UNITED
        STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON,
        D.C. 20549
 
  FORM
        10-KSB/A
  
 x
              ANNUAL
                  REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934
  For
        the
        fiscal year ended December
        31, 2004
 
 o
              TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934
 
 Commission
        file number 0-33027
 
 **STERLING
        EQUITY HOLDINGS. INC.**
 (Exact
        name of small business issuer as specified in its charter)
 
 Nevada        88-0485488
 (State
        or
        other jurisdiction of incorporation or organization)  (IRS
        Employer Identification No.)
 
 1600
        Airport Freeway, Suite 370, Bedford, Texas     76022
 (Address
        of principal executive offices)      (Zip
        Code)
 
 Registrant’s
        telephone number, including area code:   (817)
        358-0551
  Securities
                    registered pursuant to Section 12(b) of the Act -
                    None
  
 Securities
        registered pursuant to Section 12(g) of the Act: $.001 Par Value Common
        Stock
 
 Check
        whether the Issuer (1) has filed all reports required to be filed by Section
        13
        or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
        (or for such shorter period that the registrant was required to file such
        reports) and (2) has been subject to such filing requirements for the past
        90
        days. Yes x No o
 
 Check
        if
        there is no disclosure of delinquent filers in response to Item 405 of
        Regulation S-B is not contained in this form, and no disclosure will be
        contained, to the best of registrant’s knowledge, in definitive proxy or
        information statements incorporated by reference in Part III of this Form
        10-KSB
        or any amendment to this Form 10-KSB. x
 
 Issuer’s
        revenues for the fiscal year ended December 31, 2004, were
        $1,150,455.
 
 The
        aggregate market value of the voting and non-voting common equity held by
        non-affiliates of the Issuer as of April 6, 2005, based upon the last reported
        sales price on the Pink Sheets was $47,925.
 
 The
        Registrant’s common stock outstanding as of April 6, 2005, was 28,335,061
        shares.
 
 DOCUMENTS
        INCORPORATED BY REFERENCE:
 None
 
 Transitional
        Small Business Disclosure Format (Check One): Yes o No x
  
  **INDEX
        TO FORM 10-KSB**
 **December
        31, 2004**
 
 **Part
                  I**
              Item
                  1.
              Description
                  of Business
              3Item
                  2.
              Description
                  of Property
              8Item
                  3.
              Legal
                  Proceedings
              9Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              9**Part
                  II**
              Item
                  5.
              Market
                  for Common Equity and Related Stockholder Matters
              9Item
                  6.
              Management’s
                  Discussion and Analysis and Results of Operations and Financial
                  Condition
              9Item
                  7.
              Financial
                  Statements
              16Item
                  8.
              Changes
                  in and Disagreements with Accountants on Accounting and Financial
                  Disclosure
              33Item
                  8A.
              Controls
                  and Procedures
              33Item
                  8B.
              Other
                  Information
              34**Part
                  III**
              Item
                  9.
              Directors,
                  Executive Officers, Promoters and Control Persons, Compliance with
                  Section
                  16(a) of the Exchange Act
              34Item
                  10.
              Executive
                  Compensation
              35Item
                  11.
              Security
                  Ownership of Certain Beneficial Owners and Management
              36Item
                  12.
              Certain
                  Relationships and Related Party Transactions
              37Item
                  13.
              Exhibits
              39Item
                  14.
              Principal
                  Accountant Fees and Services
              40
 
  
  **FORWARD-LOOKING
        STATEMENTS**
 
 This
        annual report on Form 10-KSB contains forward-looking statements within the
        meaning of the federal securities laws. These forwarding-looking statements
        include, without limitation, statements regarding the Company’s expectations and
        beliefs about the market and industry, its goals, plans, and expectations
        regarding its properties and services, its intentions and strategies regarding
        future acquisitions and sales of properties and businesses, its intentions
        and
        strategies regarding the formation of strategic relationships, its beliefs
        regarding the future success of its properties and services, its expectations
        and beliefs regarding competition, competitors, the basis of competition
        and its
        ability to compete, its beliefs and expectations regarding its ability to
        hire
        and retain personnel, its beliefs regarding period to period results of
        operations, its expectations regarding revenues, its expectations regarding
        future growth and financial performance, its beliefs and expectations regarding
        the adequacy of its facilities, and its beliefs and expectations regarding
        its
        financial position, ability to finance operations and growth and the amount
        of financing
        necessary to support its operations. These statements are subject to risks
        and
        uncertainties that could cause actual results and events to differ materially.
        The Company undertakes no obligation to update forward-looking statements
        to
        reflect events or circumstances occurring after the date of this annual report
        on Form 10-KSB.
 
 **PART
        I**
 
 **ITEM
        1.****BUSINESS**
 
 *GENERAL*
 
 Sterling
        Equity Holdings, Inc., a Nevada corporation (“Sterling Holdings” or the
“Company”), originally incorporated under the name BlueStar Leasing, Inc., was
        formed in January 2001 and, following a series of acquisitions during 2002
        and
        the sale of certain operations in 2003, is principally engaged in the business
        of acquiring, operating and holding equity interests in business entities
        primarily in the aviation and real estate industries.
 
 *HISTORY
        AND DEVELOPMENT OF THE COMPANY*
 
 BlueStar
        was originally formed as a "small ticket" regional leasing company working
        within select niche markets of vendors, small business owners and brokers.
        BlueStar was formed to provide a funding alternative to typical "credit scoring
        matrix" leasing companies for transactions that are slightly "outside the
        box"
        building a loyal customer base one lease at a time. BlueStar planned to
        establish a strong sales and marketing group specializing in bringing creative
        and flexible leasing and financing solutions to vendors, users of commercial
        equipment and small business owners with "bruised credit". BlueStar intended
        to
        fill the void that exists between the matrix lenders focusing on "A" credit
        ratings and small business owners in need of capital for the acquisition
        of
        equipment needed to grow their business.
 
