**UNITED      STATES SECURITIES AND EXCHANGE COMMISSION**

| x | ANNUAL                REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE                ACT OF                1934 |
|---|-----------------------------------------------------------------------------------------------------------------------------------|

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

**STERLING      EQUITY HOLDINGS, INC.**

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

----

**INDEX      TO FORM 10-KSB**

**December      31, 2005**

|                        |                    |                                                                                                                                                         | Page     |
|-----------------------------|-------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
| **Part                I**   | Item                1.  | Description                of Business                                                                                                                       | 3        |
|                        | Item                2.  | Description                of Property                                                                                                                       |  12 |
|                        | Item                3.  | Legal                Proceedings                                                                                                                             |  12 |
|                        | Item                4.  | Submission                of Matters to a Vote of Security                Holders                                                                            |  12 |
|                        |                    |                                                                                                                                                         |     |
| **Part                II**  | Item                5.  | Market                for Common Equity and Related Stockholder                Matters                                                                       |  13 |
|                        | Item                6.  | Management’s                Discussion and Analysis and Results of Operations                and Financial Condition                                   |  13 |
|                        | Item                7.  | Financial                Statements                                                                                                                          |  21 |
|         | Item                8.  | Changes                in and Disagreements with Accountants on                Accounting and Financial Disclosure                                           |  64 |
|                        | Item                8A. | Controls                and Procedures                                                                                                                       |  64 |
|                        | Item                8B. | Other                Information                                                                                                                             |  64 |
|                        |                    |                                                                                                                                                         |     |
| **Part                III** | Item                9.  | Directors,                Executive Officers, Promoters and Control                Persons, Compliance with Section 16(a) of the Exchange                Act |  65 |
|                        | Item                10. | Executive                Compensation                                                                                                                        |  66 |
|                        | Item                11. | Security                Ownership of Certain Beneficial Owners and                Management                                                                 |  67 |
|                        | Item                12. | Certain                Relationships and Related Party                Transactions                                                                           |  68 |
|                        | Item                13. | Exhibits                                                                                                                                                     |  69 |
|                        | Item                14. | Principal                Accountant Fees and Services                                                                                                        |  70 |

----

**FORWARD-LOOKING      STATEMENTS**

**PART      I**

**ITEM      1.** **BUSINESS**

*GENERAL*

*HISTORY      AND DEVELOPMENT OF THE COMPANY*

----

|                              |   | Holdings                Immediately Prior to Exchange |   | Holdings                in Company Following Exchange |   |
|-----------------------------------|--------|-------------------------------------------------------|--------|-------------------------------------------------------|--------|
|                              |   | BlueStar                                              |   | Sterling                FBO                           |   |
| Name                              |   | Shares                                                |   | %                                                |   | Shares |   | % |   | Shares |   | %  |   |
|                              |   |                                                  |   |                                                  |   |   |   |   |   |   |   |   |   |
| Ron                F. Bearden (1) |   |                                                  | 0      |                                                  |   | 0 |   |   | 1,500,000 |   |   | 17.4 |   |   | 1,500,000 |   |   | 10.1 |   |
| Gregory                Neuman (2) |   |                                                  | 0      |                                                  |   | 0 |   |   | 1,500,000 |   |   | 17.4 |   |   | 1,500,000 |   |   | 10.1 |   |
| Hugo                Verhaeghe (3) |   |                                                  | 0      |                                                  |   | 0 |   |   | 3,937,117 |   |   | 45.6 |   |   | 3,937,117 |   |   | 26.4 |   |
| Chaz                Glace (4)     |   |                                                  | 0      |                                                  |   | 0 |   |   | 1,701,217 |   |   | 19.7 |   |   | 1,701,217 |   |   | 11.4 |   |

| (1) | Shares                indicated as owned by Ron F. Bearden are held of record by R.F. Bearden                Associates. Rebecca Bearden is the sole shareholder of R.F. Bearden                Associates. Mr. Bearden is the sole officer and director of R.F.                Bearden                Associates and was President and sole director of both Blue Star                and                Sterling FBO immediately prior to and after the Exchange. Mr. Bearden                disclaims ownership of all shares held in the name of R.F. Bearden                Associates. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Shares                indicated as owned by Hugo Verhaeghe are held of record by Geld Fund                LLC                as to 1,022,000 shares and Sterling REIT as to 2,915,117 shares.                Mr.                Verhaeghe may be deemed to control Geld Fund and Sterling                REIT. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                              |   | Holdings                Immediately Prior to Acquisition |      | Holdings                in Company Following Acquisition |   |
|-----------------------------------|--------|----------------------------------------------------------|-----------|----------------------------------------------------------|--------|
|                              |   | Company                                                  |      | Commodore                Plaza                           |   |
| Name                              |   | Shares                                                   |      | %                                                        |   |  % |   | Shares |   | %  |   |
|                              |   |                                                     |      |                                                     |   |   |   |   |   |   |   |
| Hugo                Verhaeghe (1) |   |                                                     | 3,937,117 |                                                     |   | 26.4 |   |   | 75 |   |   | 5,337,117 |   |   | 31.6 |   |
| Chaz                Glace (2)     |   |                                                     | 1,701,217 |                                                     |   | 11.4 |   |   | 20 |   |   | 2,101,217 |   |   | 12.4 |   |
| Thomas                Mathew (3)  |   |                                                     | 0         |                                                     |   | 0.0 |   |   | 5 |   |   | 200,000 |   |   | 1.2 |   |

| (1) | Shares                indicated as owned by Hugo Verhaeghe are held of record by Geld Fund                LLC                and Sterling REIT. Mr. Verhaeghe may be deemed to control Geld Fund                and                Sterling REIT. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Shares                indicated as owned by Thomas Mathew are held of record by Mathew                Investment Partnership. |
|-----|-------------------------------------------------------------------------------------------------------------------------------|

|                              |   | Holdings                Immediately Prior to Acquisition |      |  Holdings                in Company Following Acquisition |   |
|-----------------------------------|--------|----------------------------------------------------------|-----------|----------------------------------------------------------------|--------|
|                              |   |  Company                                            |      |  Greeley                FBO                               |   | Sterling                Austin Aero |   |
| Name                              |   | Shares                                                   |      | %                                                              |   | % |   | %  |   | Shares |   | %  |   |
|                              |   |                                                     |      |                                                           |   |   |   |   |   |   |   |
| Hugo                Verhaeghe (1) |   |                                                     | 5,337,117 |                                                           |   | 31.6 |   |   | 51.7 |   |   | 50.0 |   |   | 8,043,150 |   |   | 36.2 |   |
| Chaz                Glace (2)     |   |                                                     | 2,101,217 |                                                           |   | 12.4 |   |   | 16.4 |   |   | 40.0 |   |   | 3,484,550 |   |   | 15.7 |   |
| Thomas                Mathew (3)  |   |                                                     | 200,000   |                                                           |   | 1.2 |   |   | 31.9 |   |   | 10.0 |   |   | 1,420,634 |   |   | 6.4 |   |

| (1) | Shares                indicated as owned by Hugo Verhaeghe are held of record by Geld Fund                LLC                and Sterling REIT. Mr. Verhaeghe may be deemed to control Geld Fund                and                Sterling REIT. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Shares                indicated as owned by Thomas Mathew are held of record by Mathew                Investment Partnership. |
|-----|-------------------------------------------------------------------------------------------------------------------------------|

----

|                              |   | Holdings                Immediately Prior to Acquisition |      |   Holdings                in Company Following Acquisition |   |
|-----------------------------------|--------|----------------------------------------------------------|-----------|----------------------------------------------------------------------|--------|
|                              |   |   Company                                      |      |  Casper                Jet Center                               |   |  Austin                Aero FBO |   | Sterling-Ft.                Worth Jet Center |   |
| Name                              |   | Shares                                                   |      | %                                                                    |   | % |   | % |   |  % |   | Shares |   |  % |   |
|                              |   |                                                     |      |                                                                 |   |   |   |   |   |   |   |
| Hugo                Verhaeghe (1) |   |                                                     | 8,043,150 |                                                                 |   | 36.2 |   |   | 50.0 |   |   | 50.0 |   |   | 67.0 |   |   | 12,855,607 |   |   | 40.9 |   |
| Thomas                Mathew (2)  |   |                                                     | 1,420,634 |                                                                 |   | 6.4 |   |   | 50.0 |   |   | 50.0 |   |   | 33.0 |   |   | 5,840,958 |   |   | 18.6 |   |

| (1) | Shares                indicated as owned by Hugo Verhaeghe are held of record by Geld Fund                LLC                and Sterling REIT. Mr. Verhaeghe may be deemed to control Geld Fund                and                Sterling REIT. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Shares                indicated as owned by Thomas Mathew are held of record by Mathew                Investment Partnership. |
|-----|-------------------------------------------------------------------------------------------------------------------------------|

----

|                              |   | Holdings                Immediately Prior to Acquisition |       |  Holdings                in Company Following Acquisition |   |
|-----------------------------------|--------|----------------------------------------------------------|------------|----------------------------------------------------------------|--------|
|                              |   |  Company                                            |       | Ft.                Worth Jet Center                            |   |
| Name                              |   | Shares                                                   |       | %                                                              |   |  % |   | Shares |   | %  |   |
|                              |   |                                                     |       |                                                           |   |   |   |   |   |   |   |
| Hugo                Verhaeghe (1) |   |                                                     | 12,855,607 |                                                           |   | 40.9 |   |   | 64.2 |   |   | 18,132,095 |   |   | 45.7 |   |
| Thomas                Mathew (2)  |   |                                                     | 5,840,958  |                                                           |   | 18.6 |   |   | 35.8 |   |   | 8,788,423 |   |   | 22.2 |   |

| (1) | Shares                indicated as owned by Hugo Verhaeghe are held of record by Geld Fund                LLC                and Sterling REIT. Mr. Verhaeghe may be deemed to control Geld Fund                and                Sterling REIT. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Shares                indicated as owned by Thomas Mathew are held of record by Mathew                Investment Partnership. |
|-----|-------------------------------------------------------------------------------------------------------------------------------|

----

*BUSINESS      DEVELOPMENT DURING, AND AFTER, 2005*

----

*PROPERTIES*

----

|                                                 |   |  4501                Springdale |                 |  4405                Springdale |   |  4708                MLK |   |
|------------------------------------------------------|--------|--------------------------------------|----------------------|--------------------------------------|--------|-------------------------------|--------|
| Lease                term (1)                        |   |                                 |                 |                                 |   |                          |   |
|     Suite                A       |   |                                 | Vacant               |                                 |   | 5                Yrs          |   |   | 5                Yrs |   |
|     Suite                B  |   |                                 | 8                Yrs |                                 |   | 5                Yrs          |   |   | NA |   |
|     Suite                C       |   |                                 | NA                   |                                 |   | 5                Yrs          |   |   | NA |   |
|     Warehouse                (3) |   |                                 | NA                   |                                 |   | NA                            |   |   | 5                Yrs |   |
| Expiration                                           |   |                                 |                      |                                 |   |                               |   |   |  |   |
|     Suite                A       |   |                                 | NA                   |                                 |   | 1/31/07                (2)    |   |   | 7/31/07 |   |
|     Suite                B       |   |                                 | 1/31/09              |                                 |   | 1/31/07                (2)    |   |   | NA |   |
|     Suite                C       |   |                                 | NA                   |                                 |   | 1/31/07                (2)    |   |   | NA |   |
|     Warehouse                    |   |                                 | NA                   |                                 |   | NA                            |   |   | 10/31/10 |   |
| Renewal                options                       |   |                                 | NA                   |                                 |   | NA                            |   |   | Option                to purchase (4) |   |
| Square                footage                        |   |                                 |                      |                                 |   |                               |   |   |  |   |
|     Suite                A       |   |                                 | 4,663                |                                 |   | 16,475                        |   |   | 12,000 |   |
|     Suite                B  |   |                                 | 7,945                |                                 |   | 10,975                        |   |   | NA |   |
|     Suite                C       |   |                                 | NA                   |                                 |   | 16,470                        |   |   | NA |   |
|     Warehouse                    |   |                                 | NA                   |                                 |   | NA                            |   |   | 38,910 |   |
| Base                Annual Rental                    |   |                                 |                      |                                 |   |                               |   |   |  |   |
|     Suite                A  |   |                                 | NA                   |                                 | $      | 148,004                       |   | $ | 108,000 |   |
|     Suite                B  |   | $                                    | 81,975               |                                 | $      | 86,342                        |   |   | NA |   |
|     Suite                C  |   |                                 | NA                   |                                 | $      | 116,928                       |   |   | NA |   |
|     Warehouse               |   |                                 | NA                   |                                 |   | NA                            |   | $ | 140,076 |   |

| (1) | Each                of the leases with agencies of the State of Texas                includes a right on the part of the State of Texas as tenant to terminate                the lease based on budgetary restraints. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Subsequent                to December 31, 2005, the leases with the State                of Texas were extended to January 31,                2012. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | The                warehouse at the 4708 MLK property was leased on October                26, 2005, effective November 1, 2005, with free rent being provided                for                the period December 2005 through May 2006. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (4) | Lessor has the option to purchase the property for a predetermined              fixed prices based upon particular dates within the lease              term. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                      |   | OfficeMax |                                   | Michaels |   | Nextel                                 |   |
|-------------------------------------------|--------|-----------|----------------------------------------|----------|--------|----------------------------------------|--------|
| Lease                term                 |   |      | 15                Yrs                  |     |   | 10                Yrs                  |   |   | 5                Yrs |   |
| Expiration                of primary term |   |      | 6/03                                   |     |   | 7/08                                   |   |   | 3/10 |   |
| Expiration                of current term |   |      | 7/13                                   |     |   | 1/09                                   |   |   | 3/10 |   |
| Renewal                option             |   |      | 4                Options, 5 years each |     |   | 4                Options, 5 years each |   |   | 2                Options, 5 years each |   |
| Square                footage             |   |      | 23,500                                 |     |   | 19,834                                 |   |   | 3,181 |   |
| Base                annual rental         |   | $         | 246,746                                |     | $      | 178,506                                |   | $ | 31,810 |   |

----

*DISCONTINUED      OPERATIONS*

*PROPERTY      MANAGEMENT*

*FINANCING*

*COMPETITIVE      CONDITIONS*

*EMPLOYEE*

----

**ITEM      2.** **PROPERTIES**

**ITEM      3.** **LEGAL      PROCEEDINGS**

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

----

**PART      II**

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

**Market      Information**

**Holders**

**Dividends**

**ITEM      6. MANAGEMENT’S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS AND FINANCIAL      CONDITION**

*The      following discussion and analysis of the Company’s financial condition as of      December 31, 2005, and the Company’s results of operations for the years in the      two-year period ended December 31, 2005 and 2004, should be read in conjunction      with the Company’s audited consolidated financial statements and notes thereto      included elsewhere in this report.*

**Overview**

----

**Developments      During, and Following, 2005**

----

**Critical      Accounting Policies**

*Impairment      of Long-Lived Assets*

*Revenue      Recognition*

**Restatement      of Previously Issued Financial Statements**

----

**Selected      Financial Data**

|                                                                   |   | Years                Ended December 31, |   |
|------------------------------------------------------------------------|--------|-----------------------------------------|--------|
|                                                                   |   |                                    |   | 2002 |   | 2003 |   | 2004 |   | 2005 |   |
| **Statement                of Operations Data:**                       |   |                                    |   | (Restated) |   | (Restated) |   | (Restated) |   |   |   |
|                    Rental revenues                      |   |                                    |   |   |   | 275,887 |   |   | 1,231,921 |   |   | 1,150,455 |   |   | 1,007,702 |   |
|                    Real estate operating expenses       |   |                                    |   |   |   | 448,467 |   |   | 2,596,720 |   |   | 2,174,746 |   |   | 1,948,297 |   |
|                    Other operating expenses             |   |                                    |   |   |   | 1,001,019 |   |   | 1,694,264 |   |   | 142,687 |   |   | 36,022 |   |
|                    Other income                         |   |                                    |   |   |   | -- |   |   | 47,175 |   |   | 833,919 |   |   | 69,676 |   |
|                    Loss before income taxes             |   |                                    |   |   |   | (1,173,599 | ) |   | (3,011,888 | ) |   | (333,059 | ) |   | (906,941 | ) |
|                    Benefit for income taxes             |   |                                    |   |   |   | 312,242 |   |   | 945,130 |   |   | 13,126 |   |   | 321,041 |   |
|                    Net loss from continuing operations  |   |                                    |   |   |   | (861,357 | ) |   | (2,066,758 | ) |   | (319,933 | ) |   | (585,900 | ) |
|                    Discontinued operations              |   |                                    |   |   |   | (39,237 | ) |   | (1,670,631 | ) |   | (232,293 | ) |   | -- |   |
|                    Net loss                        |   |                                    |   |   |   | (900,594 | ) |   | (3,737,389 | ) |   | (552,226 | ) |   | (585,900 | ) |
|                    Net loss per share              |   |                                    |   |   |   | (0.04 | ) |   | (0.09 | ) |   | (0.02 | ) |   | (0.02 | ) |
| **Balance                Sheet Data**:                                 |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    Working capital deficit              |   |                                    |   |   |   | (434,856 | ) |   | (730,038 | ) |   | (5,224,842 | ) |   | (5,236,277 | ) |
|                    Total assets                         |   |                                    |   |   |   | 33,483,068 |   |   | 14,318,959 |   |   | 11,614,134 |   |   | 10,764,520 |   |
|                    Long-term debt, less current portion |   |                                    |   |   |   | 9,644,744 |   |   | 9,675,300 |   |   | 3,939,676 |   |   | 3,910,825 |   |
|                    Stockholders’ equity           |   |                                    |   |   |   | 5,785,919 |   |   | 2,048,530 |   |   | 1,496,304 |   |   | 910,404 |   |

**Results      of Operations**

*Revenue*

*Real      Estate Operating Expenses*

----

*Other      Operating Expenses*

*Other      Income*

*Income      Taxes*

*Discontinued      Operations*

**Liquidity      and Capital Resources**

*Cash      and Working Capital Position*

----

*Cash      Flows*

*Real      Estate Notes and Other Notes Payable*

----

*Financial      Commitments and Requirements*

| Years                Ending December 31,              |   | Amounts |      |
|-------------------------------------------------------|--------|---------|-----------|
|     2006                          |   | $       | 5,024,045 |   |
|     2007                          |   |    | 45,108    |   |
|     2008                          |   |    | 47,804    |   |
|     2009                          |   |    | 52,373    |   |
|     2010                          |   |    | 56,517    |   |
|     Thereafter                    |   |    | 3,709,023 |   |
|         Total |   | $       | 8,934,870 |   |

*Inflation*

**Off-Balance      Sheet Arrangements**

**New      Accounting Pronouncements**

*“Accounting      for Uncertainty in Income Taxes” *
*.*
*Accounting      for Income Taxes*

----

*Considering      the Effects of Prior Year Misstatements when Quantifying Misstatements in      Current Year Financial Statements. *

