing amounts are restated to reflect a 1 for 20
reverse split which the Company effected in May, 1999.  The
Company also agreed to issue 22,000,000 shares (after the 1 for
20 reverse split) to Mr. Nemelka, who thereby acquired a
controlling interest.

<PAGE>

     CHANGES IN CONTROL.

      There are no other arrangements including pledges by any
person of securities of the Company, the operation of which may
at a subsequent date result in a change in control of the
Company.

ITEM 12. CERTAIN RELATIONSHIPS & RELATED TRANSACTIONS.

     Gary B. Peterson, the former sole officer and director of
the Company has granted an option to the Robert W. Mann
Retirement Trust, wherein said Trust has the right to purchase
1,000,000 (50,000 post split)shares of the Company's common stock
from Mr. Peterson for $50,000 within seven years of March 31,
1993, or within two years of any acquisition by the Company.

      The Company used the offices and various services of the
Company's former president.  Such services and facilities were
provided for a fee of $100 per month.

     Over the past several years, the Company has received
advances from its former principal shareholders which are being
treated as loans.  Such advances or loans are interest-bearing at
the rate of 6% per annum and are unsecured.  The Company was also
indebted for accounting services and use of office facilities to
the Company's former president.  At December 31, 1998, $35,134
was owed by the Company with respect to these debts.

     In May, 1999 (subsequent to the end of the fiscal year for
which this report is filed), the Company agreed to issue
22,000,000 post split shares of common stock to David Nemelka for
$44,000 cash.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.

     (a) Exhibits.
        None

     (b) Reports on Form 8-K.
     The Company filed no reports on Form 8-K during the last
quarter of the year ended December 31, 1998.

<PAGE>

                              SIGNATURES

     Pursuant to the requirements of Section 12 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.

                                   CAPITAL GROWTH, INC.



Date:      June 1, 1998         /s/ David N. Nemelka
                              David N. Nemelka, President,
                              Chief Executive Officer, and
                              Chief Financial Officer



     Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.



Date:      June  1, 1999        /s/ David N. Nemelka
                                   David N. Nemelka, Director






<PAGE>


Supplemental Information to be Furnished With Reports Filed
Pursuant to Section 15(d) of the Exchange Act by Non Reporting
Issuers

No annual report or proxy statement has been sent to security
holders.


<PAGE>



CAPITAL GROWTH, INC.
(A Development Stage Company)
Financial Statements
December 31, 1998 and 1997


<PAGE>



                                                         CAPITAL GROWTH, INC.
                                                (A Development Stage Company)
                                                                        Index

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



                                                                         Page


Independent auditors' report                                              F-1


Balance sheet, December 31, 1998 and 1997                                 F-2


Statement of operations for the years
ended December 31, 1998 and 1997 and
cumulative amounts since inception                                        F-3


Statement of stockholders' deficit
from inception through December 31,
1998                                                                      F-4


Statement of cash flows for the years
ended December 31, 1998 and 1997 and
cumulative amounts since inception                                        F-6


Notes to financial statements                                             F-7

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



<PAGE>



                                                   INDEPENDENT AUDITORS' REPORT





To the Board of Directors of
Capital Growth, Inc.


We have audited the accompanying  balance  sheet of Capital  Growth,  Inc.,  (a
development stage  company) as of December  31, 1998 and 1997,  and the related
statements  of operations,  stockholders'  deficit and cash flows for the years
then ended and the cumulative  amounts from March 28, 1988 (date of inception).
These financial statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

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

In our opinion, the financial  statements  referred to above present fairly, in
all material respects,  the  financial  position of Capital  Growth,  Inc.,  (a
development stage company) at December 31, 1998 and 1997 and the results of its
operations  and its cash flows for the years then ended and cumulative  amounts
from March 28, 1988 (date of inception) in conformity with  generally  accepted
accounting principles.

The accompanying  financial  statements  have been  prepared  assuming that the
Company will  continue  as a  going  concern.  As  discussed  in  Note 2 to the
financial statements,  the  Company  has  suffered  recurring  losses and has a
stockholders' deficit.  These  conditions  raise  substantial  doubt  about its
ability to continue as a going  concern.  Management's  plans  regarding  those
matters also are described in Note 2. The  financial  statements do not include
any adjustments that might result from the outcome of this uncertainty.


                                                  TANNER+CO.