 Effective
        at the close of business on September 30, 2002, BlueStar completed an exchange
        (the "Exchange") pursuant to which BlueStar issued an aggregate of 5,638,334
        shares of common stock in exchange for 100% of the outstanding shares of
        common
        stock of Sterling FBO Holdings, Inc. ("Sterling FBO"). Pursuant to the terms
        of
        the Exchange, each share of Sterling FBO common stock was exchangeable for
        one
        share of BlueStar common stock. As a result of the Exchange, Sterling FBO
        became
        a wholly owned subsidiary of BlueStar.
 
 Sterling
        FBO is a Nevada corporation formed in May 2002 to acquire own and operate
        private airport Fixed Base Operations ("FBO’s") and income producing real
        estate. At the time of the Exchange, Sterling FBO owned 88.9% or greater
        interests in, and operated, four industrial office facilities located in
        Austin,
        Texas and leased to governmental agencies. Additionally, at the time of the
        Exchange, Sterling FBO was engaged in negotiations with certain affiliates
        to
        acquire additional properties and FBO operations, which negotiations resulted
        in
        the acquisitions, between October and December 2002, of interests in a retail
        shopping center and five FBO’s, as follows:
 
 3
 ·
              In
                  October 2002, the Company, through Sterling FBO, completed the
                  acquisition
                  of a 99% limited partnership interest in Commodore Plaza, Ltd.
                  The Company
                  issued an aggregate of 2,000,000 shares of common stock to acquire
                  Commodore Plaza, Ltd.
 
 ·
              On
                  October 30, 2002, the Company, through Sterling FBO, completed
                  the
                  acquisition of a 100% ownership interest in Greeley FBO, L.L.C.
                  and
                  Sterling Austin Aero, L.P. The Company issued an aggregate of 3,143,334
                  shares of common stock to acquire Greeley FBO and 2,166,666 shares
                  of
                  common stock to acquire Sterling Austin
                  Aero.
 
 ·
              On
                  November 25, 2002, the Company, through Sterling FBO, completed
                  the
                  acquisition of a 100% ownership interest in Casper Jet Center,
                  L.L.C.,
                  Austin Aero FBO, Ltd., and Sterling-Ft. Worth Jet Center, Ltd.
                  The Company
                  issued an aggregate of 3,723,894 shares of common stock to acquire
                  Casper
                  Jet Center, L.L.C., 4,355,554 shares of common stock to acquire
                  Austin
                  Aero FBO, Ltd., and 1,153,333 shares of common stock to acquire
                  Sterling-Ft. Worth Jet Center, Ltd.
 
 ·
              On
                  December 30, 2002, the Company completed an exchange pursuant to
                  which
                  BlueStar issued an aggregate of 8,223,953 shares of common stock
                  in
                  exchange for 100% of the outstanding shares of common stock of
                  Ft. Worth
                  Jet Center, Inc.
 
 Commodore
        Plaza, Ltd. owns the Commodore Plaza Shopping Center in Gulfport, Mississippi
        that leases retail shopping space to various establishments on a net lease
        basis.
 
 Greeley
        FBO, LLC, Sterling Austin Aero, L.P., Casper Jet Center, L.L.C., Austin Aero
        FBO, Ltd., Sterling-Ft. Worth Jet Center, Ltd., and Ft. Worth Jet Center,
        Inc.
        (collectively, the FBO Companies), each owned and/or operated private airport
        facilities located in Greeley, Colorado, Austin, Texas, Casper, Wyoming,
        Fort
        Worth, Texas, and Tuscan, Arizona.
 
 Each
        of
        Commodore Plaza, Ltd. and the FBO Companies was acquired from persons and/or
        entities (including Sterling REIT, Inc., Hugo Verhaeghe, Chaz Glace and Thomas
        Mathew, and affiliated entities) that may be deemed to be affiliates of the
        Company by reason of the holdings of the common stock of the Company and/or
        by
        reason of common officers.
 
 On
        January 6 and February 7, 2003, the Company completed the sale of its FBO's
        in
        Fort Worth and Austin, Texas; Casper, Wyoming; Tucson, Arizona; and Greeley,
        Colorado for approximately $20,787,000 in cash and liquidation of debts and
        an
        "earn-out" of up to $6,000,000 in future revenues in excess of a specified
        base.
        Under the terms of the sale, the Company agreed to liquidate outstanding
        liabilities and obligations associated with the FBO operations and properties.
        Consequently, the Company paid creditors approximately $17,476,000, established
        an escrow fund of $589,000 to satisfy potential claims and obligations and
        deposited approximately $2,556,000 in the bank.
 
 In
        March
        2003, the Company changed its name from BlueStar Leasing, Inc. to Sterling
        Equity Holdings, Inc.
 
 As
        a
        result of the Exchange, the acquisitions during 2002 and the subsequent sale
        of
        operating FBO's, the Company altered its business plan to focus on the
        acquisition, ownership and operation of income producing real estate with
        an
        emphasis on FBO's and leased properties. The Company terminated the equipment
        leasing operations originally conducted by BlueStar. Following the sale of
        FBO
        properties in 2003, operations have been limited to operation of the four
        state-leased properties and the Commodore Plaza property.
 
 On
        January 13, 2004, Ron F. Bearden resigned as Chairman and President of the
        Company and Thomas Mathew was appointed President, Treasurer and a director
        and
        Lloyd Shoppa was appointed Chairman, Secretary and a director of the
        Company.
 
 In
        conjunction with the change of management, the new management team began
        an
        investigation of circumstances and events at the Company following the sale
        of
        the FBO properties in 2003 with the intent of bringing all financial statements
        and SEC reports current and implementing various procedures and initiatives
        to
        improve internal controls and protect corporate assets.
 
 4
 Initial
        results of the investigation conducted by the new management team indicated
        that
        $2,553,261 of funds of the Company had been advanced to Sterling REIT, Inc.
        at
        the direction of Lucky Srinivasan, a former officer of the Company, without
        proper authorization. The funds advanced to Sterling REIT were purportedly
        used
        to pay certain expenses of the Company and to pay certain expenses relating
        to
        properties of Sterling REIT that were to be transferred to the
        Company.
 