*Fair      Value Measurements*

----

**ITEM      7. FINANCIAL STATEMENTS**

**REPORT      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      BALANCE SHEETS**

|                                                                                                                                                                                             |   | December                31, |       |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|------------|
|                                                                                                                                                                                             |   | 2005                        |       | 2004 |   |
| **ASSETS**                                                                                                                                                                                       |   |                        |       | (Restated) |   |
| Current                assets:                                                                                                                                                                   |   |                        |       |   |   |
|                    Cash                                                                                                                                                           |   | $                           | 102,988    |   | $ | 214,058 |   |
|                    Cash in restricted accounts                                                                                                                                    |   |                        | 163,818    |   |   | 201,346 |   |
|                    Accounts receivable                                                                                                                                            |   |                        | 81,730     |   |   | 35,692 |   |
|                    Prepaid items and other                                                                                                                                        |   |                        | 32,176     |   |   | 30,249 |   |
|                        Total current assets                                                                                                                   |   |                        | 380,712    |   |   | 481,345 |   |
| Investment                in real estate:                                                                                                                                                        |   |                        |       |   |   |  |   |
|    Buildings,                improvements and leaseholds                                                                                                                          |   |                        | 10,980,303 |   |   | 10,980,303 |   |
|                    Accumulated depreciation                                                                                                                                       |   |                        | (2,113,949 | ) |   | (1,446,157 | ) |
|                                                                                                                                                                                             |   |                        | 8,866,354  |   |   | 9,534,146 |   |
|                    Land                                                                                                                                                           |   |                        | 1,258,643  |   |   | 1,258,643 |   |
|                        Net investment in real estate                                                                                                          |   |                        | 10,124,997 |   |   | 10,792,789 |   |
| Other                assets:                                                                                                                                                                     |   |                        |       |   |   |  |   |
|                    Deferred financing costs, net of amortization of $113,200 and $72,047                at                December                31, 2005 and 2004, respectively |   |                        | 92,749     |   |   | 133,902 |   |
|     Due                from affiliates                                                                                                                                       |   |                        | --         |   |   | 65,289 |   |
|                    Rent receivable - long-term                                                                                                                                    |   |                        | 9,338      |   |   | -- |   |
|                    Escrowed funds                                                                                                                                                 |   |                        | 135,224    |   |   | 140,809 |   |
|                    Other                                                                                                                                                          |   |                        | 21,500     |   |   | -- |   |
|                        Total other assets                                                                                                                     |   |                        | 258,811    |   |   | 340,000 |   |
| Total                assets                                                                                                                                                                      |   | $                           | 10,764,520 |   | $ | 11,614,134 |   |
|                                                                                                                                                                                             |   |                        |       |   |   |  |   |
| **LIABILITIES                AND SHAREHOLDERS' EQUITY**                                                                                                                                          |   |                        |       |   |   |  |   |
| Current                liabilities:                                                                                                                                                              |   |                        |       |   |   |  |   |
|                    Accounts payable, trade                                                                                                                                        |   | $                           | 52,651     |   | $ | 41,938 |   |
|                    Accrued liabilities and deferred rental income                                                                                                                 |   |                        | 311,816    |   |   | 202,041 |   |
|                    Income taxes payable                                                                                                                                           |   |                        | 82,812     |   |   | 307,912 |   |
|                    Deferred tax liability                                                                                                                                         |   |                        | 145,665    |   |   | 145,665 |   |
|                    Current portion - notes payable                                                                                                                                |   |                        | 4,787,908  |   |   | 5,007,717 |   |
|                    Other notes payable                                                                                                                                            |   |                        | 236,137    |   |   | 914 |   |
|                        Total current liabilities                                                                                                              |   |                        | 5,616,989  |   |   | 5,706,187 |   |
| Long-term                debt                                                                                                                                                                    |   |                        | 3,910,825  |   |   | 3,939,676 |   |
| Deferred                tax liability - non-current                                                                                                                                              |   |                        | 326,302    |   |   | 471,967 |   |
|                        Total long-term liabilities                                                                                                            |   |                        | 4,237,127  |   |   | 4,411,643 |   |
| Commitments                and contingencies (Note 10)                                                                                                                                           |   |                        |       |   |   |  |   |
| Shareholders'                equity:                                                                                                                                                             |   |                        |       |   |   |  |   |
|                    Preferred stock, $.001 par value, 5,000,000 shares authorized, none                issued                                                                      |   |                        | --         |   |   | -- |   |
|                    Common stock, $.001 par value, 70,000,000 shares authorized, 28,335,061                and                                                                     |   |                        |       |   |   |  |   |
|                      39,655,068 shares issued and outstanding at December 31, 2005 and                2004, respectively                                                |   |                        | 28,335     |   |   | 39,655 |   |
|                    Additional paid-in capital                                                                                                                                     |   |                        | 6,658,178  |   |   | 6,646,858 |   |
|                    Accumulated deficit                                                                                                                                            |   |                        | (5,776,109 | ) |   | (5,190,209 | ) |
|                        Total shareholders’ equity                                                                                                       |   |                        | 910,404    |   |   | 1,496,304 |   |
| Total                liabilities and shareholders' equity                                                                                                                                        |   | $                           | 10,764,520 |   | $ | 11,614,134 |   |

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      STATEMENTS OF OPERATIONS**

**FOR      THE YEARS ENDED DECEMBER 31, 2005 AND 2004**

|                                                                                                                                    |   | Twelve                Months Ended |       |
|-----------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|------------|
|                                                                                                                                    |   | December                31,        |       |
|                                                                                                                                    |   | 2005                               |       | 2004 |   |
|                                                                                                                                    |   |                               |       | (Restated)  |   |
| Rental                revenue                                                                                                           |   | $                                  | 1,007,702  |   | $ | 1,150,455 |   |
| Real                estate operating expenses:                                                                                          |   |                               |       |   |   |  |   |
|                    Interest expense                                                                                      |   |                               | 588,623    |   |   | 575,228 |   |
|                    Real estate taxes                                                                                     |   |                               | 108,414    |   |   | 163,650 |   |
|                    Depreciation and amortization                                                                         |   |                               | 708,944    |   |   | 703,167 |   |
|                    Repairs and maintenance                                                                               |   |                               | 62,486     |   |   | 43,449 |   |
|                    Utilities                                                                                             |   |                               | 29,110     |   |   | 18,703 |   |
|                    Professional and consulting fees                                                                      |   |                               | 378,800    |   |   | 514,331 |   |
|                    Other                                                                                                 |   |                               | 71,920     |   |   | 156,218 |   |
|                        Total real estate operating expenses                                          |   |                               | 1,948,297  |   |   | 2,174,746 |   |
|                    Penalties                                                                                             |   |                               | 36,022     |   |   | 55,491 |   |
|                    Bad debt expense                                                                                      |   |                               | --         |   |   | 87,196 |   |
|                        Total operating expenses                                                 |   |                               | 1,984,319  |   |   | 2,317,433 |   |
| Other                income:                                                                                                            |   |                               |       |   |   |  |   |
|                    Interest income                                                                                       |   |                               | 4,871      |   |   | 19,488 |   |
|                    Recovery of bad debts                                                                                 |   |                               | 55,061     |   |   | 85,000 |   |
|                    Settlement of lawsuits                                                                                |   |                               | --         |   |   | 707,000 |   |
|                    Other                                                                                                 |   |                               | 9,744      |   |   | 22,431 |   |
|                        Total other income                                                            |   |                               | 69,676     |   |   | 833,919 |   |
| Loss                before income taxes                                                                                                 |   |                               | (906,941   | ) |   | (333,059 | ) |
| Benefit                for income tax expense                                                                                           |   |                               | 321,041    |   |   | 13,126 |   |
| Net                loss from continuing operations                                                                                      |   |                               | (585,900   | ) |   | (319,933 | ) |
| Discontinued                operations:                                                                                                 |   |                               |       |   |   |  |   |
|                    Loss from discontinued operations, including loss of $151,765 in                2004 from disposition |   |                               | --         |   |   | (279,649 | ) |
|                    Benefit for income tax expense                                                                        |   |                               | --         |   |   | 47,356 |   |
|                        Net loss from discontinued operations                                         |   |                               | --         |   |   | (232,293 | ) |
| Net                loss                                                                                                                 |   | $                                  | (585,900   | ) | $ | (552,226 | ) |
| Basic                and diluted net loss per share:                                                                                    |   |                               |       |   |   |  |   |
|                    Loss from continuing operations                                                                       |   | $                                  | (0.02      | ) | $ | (0.01 | ) |
|                    Loss from discontinued operations                                                                     |   |                               | 0.00       |   |   | (0.01 | ) |
| Net                loss per share                                                                                                       |   | $                                  | (0.02      | ) | $ | (0.02 | ) |
| Weighted                average number of common shares outstanding:                                                                    |   |                               |            |   |   |  |   |
|                    Basic and diluted                                                                                     |   |                               | 31,250,350 |   |   | 39,655,068 |   |

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY**

**FOR      THE PERIOD JANUARY 1, 2004 THROUGH DECEMBER 31, 2005**

|                                                    |   |                        |        |    |   |        |   |                |      |   |   |
|---------------------------------------------------------|--------|-----------------------------|-------------|---------|--------|-------------|--------|---------------------|-----------|--------|--------|
|                                                    |   |                        |        |    |   | Additional  |   |                |      | Total  |   |
|                                                    |   | Common                Stock |        | Paid-in |   | Accumulated |   | Shareholders’ |      |
|                                                    |   | Shares                      |        | Amount  |   | Capital     |   | Deficit             |      | Equity |   |
|                                                    |   |                        |        |    |   |        |   |                |      |   |   |
| Balances                at January 1, 2004 (Restated)   |   |                        | 39,655,068  |    | $      | 39,655      |   | $                   | 6,646,858 |   | $      | (4,637,983 | ) | $ | 2,048,530 |   |
| Net                loss                                 |   |                        | --          |    |   | --          |   |                | --        |   |   | (552,226 | ) |   | (552,226 | ) |
| Balances                at December 31, 2004 (Restated) |   |                        | 39,655,068  |    |   | 39,655      |   |                | 6,646,858 |   |   | (5,190,209 | ) |   | 1,496,304 |   |
| Cancellation                of shares                   |   |                        | (11,320,007 | )       |   | (11,320     | )      |                | 11,320    |   |   | -- |   |   | -- |   |
| Net                loss                                 |   |                        | --          |    |   | --          |   |                | --        |   |   | (585,900 | ) |   | (585,900 | ) |
| Balances                at December 31, 2005            |   |                        | 28,335,061  |    | $      | 28,335      |   | $                   | 6,658,178 |   | $      | (5,776,109 | ) | $ | 910,404 |   |

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

**FOR      THE YEARS ENDED DECEMBER 31, 2005 AND 2004**

|                                                                                                                                                      |   | 2005         |     | 2004             |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|----------|------------------|--------|
|                                                                                                                                                      |   |    |     |  (Restated) |   |
| Cash                flows from operating activities:                                                                                                      |   |         |     |        |   |
|                    Net loss                                                                                                                |   | $            | (585,900 | )                | $      | (552,226 | ) |
|                    Adjustments to reconcile net loss to net cash provided                by operating                activities: |   |         |     |             |   |  |   |
|                    Depreciation and amortization                                                                                           |   |         | 708,945  |             |   | 775,688 |   |
|                    Deferred tax asset - non-cash                                                                                           |   |         | (145,665 | )                |   | (66,304 | ) |
|                    Gain from settlement of law suit                                                                                        |   |         | --       |             |   | (200,000 | ) |
|                    Gain from settlement of notes payable                                                                                   |   |         | --       |             |   | (12,300 | ) |
|                    Loss from discontinued operations                                                                                       |   |         | --       |             |   | 156,960 |   |
|                    Changes in assets and liabilities:                                                                                      |   |         |     |             |   |   |   |
|                        Accounts receivable                                                                                  |   |         | (46,037  | )                |   | 405,406 |   |
|                        Prepaid items and other                                                                         |   |         | (1,927   | )                |   | 12,672 |   |
|                        Due from affiliates                                                                             |   |         | 65,289   |             |   | (65,289 | ) |
|        Other                assets                                                                                     |   |         | (21,500  | )                |   | -- |   |
|                      Accounts payable                                                                                            |   |         | 10,713   |             |   | (149,295 | ) |
|                      Income taxes payable                                                                                        |   |         | (225,100 | )                |   | 54,912 |   |
|                      Accrued liabilities                                                                                         |   |         | 254,412  |             |   | (235,967 | ) |
| Net                cash provided by operating activities                                                                                                  |   |         | 13,230   |             |   | 124,257 |   |
|                                                                                                                                                      |   |         |     |             |   |  |   |
| Cash                flows from investing activities:                                                                                                      |   |         |     |             |   |  |   |
|                    Payment of closing expenses from sale of property                                                                       |   |         | --       |             |   | 45,287 |   |
|                    Decrease in restricted cash                                                                                             |   |         | 37,528   |             |   | 8,601 |   |
|                    Long-term rent receivable                                                                                               |   |         | (9,338   | )                |   | -- |   |
|                    (Increase) decrease in escrowed funds                                                                                   |   |         | 5,585    |             |   | (33,269 | ) |
| Net                cash provided by investing activities                                                                                                  |   |         | 33,775   |             |   | 20,619 |   |
|                                                                                                                                                      |   |         |     |             |   |  |   |
| Cash                flows from financing activities:                                                                                                      |   |         |     |             |   |  |   |
|                 Proceeds (repayment) of mortgage and other notes payable                                                                        |   |         | (158,075 | )                |   | 40,487 |   |
|                    Proceeds from line of credit                                                                                            |   |         | --       |             |   | 25,000 |   |
| Net                cash provided by (used in) financing activities                                                                                        |   |         | (158,075 | )                |   | 65,487 |   |
|                                                                                                                                                      |   |         |     |             |   |  |   |
| Net                increase (decrease) in cash                                                                                                            |   |         | (111,070 | )                |   | 210,363 |   |
| Cash                and cash equivalents, beginning of year                                                                                               |   |         | 214,058  |             |   | 3,695 |   |
| Cash                and cash equivalents, end of year                                                                                                     |   | $            | 102,988  |             | $      | 214,058 |   |
|                                                                                                                                                      |   |         |     |             |   |   |   |
| Supplemental                cash flow disclosures:                                                                                                        |   |         |          |             |   |  |   |
|                    Interest paid                                                                                                           |   | $            | 499,069  |             | $      | 649,917 |   |
|                    Income taxes paid                                                                                                       |   |         | --       |             |   | 16,900 |   |
|                                                                                                                                                      |   |         |     |             |   |   |   |
| Supplemental                non-cash disclosures:                                                                                                         |   |         |     |             |   |  |   |
|                    Certificate of deposit used to pay line of credit                                                                       |   |         | --       |             |   | 750,000 |   |
|                    Cancellation of shares of common stock                                                                                  |   |         | 11,320   |             |   | -- |   |
|                    Payment of real estate taxes with note proceeds                                                                         |   |         | 144,637  |             |   | -- |   |

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**NOTE      1.**
**HISTORY      AND DEVELOPMENT OF THE COMPANY**

----

**NOTE      2.**
**SUMMARY      OF SIGNIFICANT ACCOUNTING POLICIES**

**Critical      Accounting Policies**

| *a)  * | *Acquired                Companies* |
|------------------|-------------------------------------|

| *b)  * | *Use                of Estimates* |
|------------------|-----------------------------------|

| *c)  * | *Fair                Value of Financial Instruments* |
|------------------|------------------------------------------------------|

| *d)  * | *Long-lived                Assets* |
|------------------|------------------------------------|

| *e)  * | *Comprehensive                Income (Loss)* |
|------------------|----------------------------------------------|

----

| *f)  * | *Discontinued                Operations* |
|------------------|------------------------------------------|

| *g)  * | *Real                Estate and Depreciation* |
|------------------|-----------------------------------------------|

| *h)  * | *Cash                and Cash Equivalents* |
|------------------|--------------------------------------------|

| *i)  * | *Restricted                Cash* |
|------------------|----------------------------------|

| *j)  * | *Escrowed                Funds* |
|------------------|---------------------------------|

| *k)  * | *Rental                Revenue Recognition* |
|------------------|---------------------------------------------|

----

| *l)  * | *Deferred                Financing Co*sts |
|------------------|-------------------------------------------|

| *m)  * | *Concentrations                of Risk* |
|------------------|-----------------------------------------|

| *n)  * | *Income                Taxes* |
|------------------|-------------------------------|

----

| *o)  * | *Advertising* |
|------------------|---------------|

| *p)  * | *Earnings                Per Share* |
|------------------|-------------------------------------|

| *q)* | *Consolidation                and Basis of Presentation* |
|------|----------------------------------------------------------|

| *r)* | *Going                Concern* |
|------|--------------------------------|

----

| *s) * | *Recent                Accounting Pronouncements* |
|------------|---------------------------------------------------|

*“Accounting      for Uncertainty in Income Taxes” *
*.*
*Accounting      for Income Taxes*

*Considering      the Effects of Prior Year Misstatements when Quantifying Misstatements in      Current Year Financial Statements. *

*Fair      Value Measurements*

----

**NOTE      3.**
**RESTATEMENTS**

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      RESTATED BALANCE SHEET**

**SEPTEMBER      30, 2005**

**(UNAUDITED)**

|                                                                                    |   | As                Reported |       | Adjustments |   | As                Restated |   |
|-----------------------------------------------------------------------------------------|--------|----------------------------|------------|-------------|--------|----------------------------|--------|
|                                                                                    |   |                       |       |        |   |                       |   |
| **ASSETS**                                                                              |   |                       |       |        |   |                       |   |
|                                                                                    |   |                       |       |        |   |                       |   |
| Current                assets:                                                          |   |                       |       |        |   |                       |   |
|                    Cash                                                  |   | $                          | 28,449     |        |   |                       |   | $ | 28,449 |   |
|                    Cash in restricted accounts                           |   |                       | 205,463    |        |   |                       |   |   | 205,463 |   |
|                    Accounts receivable                                   |   |                       | 62,308     |        |   |                       |   |   | 62,308 |   |
|                    Prepaid items and other                               |   |                       | 13,167     |        |   |                       |   |   | 13,167 |   |
|                        Total current assets          |   |                       | 309,387    |        |   |                       |   |   | 309,387 |   |
| Investment                in real estate:                                               |   |                       |       |        |   |                       |   |   |   |   |
|                    Buildings, improvements and leaseholds                |   |                       | 9,077,316  |        |   | 1,902,987                  |   |   | 10,980,303 |   |
|                    Accumulated depreciation                              |   |                       | (3,050,274 | )           |   | 1,113,922                  |   |   | (1,936,352 | ) |
|                                                                                    |   |                       | 6,027,042  |        |   |                       |   |   | 9,043,951 |   |
|                    Land                                                  |   |                       | 1,258,643  |        |   |                       |   |   | 1,258,643 |   |
|                        Net investment in real estate |   |                       | 7,285,685  |        |   |                       |   |   | 10,302,594 |   |
| Other                assets:                                                            |   |                       |       |        |   |                       |   |   |   |   |
|                    Goodwill                                              |   |                       | 647,043    |        |   | (647,043                   | )      |   | -- |   |
|                    Deferred financing costs                              |   |                       | 103,037    |        |   |                       |   |   | 103,037 |   |
|                    Escrowed funds                                        |   |                       | 165,843    |        |   |                       |   |   | 165,843 |   |
|                        Total other assets            |   |                       | 915,923    |        |   |                       |   |   | 268,880 |   |
| Total                assets                                                             |   | $                          | 8,510,995  |        |   |                       |   | $ | 10,880,861 |   |
|                                                                                    |   |                       |       |        |   |                       |   |   |   |   |
| **LIABILITIES                & SHAREHOLDERS’ EQUITY (DEFICIT)**               |   |                       |       |        |   |                       |   |   |   |   |
|                                                                                    |   |                       |       |        |   |                       |   |   |   |   |
| Current                liabilities:                                                     |   |                       |       |        |   |                       |   |   |   |   |
|                    Accounts payable, trade                               |   | $                          | 47,845     |        |   |                       |   | $ | 47,845 |   |
|                    Accrued liabilities                                   |   |                       | 200,003    |        |   |                       |   |   | 200,003 |   |
|                    Income taxes payable                                  |   |                       | 287,226    |        |   |                       |   |   | 287,226 |   |
|                    Deferred tax liability                                |   |                       | --         |        |   | 145,665               |   |   | 145,665 |   |
|                    Current portion - notes payable                       |   |                       | 4,991,960  |        |   |                       |   |   | 4,991,960 |   |
|                        Total current liabilities     |   |                       | 5,527,034  |        |   |                       |   |   | 5,672,699 |   |
| Long-term                debt                                                           |   |                       | 3,908,826  |        |   |                       |   |   | 3,908,826 |   |
| Deferred                tax liability - long-term                                       |   |                       | --         |        |   | 362,719                    |   |   | 362,719 |   |
|                        Total long-term liabilities   |   |                       | 3,908,826  |        |   |                       |   |   | 4,271,545 |   |
| Shareholders'                equity (deficit):                                          |   |                       |       |        |   |                       |   |   |   |   |
|                    Preferred stock                                       |   |                       | --         |        |   |                       |   |   | -- |   |
|                    Common stock                                          |   |                       | 28,335     |        |   |                       |   |   | 28,335 |   |
|                    Additional paid-in capital                            |   |                       | 618,483    |        |   | 6,039,695                  |   |   | 6,658,178 |   |
|                    Accumulated deficit                                   |   |                       | (1,571,683 | )           |   | (4,178,213                 | )      |   | (5,749,896 | ) |
|                    Total shareholders’ equity (deficit)            |   |                       | (924,865   | )           |   |                       |   |   | 936,617 |   |
| Total                liabilities and shareholders' equity (deficit)                     |   | $                          | 8,510,995  |        |   |                       |   | $ | 10,880,861 |   |