Salt Lake City,  Utah
April 20, 1999,
except for note 6,
which is dated May 18, 1999

                                                                           F-1

<PAGE>
<TABLE>

                                                                                      CAPITAL GROWTH, INC.
                                                                             (A Development Stage Company)

                                                                                             Balance Sheet

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




<CAPTION>

              Assets                                                         1998              1997
              ------
                                                                       -----------------------------------
<S>                                                                    <C>              <C>
Current assets -
     cash                                                              $             819$              996
                                                                       -----------------------------------

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

                                                                       -----------------
              Liabilities and Stockholders' Deficit

Current liabilities:
     Related party payables                                            $          35,134$           30,898
     Payables                                                                         15               850
                                                                       -----------------------------------

                  Total current liabilities                                       35,149            31,748
                                                                       -----------------------------------

Stockholders' deficit:
     Common stock; $.001 par value; 50,000,000 shares authorized,  2,500,000 and
       2,400,000 shares issued and outstanding as of December 31, 1998 and 1997,
       respectively                                                                2,500             2,400
     Additional paid-in capital                                                   65,602            63,702
     Accumulated deficit                                                        (102,432)          (96,854)
                                                                       -----------------------------------

                  Total stockholders' deficit                                    (34,330)          (30,752)
                                                                       -----------------------------------

                  Total liabilities and stockholders' deficit          $             819$              996
                                                                       -----------------------------------





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

</TABLE>
See accompanying notes to financial statements.
                                                                          F-2

<PAGE>
<TABLE>

                                                                                      CAPITAL GROWTH, INC.
                                                                             (A Development Stage Company)

                                                                                   Statement of Operations

                                                           Years Ended December 31, and Cumulative Amounts
-------------------------------------------------------------------------------------------------------------------



<CAPTION>


                                                                                            Cumulative
                                                                                             Amounts
                                                                                              Since
                                                            1998             1997           Inception
                                                     -----------------------------------------------------
<S>                                                  <C>               <C>              <C>
Revenue - interest income                            $                 $-               $ -          2,471
                                                     -----------------------------------------------------

Expenses:
     Professional fees                                            3,064            3,153            67,982
     Administrative expenses                                      2,514            3,285            34,185
     Amortization of organization costs                               -                -             2,136
                                                     -----------------------------------------------------

              Total expenses                                      5,578            6,438           104,303
                                                     -----------------------------------------------------

Loss before income taxes                                         (5,578)          (6,438)         (101,832)

Income taxes - current                                                -                -              (600)
                                                     -----------------------------------------------------

Net loss                                             $           (5,578)$          (6,438)$       (102,432)
                                                     -----------------------------------------------------

Loss per share (basic and diluted)                   $             (.00)$           (.00) $          (.00)
                                                     -----------------------------------------------------

Weighted average common shares
  (basic and diluted)                                         2,408,000        2,385,000         1,319,000
                                                     -----------------------------------------------------






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

</TABLE>
See accompanying notes to financial statements.
                                                                          F-3

<PAGE>
<TABLE>

                                                                                      CAPITAL GROWTH, INC.
                                                                             (A Development Stage Company)

                                                                        Statement of Stockholders' Deficit

                                                                          From Inception on March 28, 1988
                                                                                 Through December 31, 1998
-------------------------------------------------------------------------------------------------------------------



<CAPTION>
                                                                          Additional
                                               Common Stock                 Paid-In        Accumulated
                                    -----------------------------------
                                         Shares            Amount           Capital          Deficit
                                    ----------------------------------------------------------------------
<S>                                         <C>       <C>               <C>              <C>

Balance, March 28, 1988                             - $                 $-               $ -

Shares issued to initial stockholder for
cash, August 1988 at $.001 per share          250,000               250           26,016                 -

Net loss for the period ended
December 31, 1988                                   -                 -                -              (649)
                                    ----------------------------------------------------------------------

Balance, December 31, 1988                    250,000               250           26,016              (649)

Offering costs incurred during
1989                                                -                 -           (3,164)                -

Net loss for the year ended
December 31, 1989                                   -                 -                -           (16,406)
                                    ----------------------------------------------------------------------

Balance, December 31, 1989                    250,000               250           22,852           (17,055)

Net loss for the year ended
December 31, 1990                                   -                 -                -           (11,228)
                                    ----------------------------------------------------------------------

Balance, December 31, 1990                    250,000               250           22,852           (28,283)

Net loss for the year ended
December 31, 1991                                   -                 -                -           (13,188)
                                    ----------------------------------------------------------------------

Balance, December 31, 1991                    250,000               250           22,852           (41,471)

Net loss for the year ended
December 31, 1992                                   -                 -                -            (8,448)
                                    ----------------------------------------------------------------------

Balance, December 31, 1992                    250,000               250           22,852           (49,919)

Stock issued in private placement for
cash March 1993 at $.001 per share          1,750,000             1,750           33,250                 -

Net loss for the year ended
December 31, 1993                                   -                 -                -           (14,069)
                                    ----------------------------------------------------------------------



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

</TABLE>
See accompanying notes to financial statements.
                                                                          F-4

<PAGE>
<TABLE>

                                                                                      CAPITAL GROWTH, INC.
                                                                             (A Development Stage Company)

                                                                        Statement of Stockholders' Deficit
                                                                                                 Continued