 Based
        on
        the initial findings of the new management, the Company and Sterling REIT
        entered into a Settlement Agreement pursuant to which Sterling REIT delivered
        to
        the Company a Promissory Note evidencing the obligation of Sterling REIT
        to pay
        the amounts advanced by the Company and a Pledge Agreement, Security Agreement
        and multiple Deeds of Trust securing repayment of the note with substantially
        all of the assets of Sterling REIT. All amounts owed by Sterling REIT have
        been
        written off as bad debts. During 2004, the Company received certain excess
        proceeds from the sale of properties by Sterling REIT resulting in a partial
        recovery of bad debt.
 
 On
        January 20, 2004, the Company entered into a Settlement Agreement relating
        to
        the 2003 sale of FBO properties pursuant to which the $6 million earn-out
        was
        terminated and $350,000 was distributed to the Company in full settlement
        of the
        contingency escrow.
 
 On
        December 15, 2004, the Company completed the sale of its property
        known as
        4719-4735 South Congress, consisting of approximately 1.14 acres with
        improvements located in Austin, Texas, which property was leased by the Company
        to agencies of the State of Texas. The property was sold to SAGA Building,
        LLP,
        an unaffiliated third party. The sale price of the property was $1,200,000
        in
        cash. The sales proceeds were used to reduce existing indebtedness on the
        Company’s properties.
 
 Simultaneous
        with the appointment of the new management team, the Company relocated its
        executive offices to 1600 Airport Freeway, Suite 370, Bedford, Texas 76022,
        telephone number (817) 358-0551.
 
 *PROPERTIES*
 
 As
        of
        December 31, 2004, the Company owned interests in four properties owned in
        fee
        simple.
 
 Three
        of
        the Company’s properties held at December 31, 2004 were located in Austin, Texas
        and were leased to agencies of the State of Texas. Under those leases, the
        Company receives fixed monthly rental payments and the tenants are responsible
        for payment of various operating costs of the property. All of its Austin
        leases
        specify a minimum amount of insurance coverage required to be carried by
        each
        tenant. The Company believes that the insurance policies required to be carried
        by the tenants will adequately cover the replacement cost of the properties
        and
        any personal liability losses, which the tenants may sustain.
  5
  The
          following table
          summarizes, as of April 1, 2005, the principal terms and significant data
          regarding each of the leased properties in Austin, Texas:
 
 4501Springdale
              4405Springdale
              4708
                  MLKLease
                  term (1)Suite
                A
              Vacant
              5
                  Yrs
              5
                  YrsSuite
                B
              8
                  Yrs
              5
                  Yrs
              NASuite
                C
              NA
              5
                  Yrs
              NAWarehouse
              NA
              NA
              VacantExpirationSuite
                A
              NA
              1/31/07
              7/31/07Suite
                B
              1/31/09
              1/31/07
              NASuite
                C
              NA
              1/31/07
              NAWarehouse
              NA
              NA
              NARenewal
                  options
              NA
              NA
              NASquare
                  footageSuite
                A
              4,663
              16,475
              12,000Suite
                B
              7,945
              10,975
              NASuite
                C
              NA
              16,470
              NAWarehouse
              NA
              NA
              32,800Base
                  Annual RentalSuite
                A
              NA
              $145,102
              $108,000Suite
                B
              $81,975
              $84,649
              NASuite
                C
              NA
              $114,636
              NAWarehouse
              NA
              NA
              NA
 
 (1)  Each
        of
        the leases includes a right on the part of the State of Texas as tenant to
        terminate the lease based on budgetary restraints.
 
 The
        fourth leased property held at December 31, 2004 is the Commodore Plaza Shopping
        Center located in Gulfport, Mississippi and leased to retail establishments.
        Under those leases, the Company receives fixed monthly rental payments and
        the
        tenants are responsible for payment of all property taxes, general liability
        insurance, utility expenses and maintenance of the interior of their space.
        All
        of the leases specify a minimum amount of insurance coverage required to
        be
        carried by each tenant in addition to the "all risks" insurance policy for
        100%
        of the replacement value of the property.
 
 The
        following table summarizes, as of April 1, 2005, the principal terms and
        significant data regarding each of the tenants of Commodore Plaza Shopping
        Center:
 
 OfficeMax
              Michaels
              NextelLease
                  term
              15
                  Yrs
              10
                  Yrs
              5
                  YrsExpiration
                  of primary term
              6/03
              7/08
              3/10Expiration
                  of current term
              7/13
              1/09
              3/10Renewal
                  option
              4
                  Options,5
                  years each
              4
                  Options,5
                  years each
              2
                  Options,5
                  years eachSquare
                  footage
              23,500
              19,834
              3,181Base
                  annual rental
              $246,756
              $178,512
              $35,774
 
 6
 *DISCONTINUED
          OPERATIONS*
 
 *Sale
        of Austin, Texas Property*
 
 On
        December 15, 2004, the Company completed the sale of its property known as
        4719-4735 South Congress in Austin, Texas, consisting of approximately 1.14
        acres with improvements, which property was leased by the Company to agencies
        of
        the State of Texas. The property was sold to SAGA Building, LLP, an unaffiliated
        third party. The sale price of the property was $1,200,000, the proceeds
        of
        which were applied in full to transaction costs and reduction of the Company’s
        secured debt. The Company recorded a loss of approximately $37,000, which
        loss
        is included in “Gain (loss) from discontinued operations” on the consolidated
        statements of operations.
 
 *Sale
        of FBO Operations*
 
 From
        their acquisition, between October and December 2002, and their sale in February
        2003, the Company operated five FBO properties, consisting of two properties
        located in Texas, one property located in Colorado, one property located
        in
        Arizona and one property located in Wyoming. Each of the FBO properties
        consisted of physical improvements, generally consisting of offices, hangars
        and
        related improvements typically used in conducting airport operations, located
        on
        airport property and leased from the airport. The Company’s FBO business
        included aviation fueling services, aircraft ground services and other aviation
        services.
 