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      RESTATED STATEMENT OF OPERATIONS**

**FOR      THE NINE MONTHS ENDED SEPTEMBER 30, 2005**

**(UNAUDITED)**

|                                                                                                             |   | As                Reported |       | Adjustments |   | As                Restated |   |
|------------------------------------------------------------------------------------------------------------------|--------|----------------------------|------------|-------------|--------|----------------------------|--------|
|                                                                                                             |   |                       |       |        |   |                       |   |
| Rental                revenue                                                                                    |   | $                          | 730,160    |        |   |                       |   | $ | 730,160 |   |
|                                                                                                             |   |                       |       |        |   |                       |   |   |   |   |
| Real                estate operating expenses:                                                                   |   |                       |       |        |   |                       |   |   |   |   |
|                    Interest expense                                                               |   |                       | 426,637    |        |   |                       |   |   | 426,637 |   |
|                    Real estate taxes                                                              |   |                       | 86,794     |        |   |                       |   |   | 86,794 |   |
|                    Depreciation and amortization                                                  |   |                       | 340,870    |        |   | 180,191                    |   |   | 521,061 |   |
|                    Repairs and maintenance                                                        |   |                       | 52,448     |        |   |                       |   |   | 52,448 |   |
|                    Utilities                                                                      |   |                       | 22,329     |        |   |                       |   |   | 22,329 |   |
|                    Professional and consulting fees                                               |   |                       | 255,718    |        |   |                       |   |   | 255,718 |   |
|                    Other                                                                          |   |                       | 50,688     |        |   |                       |   |   | 50,688 |   |
|                                                                                                             |   |                       | 1,235,484  |        |   |                       |   |   | 1,415,675 |   |
| Penalties                                                                                                        |   |                       | 48,673     |        |   |                       |   |   | 48,673 |   |
|                        Total real estate operating expenses                   |   |                       | 1,284,157  |        |   |                       |   |   | 1,464,348 |   |
|                                                                                                             |   |                       |       |        |   |                       |   |   |   |   |
| Other                income:                                                                                     |   |                       |       |        |   |                       |   |   |   |   |
|                    Interest income                                                                |   |                       | 3,452      |        |   |                       |   |   | 3,452 |   |
|                    Recovery of bad debts                                                          |   |                       | 55,061     |        |   |                       |   |   | 55,061 |   |
|                    Other                                                                          |   |                       | 6,739      |        |   |                       |   |   | 6,739 |   |
|                        Total other income                                     |   |                       | 65,252     |        |   |                       |   |   | 65,252 |   |
| Loss                before income taxes                                                                          |   |                       | (488,745   | )           |   |                       |   |   | (668,936 | ) |
| Benefit                for income tax expense                                                                    |   |                       | --         |        |   | 109,248                    |   |   | 109,248 |   |
| Net                loss                                                                                          |   | $                          | (488,745   | )           |   |                       |   | $ | (559,688 | ) |
|                                                                                                             |   |                       |       |        |   |                       |   |   |   |   |
| Basic                and diluted net loss per share                                                              |   | $                          | (0.02      | )           |   |                       |   | $ | (0.02 | ) |
|                                                                                                             |   |                       |       |        |   |                       |   |   |   |   |
|  Weighted                average number of common shares outstanding, basic and                diluted |   |                       | 32,232,792 |        |   |                       |   |   | 32,232,792 |   |

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      RESTATED STATEMENT OF OPERATIONS**

**FOR      THE THREE MONTHS ENDED SEPTEMBER 30, 2005**

**(UNAUDITED)**

|                                                                                                                        |   | As                Reported |       | Adjustments |   | As                Restated |   |
|-----------------------------------------------------------------------------------------------------------------------------|--------|----------------------------|------------|-------------|--------|----------------------------|--------|
|                                                                                                                        |   |                       |       |        |   |                       |   |
| Rental                revenue                                                                                               |   | $                          | 234,204    |        |   |                       |   | $ | 234,204 |   |
|                                                                                                                        |   |                       |       |        |   |                       |   |   |   |   |
| Real                estate operating expenses:                                                                              |   |                       |       |        |   |                       |   |   |   |   |
|                    Interest expense                                                                          |   |                       | 148,995    |        |   |                       |   |   | 148,995 |   |
|                    Real estate taxes                                                                         |   |                       | 27,810     |        |   |                       |   |   | 27,810 |   |
|                    Depreciation and amortization                                                             |   |                       | 113,618    |        |   | 48,807                     |   |   | 162,425 |   |
|                    Repairs and maintenance                                                                   |   |                       | 22,698     |        |   |                       |   |   | 22,698 |   |
|                    Utilities                                                                                 |   |                       | 7,116      |        |   |                       |   |   | 7,116 |   |
|                    Professional and consulting fees                                                          |   |                       | 73,710     |        |   |                       |   |   | 73,710 |   |
|                    Other                                                                                     |   |                       | 15,443     |        |   |                       |   |   | 15,443 |   |
|                                                                                                                        |   |                       | 409,390    |        |   |                       |   |   | 458,197 |   |
| Penalties                                                                                                                   |   |                       | 19,564     |        |   |                       |   |   | 19,564 |   |
|                        Total real estate operating expenses                              |   |                       | 428,954    |        |   |                       |   |   | 477,761 |   |
|                                                                                                                        |   |                       |       |        |   |                       |   |   |   |   |
| Other                income:                                                                                                |   |                       |       |        |   |                       |   |   |   |   |
|                    Interest income                                                                           |   |                       | 590        |        |   |                       |   |   | 590 |   |
|                    Other                                                                                     |   |                       | 314        |        |   |                       |   |   | 314 |   |
|                        Total other income                                                |   |                       | 904        |        |   |                       |   |   | 904 |   |
| Loss                before income taxes                                                                                     |   |                       | (193,846   | )           |   |                       |   |   | (242,653 | ) |
| Benefit                for income tax expense                                                                               |   |                       | --         |        |   | 36,416                     |   |   | 36,416 |   |
| Net                loss                                                                                                     |   | $                          | (193,846   | )           |   |                       |   | $ | (206,237 | ) |
|                                                                                                                        |   |                       |       |        |   |                       |   |   |   |   |
| Basic                and diluted net loss per share                                                                         |   | $                          | (0.01      | )           |   |                       |   | $ | (0.01 | ) |
|                                                                                                                        |   |                       |       |        |   |                       |   |   |   |   |
|                  Weighted                average number of common shares outstanding, basic and                diluted |   |                       | 28,335,061 |        |   |                       |   |   | 28,335,061 |   |

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      RESTATED STATEMENT OF CASH FLOWS**

**FOR      THE NINE MONTHS ENDED SEPTEMBER 30, 2005**

**(UNAUDITED)**

|                                                                                                                                       |   | As                Reported |     | Adjustments |   | As                Restated |   |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------|----------|-------------|--------|----------------------------|--------|
|                                                                                                                                       |   |                       |     |        |   |                       |   |
| Cash                flows from operating activities:                                                                                       |   |                       |     |        |   |                       |   |
|                    Net loss                                                                                                 |   | $                          | (488,745 | )           |   | (70,943                    | )      | $ | (559,688 | ) |
|     Adjustments                to reconcile net loss to net cash provided by operating                activities: |   |                       |     |        |   |                       |   |   |   |   |
|                    Depreciation and amortization                                                                            |   |                       | 340,870  |        |   | 180,191                    |   |   | 521,061 |   |
|                    Deferred tax asset - non-cash                                                                            |   |                       | --       |        |   | (109,248                   | )      |   | (109,248  | ) |
|                    Changes in assets and liabilities:                                                                       |   |                       |     |        |   |                       |   |   |   |   |
|                        Accounts receivable                                                              |   |                       | (26,616  | )           |   |                       |   |   | (26,616 | ) |
|                        Prepaid items and other                                                          |   |                       | 17,082   |        |   |                       |   |   | 17,082 |   |
|                        Due from affiliates                                                              |   |                       | 65,289   |        |   |                       |   |   | 65,289 |   |
|                        Accounts payable, accrued expenses and other                liabilities          |   |                       | 127,820  |        |   |                       |   |   | 127,820 |   |
| Net                cash provided by operating activities                                                                                   |   |                       | 35,700   |        |   |                       |   |   | 35,700 |   |
|                                                                                                                                       |   |                       |     |        |   |                       |   |   |   |   |
| Cash                flows from investing activities:                                                                                       |   |                       |     |        |   |                       |   |   |   |   |
|                    Increase in restricted cash                                                                              |   |                       | (4,117   | )           |   |                       |   |   | (4,117 | ) |
|                    Increase in escrowed funds                                                                               |   |                       | (25,035  | )           |   |                       |   |   | (25,035 | ) |
| Net                cash used in investing activities                                                                                       |   |                       | (29,152  | )           |   |                       |   |   | (29,152 | ) |
|                                                                                                                                       |   |                       |     |        |   |                       |   |   |   |   |
| Cash                flows from financing activities:                                                                                       |   |                       |     |        |   |                       |   |   |   |   |
|                    Repayment of mortgage and other notes payable                                                            |   |                       | (192,157 | )           |   |                       |   |   | (192,157 | ) |
|                    Net cash used in financing activities                                                                    |   |                       | (192,157 | )           |   |                       |   |   | (192,157 | ) |
|                                                                                                                                       |   |                       |     |        |   |                       |   |   |   |   |
| Net                decrease in cash                                                                                                        |   |                       | (185,609 | )           |   |                       |   |   | (185,609 | ) |
| Cash                and cash equivalents, beginning of period                                                                              |   |                       | 214,058  |        |   |                       |   |   | 214,058 |   |
| Cash                and cash equivalents, end of period                                                                                    |   | $                          | 28,449   |        |   |                       |   | $ | 28,449 |   |

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      RESTATED BALANCE SHEET**

**JUNE      30, 2005**

**(UNAUDITED)**

|                                                                                                 |   | As                Reported |       | Adjustments |   | As                Restated |   |
|------------------------------------------------------------------------------------------------------|--------|----------------------------|------------|-------------|--------|----------------------------|--------|
|                                                                                                 |   |                       |       |        |   |                       |   |
| **ASSETS**                                                                                           |   |                       |       |        |   |                       |   |
|                                                                                                 |   |                       |       |        |   |                       |   |
| Current                assets:                                                                       |   |                       |       |        |   |                       |   |
|                    Cash                                                               |   | $                          | 109,792    |        |   |                       |   | $ | 109,792 |   |
|                    Cash in restricted accounts                                        |   |                       | 204,071    |        |   |                       |   |   | 204,071 |   |
|                    Accounts receivable                                                |   |                       | 31,602     |        |   |                       |   |   | 31,602 |   |
|                    Prepaid items and other                                            |   |                       | 22,050     |        |   |                       |   |   | 22,050 |   |
|                        Total current assets                       |   |                       | 367,515    |        |   |                       |   |   | 367,515 |   |
| Investment                in real estate:                                                            |   |                       |       |        |   |                       |   |   |   |   |
|                    Building, improvements and leaseholds                              |   |                       | 9,077,316  |        |   | 1,902,987                  |   |   | 10,980,303 |   |
|                    Accumulated depreciation                                           |   |                       | (2,946,944 | )           |   | 1,162,729                  |   |   | (1,784,215 | ) |
|                                                                                                 |   |                       | 6,130,372  |        |   |                       |   |   | 9,196,088 |   |
|                    Land                                                               |   |                       | 1,258,643  |        |   |                       |   |   | 1,258,643 |   |
|                        Net investment in real estate              |   |                       | 7,389,015  |        |   |                       |   |   | 10,454,731 |   |
| Other                assets:                                                                         |   |                       |       |        |   |                       |   |   |   |   |
|                    Goodwill                                                           |   |                       | 647,043    |        |   | (647,043                   | )      |   | -- |   |
|                    Deferred financing costs                                           |   |                       | 113,325    |        |   |                       |   |   | 113,325 |   |
|                    Escrowed funds                                                     |   |                       | 149,985    |        |   |                       |   |   | 149,985 |   |
|                        Total other assets                         |   |                       | 910,353    |        |   |                       |   |   | 263,310 |   |
| Total                assets                                                                          |   | $                          | 8,666,883  |        |   |                       |   | $ | 11,085,556 |   |
|                                                                                                 |   |                       |       |        |   |                       |   |   |   |   |
| **LIABILITIES                & SHAREHOLDERS’ EQUITY (DEFICIT)**                            |   |                       |       |        |   |                       |   |   |   |   |
|                                                                                                 |   |                       |       |        |   |                       |   |   |   |   |
| Current                liabilities:                                                                  |   |                       |       |        |   |                       |   |   |   |   |
|                    Accounts payable, trade                                            |   | $                          | 25,046     |        |   |                       |   | $ | 25,046 |   |
|                    Accrued liabilities                                                |   |                       | 127,309    |        |   |                       |   |   | 127,309 |   |
|                    Income taxes payable                                               |   |                       | 284,663    |        |   |                       |   |   | 284,663 |   |
|                    Deferred tax liability                                             |   |                       | --         |        |   | 145,665                    |   |   | 145,665 |   |
|                    Current portion - notes payable                                    |   |                       | 4,897,494  |        |   |                       |   |   | 4,897,494 |   |
|                        Total current liabilities                  |   |                       | 5,334,512  |        |   |                       |   |   | 5,480,177 |   |
| Long-term                debt                                                                        |   |                       | 4,063,390  |        |   |                       |   |   | 4,063,390 |   |
| Deferred                tax liability - long-term                                                    |   |                       | --         |        |   | 399,135                    |   |   | 399,135 |   |
|                        Total long-term liabilities                |   |                       | 4,063,390  |        |   |                       |   |   | 4,462,525 |   |
| Shareholders'                equity (deficit):                                                       |   |                       |       |        |   |                       |   |   |   |   |
|                    Preferred stock                                                    |   |                       | --         |        |   |                       |   |   | -- |   |
|                    Common stock                                                       |   |                       | 28,335     |        |   |                       |   |   | 28,335 |   |
|                    Additional paid-in capital                                         |   |                       | 618,483    |        |   | 6,039,695                  |   |   | 6,658,178 |   |
|                    Accumulated deficit                                                |   |                       | (1,377,837 | )           |   | (4,165,822                 | )      |   | (5,543,659 | ) |
|                        Total shareholders’ equity (deficit) |   |                       | (731,019   | )           |   |                       |   |   | 1,142,854 |   |
| Total                liabilities and shareholders' equity (deficit)                                  |   | $                          | 8,666,883  |        |   |                       |   | $ | 11,085,556 |   |

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      RESTATED STATEMENT OF OPERATIONS**

**FOR      THE SIX MONTHS ENDED JUNE 30, 2005**

**(UNAUDITED)**

|                                                                                                        |   | As                Reported |       | Adjustments |   | As                Restated |   |
|-------------------------------------------------------------------------------------------------------------|--------|----------------------------|------------|-------------|--------|----------------------------|--------|
|                                                                                                        |   |                       |       |        |   |                       |   |
| Rental                revenue                                                                               |   | $                          | 495,956    |        |   |                       |   | $ | 495,956 |   |
|                                                                                                        |   |                       |       |        |   |                       |   |   |   |   |
| Real                estate operating expenses:                                                              |   |                       |       |        |   |                       |   |   |   |   |
|                    Interest expense                                                          |   |                       | 277,642    |        |   |                       |   |   | 277,642 |   |
|                    Real estate taxes                                                         |   |                       | 58,984     |        |   |                       |   |   | 58,984 |   |
|                    Depreciation and amortization                                             |   |                       | 227,252    |        |   | 131,384                    |   |   | 358,636 |   |
|                    Repairs and maintenance                                                   |   |                       | 29,750     |        |   |                       |   |   | 29,750 |   |
|                    Utilities                                                                 |   |                       | 15,213     |        |   |                       |   |   | 15,213 |   |
|                    Professional and consulting fees                                          |   |                       | 182,008    |        |   |                       |   |   | 182,008 |   |
|                    Other                                                                     |   |                       | 35,245     |        |   |                       |   |   | 35,245 |   |
|                                                                                                        |   |                       | 826,094    |        |   |                       |   |   | 957,478 |   |
| Penalties                                                                                                   |   |                       | 29,109     |        |   |                       |   |   | 29,109 |   |
|                        Total real estate operating expenses              |   |                       | 855,203    |        |   |                       |   |   | 986,587 |   |
|                                                                                                        |   |                       |       |        |   |                       |   |   |   |   |
| Other                income:                                                                                |   |                       |       |        |   |                       |   |   |   |   |
|                    Interest income                                                           |   |                       | 2,862      |        |   |                       |   |   | 2,862 |   |
|                    Recovery of bad debts                                                     |   |                       | 55,061     |        |   |                       |   |   | 55,061 |   |
|                    Other                                                                     |   |                       | 6,425      |        |   |                       |   |   | 6,425 |   |
|                        Total other income                                |   |                       | 64,348     |        |   |                       |   |   | 64,348 |   |
| Loss                before income taxes                                                                     |   |                       | (294,899   | )           |   |                       |   |   | (426,283 | ) |
| Benefit                for income tax expense                                                               |   |                       | --         |        |   | 72,832                     |   |   | 72,832 |   |
| Net                loss                                                                                     |   | $                          | (294,899   | )           |   |                       |   | $ | (353,451 | ) |
|                                                                                                        |   |                       |       |        |   |                       |   |   |   |   |
| Basic                and diluted net loss per share                                                         |   | $                          | (0.01      | )           |   |                       |   | $ | (0.01 | ) |
|                                                                                                        |   |                       |       |        |   |                       |   |   |   |   |
|  Weighted                average number of common shares outstanding, basic and                diluted |   |                       | 34,213,960 |        |   |                       |   |   | 34,213,960 |   |

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      RESTATED STATEMENT OF OPERATIONS**