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


<CAPTION>

                                               Common Stock            Additional Paid-In  Accumulated
                                    -----------------------------------
                                         Shares            Amount           Capital          Deficit
                                    ----------------------------------------------------------------------
<S>                                      <C>          <C>               <C>              <C>
Balance, December 31, 1993                  2,000,000             2,000           56,102           (63,988)

Net loss for the year ended
December 31, 1994                                   -                 -                -           (13,550)
                                    ----------------------------------------------------------------------

Balance, December 31, 1994                  2,000,000             2,000           56,102           (77,538)

Stock issued in private placement for
cash September 1995 at $.001 per
share                                         125,000               125            2,375                 -

Net loss for the year ended
December 31, 1995                                   -                 -                -            (8,119)
                                    ----------------------------------------------------------------------

Balance, December 31, 1995                  2,125,000             2,125           58,477           (85,657)

Stock issued in private placement for
cash August 1996 at $.001 per share           100,000               100            1,900                 -

Net loss for the year ended
December 31, 1996                                   -                 -                -            (4,759)
                                    ----------------------------------------------------------------------

Balance, December 31, 1996                  2,225,000             2,225           60,377           (90,416)

Stock issued in private placement for
cash February 1997 at $.001 per
share                                         175,000               175            3,325                 -

Net loss for the year ended
December 31, 1997                                   -                 -                -            (6,438)
                                    ----------------------------------------------------------------------

Balance, December 31, 1997                  2,400,000             2,400           63,702           (96,854)

Stock issued in private placement for
cash  December 1998 at $.001 per
share                                         100,000               100            1,900                 -

Net loss for the year ended
December 31, 1998                                   -                 -                -            (5,578)
                                    ----------------------------------------------------------------------

Balance, December 31, 1998                  2,500,000 $           2,500 $         65,602 $        (102,432)
                                    ----------------------------------------------------------------------




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

</TABLE>
See accompanying notes to financial statements.
                                                                         F-5

<PAGE>
<TABLE>

                                                                                      CAPITAL GROWTH, INC.
                                                                             (A Development Stage Company)

                                                                                   Statement of Cash Flows

                                                           Years Ended December 31, and Cumulative Amounts
-------------------------------------------------------------------------------------------------------------------


<CAPTION>

                                                                                            Cumulative
                                                                                             Amounts
                                                                                              Since
                                                            1998             1997           Inception
                                                     -----------------------------------------------------
<S>                                                  <C>                <C>               <C>
Cash flows from operating activities:
     Net loss                                        $          (5,578) $         (6,438) $       (102,432)
     Adjustments to reconcile net loss to
       net cash used in operating activities:
         Amortization expense                                         -                -             2,136
         Increase in organization costs                               -                -            (2,136)
         (Decrease) increase in
              Payables                                             (835)             850            10,147
                                                     -----------------------------------------------------

                  Net cash used in
                  operating activities                           (6,413)          (5,588)          (92,285)
                                                     -----------------------------------------------------

Cash flows from investing activities -
     related party payables                                       4,236            2,774            25,002
                                                     -----------------------------------------------------

Cash flows from financing activities:
     Proceeds from issuance of common stock                       2,000            3,500            95,000
     Public offering costs                                            -                -           (26,898)
                                                     -----------------------------------------------------

                  Net cash provided by
                  financing activities                            2,000            3,500            68,102
                                                     -----------------------------------------------------

Net increase (decrease) in cash                                    (177)             686               819

Cash, beginning of period                                           996              310                 -
                                                     -----------------------------------------------------

Cash, end of period                                  $              819 $            996 $             819
                                                     -----------------------------------------------------






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

</TABLE>
See accompanying notes to financial statements.
                                                                          F-6

<PAGE>


                                                          CAPITAL GROWTH, INC.
                                                 (A Development Stage Company)

                                                 Notes to Financial Statements

                                                    December 31, 1998 and 1997
-------------------------------------------------------------------------------


1.   Organization
     and
     Summary of
     Significant
     Accounting
     Policies
Organization
The  Company  was  organized  under the laws of the state of Nevada on March 28,
1988 and has designated  December 31 as its fiscal year end. The Company has not
commenced  planned  principal  operations and purposes to seek business ventures
which will allow for  long-term  growth.  Further,  the Company is  considered a
development  stage  company  as  defined  in SFAS No. 7 and has not,  thus  far,
engaged in business  activities  of any kind.  Its  principal  activities  since
inception  have  consisted  of the  offer  and  sale  of  common  stock  and the
engagement  of legal  counsel  and  other  professionals  in  connection  with a
proposed  public offering of additional  common shares.  The Company has, at the
present time,  not paid any dividends and any dividends  that may be paid in the
future  will  depend upon the  financial  requirements  of the Company and other
relevant factors.