 On
        February 27, 2003, the Company completed the sale of all of the assets and
        operations of its Sterling-Austin Aero, Sterling-Forth Worth Jet Center,
        Austin
        Aero FBO, Fort Worth Jet Center, Casper Jet Center and Greeley FBO subsidiaries,
        comprising all of its FBO properties and operations. The assets and operations
        sold consisted principally of real estate, permits to conduct fixed base
        flight
        support operations for commercial, private, military and government aircraft,
        facilities improvements, equipment and related assets.
 
 The
        assets and operations were sold to Trajen Flight Support, L.P., an unaffiliated
        third party, for a total purchase price of $20.8 million plus an "earn-out"
        capped at $6 million based on jet fuel sales from the five defined FBO
        operations over the succeeding three years as compared to certain benchmarks.
        The purchase price consisted of $11.5 million paid on January 6, 2003 with
        the
        balance being paid in full at closing on February 27, 2003. Pursuant to a
        Settlement Agreement entered into in January 2004, the earn-out provision
        relating to the Company’s sale to Trajen was terminated.
 
 *OPERATING
        STRATEGY*
 
 The
        Company intends to continue its business of operating and holding real
        properties for investment and may evaluate the acquisition of aviation related
        businesses. It will seek to acquire operating businesses that are aviation
        related including service businesses with the objective to own the business
        as a
        subsidiary or as an investment which can generate income under the Company’s
        management. While it is not a principal objective, the Company may from time
        to
        time acquire businesses for investment or development not in the aviation
        industry. Each potential acquisition and leasing transaction will be evaluated
        based on the ability to generate sufficient rates of return in excess of
        the
        Company’s cost of capital. The Company’s objectives are:
 
 (1)
        to
        preserve and protect its capital by the acquisition of income producing
        businesses or improved real estate properties on an "all cash" basis or where
        favorable financing is available;
 (2)
        to
        purchase income-producing businesses and properties at prices that are below
        appraised values; and
 (3)
        to
        obtain capital appreciation through increases in the value of its businesses
        and
        properties.
 
 There
        can
        be no assurance that such objectives can be attained.
 7
  *PROPERTY
          MANAGEMENT*
 
 The
        supervision of the operations of the properties is managed principally by
        management of the Company’s subsidiary, Sterling FBO. Because of the nature of
        the Company’s properties and the leases on those properties, necessary
        management functions are limited. If and when needed to supplement the efforts
        and capabilities of the Company’s management, the Company may retain third-party
        real estate professionals to provide leasing services in connection with
        identifying and qualifying prospective tenants, assist in the negotiation
        of
        leases, provide periodic financial statements, receive and deposit monthly
        lease
        payments, periodically verify tenant payments of real estate taxes and insurance
        coverage, and periodically inspect properties and tenant records where
        applicable. Third party real estate professionals, and affiliates providing
        services in lieu of such real estate professionals, will be compensated for
        administrative and management services in an amount not to exceed those fees
        which would be customarily charged in an arms-length transaction by others
        rendering similar services. The tenants are responsible, at their expense,
        for
        day-to-day on-site management and maintenance of the properties.
 
 *FINANCING*
 
 The
        Company has no specific guidelines relating to the manner in which it finances
        the acquisition and operation of businesses or properties. Management intends
        to
        seek out, evaluate and select the most favorable financing option available
        to
        acquire and operate properties, which options may include, among others:
        (1) use
        of available funds on hand; (2) conventional lenders; (3) seller financing;
        (4)
        institutional lending sources; and (5) joint venture or similar structures.
        Debt
        financing received will typically include the granting of a first lien on
        assets
        or a mortgage first lien position on properties financed and require compliance
        with a variety of standard borrowing covenants.
 
 *COMPETITIVE
        CONDITIONS*
 
 The
        properties the Company owns in Austin, Texas at December 31, 2004 are leased
        to
        various agencies of the State of Texas. While those state agencies are not
        subject to competition, upon the expiration of the leases those agencies
        may
        seek out other space to lease. The tenants of the Company’s other retail
        property in Mississippi have long-term leases with options to extend and
        upon
        lease expiration, other competing tenants will be sought. Similarly, properties
        that the Company may acquire in the future will be subject to risks affecting
        the tenants and risks that tenants will relocate at the end of the lease
        term.
        The real estate rental market in the markets in which the Company operates
        now
        and in the future are subject to fluctuations and are affected by local economic
        conditions. There will typically be a large number of comparable properties
        that
        compete with the Company’s properties for tenants. Many property owner/operators
        may be willing to lease space on terms significantly more favorable to tenants
        than is the Company, in which case the Company may lose tenants. The Company
        attempts to mitigate competitive factors by acquiring properties with existing
        tenants that are financially sound and long-term leases.
 
 *EMPLOYEE* S
 
 As
        of
        April 1, 2005, the Company employed one full-time employee/officer of the
        Company. The Company’s current operations are limited to the acquisition,
        oversight, collection of lease payments and other administrative functions
        associated with the ownership of leased properties. In that regard, the Company
        may, from time to time retain consultants or part-time employees to provide
        services.
 
 **ITEM
        2.****PROPERTIES**
 
 As
        of
        April 1, 2005, the Company owned properties that are described more fully
        under
        Item 1. “Business - Properties”.
 
 As
        of
        April 1, 2005, the Company’s principal offices are located at 1600 Airport
        Freeway, Suite 370, Bedford, Texas 76022. Those offices are leased from a
        third
        party pursuant to a short-term lease at a monthly rent of approximately $1,200.
        Management believes that its facilities are adequate to support operations
        for
        the foreseeable future.
 
 8
 **ITEM
        3.****LEGAL
        PROCEEDINGS**
 
 The
        Company may from time to time be a party to lawsuits incidental to its business.
        The Company is not aware of any current, pending, or threatened litigation
        or
        proceedings that could have a material adverse effect on its results of
        operations, cash flows or financial condition.
 
 **ITEM
        4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
        HOLDERS**
 
 No
        matters were submitted during the fourth quarter of the period covered in
        this
        report to a vote of shareholders.
 
 **PART
        II**
 
 **ITEM
        5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS**
 
 
 **Market
        Information**
 
 The
        Company’s common stock trades on the Pink Sheets under the symbol
“SEQU”.
 