**FOR      THE THREE MONTHS ENDED JUNE 30, 2005**

**(UNAUDITED)**

|                                                                                                        |   | As                Reported |       | Adjustments |   | As                Restated |   |
|-------------------------------------------------------------------------------------------------------------|--------|----------------------------|------------|-------------|--------|----------------------------|--------|
|                                                                                                        |   |                       |       |        |   |                       |   |
| Rental                revenue                                                                               |   | $                          | 248,428    |        |   |                       |   | $ | 248,428 |   |
|                                                                                                        |   |                       |       |        |   |                       |   |   |   |   |
| Real                estate operating expenses:                                                              |   |                       |       |        |   |                       |   |   |   |   |
|                    Interest expense                                                          |   |                       | 139,822    |        |   |                       |   |   | 139,822 |   |
|                    Real estate taxes                                                         |   |                       | 21,462     |        |   |                       |   |   | 21,462 |   |
|                    Depreciation and amortization                                             |   |                       | 113,632    |        |   | 71,320                     |   |   | 184,952 |   |
|                    Repairs and maintenance                                                   |   |                       | 13,555     |        |   |                       |   |   | 13,555 |   |
|                    Utilities                                                                 |   |                       | 7,927      |        |   |                       |   |   | 7,927 |   |
|                    Professional and consulting fees                                          |   |                       | 79,181     |        |   |                       |   |   | 79,181 |   |
|                    Other                                                                     |   |                       | 14,907     |        |   |                       |   |   | 14,907 |   |
|                                                                                                        |   |                       | 390,486    |        |   |                       |   |   | 461,806 |   |
| Penalties                                                                                                   |   |                       | 11,646     |        |   |                       |   |   | 11,646 |   |
|                        Total real estate operating expenses              |   |                       | 402,132    |        |   |                       |   |   | 473,452 |   |
|                                                                                                        |   |                       |       |        |   |                       |   |   |   |   |
| Other                income:                                                                                |   |                       |       |        |   |                       |   |   |   |   |
|                    Interest income                                                           |   |                       | 1,442      |        |   |                       |   |   | 1,442 |   |
|                    Other                                                                     |   |                       | 2,258      |        |   |                       |   |   | 2,258 |   |
|                        Total other income                                |   |                       | 3,700      |        |   |                       |   |   | 3,700 |   |
| Loss                before income taxes                                                                     |   |                       | (150,004   | )           |   |                       |   |   | (221,324 | ) |
| Benefit                for income tax expense                                                               |   |                       | --         |        |   | 36,416                     |   |   | 36,416 |   |
| Net                loss                                                                                     |   | $                          | (150,004   | )           |   |                       |   | $ | (184,908 | ) |
|                                                                                                        |   |                       |       |        |   |                       |   |   |   |   |
| Basic                and diluted net loss per share                                                         |   | $                          | (0.01      | )           |   |                       |   | $ | (0.01 | ) |
|                                                                                                        |   |                       |       |        |   |                       |   |   |   |   |
|  Weighted                average number of common shares outstanding, basic and                diluted |   |                       | 28,832,644 |        |   |                       |   |   | 28,832,644 |   |

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      RESTATED STATEMENT OF CASH FLOWS**

**FOR      THE SIX MONTHS ENDED JUNE 30, 2005**

**(UNAUDITED)**

|                                                                                                                                       |   | As                Reported |     | Adjustments |   | As                Restated |   |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------|----------|-------------|--------|----------------------------|--------|
|                                                                                                                                       |   |                       |     |        |   |                       |   |   |   |   |
| Cash                flows from operating activities:                                                                                       |   |                       |     |        |   |                       |   |   |   |   |
|                    Net loss                                                                                                 |   | $                          | (294,899 | )           |   | (58,552                    | )      | $ | (353,451 | ) |
|                    Adjustments                to reconcile net loss to net cash provided by operating                activities: |   |                       |     |        |   |                       |   |   |   |   |
|                    Depreciation and amortization                                                                            |   |                       | 227,252  |        |   | 131,384                    |   |   | 358,636 |   |
|                    Deferred tax asset - non-cash                                                                            |   |                       | --       |        |   | (72,832                    | )      |   | (72,832 | ) |
|                    Changes in assets and liabilities:                                                                       |   |                       |     |        |   |                       |   |   |   |   |
|                        Accounts receivable                                                              |   |                       | 4,090    |        |   |                       |   |   | 4,090 |   |
|                        Prepaid items and other                                                          |   |                       | 8,199    |        |   |                       |   |   | 8,199 |   |
|                        Due from affiliates                                                              |   |                       | 65,289   |        |   |                       |   |   | 65,289 |   |
|                        Accounts payable, accrued expenses and other                liabilities          |   |                       | 29,764   |        |   |                       |   |   | 29,764 |   |
| Net                cash provided by operating activities                                                                                   |   |                       | 39,695   |        |   |                       |   |   | 39,695 |   |
|                                                                                                                                       |   |                       |     |        |   |                       |   |   |   |   |
| Cash                flows from investing activities:                                                                                       |   |                       |     |        |   |                       |   |   |   |   |
|                    Increase in restricted cash                                                                              |   |                       | (2,725   | )           |   |                       |   |   | (2,725 | ) |
|                    Increase in escrowed funds                                                                               |   |                       | (9,176   | )           |   |                       |   |   | (9,176 | ) |
| Net                cash used in investing activities                                                                                       |   |                       | (11,901  | )           |   |                       |   |   | (11,901 | ) |
|                                                                                                                                       |   |                       |     |        |   |                       |   |   |   |   |
| Cash                flows from financing activities:                                                                                       |   |                       |     |        |   |                       |   |   |   |   |
|                    Repayment of mortgage and other notes payable                                                            |   |                       | (132,060 | )           |   |                       |   |   | (132,060 | ) |
| Net                cash used in financing activities                                                                                       |   |                       | (132,060 | )           |   |                       |   |   | (132,060 | ) |
|                                                                                                                                       |   |                       |     |        |   |                       |   |   |   |   |
| Net                decrease in cash                                                                                                        |   |                       | (104,266 | )           |   |                       |   |   | (104,266 | ) |
| Cash                and cash equivalents, beginning of period                                                                              |   |                       | 214,058  |        |   |                       |   |   | 214,058 |   |
| Cash                and cash equivalents, end of period                                                                                    |   | $                          | 109,792  |        |   |                       |   | $ | 109,792 |   |

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      RESTATED BALANCE SHEET**

**MARCH      31, 2005**

**(UNAUDITED)**

|                                                                                                 |   | As                Reported |       | Adjustments |   | As                Restated |   |
|------------------------------------------------------------------------------------------------------|--------|----------------------------|------------|-------------|--------|----------------------------|--------|
|                                                                                                 |   |                       |       |        |   |                       |   |
| **ASSETS**                                                                                           |   |                       |       |        |   |                       |   |
|                                                                                                 |   |                       |       |        |   |                       |   |
| Current                assets:                                                                       |   |                       |       |        |   |                       |   |
|                    Cash                                                               |   | $                          | 245,908    |        |   |                       |   | $ | 245,908 |   |
|                    Cash in restricted accounts                                        |   |                       | 202,689    |        |   |                       |   |   | 202,689 |   |
|                    Accounts receivable                                                |   |                       | 9,669      |        |   |                       |   |   | 9,669 |   |
|                    Prepaid items and other                                            |   |                       | 21,939     |        |   |                       |   |   | 21,939 |   |
|                        Total current assets                       |   |                       | 480,205    |        |   |                       |   |   | 480,205 |   |
| Investment                in real estate:                                                            |   |                       |       |        |   |                       |   |   |   |   |
|                    Buildings, improvements and leaseholds                             |   |                       | 9,077,316  |        |   | 1,902,987                  |   |   | 10,980,303 |   |
|                    Accumulated depreciation                                           |   |                       | (2,843,601 | )           |   | 1,234,049                  |   |   | (1,609,552 | ) |
|                                                                                                 |   |                       | 6,233,715  |        |   |                       |   |   | 9,370,751 |   |
|                    Land                                                               |   |                       | 1,258,643  |        |   |                       |   |   | 1,258,643 |   |
|                        Net investment in real estate              |   |                       | 7,492,358  |        |   |                       |   |   | 10,629,394 |   |
| Other                assets:                                                                         |   |                       |       |        |   |                       |   |   |   |   |
|                    Goodwill                                                           |   |                       | 647,043    |        |   | (647,043                   | )      |   | -- |   |
|                    Deferred financing costs                                           |   |                       | 123,614    |        |   |                       |   |   | 123,614 |   |
|                    Escrowed funds                                                     |   |                       | 113,613    |        |   |                       |   |   | 113,613 |   |
|                        Total other assets                         |   |                       | 884,270    |        |   |                       |   |   | 237,227 |   |
| Total                assets                                                                          |   | $                          | 8,856,833  |        |   |                       |   | $ | 11,346,826 |   |
|                                                                                                 |   |                       |       |        |   |                       |   |   |   |   |
| **LIABILITIES                & SHAREHOLDERS’ EQUITY (DEFICIT)**                            |   |                       |       |        |   |                       |   |   |   |   |
|                                                                                                 |   |                       |       |        |   |                       |   |   |   |   |
| Current                liabilities:                                                                  |   |                       |       |        |   |                       |   |   |   |   |
|                    Accounts payable, trade                                            |   | $                          | 145,786    |        |   |                       |   | $ | 145,786 |   |
|                    Accrued liabilities                                                |   |                       | 113,540    |        |   |                       |   |   | 113,540 |   |
|                    Income taxes payable                                               |   |                       | 296,243    |        |   |                       |   |   | 296,243 |   |
|                    Deferred tax liability                                             |   |                       | --         |        |   | 145,665                    |   |   | 145,665 |   |
|                    Current portion - notes payable                                    |   |                       | 4,953,465  |        |   |                       |   |   | 4,953,465 |   |
|                    Other notes payable                                                |   |                       | 307        |        |   |                       |   |   | 307 |   |
|                        Total current liabilities                  |   |                       | 5,509,341  |        |   |                       |   |   | 5,655,006 |   |
| Long-term                debt                                                                        |   |                       | 3,928,507  |        |   |                       |   |   | 3,928,507 |   |
| Deferred                tax liability - long-term                                                    |   |                       | --         |        |   | 435,551                    |   |   | 435,551 |   |
|                        Total long-term liabilities                |   |                       | 3,928,507  |        |   |                       |   |   | 4,364,058 |   |
| Shareholders'                equity (deficit):                                                       |   |                       |       |        |   |                       |   |   |   |   |
|                    Preferred stock                                                    |   |                       | --         |        |   |                       |   |   | -- |   |
|                    Common stock                                                       |   |                       | 39,655     |        |   |                       |   |   | 39,655 |   |
|                    Additional paid-in capital                                         |   |                       | 607,163    |        |   | 6,039,695                  |   |   | 6,646,858 |   |
|                    Accumulated deficit                                                |   |                       | (1,227,833 | )           |   | (4,130,918                 | )      |   | (5,358,751 | ) |
|                        Total shareholders’ equity (deficit) |   |                       | (581,015   | )           |   |                       |   |   | 1,327,762 |   |
| Total                liabilities and shareholders' equity (deficit)                                  |   | $                          | 8,856,833  |        |   |                       |   | $ | 11,346,826 |   |

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      RESTATED STATEMENT OF OPERATIONS**

**FOR      THE THREE MONTHS ENDED MARCH 31, 2005**

**(UNAUDITED)**

|                                                                                                        |   | As                Reported |       | Adjustments |   | As                Restated |   |
|-------------------------------------------------------------------------------------------------------------|--------|----------------------------|------------|-------------|--------|----------------------------|--------|
|                                                                                                        |   |                       |       |        |   |                       |   |
| Rental                revenue                                                                               |   | $                          | 247,528    |        |   |                       |   | $ | 247,528 |   |
|                                                                                                        |   |                       |       |        |   |                       |   |   |   |   |
| Real                estate operating expenses:                                                              |   |                       |       |        |   |                       |   |   |   |   |
|                    Interest expense                                                          |   |                       | 137,820    |        |   |                       |   |   | 137,820 |   |
|                    Real estate taxes                                                         |   |                       | 37,522     |        |   |                       |   |   | 37,522 |   |
|                    Depreciation and amortization                                             |   |                       | 113,620    |        |   | 60,064                     |   |   | 173,684 |   |
|                    Repairs and maintenance                                                   |   |                       | 16,195     |        |   |                       |   |   | 16,195 |   |
|                    Utilities                                                                 |   |                       | 7,286      |        |   |                       |   |   | 7,286 |   |
|                    Professional and consulting fees                                          |   |                       | 102,827    |        |   |                       |   |   | 102,827 |   |
|                    Other                                                                     |   |                       | 20,338     |        |   |                       |   |   | 20,338 |   |
|                                                                                                        |   |                       | 435,608    |        |   |                       |   |   | 495,672 |   |
| Penalties                                                                                                   |   |                       | 17,463     |        |   |                       |   |   | 17,463 |   |
|                        Total real estate operating expenses              |   |                       | 453,071    |        |   |                       |   |   | 513,135 |   |
|                                                                                                        |   |                       |       |        |   |                       |   |   |   |   |
| Other                income:                                                                                |   |                       |       |        |   |                       |   |   |   |   |
|                    Interest income                                                           |   |                       | 1,420      |        |   |                       |   |   | 1,420 |   |
|                    Recovery of bad debts                                                     |   |                       | 55,061     |        |   |                       |   |   | 55,061 |   |
|                    Other                                                                     |   |                       | 4,167      |        |   |                       |   |   | 4,167 |   |
|                        Total other income                                |   |                       | 60,648     |        |   |                       |   |   | 60,648 |   |
| Loss                before income taxes                                                                     |   |                       | (144,895   | )           |   |                       |   |   | (204,959 | ) |
| Benefit                for income tax expense                                                               |   |                       | --         |        |   | 36,416                     |   |   | 36,416 |   |
| Net                loss                                                                                     |   | $                          | (144,895   | )           |   |                       |   | $ | (168,543 | ) |
|                                                                                                        |   |                       |       |        |   |                       |   |   |   |   |
| Basic                and diluted net loss per share                                                         |   | $                          | (0.00      | )           |   |                       |   | $ | (0.00 | ) |
|                                                                                                        |   |                       |       |        |   |                       |   |   |   |   |
|  Weighted                average number of common shares outstanding, basic and                diluted |   |                       | 39,655,068 |        |   |                       |   |   | 39,655,068 |   |

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      RESTATED STATEMENT OF CASH FLOWS**

**FOR      THE THREE MONTHS ENDED MARCH 31, 2005**

**(UNAUDITED)**

|                                                                                                                                            |   | As                Reported |     | Adjustments |   | As                Restated |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------|----------|-------------|--------|----------------------------|--------|
|                                                                                                                                            |   |                       |     |        |   |                       |   |
| Cash                flows from operating activities:                                                                                            |   |                       |     |        |   |                       |   |   |   |   |
|                    Net loss                                                                                                      |   | $                          | (144,895 | )           |   | (23,648                    | )      | $ | (168,543 | ) |
|                    Adjustments                to reconcile net loss to net cash provided by operating                activities: |   |                       |     |        |   |                       |   |   |   |   |
|                    Depreciation and amortization                                                                                 |   |                       | 113,620  |        |   | 60,064                     |   |   | 173,684 |   |
|                    Deferred tax asset - non-cash                                                                                 |   |                       | --       |        |   | (36,416                    | )      |   | (36,416 | ) |
|                    Changes in assets and liabilities:                                                                            |   |                       |     |        |   |                       |   |   |   |   |
|                    Accounts receivable                                                                                           |   |                       | 26,023   |        |   |                       |   |   | 26,023 |   |
|                    Prepaid items and other                                                                                       |   |                       | 8,310    |        |   |                       |   |   | 8,310 |   |
|                    Due from affiliates                                                                                           |   |                       | 65,289   |        |   |                       |   |   | 65,289 |   |
|                    Accounts payable, accrued expenses and other                liabilities                                       |   |                       | 3,678    |        |   |                       |   |   | 3,678 |   |
| Net                cash provided by operating activities                                                                                        |   |                       | 72,025   |        |   |                       |   |   | 72,025 |   |
|                                                                                                                                            |   |                       |     |        |   |                       |   |   |   |   |
| Cash                flows from investing activities:                                                                                            |   |                       |     |        |   |                       |   |   |   |   |
|                    Increase in restricted cash                                                                                   |   |                       | (1,343   | )           |   |                       |   |   | (1,343 | ) |
|                    Decrease in escrowed funds                                                                                    |   |                       | 27,196   |        |   |                       |   |   | 27,196 |   |
| Net                cash provided by investing activities                                                                                        |   |                       | 25,853   |        |   |                       |   |   | 25,853 |   |
|                                                                                                                                            |   |                       |     |        |   |                       |   |   |   |   |
| Cash                flows from financing activities:                                                                                            |   |                       |     |        |   |                       |   |   |   |   |
|                    Repayment of mortgage and other notes payable                                                                 |   |                       | (66,028  | )           |   |                       |   |   | (66,028 | ) |
| Net                cash used in financing activities                                                                                            |   |                       | (66,028  | )           |   |                       |   |   | (66,028 | ) |
|                                                                                                                                            |   |                       |     |        |   |                       |   |   |   |   |
| Net                increase in cash                                                                                                             |   |                       | 31,850   |        |   |                       |   |   | 31,850 |   |
| Cash                and cash equivalents, beginning of period                                                                                   |   |                       | 214,058  |        |   |                       |   |   | 214,058 |   |
| Cash                and cash equivalents, end of period                                                                                         |   | $                          | 245,908  |        |   |                       |   | $ | 245,908 |   |

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      RESTATED BALANCE SHEET**