Cash and Cash Equivalents
Cash  equivalents are generally  comprised of certain highly liquid  investments
with maturities of less than three months.


Loss Per Share
The  computation  of loss per  share of  common  stock is based on the  weighted
average  number  of  shares  outstanding  as of  December  31,  1998  and  1997,
respectively.  Common shares  issuable upon exercise of stock purchase  warrants
and stock  options  are not  included  in the per share  computation  when their
effect would be antidilutive.


Use of Estimates in the  Preparation of Financial  Statements The preparation of
financial statements in conformity with generally accepted accounting principles
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.



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


                                                                            F-7

<PAGE>


                                                         CAPITAL GROWTH, INC.
                                                (A Development Stage Company)
                                                Notes to Financial Statements
                                                                      Continued

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



2.   Going
     Concern
The  accompanying  financial  statements  of  Capital  Growth,  Inc.,  have been
prepared on a going-concern basis, which contemplates  profitable operations and
the  satisfaction  of  liabilities  in the normal course of business.  There are
uncertainties  that raise  substantial doubt about the ability of the Company to
continue  as a going  concern.  As shown in the  statement  of  operations,  the
Company has had no revenues from  operations,  reported a net loss of $5,578 for
the  year  ended  December  31,  1998  and  as  of  December  31,  1998,  has  a
stockholders' deficit of $34,330.


The Company's  continuation  as a going concern is dependent upon its ability to
satisfactorily  meet its debt  obligations,  secure  adequate new  financing and
generate  sufficient  cash flows from  operations to meet its  obligations.  The
financial  statements do not include any adjustments  that might result from the
outcome of these uncertainties.


Management  has entered  into a plan where it is pursuing  other  financing  and
searching for additional business opportunities.  It is not known if the Company
will be successful.


3.   Income
     Taxes
The difference  between income taxes at statutory rates and the amount presented
in the financial statements is a result of the following:


                                           Years Ended
                                          December 31,         Cumulative
                                    -------------------------
                                        1998         1997       Amounts
                                    ---------------------------------------

Income tax benefit at statutory
  rate                              $       1,000$      1,000$       33,000
Change in valuation allowance              (1,000)     (1,000)      (33,000)
                                    ---------------------------------------

                                    $         -   $         -  $              -
                                    ---------------------------------------



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


                                                                            F-8

<PAGE>


                                                         CAPITAL GROWTH, INC.
                                                (A Development Stage Company)
                                                Notes to Financial Statements
                                                                      Continued

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



3.   Income
     Taxes
     Continued
Deferred tax assets are as follows:


                                  December 31,
                                        -----------------------------------
                                               1998             1997
                                        -----------------------------------

Operating loss carryforwards            $           33,000$          32,000
Valuation allowance                                (33,000)         (32,000)
                                        -----------------------------------

                                        $                 $ -                -
                                        -----------------------------------



The Company has net operating  loss  carryforwards  of  approximately  $100,000,
which  begin to expire  in the year  2003.  The  amount  of net  operating  loss
carryforward  that can be used in any one year will be  limited  by  significant
changes in the ownership of the Company and by the applicable tax laws which are
in effect at the time such carryforwards can be utilized.


4.   Related
     Party
     Transactions
The  Company  has  agreed to pay $100 per month to a  shareholder,  officer  and
director of the Company for accounting and office  expenses.  For the year ended
December  31, 1998 and 1997,  the Company  incurred  annual  expenses  under the
agreement of $1,200. At December 31, 1998 and 1997, the Company owed $13,732 and
$12,532, respectively to the officer.


In addition, the Company has agreed to pay interest expense at 6% to an officer,
director, and shareholder of the Company for cash advances. At December 31, 1998
and 1997, the Company owed $19,402 and $18,366, respectively, to the officer.


At  December  31,  1998,  the  Company  owed an officer  $2,000  related to cash
advances  made  during  the year ended  December  31,  1998.  The  advances  are
non-interest bearing and have no specific repayment terms.


During the years  ended  December  31, 1998 and 1997,  a  principal  shareholder
purchased additional stock for $3,500 and $2,000, respectively.



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


                                                                            F-9

<PAGE>


                                                          CAPITAL GROWTH, INC.
                                                 (A Development Stage Company)
                                                 Notes to Financial Statements
                                                                     Continued

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


5.   Supplemental
     Cash Flow
     Information
The Company has not paid any amounts  for  interest or income  taxes  during the
years ended December 31, 1998 and 1997, and since inception.


6.   Subsequent
     Event
On May 18, 1999,  the Company's  shareholders  approved a 1 for 20 reverse stock
split.  All  references in the financial  statements to number of shares and per
share amounts have been  retroactively  restated to reflect the decreased number
of shares  outstanding.  In addition,  the Company issued  22,000,000 post split
shares of common stock for $44,000.

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


                                                                           F-10

<PAGE>