 There
        is
        no established trading market in the Company’s common stock and trading therein
        is sporadic. The last reported price of the Company’s common stock, as of April
        1, 2005, was $0.01.
 
 **Holders**
 
 As
        of
        April 1, 2005, there were approximately 42 holders of record of the Company’s
        common stock.
 
 **Dividends**
 
 The
        Company has not paid any cash dividends since its inception and presently
        anticipates that all earnings, if any, will be retained for development of
        the
        Company's business and that no dividends on the shares of common stock will
        be
        declared in the foreseeable future. Any future dividends will be subject
        to the
        discretion of the Company's Board of Directors and will depend upon, among
        other
        things, future earnings, the operating and financial condition of the Company,
        its capital requirements, general business conditions and other pertinent
        facts.
        Therefore, there can be no assurance that any dividends on the common stock
        will
        be paid in the future.
  **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, 2004, and the Company’s results of operations for the years in the
        two-year period ended December 31, 2004 and 2003, should be read in conjunction
        with the Company’s audited consolidated financial statements and notes thereto
        included elsewhere in this report.*
 
 **Overview**
 
 Sterling
        Equity Holdings, Inc.’s (“Sterling Holdings” or the “Company”) business during
        the 2004 period included operation of five properties under leases. During
        the
        2003 period, the Company also operated five FBO properties offering aviation
        fueling services, aircraft ground services and other aviation services. As
        a
        result of the disposal of all FBO operations in 2003, all operating results
        relating to the FBO operations have been reclassified as “discontinued
        operations” and are reported as a single entry on the Consolidated Statements of
        Operations. Additionally, on December 15, 2004, the Company completed the
        sale
        of its property known as 4719-4735 South Congress, consisting of
        approximately 1.14 acres with improvements located in Austin, Texas, which
        property was leased by the Company to agencies of the State of Texas. As
        a
        result of this sale, all operating results relating to 4719-4735 South Congress
        operations have been reclassified as “discontinued operations” and are reported
        as a single entry on the Consolidated Statements of Operations.
 
 9
 Leased
        properties held during the 2004 period consisted of four properties located
        in
        Austin, Texas, each of which was leased to agencies of the State of Texas
        under
        leases in which the tenant pays a fixed monthly rental and a negotiated portion
        of the operating costs relating to the property. During the 2004 period,
        the
        Company also owned one retail property in Gulfport, Mississippi, which is
        currently leased to retail tenants on a "net lease" basis.
 
 **2004
        Developments**
 
 During
        the 2004 period, the Company's operations were focused on operation of its
        existing properties and cost control measures. During the period, the Company
        was also engaged in efforts to identify and secure opportunities in the aviation
        industry.
 
 In
        January 2004, the Company entered into a Settlement Agreement relating to
        the
        2003 sale of FBO properties pursuant to which the $6 million earn-out was
        terminated and $350,000 was distributed to the Company in full settlement
        of the
        contingency escrow.
 
 In
        April
        2004, the Company received $485,000 from the settlement of a lawsuit relating
        to
        the Fort Worth Jet Center property that was sold in 2003. The property incurred
        hail damage to its roof and, in lieu of replacing the roof, the Company's
        insurer recommended that repairs be made by contractors and used products
        recommended by the insurer. The repairs performed by the contractor were
        ineffective. As a result, the Company filed suit against the insurer, the
        contractor and the product manufacturer. The Company retained the rights
        under
        the suit following the sale of the Fort Worth Jet Center property.
 
 In
        2004,
        Sterling REIT sold an existing property on which the Company had a junior
        lien
        position granted in connection with the previous settlement of claims regarding
        amounts advanced to Sterling REIT. In connection with the Company's agreement
        to
        release its junior lien, Sterling REIT remitted excess proceeds from the
        sale,
        in the amount of $85,000. As amounts owed by Sterling REIT had previously
        been
        written off as bad debts, the receipt of the payment was reflected as recovery
        of a bad debt.
 
 In
        September 2004, the Company settled a lawsuit with the City of Austin related
        to
        property taxes. This resulted in a release of escrowed funds of $222,000
        established in the sale of assets in 2002. This amount is included in “other
        income” on the Consolidated Statements of Operations.
 
 In
        December 2004, the Company completed the sale of its property known as 4719-4735
        South Congress, consisting of approximately 1.14 acres with improvements
        located
        in Austin, Texas, which property was leased by the Company to agencies of
        the
        State of Texas. The property was sold to SAGA Building, LLP, an unaffiliated
        third party. The sale price of the property was $1,200,000 in cash. The sales
        proceeds were used to reduce existing indebtedness of the Company's
        properties.
 
 **Critical
        Accounting Policies**
 
 The
        following describes the critical accounting policies used in reporting the
        Company’s financial condition and results of operations. In some cases,
        accounting standards allow more than one alternative accounting method for
        reporting. In those cases, reported results of operations would be different
        should the Company employ an alternative accounting method.
 
 *Impairment
        of Long-Lived Assets*
 
 The
        Company reviews all long-lived assets on a regular basis to determine if
        there
        has been impairment in the value of those assets. If, upon review, it is
        determined that the carrying value of those assets may not be recoverable,
        the
        Company will record a charge to earnings and reduce the value of the asset
        on
        the balance sheet to the amount determined to be recoverable.
 
 10
 For
        purposes of evaluating recoverability of long-lived assets, the recoverability
        test is performed using undiscounted cash flows of the individual assets
        and
        consolidated undiscounted net cash flows for long-lived assets not identifiable
        to individual properties compared to the related carrying value. If the
        undiscounted operating income is less than the carrying value, the amount
        of the
        impairment, if any, will be determined by comparing the carrying value of
        each
        asset with its fair value. Fair value is generally based on a discounted
        cash
        flow analysis.
 
 Based
        on
        the Company’s review of present operating properties and other long-lived
        assets, during the fiscal year ended December 31, 2004, the Company recorded
        no
        impairments of long-lived assets.
 