**DECEMBER      31, 2004**

|                                                                                                 |   | As                Reported |       | Adjustments |   | As                Restated |   |
|------------------------------------------------------------------------------------------------------|--------|----------------------------|------------|-------------|--------|----------------------------|--------|
|                                                                                                 |   |                       |       |        |   |                       |   |
| **ASSETS**                                                                                           |   |                       |       |        |   |                       |   |
| Current                assets:                                                                       |   |                       |       |        |   |                       |   |
|                    Cash                                                               |   | $                          | 214,058    |        |   |                       |   | $ | 214,058 |   |
|                    Cash in restricted accounts                                        |   |                       | 201,346    |        |   |                       |   |   | 201,346 |   |
|                    Accounts receivable                                                |   |                       | 35,692     |        |   |                       |   |   | 35,692 |   |
|                    Prepaid items and other                                            |   |                       | 30,249     |        |   |                       |   |   | 30,249 |   |
|                        Total current assets                       |   |                       | 481,345    |        |   |                       |   |   | 481,345 |   |
| Investment                in real estate:                                                            |   |                       |       |        |   |                       |   |   |   |   |
|                    Buildings, improvements and leaseholds                             |   |                       | 9,077,316  |        |   | 1,902,987                  |   |   | 10,980,303 |   |
|                    Accumulated depreciation                                           |   |                       | (2,740,269 | )           |   | 1,294,112                  |   |   | (1,446,157 | ) |
|                                                                                                 |   |                       | 6,337,047  |        |   |                       |   |   | 9,534,146 |   |
|                    Land                                                               |   |                       | 1,258,643  |        |   |                       |   |   | 1,258,643 |   |
|                        Net investment in real estate              |   |                       | 7,595,690  |        |   |                       |   |   | 10,792,789 |   |
| Other                assets:                                                                         |   |                       |       |        |   |                       |   |   |   |   |
|                    Goodwill                                                           |   |                       | 647,043    |        |   | (647,043              | )      |   | -- |   |
|                    Deferred financing costs                                           |   |                       | 133,902    |        |   |                       |   |   | 133,902 |   |
|                    Due from affiliates                                                |   |                       | 65,289     |        |   |                       |   |   | 65,289 |   |
|                    Escrowed funds                                                     |   |                       | 140,809    |        |   |                       |   |   | 140,809 |   |
|                        Total other assets                         |   |                       | 987,043    |        |   |                       |   |   | 340,000 |   |
| Total                assets                                                                          |   | $                          | 9,064,078  |        |   |                       |   | $ | 11,614,134 |   |
|                                                                                                 |   |                       |       |        |   |                       |   |   |   |   |
| **LIABILITIES                & SHAREHOLDERS’ EQUITY (DEFICIT)**                            |   |                       |       |        |   |                       |   |   |   |   |
| Current                liabilities:                                                                  |   |                       |       |        |   |                       |   |   |   |   |
|                    Accounts payable, trade                                            |   | $                          | 41,938     |        |   |                       |   | $ | 41,938 |   |
|                    Accrued liabilities                                                |   |                       | 202,041    |        |   |                       |   |   | 202,041 |   |
|                    Income taxes payable                                               |   |                       | 307,912    |        |   |                       |   |   | 307,912 |   |
|                    Deferred tax liability                                             |   |                       | --         |        |   | 145,665                    |   |   | 145,665 |   |
|                    Current portion - notes payable                                    |   |                       | 5,007,717  |        |   |                       |   |   | 5,007,717 |   |
|                    Other notes payable                                                |   |                       | 914        |        |   |                       |   |   | 914 |   |
|                        Total current liabilities                  |   |                       | 5,560,522  |        |   |                       |   |   | 5,706,187 |   |
| Long-term                debt                                                                        |   |                       | 3,939,676  |        |   |                       |   |   | 3,939,676 |   |
| Deferred                tax liability - long-term                                                    |   |                       | --         |        |   | 471,967                    |   |   | 471,967 |   |
|                    Total long-term liabilities                                        |   |                       | 3,939,522  |        |   |                       |   |   | 4,411,643 |   |
| Shareholders'                equity (deficit):                                                       |   |                       |       |        |   |                       |   |   |   |   |
|                    Preferred stock                                                    |   |                       | --         |        |   |                       |   |   | -- |   |
|                    Common stock                                                       |   |                       | 39,655     |        |   |                       |   |   | 39,655 |   |
|                    Additional paid-in capital                                         |   |                       | 607,163    |        |   | 6,039,695                  |   |   | 6,646,858 |   |
|                    Accumulated deficit                                                |   |                       | (1,082,938 | )           |   | (4,107,271                 | )      |   | (5,190,209 | ) |
|                        Total shareholders’ equity (deficit) |   |                       | (436,120   | )           |   |                       |   |   | 1,496,304 |   |
| Total                liabilities and shareholders' equity (deficit)                                  |   | $                          | 9,064,078  |        |   |                       |   | $ | 11,614,134 |   |

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      RESTATED STATEMENT OF OPERATIONS**

**FOR      THE YEAR ENDED DECEMBER 31, 2004**

|                                                                                           |   | As                Reported |       | Adjustments |   | As                Restated |   |
|------------------------------------------------------------------------------------------------|--------|----------------------------|------------|-------------|--------|----------------------------|--------|
|                                                                                           |   |                       |       |        |   |                       |   |
| Rental                revenue                                                                  |   | $                          | 1,150,455  |        |   |                       |   | $ | 1,150,455 |   |
|                                                                                           |   |                       |       |        |   |                       |   |   |   |   |
| Real                estate operating expenses:                                                 |   |                       |       |        |   |                       |   |   |   |   |
|                    Interest expense                                             |   |                       | 575,228    |        |   |                       |   |   | 575,228 |   |
|                    Real estate taxes                                            |   |                       | 163,650    |        |   |                       |   |   | 163,650 |   |
|                    Depreciation and amortization                                |   |                       | 455,976    |        |   | 247,191                    |   |   | 703,167 |   |
|                    Repairs and maintenance                                      |   |                       | 43,449     |        |   |                       |   |   | 43,449 |   |
|                    Utilities                                                    |   |                       | 18,703     |        |   |                       |   |   | 18,703 |   |
|                    Professional and consulting fees                             |   |                       | 514,331    |        |   |                       |   |   | 514,331 |   |
|                    Other                                                        |   |                       | 156,218    |        |   |                       |   |   | 156,218 |   |
|                                                                                           |   |                       | 1,927,555  |        |   |                       |   |   | 2,174,746 |   |
| Penalties                                                                                      |   |                       | 55,491     |        |   |                       |   |   | 55,491 |   |
| Bad                debt expense                                                                |   |                       | 87,196     |        |   |                       |   |   | 87,196 |   |
|                        Total real estate operating expenses |   |                       | 2,070,242  |        |   |                       |   |   | 2,317,433 |   |
|                                                                                           |   |                       |       |        |   |                       |   |   |   |   |
| Other                income:                                                                   |   |                       |       |        |   |                       |   |   |   |   |
|                    Interest income                                              |   |                       | 19,488     |        |   |                       |   |   | 19,488 |   |
|                    Other                                                        |   |                       | 22,431     |        |   |                       |   |   | 22,431 |   |
|                    Recovery of bad debts                                        |   |                       | 85,000     |        |   |                       |   |   | 85,000 |   |
|                    Settlement of lawsuits                                       |   |                       | 707,000    |        |   |                       |   |   | 707,000 |   |
|                        Total other income                   |   |                       | 833,919    |        |   |                       |   |   | 833,919 |   |
| Loss                before income taxes                                                        |   |                       | (85,868    | )           |   |                       |   |   | (333,059 | ) |
| Benefit                (provision) for income tax expense                                      |   |                       | (53,178    | )           |   | 66,304                     |   |   | 13,126 |   |
| Net                loss from continuing operations                                             |   |                       | (139,046   | )           |   |                       |   |   | (319,933 | ) |
| Discontinued                operations:                                                        |   |                       |       |        |   |                       |   |   |   |   |
|                    Loss from discontinued operations                            |   |                       | (139,104   | )           |   | (140,545                   | )      |   | (279,649 | ) |
|                    Tax benefit from disposition                                 |   |                       | 47,356     |        |   |                       |   |   | 47,356 |   |
| Net                loss from discontinued operations                                           |   |                       | (91,748    | )           |   |                       |   |   | (232,293 | ) |
| Net                loss                                                                        |   | $                          | (230,794   | )           |   |                       |   | $ | (552,226 | ) |
|                                                                                           |   |                       |       |        |   |                       |   |   |   |   |
| Basic                and diluted net loss per share:                                           |   |                       |       |        |   |                       |   |   |   |   |
|                    Loss from continuing operations                              |   | $                          | (0.01      | )           |   |                       |   | $ | (0.01 | ) |
|                    Loss from discontinued operations                            |   |                       | --         |        |   |                       |   |   | (0.01 | ) |
| Net                loss per share                                                              |   | $                          | (0.01      | )           |   |                       |   | $ | (0.02 | ) |
|                                                                                           |   |                       |       |        |   |                       |   |   |   |   |
| Weighted                average number of common shares  outstanding:                     |   |                       |       |        |   |                       |   |   |   |   |
|                    Basic and diluted                                            |   |                       | 39,655,068 |        |   |                       |   |   | 39,655,068 |   |

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      RESTATED STATEMENTS OF SHAREHOLDERS’ EQUITY**

**FOR      THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002**

|                                                         |   | As                Reported |       | Adjustments |   | As                Restated |   |
|--------------------------------------------------------------|--------|----------------------------|------------|-------------|--------|----------------------------|--------|
| December                31, 2004                             |   |                       |       |        |   |                       |   |
|                    Common stock               |   | $                          | 39,655     |        |   |                       |   | $ | 39,655 |   |
|                    Additional paid-in capital |   |                       | 607,163    |        |   | 6,039,695                  |   |   | 6,646,858 |   |
|                    Accumulated deficit        |   |                       | (1,082,938 | )           |   | (4,107,271                 | )      |   | (5,190,209 | ) |
| Shareholders’                equity (deficit)          |   | $                          | (436,120   | )           |   |                       |   | $ | 1,496,304 |   |
|                                                         |   |                       |       |        |   |                       |   |   |   |   |
| December                31, 2003                             |   |                       |       |        |   |                       |   |   |   |   |
|                    Common stock               |   | $                          | 39,655     |        |   |                       |   | $ | 39,655 |   |
|                    Additional paid-in capital |   |                       | 607,163    |        |   | 6,039,695                  |   |   | 6,646,858 |   |
|                    Accumulated deficit        |   |                       | (852,144   | )           |   | (3,785,839                 | )      |   | (4,637,983 | ) |
| Shareholders’                equity (deficit)          |   | $                          | (205,326   | )           |   |                       |   | $ | 2,048,530 |   |
|                                                         |   |                       |       |        |   |                       |   |   |   |   |
| December                31, 2002                             |   |                       |       |        |   |                       |   |   |   |   |
|                    Common stock               |   | $                          | 39,655     |        |   |                       |   | $ | 39,655 |   |
|                    Additional paid-in capital |   |                       | 607,163    |        |   | 6,039,695                  |   |   | 6,646,858 |   |
|                    Accumulated deficit        |   |                       | (902,362   | )           |   | 1,768                      |   |   | (900,594 | ) |
| Shareholders’                equity (deficit)          |   | $                          | (255,544   | )           |   |                       |   | $ | 5,785,919 |   |

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      RESTATED STATEMENT OF CASH FLOWS**

**FOR      THE YEAR ENDED DECEMBER 31, 2004**

|                                                                                                                                                            |   | As                Reported |     | Adjustments |   | As                Restated |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------|----------|-------------|--------|----------------------------|--------|
|                                                                                                                                                            |   |                       |     |        |   |                       |   |
| Cash                flows from operating activities:                                                                                                            |   |                       |     |        |   |                       |   |
|                    Net loss                                                                                                                      |   | $                          | (230,794 | )           |   | (321,432                   | )      | $ | (552,226 | ) |
|                      Adjustments to reconcile net loss to net cash provided by operating                  activities:                            |   |                       |     |        |   |                       |   |   |   |   |
|                        Depreciation and amortization                                                                         |   |                       | 507,897  |        |   | 267,791                    |   |   | 775,688 |   |
|                        Deferred tax asset - non-cash                                                                         |   |                       | --       |        |   | (66,304                    | )      |   | (66,304 | ) |
|                        Gain from settlement of law suit                                                                      |   |                       | (200,000 | )           |   |                       |   |   | (200,000 | ) |
|                        Gain from settlement of notes payable                                                                 |   |                       | (12,300  | )           |   |                       |   |   | (12,300 | ) |
|                        Loss from discontinued operations                                                                     |   |                       | 37,015   |        |   | 119,945                    |   |   | 156,960 |   |
|                        Changes in assets and liabilities:                                                                    |   |                       |     |        |   |                       |   |   |   |   |
|                            Accounts receivable                                                           |   |                       | 405,406  |        |   |                       |   |   | 405,406 |   |
|                            Prepaid items and other                                                       |   |                       | 12,672   |        |   |                       |   |   | 12,672 |   |
|                            Due from affiliates                                                           |   |                       | (65,289  | )           |   |                       |   |   | (65,289 | ) |
|                            Accounts payable, accrued liabilities and income                taxes payable |   |                       | (330,350 | )           |   |                       |   |   | (330,350 | ) |
| Net                cash provided by operating activities                                                                                                        |   |                       | 124,257  |        |   |                       |   |   | 124,257 |   |
|                                                                                                                                                            |   |                       |     |        |   |                       |   |   |   |   |
| Cash                flows from investing activities:                                                                                                            |   |                       |     |        |   |                       |   |   |   |   |
|                    Payment of closing expenses from sale of property                                                                             |   |                       | 45,287   |        |   |                       |   |   | 45,287 |   |
|                    Decrease in restricted cash                                                                                                   |   |                       | 8,601    |        |   |                       |   |   | 8,601 |   |
|                    Increase in escrowed funds                                                                                                    |   |                       | (33,269  | )           |   |                       |   |   | (33,269 | ) |
| Net                cash provided by investing activities                                                                                                        |   |                       | 20,619   |        |   |                       |   |   | 20,619 |   |
|                                                                                                                                                            |   |                       |     |        |   |                       |   |   |   |   |
| Cash                flows from financing activities:                                                                                                            |   |                       |     |        |   |                       |   |   |   |   |
|                    Proceeds from line of credit                                                                                                  |   |                       | 25,000   |        |   |                       |   |   | 25,000 |   |
|                    Proceeds from property notes payable                                                                                          |   |                       | 40,487   |        |   |                       |   |   | 40,487 |   |
| Net                cash provided by financing activities                                                                                                        |   |                       | 65,487   |        |   |                       |   |   | 65,487 |   |
|                                                                                                                                                            |   |                       |     |        |   |                       |   |   |   |   |
| Net                increase in cash                                                                                                                             |   |                       | 210,363  |        |   |                       |   |   | 210,363 |   |
| Cash                and cash equivalents, beginning of year                                                                                                     |   |                       | 3,695    |        |   |                       |   |   | 3,695 |   |
| Cash                and cash equivalents, end of year                                                                                                           |   | $                          | 214,058  |        |   |                       |   | $ | 214,058 |   |

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      RESTATED BALANCE SHEET**

**SEPTEMBER      30, 2004**

**(UNAUDITED)**

|                                                                                                 |   | As                Reported |       | Adjustments |   | As                Restated |   |
|------------------------------------------------------------------------------------------------------|--------|----------------------------|------------|-------------|--------|----------------------------|--------|
| **ASSETS**                                                                                           |   |                       |       |        |   |                       |   |
|                                                                                                 |   |                       |       |        |   |                       |   |
| Current                assets:                                                                       |   |                       |       |        |   |                       |   |
|                    Cash                                                               |   | $                          | 333,443    |        |   |                       |   | $ | 333,443 |   |
|                    Cash in restricted accounts                                        |   |                       | 200,000    |        |   |                       |   |   | 200,000 |   |
|                    Accounts receivable                                                |   |                       | 38,065     |        |   |                       |   |   | 38,065 |   |
|                    Prepaid items and other                                            |   |                       | 13,792     |        |   |                       |   |   | 13,792 |   |
|                        Total current assets                       |   |                       | 585,300    |        |   |                       |   |   | 585,300 |   |
| Investment                in real estate:                                                            |   |                       |       |        |   |                       |   |   |   |   |
|                    Buildings, improvements and leaseholds                             |   |                       | 10,287,680 |        |   | 2,045,314                  |   |   | 12,332,994 |   |
|                    Accumulated depreciation                                           |   |                       | (3,067,730 | )           |   | 1,593,655                  |   |   | (1,474,075 | ) |
|                                                                                                 |   |                       | 7,219,950  |        |   |                       |   |   | 10,858,919 |   |
|                    Land                                                               |   |                       | 1,389,420  |        |   |                       |   |   | 1,389,420 |   |
|                        Net investment in real estate              |   |                       | 8,609,370  |        |   |                       |   |   | 12,248,339 |   |
| Other                assets:                                                                         |   |                       |       |        |   |                       |   |   |   |   |
|                    Goodwill                                                           |   |                       | 908,523    |        |   | (908,523                   | )      |   | -- |   |
|                    Deferred financing costs                                           |   |                       | 144,190    |        |   |                       |   |   | 144,190 |   |
|                    Due from affiliates                                                |   |                       | 126,454    |        |   |                       |   |   | 126,454 |   |
|                    Deposits                                                           |   |                       | 200        |        |   |                       |   |   | 200 |   |
|                    Escrowed funds                                                     |   |                       | 131,895    |        |   |                       |   |   | 131,895 |   |
|                        Total other assets                         |   |                       | 1,311,262  |        |   |                       |   |   | 402,739 |   |
| Total                assets                                                                          |   | $                          | 10,505,932 |        |   |                       |   | $ | 13,236,378 |   |
|                                                                                                 |   |                       |       |        |   |                       |   |   |   |   |
| **LIABILITIES                & SHAREHOLDERS’ EQUITY (DEFICIT)**                            |   |                       |       |        |   |                       |   |   |   |   |
|                                                                                                 |   |                       |       |        |   |                       |   |   |   |   |
| Current                liabilities:                                                                  |   |                       |       |        |   |                       |   |   |   |   |
|                    Accounts payable, trade                                            |   | $                          | 99,603     |        |   |                       |   | $ | 99,603 |   |
|                    Accrued liabilities                                                |   |                       | 209,299    |        |   |                       |   |   | 209,299 |   |
|                    Income taxes payable                                               |   |                       | 249,809    |        |   |                       |   |   | 249,809 |   |
|                    Deferred tax liability                                             |   |                       | --         |        |   | 145,665                    |   |   | 145,665 |   |
|                    Current portion - notes payable                                    |   |                       | 152,498    |        |   |                       |   |   | 152,498 |   |
|                    Other notes payable                                                |   |                       | 324,805    |        |   |                       |   |   | 324,805 |   |
|                        Total current liabilities                  |   |                       | 1,036,014  |        |   |                       |   |   | 1,181,679 |   |
| Long-term                debt                                                                        |   |                       | 9,609,461  |        |   |                       |   |   | 9,609,461 |   |
| Deferred                tax liability - long-term                                                    |   |                       | --         |        |   | 488,543                    |   |   | 488,543 |   |
|       Total              long-term liabilities                         |   |                       | 9,609,461  |        |   |                       |   |   | 10,098,004 |   |
| Shareholders'                equity (deficit):                                                       |   |                       |       |        |   |                       |   |   |   |   |
|                    Preferred stock                                                    |   |                       | --         |        |   |                       |   |   | -- |   |
|                    Common stock                                                       |   |                       | 39,655     |        |   |                       |   |   | 39,655 |   |
|                    Additional paid-in capital                                         |   |                       | 607,163    |        |   | 6,039,695                  |   |   | 6,646,858 |   |
|                    Accumulated deficit                                                |   |                       | (786,361   | )           |   | (3,943,457                 | )      |   | (4,729,818 | ) |
|                        Total shareholders’ equity (deficit) |   |                       | (139,543   | )           |   |                       |   |   | 1,956,695 |   |
| Total                liabilities and shareholders' equity (deficit)                                  |   | $                          | 10,505,932 |        |   |                       |   | $ | 13,236,378 |   |

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      RESTATED STATEMENT OF OPERATIONS**