 *Revenue
        Recognition*
 
 Rental
        income is recognized on a straight-line basis over the term of the lease.
        The
        Company establishes, on a current basis, an allowance for future potential
        tenant credit losses that may occur against this account. Amounts reflected
        as
        accounts receivable on the balance sheet are net of such allowance, if required.
        In establishing the allowance, the Company evaluates the ability of each
        tenant
        to make required rental payments. If the financial condition of a specific
        tenant were to deteriorate, resulting in an impairment of their ability to
        make
        payments, additional allowances will be required.
 
 Based
        on
        the Company’s review of the ability of tenants to pay required rental payments,
        no allowance for tenant credit losses were established as of December 31,
        2004.
 
 **Results
        of Operations**
 
 *Revenue*
 
 Revenue
        totaled $1,150,455 during the year ended December 31, 2004 as compared to
        $1,144,808 during the year ended December 31, 2003. All revenue was derived
        from
        the leases of the four properties owned and operated by the Company at December
        31, 2004. Base rental amounts are fixed by contract subject to contractual
        escalation provisions and obligations of tenants to pay certain operating
        expenses associated with the properties. Estimated minimum annual rental
        payments to the Company, after giving effect to the sale of a property in
        December 2004, for the current leased properties are approximately $960,000
        annually through 2006 and decrease thereafter.
 
 *Real
        Estate Operating Expenses*
 
 Real
        estate operating expenses are costs associated with the ownership and operation
        of rental properties. Principal rental operating expenses consist of interest,
        taxes, depreciation and professional and consulting fees. Real estate operating
        expenses totaled $1,927,555 during the year ended December 31, 2004 as compared
        to $2,118,981 during the same period in 2003. The reduction in real estate
        operating expenses reflects a reduction in interest, taxes, professional
        and
        consulting and depreciation and amortization, partially offset by increases
        in
        repairs and maintenance expense and in other expenses. The decline in interest
        expense was attributable to the consolidation of three separate mortgage
        notes
        into one with more favorable interest terms while the decline in property
        taxes
        was attributable to interest and penalties paid in 2003 for late payment
        of
        property taxes for prior years.  Professional and consulting fees
        decreased
        7% during 2004 as compared to 2003 reflecting a reduction of costs associated
        with bringing the Company's public company reports current, but still remained
        at high levels due to ongoing efforts to bring delinquent reports current
        and
        costs associated with settling various disputes. Professional and
        consulting fees in 2004  included accounting fees of $141,339, legal
        fees
        of $193,290 and management fees and other consulting fees of $186,661, which
        amount includes $180,000 paid to Mr. Mathew, the Company's President. The
        Company anticipates that professional fees will be substantially reduced
        in
        2005 with completion of various settlements and efforts to bring reports
        current. The increase in other expense reflects certain recurring office
        and
        general and administrative expenses which were included in discontinued
        operations during 2003.
 
 11
 *Other
        Operating Expenses*
 
 Other
        operating expenses related to penalties due the IRS for unpaid income taxes
        totaling $55,491 and bad debts totaling $87,196 during the year ended December
        31, 2004, compared to $1,694,264 of bad debts during the same period in 2003.
        Bad debt expense for both periods relate to funds advanced to Sterling REIT,
        an
        affiliated shareholder of the Company, in connection with the payment of
        certain
        expenses relating to properties to be transferred from Sterling REIT to the
        Company. The properties in question were never transferred to the Company.
        In
        2004, pursuant to the terms of a Settlement Agreement, Sterling REIT pledged
        substantially all of its assets to the Company to secure repayment of amounts
        advanced by the Company. Based on an evaluation by management, all advances
        made
        to Sterling REIT at December 31, 2003 were determined to be uncollectible.
        During April 2005, the Company foreclosed and cancelled 11,320,007 shares
        of its
        common stock owned by Sterling REIT and pledged to the Company to secure
        repayment of advances to Sterling REIT by the Company totaling
        $2,553,261.
 
 *Other
        Income*
 
 Other
        income, consisting of interest, recovery of bad debts, settlement of lawsuits
        and other income, totaled $833,919 during the year ended December 31, 2004
        as
        compared to $47,175 during the same period in 2003. The increase in other
        income
        related to a recovery of bad debts of $85,000, receipt of settlement proceeds
        from two lawsuits of $707,000 and receipt of other miscellaneous income of
        $22,431 during the 2004 period, partially offset by a reduction in interest
        income from $47,175 in 2003 to $19,488 in 2004.
 
 *Income
        Taxes*
 
 Income
        tax expense of $53,178 was recorded during the 2004 period as compared to
        an
        income tax benefit of $811,290 during the 2003 period. The deferred income
        tax
        benefit during the 2003 period reflected the net operating losses for the
        period
        and the gain from discontinued operations.
 
 *Discontinued
        Operations*
 
 As
        a
        result of the sale of all FBO operations in 2003, all revenue and expenses
        relating to those operations was classified as discontinued operations and
        was
        recorded, net of a gain arising from the sale, as a net amount. During the
        2003
        period, the Company recorded a gain from discontinued operations of $3,199,334,
        including a gain on the sale of the FBO operations of $3,632,981. As a result
        of
        the sale of its property known as 4719-4735 South Congress in Austin, Texas,
        the
        Company recorded a loss from discontinued operations of $139,284 and $102,161
        for the years ended December 31, 2004 and 2003, respectively.
 
 The
        Company also recorded a tax provision of $1,339,144 in the 2003 period in
        connection with the discontinued FBO operations and a tax benefit of $47,356
        in
        the 2004 period in connection with the sale of its 4719-4735 South Congress
        property.
 
 **Liquidity
        and Capital Resources**
 
 *Cash
        and Working Capital Position*
 
 At
        December 31, 2004, the Company had cash balances in non-restrictive accounts
        of
        $214,058 and a working capital deficit of approximately $5,079,177 as compared
        to cash balances in non-restrictive accounts of $3,695 and a working capital
        deficit of approximately $706,397 at December 31, 2003. Included in the working
        capital balance at December 31, 2004 was $201,346 of restricted cash held
        in
        trust by the lender on the Austin, Texas properties to assure compliance
        with
        financial ratios under the loan pending the leasing of vacant office space.
        The
        note on the three Austin buildings has normal covenants regarding liquidation,
        merger, sale of assets, indebtedness, transfer of ownership, payment of
        dividends and other restrictions. The note also has a “debt service coverage
        ratio" as defined in the note agreement and reporting requirements. At December
        31, 2004, the Company was in default of the debt service coverage ratio and
        received a verbal waiver of this covenant until September 30, 2005. The entire
        amount of this note, which is due on March 27, 2006, has been classified
        as a
        current liability on the balance sheet. The Company is currently seeking
        alternative financing to retire this note and extend the due date.
 