**FOR      THE NINE MONTHS ENDED SEPTEMBER 30, 2004**

**(UNAUDITED)**

|                                                                                           |   | As                Reported |       | Adjustments |   | As                Restated |   |
|------------------------------------------------------------------------------------------------|--------|----------------------------|------------|-------------|--------|----------------------------|--------|
|                                                                                           |   |                       |       |        |   |                       |   |
| Rental                revenue                                                                  |   | $                          | 870,715    |        |   |                       |   | $ | 870,715 |   |
|                                                                                           |   |                       |       |        |   |                       |   |   |   |   |
| Real                estate operating expenses:                                                 |   |                       |       |        |   |                       |   |   |   |   |
|                    Interest expense                                             |   |                       | 457,117    |        |   |                       |   |   | 457,117 |   |
|                    Real estate taxes                                            |   |                       | 94,729     |        |   |                       |   |   | 94,729 |   |
|                    Depreciation and amortization                                |   |                       | 342,847    |        |   | 207,346                    |   |   | 550,193 |   |
|                    Repairs and maintenance                                      |   |                       | 26,590     |        |   |                       |   |   | 26,590 |   |
|                    Utilities                                                    |   |                       | 17,040     |        |   |                       |   |   | 17,040 |   |
|                    Professional and consulting fees                             |   |                       | 442,976    |        |   |                       |   |   | 442,976 |   |
|                    Other                                                        |   |                       | 108,861    |        |   |                       |   |   | 108,861 |   |
|                                                                                           |   |                       | 1,490,160  |        |   |                       |   |   | 1,697,506 |   |
| Bad                debt expense                                                                |   |                       | 83,955     |        |   |                       |   |   | 83,955 |   |
|                        Total real estate operating expenses |   |                       | 1,574,115  |        |   |                       |   |   | 1,781,461 |   |
|                                                                                           |   |                       |       |        |   |                       |   |   |   |   |
| Other                income:                                                                   |   |                       |       |        |   |                       |   |   |   |   |
|                    Interest income                                              |   |                       | 18,142     |        |   |                       |   |   | 18,142 |   |
|                    Other income                                                 |   |                       | 18,482     |        |   |                       |   |   | 18,482 |   |
|                    Recovery of bad debts                                        |   |                       | 85,000     |        |   |                       |   |   | 85,000 |   |
|                    Settlement of lawsuits                                       |   |                       | 707,000    |        |   |                       |   |   | 707,000 |   |
|                        Total other income                   |   |                       | 828,624    |        |   |                       |   |   | 828,624 |   |
| Income                (loss) before income taxes                                               |   |                       | 125,224    |        |   |                       |   |   | (82,122 | ) |
| Benefit                for income tax expense                                                  |   |                       | --         |        |   | 49,728                     |   |   | 49,728 |   |
| Net                income (loss) before discontinued operations                                |   |                       | 125,224    |        |   |                       |   |   | (32,394 | ) |
| Loss                from discontinued operations                                               |   |                       | (59,442    | )           |   |                       |   |   | (59,442 | ) |
| Net                income (loss)                                                               |   | $                          | 65,782     |        |   |                       |   | $ | (91,836 | ) |
|                                                                                           |   |                       |       |        |   |                       |   |   |   |   |
| Basic                and diluted net income (loss) per share:                                  |   |                       |       |        |   |                       |   |   |   |   |
|                    Income (loss) from continuing operations                     |   | $                          | 0.00       |        |   |                       |   | $ | (0.00 | ) |
|                    Loss from discontinued operations                            |   |                       | --         |        |   |                       |   |   | -- |   |
| Net                income (loss) per share                                                     |   | $                          | 0.00       |        |   |                       |   | $ | (0.00 | ) |
|                                                                                           |   |                       |       |        |   |                       |   |   |   |   |
| Weighted                average number of common shares outstanding:                           |   |                       |       |        |   |                       |   |   |   |   |
|    Basic                and diluted                                             |   |                       | 39,655,068 |        |   |                       |   |   | 39,655,068 |   |

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      RESTATED STATEMENT OF OPERATIONS**

**FOR      THE THREE MONTHS ENDED SEPTEMBER 30, 2004**

**(UNAUDITED)**

|                                                                                           |   | As                Reported |       | Adjustments |   | As                Restated |   |
|------------------------------------------------------------------------------------------------|--------|----------------------------|------------|-------------|--------|----------------------------|--------|
|                                                                                           |   |                       |       |        |   |                       |   |
| Rental                revenue                                                                  |   | $                          | 290,839    |        |   |                       |   | $ | 290,839 |   |
|                                                                                           |   |                       |       |        |   |                       |   |   |   |   |
| Real                estate operating expenses:                                                 |   |                       |       |        |   |                       |   |   |   |   |
|                    Interest expense                                             |   |                       | 149,032    |        |   |                       |   |   | 149,032 |   |
|                    Real estate taxes                                            |   |                       | 13,898     |        |   |                       |   |   | 13,898 |   |
|                    Depreciation and amortization                                |   |                       | 123,607    |        |   | 69,116                     |   |   | 192,723 |   |
|                    Repairs and maintenance                                      |   |                       | 18,742     |        |   |                       |   |   | 18,742 |   |
|                    Utilities                                                    |   |                       | 8,891      |        |   |                       |   |   | 8,891 |   |
|                    Professional and consulting fees                             |   |                       | 159,187    |        |   |                       |   |   | 159,187 |   |
|                    Other                                                        |   |                       | 25,742     |        |   |                       |   |   | 25,742 |   |
|                                                                                           |   |                       | 499,099    |        |   |                       |   |   | 568,215 |   |
| Bad                debt expense                                                                |   |                       | 14,196     |        |   |                       |   |   | 14,196 |   |
|                        Total real estate operating expenses |   |                       | 513,295    |        |   |                       |   |   | 582,411 |   |
|                                                                                           |   |                       |       |        |   |                       |   |   |   |   |
| Other                income:                                                                   |   |                       |       |        |   |                       |   |   |   |   |
|                    Interest income                                              |   |                       | 4,503      |        |   |                       |   |   | 4,503 |   |
|                    Other income                                                 |   |                       | 12,496     |        |   |                       |   |   | 12,496 |   |
|                    Settlement of lawsuits                                       |   |                       | 222,000    |        |   |                       |   |   | 222,000 |   |
|                        Total other income                   |   |                       | 238,999    |        |   |                       |   |   | 238,999 |   |
| Income                (loss) before income taxes                                               |   |                       | 16,543     |        |   |                       |   |   | (52,573 | ) |
| Benefit                for income tax expense                                                  |   |                       | --         |        |   | 16,576                     |   |   | 16,576 |   |
| Net                income (loss) before discontinued operations                                |   |                       | 16,543     |        |   |                       |   |   | (35,997 | ) |
| Loss                from discontinued operations                                               |   |                       | (5,529     | )           |   |                       |   |   | (5,529 | ) |
| Net                income (loss)                                                               |   | $                          | 11,014     |        |   |                       |   | $ | (41,526 | ) |
|                                                                                           |   |                       |       |        |   |                       |   |   |   |   |
| Basic                and diluted net income (loss) per share:                                  |   |                       |       |        |   |                       |   |   |   |   |
|                    Income (loss) from continuing operations                     |   | $                          | 0.00       |        |   |                       |   | $ | (0.00 | ) |
|                    Loss from discontinued operations                            |   |                       | --         |        |   |                       |   |   | -- |   |
| Net                income (loss) per share                                                     |   | $                          | 0.00       |        |   |                       |   | $ | (0.00 | ) |
|                                                                                           |   |                       |       |        |   |                       |   |   |   |   |
| Weighted                average number of common shares outstanding:                           |   |                       |       |        |   |                       |   |   |   |   |
|                    Basic and diluted                                            |   |                       | 39,655,068 |        |   |                       |   |   | 39,655,068 |   |

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      RESTATED STATEMENT OF CASH FLOWS**

**FOR      THE NINE MONTHS ENDED SEPTEMBER 30, 2004**

**(UNAUDITED)**

|                                                                                                                                                      |   | As                Reported |     | Adjustments |   | As                Restated |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------|----------|-------------|--------|----------------------------|--------|
|                                                                                                                                                      |   |                       |     |        |   |                       |   |
| Cash                flows from operating activities:                                                                                                      |   |                       |     |        |   |                       |   |
|                    Net income (loss)                                                                                                       |   | $                          | 65,782   |        |   | (157,618                   | )      | $ | (91,836 | ) |
|                    Adjustments to reconcile net income (loss)to net cash provided by                operating activities:                  |   |                       |     |        |   |                       |   |   |   |   |
|                        Depreciation and amortization                                                                   |   |                       | 387,352  |        |   | 207,346                    |   |   | 594,698 |   |
|                        Deferred tax asset - non-cash                                                                   |   |                       | --       |        |   | (49,728                    | )      |   | (49,728 | ) |
|                        Gain from settlement of notes payable                                                           |   |                       | (12,300  | )           |   |                       |   |   | (12,300 | ) |
|                        Changes in assets and liabilities:                                                              |   |                       |     |        |   |                       |   |   |   |   |
|                            Accounts receivable                                                     |   |                       | 403,033  |        |   |                       |   |   | 403,033 |   |
|                            Prepaid items and other                                                 |   |                       | 29,129   |        |   |                       |   |   | 29,129 |   |
|                            Due from affiliates                                                     |   |                       | (126,454 | )           |   |                       |   |   | (126,454 | ) |
|                            Accounts payable, accrued expenses and other                liabilities |   |                       | (323,530 | )           |   |                       |   |   | (323,530 | ) |
| Net                cash provided by operating activities                                                                                                  |   |                       | 423,012  |        |   |                       |   |   | 423,012 |   |
|                                                                                                                                                      |   |                       |     |        |   |                       |   |   |   |   |
| Cash                flows from investing activities:                                                                                                      |   |                       |     |        |   |                       |   |   |   |   |
|                    Land, buildings and improvements                                                                                        |   |                       | (23,468  | )           |   |                       |   |   | (23,468 | ) |
|                    Increase in escrowed funds                                                                                              |   |                       | (24,555  | )           |   |                       |   |   | (24,555 | ) |
| Net                cash used in investing activities                                                                                                      |   |                       | (48,023  | )           |   |                       |   |   | (48,023 | ) |
|                                                                                                                                                      |   |                       |     |        |   |                       |   |   |   |   |
| Cash                flows from financing activities:                                                                                                      |   |                       |     |        |   |                       |   |   |   |   |
|                    Proceeds from property notes payable                                                                                    |   |                       | 296,774  |        |   |                       |   |   | 296,774 |   |
|                    Repayment of mortgage and other notes payable                                                                           |   |                       | (151,962 | )           |   |                       |   |   | (151,962 | ) |
|                    Certificate of deposit used to pay line of credit                                                                       |   |                       | (190,053 | )           |   |                       |   |   | (190,053 | ) |
| Net                cash used in financing activities                                                                                                      |   |                       | (45,241  | )           |   |                       |   |   | (45,241 | ) |
|                                                                                                                                                      |   |                       |     |        |   |                       |   |   |   |   |
| Net                increase in cash                                                                                                                       |   |                       | 329,748  |        |   |                       |   |   | 329,748 |   |
| Cash                and cash equivalents, beginning of period                                                                                             |   |                       | 3,695    |        |   |                       |   |   | 3,695 |   |
| Cash                and cash equivalents, end of period                                                                                                   |   | $                          | 333,443  |        |   |                       |   | $ | 333,443 |   |

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      RESTATED BALANCE SHEET**

**JUNE      30, 2004**

**(UNAUDITED)**

|                                                                                                 |   | As                Reported |       | Adjustments |   | As                Restated |   |
|------------------------------------------------------------------------------------------------------|--------|----------------------------|------------|-------------|--------|----------------------------|--------|
|                                                                                                 |   |                       |       |        |   |                       |   |
| **ASSETS**                                                                                           |   |                       |       |        |   |                       |   |
|                                                                                                 |   |                       |       |        |   |                       |   |
| Current                assets:                                                                       |   |                       |       |        |   |                       |   |
|                    Cash                                                               |   | $                          | 425,483    |        |   |                       |   | $ | 425,483 |   |
|                    Accounts receivable                                                |   |                       | 48,570     |        |   |                       |   |   | 48,570 |   |
|                    Prepaid items and other                                            |   |                       | 23,044     |        |   |                       |   |   | 23,044 |   |
|                        Total current assets                       |   |                       | 497,097    |        |   |                       |   |   | 497,097 |   |
| Investment                in real estate:                                                            |   |                       |       |        |   |                       |   |   |   |   |
|                    Buildings, improvements and leaseholds                             |   |                       | 10,287,680 |        |   | 2,045,314                  |   |   | 12,332,994 |   |
|                    Accumulated depreciation                                           |   |                       | (2,939,576 | )           |   | 1,662,771                  |   |   | (1,276,805 | ) |
|                                                                                                 |   |                       | 7,348,104  |        |   |                       |   |   | 11,056,189 |   |
|                    Land                                                               |   |                       | 1,389,420  |        |   |                       |   |   | 1,389,420 |   |
|                        Net investment in real estate              |   |                       | 8,737,524  |        |   |                       |   |   | 12,445,609 |   |
| Other                assets:                                                                         |   |                       |       |        |   |                       |   |   |   |   |
|                    Goodwill                                                           |   |                       | 908,523    |        |   | (908,523                   | )      |   | -- |   |
|                    Deferred financing costs                                           |   |                       | 154,478    |        |   |                       |   |   | 154,478 |   |
|                    Due from affiliates                                                |   |                       | 115,135    |        |   |                       |   |   | 115,135 |   |
|                    Escrowed funds                                                     |   |                       | 103,499    |        |   |                       |   |   | 103,499 |   |
|                        Total other assets                         |   |                       | 1,281,635  |        |   |                       |   |   | 373,112 |   |
| Total                assets                                                                          |   | $                          | 10,516,256 |        |   |                       |   | $ | 13,315,818 |   |
|                                                                                                 |   |                       |       |        |   |                       |   |   |   |   |
| **LIABILITIES                & SHAREHOLDERS’ EQUITY (DEFICIT)**                            |   |                       |       |        |   |                       |   |   |   |   |
|                                                                                                 |   |                       |       |        |   |                       |   |   |   |   |
| Current                liabilities:                                                                  |   |                       |       |        |   |                       |   |   |   |   |
|                    Accounts payable, trade                                            |   | $                          | 99,744     |        |   |                       |   | $ | 99,744 |   |
|                    Accrued liabilities                                                |   |                       | 187,353    |        |   |                       |   |   | 187,353 |   |
|                    Income taxes payable                                               |   |                       | 253,000    |        |   |                       |   |   | 253,000 |   |
|                    Deferred tax liability                                             |   |                       | --         |        |   | 145,665                    |   |   | 145,665 |   |
|                    Current portion - notes payable                                    |   |                       | 92,377     |        |   |                       |   |   | 92,377 |   |
|                    Other notes payable                                                |   |                       | 315,009    |        |   |                       |   |   | 315,009 |   |
|                        Total current liabilities                  |   |                       | 947,483    |        |   |                       |   |   | 1,093,148 |   |
| Long-term                debt                                                                        |   |                       | 9,719,655  |        |   |                       |   |   | 9,719,655 |   |
| Deferred                tax liability - long-term                                                    |   |                       | --         |        |   | 505,119                    |   |   | 505,119 |   |
|                    Total long-term liabilities                                        |   |                       | 9,719,655  |        |   |                       |   |   | 10,224,774 |   |
| Shareholders'                equity (deficit):                                                       |   |                       |       |        |   |                       |   |   |   |   |
|                    Preferred stock                                                    |   |                       | --         |        |   |                       |   |   | -- |   |
|                    Common stock                                                       |   |                       | 39,655     |        |   |                       |   |   | 39,655 |   |
|                    Additional paid-in capital                                         |   |                       | 607,163    |        |   | 6,039,695                  |   |   | 6,646,858 |   |
|                    Accumulated deficit                                                |   |                       | (797,700   | )           |   | (3,890,917                 | )      |   | (4,688,617 | ) |
|                        Total shareholders’ equity (deficit) |   |                       | (150,882   | )           |   |                       |   |   | 1,997,896 |   |
| Total                liabilities and shareholders' equity (deficit)                                  |   | $                          | 10,516,256 |        |   |                       |   | $ | 13,315,818 |   |

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      RESTATED STATEMENT OF OPERATIONS**

**FOR      THE SIX MONTHS ENDED JUNE 30, 2004**

**(UNAUDITED)**

|                                                                                           |   | As                Reported |       | Adjustments |   | As                Restated |   |
|------------------------------------------------------------------------------------------------|--------|----------------------------|------------|-------------|--------|----------------------------|--------|
|                                                                                           |   |                       |       |        |   |                       |   |
| Rental                revenue                                                                  |   | $                          | 579,876    |        |   |                       |   | $ | 579,876 |   |
|                                                                                           |   |                       |       |        |   |                       |   |   |   |   |
| Real                estate operating expenses:                                                 |   |                       |       |        |   |                       |   |   |   |   |
|                    Interest expense                                             |   |                       | 308,085    |        |   |                       |   |   | 308,085 |   |
|                    Real estate taxes                                            |   |                       | 80,831     |        |   |                       |   |   | 80,831 |   |
|                    Depreciation and amortization                                |   |                       | 219,240    |        |   | 138,230                    |   |   | 357,470 |   |
|                    Repairs and maintenance                                      |   |                       | 7,848      |        |   |                       |   |   | 7,848 |   |
|                    Utilities                                                    |   |                       | 8,149      |        |   |                       |   |   | 8,149 |   |
|                    Professional and consulting fees                             |   |                       | 193,789    |        |   |                       |   |   | 193,789 |   |
|                    Other                                                        |   |                       | 173,119    |        |   |                       |   |   | 173,119 |   |
|                                                                                           |   |                       | 991,061    |        |   |                       |   |   | 1,129,291 |   |
| Bad                debt expense                                                                |   |                       | 69,759     |        |   |                       |   |   | 69,759 |   |
|                        Total real estate operating expenses |   |                       | 1,060,820  |        |   |                       |   |   | 1,199,050 |   |
|                                                                                           |   |                       |       |        |   |                       |   |   |   |   |
| Other                income:                                                                   |   |                       |       |        |   |                       |   |   |   |   |
|                    Interest income                                              |   |                       | 13,639     |        |   |                       |   |   | 13,639 |   |
|                    Other income                                                 |   |                       | 5,986      |        |   |                       |   |   | 5,986 |   |
|                    Recovery of bad debts                                        |   |                       | 85,000     |        |   |                       |   |   | 85,000 |   |
|                    Settlement of lawsuits                                       |   |                       | 485,000    |        |   |                       |   |   | 485,000 |   |
|                        Total other income                   |   |                       | 589,625    |        |   |                       |   |   | 589,625 |   |
| Income                (loss) before income taxes                                               |   |                       | 108,681    |        |   |                       |   |   | (29,549 | ) |
| Benefit                for income tax expense                                                  |   |                       | --         |        |   | 33,152                     |   |   | 33,152 |   |
| Net                income before discontinued operations                                       |   |                       | 108,681    |        |   |                       |   |   | 3,603 |   |
| Loss                from discontinued operations                                               |   |                       | (53,913    | )           |   |                       |   |   | (53,913 | ) |
| Net                income (loss)                                                               |   | $                          | 54,768     |        |   |                       |   | $ | (50,310 | ) |
|                                                                                           |   |                       |       |        |   |                       |   |   |   |   |
| Basic                and diluted net income (loss) per share:                                  |   |                       |       |        |   |                       |   |   |   |   |
|                    Income (loss) from continuing operations                     |   | $                          | 0.00       |        |   |                       |   | $ | (0.00 | ) |
|                    Loss from discontinued operations                            |   |                       | --         |        |   |                       |   |   | -- |   |
| Net                loss per share                                                              |   | $                          | 0.00       |        |   |                       |   | $ | (0.00 | ) |
|                                                                                           |   |                       |       |        |   |                       |   |   |   |   |
| Weighted                average number of common shares outstanding:                           |   |                       |       |        |   |                       |   |   |   |   |
|                    Basic and diluted                                            |   |                       | 39,655,068 |        |   |                       |   |   | 39,655,068 |   |

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      RESTATED STATEMENT OF OPERATIONS**

**FOR      THE THREE MONTHS ENDED JUNE 30, 2004**

**(UNAUDITED)**

|                                                                                           |   | As                Reported |       | Adjustments |   | As                Restated |   |
|------------------------------------------------------------------------------------------------|--------|----------------------------|------------|-------------|--------|----------------------------|--------|
|                                                                                           |   |                       |       |        |   |                       |   |
| Rental                revenue                                                                  |   | $                          | 291,286    |        |   |                       |   | $ | 291,286 |   |
|                                                                                           |   |                       |       |        |   |                       |   |   |   |   |
| Real                estate operating expenses:                                                 |   |                       |       |        |   |                       |   |   |   |   |
|                    Interest expense                                             |   |                       | 155,384    |        |   |                       |   |   | 155,384 |   |
|                    Real estate taxes                                            |   |                       | 35,530     |        |   |                       |   |   | 35,530 |   |
|                    Depreciation and amortization                                |   |                       | 111,555    |        |   | 69,115                     |   |   | 180,670 |   |
|                    Repairs and maintenance                                      |   |                       | 7,848      |        |   |                       |   |   | 7,848 |   |
|                    Utilities                                                    |   |                       | 2,931      |        |   |                       |   |   | 2,931 |   |
|                    Professional and consulting fees                             |   |                       | 57,415     |        |   |                       |   |   | 57,415 |   |
|                    Other                                                        |   |                       | 107,584    |        |   |                       |   |   | 107,584 |   |
|                        Total real estate operating expenses |   |                       | 478,247    |        |   |                       |   |   | 547,362 |   |
|                                                                                           |   |                       |       |        |   |                       |   |   |   |   |
| Other                income:                                                                   |   |                       |       |        |   |                       |   |   |   |   |
|                    Other income                                                 |   |                       | 3,406      |        |   |                       |   |   | 3,406 |   |
|                    Recovery of bad debts                                        |   |                       | 85,000     |        |   |                       |   |   | 85,000 |   |
|                    Settlement of lawsuits                                       |   |                       | 485,000    |        |   |                       |   |   | 485,000 |   |
|                        Total other income                   |   |                       | 573,406    |        |   |                       |   |   | 573,406 |   |
| Income                before income taxes                                                      |   |                       | 386,445    |        |   |                       |   |   | 317,330 |   |
| Benefit                for income tax expense                                                  |   |                       | --         |        |   | 16,576                     |   |   | 16,576 |   |
| Net                income before discontinued operations                                       |   |                       | 386,445    |        |   |                       |   |   | 333,906 |   |
| Loss                from discontinued operations                                               |   |                       | (26,663    | )           |   |                       |   |   | (26,663 | ) |
| Net                income                                                                      |   | $                          | 359,782    |        |   |                       |   | $ | 307,243 |   |
|                                                                                           |   |                       |       |        |   |                       |   |   |   |   |
| Basic                and diluted net income (loss) per share:                                  |   |                       |       |        |   |                       |   |   |   |   |
|                    Income from continuing operations                            |   | $                          | 0.01       |        |   |                       |   | $ | 0.01 |   |
|                    Loss from discontinued operations                            |   |                       | --         |        |   |                       |   |   | -- |   |
| Net                income per share                                                            |   | $                          | 0.01       |        |   |                       |   | $ | 0.01 |   |
|                                                                                           |   |                       |       |        |   |                       |   |   |   |   |
| Weighted                average number of common shares outstanding:                           |   |                       |       |        |   |                       |   |   |   |   |
|                    Basic and diluted                                            |   |                       | 39,655,068 |        |   |                       |   |   | 39,655,068 |   |

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      RESTATED STATEMENT OF CASH FLOWS**

**FOR      THE SIX MONTHS ENDED JUNE 30, 2004**

**(UNAUDITED)**

|                                                                                                                                      |   | As                Reported |     | Adjustments |   | As                Restated |   |
|-------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------|----------|-------------|--------|----------------------------|--------|
|                                                                                                                                      |   |                       |     |        |   |                       |   |
| Cash                flows from operating activities:                                                                                      |   |                       |     |        |   |                       |   |
|                    Net income (loss)                                                                                       |   | $                          | 54,768   |        |   | (105,078                   | )      | $ | (50,310 | ) |
|                    Adjustments to reconcile net income (loss) to net cash provided by                operating activities: |   |                       |     |        |   |                       |   |   |   |   |
|                    Depreciation and amortization                                                                           |   |                       | 248,910  |        |   | 138,230                    |   |   | 387,140 |   |
|                    Deferred tax asset - non-cash                                                                           |   |                       | --       |        |   | (33,152                    | )      |   | (33,152 | ) |
|                    Changes in assets and liabilities:                                                                      |   |                       |     |        |   |                       |   |   |   |   |
|                        Accounts receivable                                                             |   |                       | 392,528  |        |   |                       |   |   | 392,528 |   |
|                        Prepaid items and other                                                         |   |                       | 19,877   |        |   |                       |   |   | 19,877 |   |
|                        Other assets                                                                    |   |                       | 3,716    |        |   |                       |   |   | 3,716 |   |
|                        Due from affiliates                                                             |   |                       | (115,135 | )           |   |                       |   |   | (115,135 | ) |
|                        Accounts payable, accrued expenses and other                liabilities         |   |                       | (225,863 | )           |   |                       |   |   | (225,863 | ) |
| Net                cash provided by operating activities                                                                                  |   |                       | 378,801  |        |   |                       |   |   | 378,801 |   |
|                                                                                                                                      |   |                       |     |        |   |                       |   |   |   |   |
| Cash                flows from investing activities:                                                                                      |   |                       |     |        |   |                       |   |   |   |   |
|                    Land, buildings and improvements                                                                        |   |                       | (23,468  | )           |   |                       |   |   | (23,468 | ) |
| Net                cash used in investing activities                                                                                      |   |                       | (23,468  | )           |   |                       |   |   | (23,468 | ) |
|                                                                                                                                      |   |                       |     |        |   |                       |   |   |   |   |
| Cash                flows from financing activities:                                                                                      |   |                       |     |        |   |                       |   |   |   |   |
|                    Proceeds from property notes payable                                                                    |   |                       | 160,250  |        |   |                       |   |   | 160,250 |   |
|                    Repayment of mortgage and other notes payable                                                           |   |                       | (103,742 | )           |   |                       |   |   | (103,742 | ) |
|                    Certificate of deposit used to pay line of credit                                                       |   |                       | 9,947    |        |   |                       |   |   | 9,947 |   |
| Net                cash provided by financing activities                                                                                  |   |                       | 66,455   |        |   |                       |   |   | 66,455 |   |
|                                                                                                                                      |   |                       |     |        |   |                       |   |   |   |   |
| Net                increase in cash                                                                                                       |   |                       | 421,788  |        |   |                       |   |   | 421,788 |   |
| Cash                and cash equivalents, beginning of period                                                                             |   |                       | 3,695    |        |   |                       |   |   | 3,695 |   |
| Cash                and cash equivalents, end of period                                                                                   |   | $                          | 425,483  |        |   |                       |   | $ | 425,483 |   |

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      RESTATED BALANCE SHEET**

**MARCH      31, 2004**

**(UNAUDITED)**

|                                                                                                 |   | As                Reported |       | Adjustments |   | As                Restated |   |
|------------------------------------------------------------------------------------------------------|--------|----------------------------|------------|-------------|--------|----------------------------|--------|
|                                                                                                 |   |                       |       |        |   |                       |   |
| **ASSETS**                                                                                           |   |                       |       |        |   |                       |   |
|                                                                                                 |   |                       |       |        |   |                       |   |
| Current                assets:                                                                       |   |                       |       |        |   |                       |   |
|                    Cash                                                               |   | $                          | 49,577     |        |   |                       |   | $ | 49,577 |   |
|                    Accounts receivable                                                |   |                       | 67,360     |        |   |                       |   |   | 67,360 |   |
|                    Prepaid items and other                                            |   |                       | 31,549     |        |   |                       |   |   | 31,549 |   |
|                        Total current assets                       |   |                       | 148,486    |        |   |                       |   |   | 148,486 |   |
| Investment                in real estate:                                                            |   |                       |       |        |   |                       |   |   |   |   |
|                    Buildings, improvements and leaseholds                             |   |                       | 10,264,212 |        |   | 2,045,314                  |   |   | 12,309,526 |   |
|                    Accumulated depreciation                                           |   |                       | (2,825,409 | )           |   | 1,731,886                  |   |   | (1,093,523 | ) |
|                                                                                                 |   |                       | 7,438,803  |        |   |                       |   |   | 11,216,003 |   |
|                    Land                                                               |   |                       | 1,389,420  |        |   |                       |   |   | 1,389,420 |   |
|                        Net investment in real estate              |   |                       | 8,828,223  |        |   |                       |   |   | 12,605,423 |   |
| Other                assets:                                                                         |   |                       |       |        |   |                       |   |   |   |   |
|                    Goodwill                                                           |   |                       | 908,523    |        |   | (908,523                   | )      |   | -- |   |
|                    Deferred financing costs                                           |   |                       | 164,766    |        |   |                       |   |   | 164,766 |   |
|                    Due from affiliates                                                |   |                       | 24,938     |        |   |                       |   |   | 24,938 |   |
|                    Escrowed funds                                                     |   |                       | 62,909     |        |   |                       |   |   | 62,909 |   |
|                        Total other assets                         |   |                       | 1,161,136  |        |   |                       |   |   | 252,613 |   |
| Total                assets                                                                          |   | $                          | 10,137,845 |        |   |                       |   | $ | 13,006,522 |   |
|                                                                                                 |   |                       |       |        |   |                       |   |   |   |   |
| **LIABILITIES                & SHAREHOLDERS’ EQUITY (DEFICIT)**                            |   |                       |       |        |   |                       |   |   |   |   |
|                                                                                                 |   |                       |       |        |   |                       |   |   |   |   |
| Current                liabilities:                                                                  |   |                       |       |        |   |                       |   |   |   |   |
|                    Accounts payable, trade                                            |   | $                          | 204,148    |        |   |                       |   | $ | 204,148 |   |
|                    Accrued liabilities                                                |   |                       | 127,575    |        |   |                       |   |   | 127,575 |   |
|                    Income taxes payable                                               |   |                       | 253,000    |        |   |                       |   |   | 253,000 |   |
|                    Deferred tax liability                                             |   |                       | --         |        |   | 145,665                    |   |   | 145,665 |   |
|                    Current portion - notes payable                                    |   |                       | 275,586    |        |   |                       |   |   | 275,586 |   |
|                    Other notes payable                                                |   |                       | 201,177    |        |   |                       |   |   | 201,177 |   |
|                        Total current liabilities                  |   |                       | 1,061,486  |        |   |                       |   |   | 1,207,151 |   |
| Long-term                debt                                                                        |   |                       | 9,587,504  |        |   |                       |   |   | 9,587,504 |   |
| Deferred                tax liability - long-term                                                    |   |                       | --         |        |   | 521,695                    |   |   | 521,695 |   |
|                    Total long-term liabilities                                        |   |                       | 9,587,504  |        |   |                       |   |   | 10,109,199 |   |
| Shareholders'                equity (deficit):                                                       |   |                       |       |        |   |                       |   |   |   |   |
|                    Preferred stock                                                    |   |                       | --         |        |   |                       |   |   | -- |   |
|                    Common stock                                                       |   |                       | 39,655     |        |   |                       |   |   | 39,655 |   |
|                    Additional paid-in capital                                         |   |                       | 607,163    |        |   | 6,039,695                  |   |   | 6,646,858 |   |
|                    Accumulated deficit                                                |   |                       | (1,157,963 | )           |   | (3,838,378                 | )      |   | (4,996,341 | ) |
|                        Total shareholders’ equity (deficit) |   |                       | (511,145   | )           |   |                       |   |   | 1,690,172 |   |
| Total                liabilities and shareholders' equity (deficit)                                  |   | $                          | 10,137,845 |        |   |                       |   | $ | 13,006,522 |   |

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      RESTATED STATEMENT OF OPERATIONS**

**FOR      THE THREE MONTHS ENDED MARCH 31, 2004**

**(UNAUDITED)**

|                                                                                           |   | As                Reported |       | Adjustments |   | As                Restated |   |
|------------------------------------------------------------------------------------------------|--------|----------------------------|------------|-------------|--------|----------------------------|--------|
|                                                                                           |   |                       |       |        |   |                       |   |
| Rental                revenue                                                                  |   | $                          | 288,590    |        |   |                       |   | $ | 288,590 |   |
|                                                                                           |   |                       |       |        |   |                       |   |   |   |   |
| Real                estate operating expenses:                                                 |   |                       |       |        |   |                       |   |   |   |   |
|                    Interest expense                                             |   |                       | 152,701    |        |   |                       |   |   | 152,701 |   |
|                    Real estate taxes                                            |   |                       | 45,301     |        |   |                       |   |   | 45,301 |   |
|                    Depreciation and amortization                                |   |                       | 107,685    |        |   | 69,115                     |   |   | 176,800 |   |
|                    Utilities                                                    |   |                       | 5,218      |        |   |                       |   |   | 5,218 |   |
|                    Professional and consulting fees                             |   |                       | 136,374    |        |   |                       |   |   | 136,374 |   |
|                    Other                                                        |   |                       | 65,535     |        |   |                       |   |   | 65,535 |   |
|                                                                                           |   |                       | 512,814    |        |   |                       |   |   | 581,929 |   |
| Bad                debt expense                                                                |   |                       | 69,759     |        |   |                       |   |   | 69,759 |   |
|                        Total real estate operating expenses |   |                       | 582,573    |        |   |                       |   |   | 651,688 |   |
|                                                                                           |   |                       |       |        |   |                       |   |   |   |   |
| Interest                income                                                                 |   |                       | 16,219     |        |   |                       |   |   | 16,219 |   |
| Benefit                for income tax expense                                                  |   |                       | --         |        |   | 16,576                     |   |   | 16,576 |   |
| Net                loss from continuing operations                                             |   |                       | (277,764   | )           |   |                       |   |   | (330,303 | ) |
| Loss                from discontinued operations                                               |   |                       | (27,250    | )           |   |                       |   |   | (27,250 | ) |
| Net                loss                                                                        |   | $                          | (305,014   | )           |   |                       |   | $ | (357,553 | ) |
|                                                                                           |   |                       |       |        |   |                       |   |   |   |   |
| Basic                and diluted net loss per share:                                           |   |                       |       |        |   |                       |   |   |   |   |
|                    Loss from continuing operations                              |   | $                          | (0.01      | )           |   |                       |   | $ | (0.01 | ) |
|                    Loss from discontinued operations                            |   |                       | --         |        |   |                       |   |   | -- |   |
| Net                loss per share                                                              |   | $                          | (0.01      | )           |   |                       |   | $ | (0.01 | ) |
|                                                                                           |   |                       |       |        |   |                       |   |   |   |   |
| Weighted                average number of common shares outstanding:                           |   |                       |       |        |   |                       |   |   |   |   |
|                    Basic and diluted                                            |   |                       | 39,655,068 |        |   |                       |   |   | 39,655,068 |   |

----

**STERLING      EQUITY HOLDINGS, INC.**

**AND      SUBSIDIARY**

**CONSOLIDATED      RESTATED STATEMENT OF CASH FLOWS**

**FOR      THE THREE MONTHS ENDED MARCH 31, 2004**

**(UNAUDITED)**

|                                                                                                                                                      |   | As                Reported |     | Adjustments |   | As                Restated |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------|----------|-------------|--------|----------------------------|--------|
|                                                                                                                                                      |   |                       |     |        |   |                       |   |
| Cash                flows from operating activities:                                                                                                      |   |                       |     |        |   |                       |   |
|                    Net loss                                                                                                                |   | $                          | (305,014 | )           |   | (52,539                    | )      | $ | (357,553 | ) |
|                      Adjustments to reconcile net loss to net cash provided by operating                  activities:                      |   |                       |     |        |   |                       |   |   |   |   |
|                        Depreciation and amortization                                                                   |   |                       | 124,454  |        |   | 69,115                     |   |   | 193,569 |   |
|                        Deferred tax asset - non-cash                                                                   |   |                       | --       |        |   | (16,576                    | )      |   | (16,576 | ) |
|                        Changes in assets and liabilities:                                                              |   |                       |     |        |   |                       |   |   |   |   |
|                            Accounts receivable                                                     |   |                       | 373,738  |        |   |                       |   |   | 373,738 |   |
|                            Prepaid items and other                                                 |   |                       | 11,372   |        |   |                       |   |   | 11,372 |   |
|                            Other assets                                                       |   |                       | (24,938  | )           |   |                       |   |   | (24,938 | ) |
|                            Due from affiliates                                                     |   |                       | 43,827   |        |   |                       |   |   | 43,827 |   |
|                            Accounts payable, accrued expenses and other                liabilities |   |                       | (297,519 | )           |   |                       |   |   | (297,519 | ) |
| Net                cash used in by operating activities                                                                                                   |   |                       | (74,080  | )           |   |                       |   |   | (74,080 | ) |
|                                                                                                                                                      |   |                       |     |        |   |                       |   |   |   |   |
| Cash                flows from investing activities                                                                                                       |   |                       | --       |        |   |                       |   |   | -- |   |
|                                                                                                                                                      |   |                       |     |        |   |                       |   |   |   |   |
| Cash                flows from financing activities:                                                                                                      |   |                       |     |        |   |                       |   |   |   |   |
|                    Proceeds from property note payable                                                                                     |   |                       | 160,846  |        |   |                       |   |   | 160,846 |   |
|                    Repayment of mortgage and other notes payable                                                                           |   |                       | (50,831  | )           |   |                       |   |   | (50,831 | ) |
|                    Certificate of deposit used to pay line of credit                                                                       |   |                       | 9,947    |        |   |                       |   |   | 9,947 |   |
| Net                cash provided by financing activities                                                                                                  |   |                       | 119,962  |        |   |                       |   |   | 119,962 |   |
|                                                                                                                                                      |   |                       |     |        |   |                       |   |   |   |   |
| Net                increase in cash                                                                                                                       |   |                       | 45,882   |        |   |                       |   |   | 45,882 |   |
| Cash                and cash equivalents, beginning of period                                                                                             |   |                       | 3,695    |        |   |                       |   |   | 3,695 |   |
| Cash                and cash equivalents, end of period                                                                                                   |   | $                          | 49,577   |        |   |                       |   | $ | 49,577 |   |

----

**NOTE      4.**
**SALE      OF DISCONTINUED OPERATIONS**

|                                                                 |   | 2004   |     |
|----------------------------------------------------------------------|--------|--------|----------|
|                                                                 |   |   |     |
| Revenue                                                              |   | $      | 75,872   |   |
| Cost                of revenue                                       |   |   | 203,756  |   |
| Loss                before sale of asset                             |   |   | (127,884 | ) |
| Loss                on sale of asset                                 |   |   | (151,765 | ) |
| Loss                from discontinued operations before income taxes |   | $      | (279,649 | ) |

**NOTE      5.**
**RELATED      PARTY TRANSACTIONS**

**NOTE      6.**
**ADVANCES      TO A PRINCIPAL SHAREHOLDER**

----

**NOTE      7.**
**REAL      ESTATE AND OTHER NOTES PAYABLE**

*Real      Estate Notes Payable *

|                                                                                                                                                                                                                                                                                                                                  |   | December                31, |       |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|------------|
| Property                and Note Description                                                                                                                                                                                                                                                                                          |   | 2005                        |       | 2004 |   |
|                                                                                                                                                                                                                                                                                                                                  |   |                        |       |   |   |
| Commodore                Plaza - Gulfport, Mississippi:                   First lien note dated October 28, 2002, with interest at 7.48%, monthly                installments                of $28,263 including principal and interest and due in                full November                1, 2012           |   | $                           | 3,992,626  |   | $ | 3,978,452 |   |
| Three                Austin Buildings - Austin, Texas:                   First lien bearing interest at 5.5% with thirty-five monthly installments                of $41,067                including principal and interest starting July 5, 2003 and a final                payment                on March 27, 2006 |   |                        | 4,727,607  |   |   | 4,968,941 |   |
| Promissory                note dated June 29, 2005, due July 1, 2006 with payment of monthly                interest beginning August 1, 2005 at 17% and secured by tax lien                from Travis County, Texas                                                                                                                 |   |                        | 144,637    |   |   | -- |   |
| Promissory                note dated October 2005, due December 31, 2005 at 8% interest                                                                                                                                                                                                                                               |   |                        | 70,000     |   |   | -- |   |
| Total                notes payable                                                                                                                                                                                                                                                                                                    |   |                        | 8,934,870  |   |   | 8,947,393 |   |
| Less                current maturities of long-term debt                                                                                                                                                                                                                                                                              |   |                        | (5,024,045 | ) |   | (5,007,717 | ) |
| Long-term                debt                                                                                                                                                                                                                                                                                                         |   | $                           | 3,910,825  |   | $ | 3,939,676 |   |