 12
 At
        December 31, 2003, working capital balances included $759,947 of restricted
        cash
        reserved pursuant to the terms of a $750,000 line of credit. An additional
        $140,809 was held in escrow at December 31, 2004 and $107,540 was held in
        escrow
        at December 31, 2003 by the lender for the Commodore Plaza Shopping Center
        in
        Gulfport, Mississippi.
 
 During
        the year ended December 31, 2004, the Company entered into a settlement
        agreement relating to certain disputes arising in connection with the sale
        of
        the FBO properties. Pursuant to that settlement, the Company released to
        the
        purchaser of the FBO properties the amount in escrow other than $350,000
        that
        the Company retained.
 
 During
        the year ended December 31, 2004, the Company also received $485,000 from
        the
        settlement of a lawsuit retained following the sale of the FBO properties,
        $222,000 from settlement of a lawsuit with the City of Austin relating to
        taxes
        owing on the Austin FBO properties and $85,000 was recovered that had previously
        been written off as a bad debt.
 
 During
        the year ended December 31, 2004, a $750,000 certificate of deposit, comprising
        substantially all of the restricted cash balance, was released to settle
        a
        $750,000 line of credit.
 
 During
        the year ended December 31, 2004, the Company borrowed $175,000 from a bank.
        The
        note was due February 16, 2005, payable in monthly installments of $15,027
        including interest of 5.5% per annum, however the bank could call the note
        at
        any time. The note was guaranteed by an officer of the Company. In May 2004,
        the
        Company borrowed $300,000 from the same bank. The note was due June 5, 2005
        with
        an interest rate of 5.5% and interest only was due for the first three months.
        Starting the fourth month, nine monthly installments of $30,773, including
        interest, were due; however the bank could call the note at any time. The
        note
        was guaranteed by an officer of the Company. Approximately $147,000 of this
        loan
        was used to pay off the loan incurred in February 2004 at the same bank and
        the
        Company repaid the $300,000 note with the proceeds from the sale of its Austin,
        Texas property in December 2004.
 
 *Cash
        Flows*
 
 Operations
        provided $124,257 of cash during the year ended December 31, 2004, as compared
        to $2,381,533 of cash used in operations during the year ended December 31,
        2003. The improvement in operating cash flows during the 2004 period was
        a
        result of reduced expenses during the current period and the incurrence of
        bad
        debt expense of $1,688,288 during the 2003 period.
 
 Investing
        activities provided cash of $20,619 during the 2004 period, relating to the
        sale
        of the Austin, Texas property. Investing activities provided $1,369,819 of
        cash
        during the 2003 period. The cash provided by investing activities during
        the
        2003 period related to the receipt of net proceeds from the sale of discontinued
        operations, partially offset by the use of a certificate of deposit to secure
        a
        line of credit and investments in leasehold improvements.
 
 Financing
        activities provided $65,487 of cash during the year ended December 31, 2004,
        and
        provided $539,564 of cash during the 2003 period. Cash provided by financing
        activities during the 2004 period related principally to proceeds received
        under
        the line of credit and borrowings. The cash provided by financing activities
        during the 2003 period related to proceeds from a line of credit, partially
        offset by payments on mortgages and notes payable.
 
 *Long-Term
        Debt*
 
 At
        December 31, 2004, the Company had long-term debt, consisting of real estate
        notes payable, of $3,979,676 as compared to $9,632,435 of long-term debt
        at
        December 31, 2003. The reduction in long-term debt during 2004 was attributable
        to regular scheduled debt service payments, the payoff of a mortgage note
        with
        the sale of its Austin, Texas property in 2004 and the classification as
        “Current portion - notes payable” of the loan on its Austin, Texas properties as
        a result of the Company being in default of the debt service coverage ratio.
        The
        Company received a verbal waiver of this ratio until September 30, 2005.
        The
        Company is currently seeking alternative financing to retire this note and
        extend its due date. This note is secured by a first lien position on the
        Company’s Austin, Texas real estate.
 
 The
        long-term indebtedness at December 31, 2004 was comprised of one loan on
        the
        Company's Gulfport, Mississippi property, which is secured by a first lien
        position on the Company's Gulfport, Mississippi real estate.
 
 13
 *Financial
        Commitments and Requirements*
 
 The
        Company's principal financial commitments and requirements relate to funding
        operational deficits, if any, overhead and servicing debt on Company real
        estate.
 
 The
        Company’s only material contractual obligations requiring determinable future
        payments on its part are its notes payable secured by real estate. Scheduled
        debt service payments on real estate notes, excluding debt relating to assets
        held for sale, at December 31, 2004 are as follows:
 
 Years
                  Ending December 31,
              
              Amounts2005
              
              $
              5,007,7172006
              
              
              41,8212007
              
              
              45,1062008
              
              
              47,8032009
              
              
              52,401Thereafter
              
              
              3,752,545Total
              
              $
              8,947,393
 
 *Due
        from Affiliates*
 
 Due
        from
        affiliates, totaling $65,289, represents amounts owed to the Company by Sterling
        REIT. The amounts due from Sterling REIT represent rents previously collected
        by
        Sterling REIT and belonging to the Company and amounts advanced by the Company
        to Sterling REIT to facilitate the sale by Sterling REIT of various properties
        with the agreement that Sterling REIT will repay all amounts owed to the
        Company
        from the proceeds of the sale of the properties.  The due from affiliates
        owed by Sterling REIT was repaid in full in 2005.
 
 *Inflation*
 
 Inflation
        has historically not had a material effect on the Company’s operations. Each of
        its leases includes escalation provisions based on cost-of-living increases.
        Accordingly, the Company believes inflation will not have a material adverse
        effect on its future operations.
 