----

*Principal      Maturities*

| Years                Ending December 31,              |   | Amounts |      |
|-------------------------------------------------------|--------|---------|-----------|
|     2006                          |   | $       | 5,024,045 |   |
|     2007                          |   |    | 45,108    |   |
|     2008                          |   |    | 47,804    |   |
|     2009                          |   |    | 52,373    |   |
|     2010                          |   |    | 56,517    |   |
|     Thereafter                    |   |    | 3,709,023 |   |
|         Total |   | $       | 8,934,870 |   |

*Other      Notes *

**NOTE      8.**
**RENTAL      INCOME**

| Years                Ending December 31,              | Amounts |      |
|-------------------------------------------------------|---------|-----------|
|     2006                          | $       | 1,080,023 |   |
|     2007                          |    | 771,386   |   |
|     2008                          |    | 679,144   |   |
|     2009                          |    | 440,339   |   |
|     2010                          |    | 371,429   |   |
|     Thereafter                    |    | 637,428   |   |
|         Total | $       | 3,979,749 |   |

----

**NOTE      9.**
**INCOME      TAXES**

|                                                  |   | 2005    |           | 2004   |   |
|-------------------------------------------------------|--------|---------|----------------|--------|--------|
|                                                  |   |    |           |   |   |
| Loss                before income taxes               |   | $       | (906,941       | )      | $      | (612,708 | ) |
|                                                  |   |    |           |   |   |  |   |
| Income                tax computed at statutory rates |   | $       | (308,360       | )      | $      | (208,320 | ) |
| Book                tax differences on income         |   |    | --             |   |   | 119,000 |   |
| Permanent                differences                  |   |    | (10,465        | )      |   | 18,525 |   |
| Other                                                 |   |    | (2,216         | )      |   | 10,313 |   |
| Tax                benefit                            |   |  $ | (321,041  | )      | $      | (60,482 | )  |
|                                                  |   |    |           |   |   |  |   |
| Current                tax (benefit) provision        |   | $       | (175,376       | )      | $      | $5,822 |   |
| Deferred                tax benefit                   |   |    | (145,665       | )      |   | (66,304 | ) |
| Total                tax benefit                      |   |  $ | (321,041       | )      | $      | (60,482 |  ) |

|                                                                    |   | 2005    |          | 2004   |   |
|-------------------------------------------------------------------------|--------|---------|---------------|--------|--------|
|                                                                    |   |    |          |   |   |
| Deferred                tax liability:                                  |   |    |          |   |   |
|                    Book basis of assets greater than tax |   |  $ | 471,967       |   | $      | 617,632 |   |
| Deferred                tax liability                              |   |  $ | 471,967  |   | $      | 617,632 |   |

**NOTE      10.**
**COMMITMENTS**

*Legal      Contingencies*

----

**NOTE      11.**
**SUBSEQUENT      EVENTS**

----

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

**ITEM      8A.** **CONTROLS      AND PROCEDURES**

**ITEM      8B.** **OTHER      INFORMATION**

----

**PART      III**

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

| **Name**                      | **Age** | **Position**                                     |
|-------------------------------|---------|--------------------------------------------------|
|                          |    |                                             |
| Thomas                Mathew  | 50      | President,                Treasurer and Director |
| Ron                F. Bearden | 65      | Director                and Secretary            |

*Term      of Office*

*Committees      of the Board*

*Code      of Ethics*

----

*Section      16(a) Beneficial Ownership Reporting Compliance*

**ITEM      10. EXECUTIVE COMPENSATION**

**Summary      Compensation Table**

|                                           |   |           |   |  **Annual                Compensation** |   | **Long-Term****Compensation** |   |
|------------------------------------------------|--------|----------------|--------|----------------------------------------------|--------|-------------------------------|--------|
| **Name                and Principal Position** |   |  **Year** |   | **Salary****($)**                            |   | **Bonus****($)**              |   | **Other****($)** |   | **Stock****Options** |   |
| Thomas                Mathew, President (1)    |   |           | 2005   |                                         | $      | 171,250                       |   |   | -- |   |   | -- |   |   | -- |   |
|                                           |   |           | 2004   |                                         | $      | 180,000                       |   |   | -- |   |   | -- |   |   | -- |   |
|                                           |   |           | 2003   |                                         | $      | 174,000                       |   |   | -- |   |   | -- |   |   | -- |   |

|            |                                                                                      |
|-----------------|-------------------------------------------------------------------------------------------|
| (1)   | Mr.                Mathew was appointed President and CEO in January                2004. |

----

**ITEM      11.** **SECURITY      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER      MATTERS**

| § | each                person who is known by the Company to be the beneficial owner of                more than                5% of its outstanding shares of common stock; |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| § | each                of the Company’s directors;                                                                                                                      |

| § | each                of the Company’s named executive officers; and                              |
|--------|-------------------------------------------------------------------------------------------------------|
| § | all                of the Company’s directors and executive officers as a                group. |

|  **Name                and Address of Beneficial Owner**                             |   | **Number                of Shares****Beneficially                Owned** |       | **Percentage                of Outstanding Shares** |   |
|-------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------|------------|-----------------------------------------------------|--------|
|                                                                                      |   |                                                                     |       |                                                |   |
| Thomas                Mathew (1)                                                          |   |                                                                     | 8,788,422  |                                                |   | 31.0 | % |
| Ron                F. Bearden (2)                                                         |   |                                                                     | 1,500,000  |                                                |   | 5.3 | % |
| All                Executive Officers and Directors as a group                (2 persons) |   |                                                                     | 10,288,422 |                                                |   | 36.3 | % |
| Hugo                Verhaghe (3)                                                          |   |                                                                     | 6,812,088  |                                                |   | 24.0 | % |
| Charles                Glace (4)                                                          |   |                                                                     | 3,484,550  |                                                |   | 12.3 | % |
| Lucky                Srinivasan (5)                                                       |   |                                                                     | 2,500,000  |                                                |   | 8.8 | % |

| (1) | All                shares are held of record by Mathew Investment Partnership whose                address                is 7401 Windswept Trail, Colleyville, Texas                76034. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | All                shares are held of record by R.F. Bearden Associates, Inc. The sole                shareholder of R.F. Bearden Associates, Inc. is Rebecca Bearden who                is                married to Ron F. Bearden, a director of the Company. Ron F. Bearden                disclaims beneficial ownership of all shares held by R.F. Bearden                Associates, Inc., whose address is 5051 Westheimer, Suite 700, Houston,                Texas 77056. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | All                shares are held of record by Geld Fund II LC whose address is 7705                Debbie                Dr., Leander, Texas 78641. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | All                shares are held of record by Chasco Investments, Inc., whose address                is PO                Box 1057, Round Rock, Texas 78680. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | All                shares are held of record by E Corp., whose address is 11526 Echo                Woods                Street, Houston, Texas 77024. Lucky Srinivasan holds voting and investment                power with respect to the                shares. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**ITEM      12.** **CERTAIN      RELATIONSHIPS AND RELATED PARTY TRANSACTIONS**

----

**ITEM      13.** **EXHIBITS**

| Exhibit                Number | Description                of Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|-------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.1                           | Exchange                Agreement dated June 1, 2002, by and among BlueStar Leasing, Inc.                and                Sterling FBO Holdings, Inc.(incorporated by reference to the respective                exhibits filed with Registrant's Current Report on Form 8-K dated                September 30, 2002)                                                                                                                                                                                                             |
| 2.2                           | Amendment                to Exchange Agreement dated September 25, 2002 (incorporated by reference                to the respective exhibits filed with Registrant's Current Report                on Form                8-K dated September 30, 2002)                                                                                                                                                                                                                                                                             |
| 2.3                           | Exchange                Agreement dated December 30, 2002, by and among BlueStar Leasing,                Inc.,                Sterling FBO Holdings, Inc. and Ft. Worth Jet Center, Inc. Incorporated                by                reference to the respective exhibits filed with Registrant's Current                Report on Form 8-K dated December 30, 2002)                                                                                                                                                              |
| 2.4                           | Austin                Aero FBO, Ltd. Asset Purchase Agreement, dated December 31, 2002,                by and                between Trajen Flight Support, LP, Austin Aero FBO, Limited and                Sterling-Austin Aero L.P. (incorporated by reference to the respective                exhibits filed with the Registrant's Current Report on Form 8-K dated                February 27, 2003)                                                                                                                           |
| 2.5                           | Asset                Purchase Agreement, dated February 26, 2003, by and between Trajen                Flight                Support, LP, Sterling FBO Holdings, Inc., Greeley FBO, L.L.C., Casper                Jet                Center, L.L.C., Fort Worth Jet Center, Inc., and Sterling-Fort Worth                JC,                LP. (incorporated by reference to the respective exhibits filed with                the                Registrant's Current Report on Form 8-K dated February 27,                2003.) |
| 3.1                           | Articles                of Incorporation (incorporated by reference to the respective exhibits                filed with Registrant's Registration Statement on Form 10-SB filed                October                10, 2001.)                                                                                                                                                                                                                                                                                                   |
| 3.2                           | Bylaws                (incorporated by reference to the respective exhibits filed with                Registrant's Registration Statement on Form 10-SB filed October 10,                2001.)                                                                                                                                                                                                                                                                                                                                     |
| 10.1                          | Settlement                Agreement, dated January 14, 2004, between Sterling Equity Holdings,                Inc.                and Sterling REIT, Inc. (incorporated by reference to the respective                exhibits filed with the Registrant's Current Report on Form 8-K dated                January 13, 2004.)                                                                                                                                                                                                       |
| 10.2                          | Promissory                Note, dated January 14, 2004, from Sterling REIT, Inc. to Sterling                Equity                Holdings, Inc. (incorporated by reference to the respective exhibits                filed                with the Registrant's Current Report on Form 8-K dated January 13,                2004.)                                                                                                                                                                                                 |
| 10.3                          | Pledge                Agreement, dated January 14, 2004, from Sterling REIT, Inc. to Sterling                Equity Holdings, Inc. (incorporated by reference to the respective                exhibits filed with the Registrant's Current Report on Form 8-K dated                January 13, 2004.)                                                                                                                                                                                                                              |
| 10.4                          | Security                Agreement, dated January 14, 2004, from Sterling REIT, Inc. in favor                of                Sterling Equity Holdings, Inc. (incorporated by reference to the                respective exhibits filed with the Registrant's Current Report on                Form 8-K                dated January 13, 2004.)                                                                                                                                                                                     |
| 10.5                          | Commercial                Earnest Money Contract, dated February 24, 2004, for 4719-4735 South                Congress (Incorporated by reference to the respective exhibits filed                with                the Registrant’s Current Report on Form 8-K dated December 15,                2004)                                                                                                                                                                                                                     |
| 10.6                          | Amendment                to Commercial Earnest Money Contract, dated June 18, 2004, for 4719-4735                South Congress (Incorporated by reference to the respective exhibits                filed                with the Registrant’s Current Report on Form 8-K dated December 15,                2004)                                                                                                                                                                                                            |
| 10.7                          | Second                Amendment to Commercial Earnest Money Contract, dated November 5,                2004,                for 4719-4735 South Congress (Incorporated by reference to the respective                exhibits filed with the Registrant’s Current Report on Form 8-K dated                December 15, 2004)                                                                                                                                                                                                  |
| 10.8                          | Exchange                Agreement dated August 31, 2006, from ITI Capital, Inc, to Sterling                Equity                Holdings, Inc. (Incorporated by reference to the respective exhibits                filed                with the Registrant’s Current Report on Form 8-K dated September 1,                2006)                                                                                                                                                                                            |
| 14.1                          | Code                of Ethics for CEO and Senior Financial Officers (incorporated by                reference                to Exhibit 14.1 to Registrant’s Form 10-KSB dated October 8,                2004.)                                                                                                                                                                                                                                                                                                               |
| 21.1                          | List                of subsidiaries (incorporated by reference to the respective exhibits                filed with the Registrant's Annual Report on Form 10-KSB for the                year                ended December 31, 2002.)                                                                                                                                                                                                                                                                                              |
| 31.1*                         | Section                302 Certification                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 32.1*                         | Section                906                Certification                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |

----

**ITEM      14.** **PRINCIPAL      ACCOUNTANT FEES AND SERVICES**

*Fees      Paid to Independent Public Accountants*

|                                                              |   | Fiscal                2004 |    | Fiscal                2005 |          |          |
|-------------------------------------------------------------------|--------|----------------------------|---------|----------------------------|---------------|---------------|
|                                                              |   |                       |    |                       |          |          |
| Audit                fees (1)                                     |   | $                          | 137,070 |                       |  $  | 47,770        |   |
| Audit                related fees - SEC comments and restatements |   |                       | --      |                       |          | 62,365        |   |
| Tax                fees                                           |   |                       | 29,622  |                       |          | 6,795         |   |
| All                other fees                                     |   |                       | --      |                       |          | --            |   |
| Total                                                             |   | $                          | 166,692 |                       |  $       | 116,930  |   |

*Policy      on Pre-Approval of Audit and Non-Audit Services of Independent      Auditor*

----

**SIGNATURES**

**                                                    STERLING EQUITY HOLDINGS, INC.**

| Signature                                                                                         | Title                                                                                                                                          | Date                            |
|---------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------|
| /s/                  Thomas Mathew                       Thomas Mathew   | President,                  Chief Executive Officer (Principal Executive Officer                  and Principal Accouning Officer and Director | April                  25, 2007 |
| /s/                  Ron F. Bearden                       Ron F. Bearden | Director                                                                                                                                       | April                  25, 2007 |

----

**INDEX      TO EXHIBITS**

| Exhibit                Number | Description                of Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|-------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.1                           | Exchange                Agreement dated June 1, 2002, by and among BlueStar Leasing, Inc.                and                Sterling FBO Holdings, Inc.(incorporated by reference to the respective                exhibits filed with Registrant's Current Report on Form 8-K dated                September 30, 2002)                                                                                                                                                                                              |
| 2.2                           | Amendment                to Exchange Agreement dated September 25, 2002 (incorporated by reference                to the respective exhibits filed with Registrant's Current Report                on Form                8-K dated September 30, 2002)                                                                                                                                                                                                                                                              |
| 2.3                           | Exchange                Agreement dated December 30, 2002, by and among BlueStar Leasing,                Inc.,                Sterling FBO Holdings, Inc. and Ft. Worth Jet Center, Inc. Incorporated                by                reference to the respective exhibits filed with Registrant's Current                Report on Form 8-K dated December 30, 2002)                                                                                                                                               |
| 2.4                           | Austin                Aero FBO, Ltd. Asset Purchase Agreement, dated December 31, 2002,                by and                between Trajen Flight Support, LP, Austin Aero FBO, Limited and                Sterling-Austin Aero L.P. (incorporated by reference to the respective                exhibits filed with the Registrant's Current Report on Form 8-K dated                February 27, 2003)                                                                                                            |
| 2.5                           | Asset                Purchase Agreement, dated February 26, 2003, by and between Trajen Flight                Support, LP, Sterling FBO Holdings, Inc., Greeley FBO, L.L.C., Casper                Jet                Center, L.L.C., Fort Worth Jet Center, Inc., and Sterling-Fort Worth                JC,                LP. (incorporated by reference to the respective exhibits filed with                the                Registrant's Current Report on Form 8-K dated February 27,                2003.) |
| 3.1                           | Articles                of Incorporation (incorporated by reference to the respective exhibits                filed with Registrant's Registration Statement on Form 10-SB filed                October                10, 2001.)                                                                                                                                                                                                                                                                                    |
| 3.2                           | Bylaws                (incorporated by reference to the respective exhibits filed with                Registrant's Registration Statement on Form 10-SB filed October 10,                2001.)                                                                                                                                                                                                                                                                                                                      |
| 10.1                          | Settlement                Agreement, dated January 14, 2004, between Sterling Equity Holdings,                Inc.                and Sterling REIT, Inc. (incorporated by reference to the respective                exhibits filed with the Registrant's Current Report on Form 8-K dated                January 13, 2004.)                                                                                                                                                                                        |
| 10.2                          | Promissory                Note, dated January 14, 2004, from Sterling REIT, Inc. to Sterling                Equity                Holdings, Inc. (incorporated by reference to the respective exhibits                filed                with the Registrant's Current Report on Form 8-K dated January 13,                2004.)                                                                                                                                                                                  |
| 10.3                          | Pledge                Agreement, dated January 14, 2004, from Sterling REIT, Inc. to Sterling                Equity Holdings, Inc. (incorporated by reference to the respective                exhibits filed with the Registrant's Current Report on Form 8-K dated                January 13, 2004.)                                                                                                                                                                                                               |
| 10.4                          | Security                Agreement, dated January 14, 2004, from Sterling REIT, Inc. in favor                of                Sterling Equity Holdings, Inc. (incorporated by reference to the                respective exhibits filed with the Registrant's Current Report on                Form 8-K                dated January 13, 2004.)                                                                                                                                                                      |
| 10.5                          | Commercial                Earnest Money Contract, dated February 24, 2004, for 4719-4735 South                Congress (Incorporated by reference to the respective exhibits filed                with                the Registrant’s Current Report on Form 8-K dated December 15,                2004)                                                                                                                                                                                                      |
| 10.6                          | Amendment                to Commercial Earnest Money Contract, dated June 18, 2004, for 4719-4735                South Congress (Incorporated by reference to the respective exhibits                filed                with the Registrant’s Current Report on Form 8-K dated December 15,                2004)                                                                                                                                                                                             |
| 10.7                          | Second                Amendment to Commercial Earnest Money Contract, dated November 5,                2004,                for 4719-4735 South Congress (Incorporated by reference to the respective                exhibits filed with the Registrant’s Current Report on Form 8-K dated                December 15, 2004)                                                                                                                                                                                   |
| 10.8                          | Exchange                Agreement dated August 31, 2006, from ITI Capital, Inc, to Sterling                Equity                Holdings, Inc. (Incorporated by reference to the respective exhibits                filed                with the Registrant’s Current Report on Form 8-K dated September 1,                2006)                                                                                                                                                                             |
| 14.1                          | Code                of Ethics for CEO and Senior Financial Officers (incorporated by                reference                to Exhibit 14.1 to Registrant’s Form 10-KSB dated October 8,                2004.)                                                                                                                                                                                                                                                                                                |
| 21.1                          | List                of subsidiaries (incorporated by reference to the respective exhibits                filed with the Registrant's Annual Report on Form 10-KSB for the                year                ended December 31, 2002.)                                                                                                                                                                                                                                                                               |
| 31.1*                         | Section                302 Certification                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 32.1*                         | Section                906                Certification                                                                                                                                                                                                                                                                                                                                                                                                                                                              |