 **Off-Balance
        Sheet Arrangements**
 
 The
        Company does not have any off-balance sheet arrangements.
 
 **New
        Accounting Pronouncements**
 
 In
        December 2004, the Financial Accounting Standards Board, or FASB, issued
        Statement of Financial Accounting Standards No. 123R “Share-Based Payment” (SFAS
        123R). This statement revises SFAS No. 123, supersedes APB No. 25, and requires
        companies to recognize the cost of employee stock options and other awards
        of
        stock-based compensation based on the fair value of the award as of the grant
        date. The effective date of this pronouncement is as of the beginning of
        the
        first interim or annual period that begins after June 15, 2005. The adoption
        of
        FASB No. 123R will not have a material effect on the Company’s consolidated
        financial position, results of operations or cash flows.
 
 14
 In
        December 2004, the FASB published the following two final FASB Staff Positions,
        effective immediately. FAS 109-1, "Application of FASB Statement No. 109,
        Accounting for Income Taxes, to the Tax Deduction on Qualified Production
        Activities Provided by the American Jobs Creation Act of 2004," giving guidance
        on applying FASB Statement No. 109, Accounting for Income Taxes, to the tax
        deduction on qualified production activities provided by the American Jobs
        Creation Act of 2004. FAS 109-2 "Accounting and Disclosure Guidance for that
        Foreign Earnings Repatriation Provision within the American Jobs Creation
        Act of
        2004" provides guidance on the Act's repatriation provision. The Company
        does
        not believe that the adoption of FAS 109-1 or FAS 109-2 will have a material
        impact on its consolidated financial position, results of operations or cash
        flows.
 
 In
        November 2004, the FASB Emerging Issues Task Force, or EITF, reached a consensus
        in applying the conditions in Paragraph 42 of SFAS No. 144, "Accounting for
        the
        Impairment or Disposal of Long-Lived Assets, in Determining Whether to Report
        Discontinued Operations" (EITF 03-13). Evaluation of whether operations and
        cash
        flows have been eliminated depends on whether (1) continuing operations and
        cash
        flows are expected to be generated, and (2) the cash flows, based on their
        nature and significance, are considered direct or indirect. This consensus
        should be applied to a component that is either disposed of or classified
        as
        held for sale in fiscal periods beginning after December 15, 2004. The Company
        does not believe that the adoption of EITF 03-13 will have a material impact
        on
        its consolidated financial position, results of operations or cash
        flows.
 
 In
        November 2004, the FASB issued SFAS No. 151, "Inventory Costs—An Amendment of
        ARB No. 43, Chapter 4" (SFAS No. 151). SFAS No. 151 amends the guidance in
        ARB
        No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal
        amounts of idle facility expense, freight, handling costs, and wasted material
        (spoilage). Among other provisions, the new rule requires that items such
        as
        idle facility expense, excessive spoilage, double freight, and rehandling
        costs
        be recognized as current-period charges regardless of whether they meet the
        criterion of "so abnormal" as stated in ARB No. 43. SFAS No. 151 is effective
        for fiscal years beginning after June 15, 2005 and is required to be adopted
        by
        the Company in the first quarter of fiscal 2006, beginning on January 1,
        2006.
        The Company does not believe the adoption of SFAS No. 151 will have a material
        impact on the consolidated financial position, results of operations and
        cash
        flows.
 
  
  **ITEM
        7. FINANCIAL STATEMENTS**
 
 
 
 **REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 
 
 
 
 To
        the
        Board of Directors of:
 Sterling
        Equity Holdings, Inc. and Subsidiary
 Bedford,
        Texas
 
 We
        have
        audited the accompanying balance sheets of Sterling Equity Holdings, Inc.
        and
        Subsidiary, as of December 31, 2004 and 2003 and the related consolidated
        statements of operations, shareholders’ deficit and cash flows for the two years
        ended December 31, 2004 and 2003. These consolidated financial statements
        are
        the responsibility of the Company’s management. Our responsibility is to express
        an opinion on these consolidated financial statements based on our
        audit.
 
 We
        conducted our audit in accordance with auditing standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the
        consolidated financial statements are free of material misstatement. An audit
        includes examining, on a test basis, evidence supporting the amounts and
        disclosures in the consolidated financial statements. An audit also includes
        assessing the accounting principles used and significant estimates made by
        management, as well as evaluating the overall consolidated financial statement
        presentation. We believe that our audit provides a reasonable basis for our
        opinion.
 
 In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects, the financial position of Sterling Equity Holdings,
        Inc. and Subsidiary as of December 31, 2004 and 2003, and the results of
        its
        operations and cash flows for the two years ended December 31, 2004 and 2003
        in
        conformity with accounting principles generally accepted in the United States
        of
        America.
 
 The
        accompanying consolidated financial statements have been prepared assuming
        that
        the Company will continue as a going concern. The Company has suffered recurring
        losses from operations and has cash flow problems. These conditions raise
        substantial doubt about the Company’s ability to continue as a going concern.
        Management’s plans in regard to those matters also are described in Note 2. The
        consolidated financial statements do not include any adjustments that might
        result from the outcome of this uncertainty.
 
 
 
 Thomas
        Leger &
        Co., L.L.P.
 Houston,
        Texas
 March
        22,
        2005
  
  **STERLING
        EQUITY HOLDINGS, INC.**
 **AND
        SUBSIDIARY**
 **CONSOLIDATED
        BALANCE SHEETS**
 
 December
                  31,2004
              
              2003**ASSETS**Current
                  assets:Cash
              
              $
              214,058
              
              $
              3,695Cash in restricted accounts
              
              
              201,346
              
              
              759,947Accounts receivable
              
              
              35,692
              
              
              441,098Prepaid items and other
              
              
              30,249
              
              
              42,921Total current assets
              
              
              481,345
              
              
              1,247,661Investment
                  in real estate:Land, improvements and leaseholds
              
              
              9,077,316
              
              
              10,264,212Accumulated depreciation
              
              
              (2,740,269
              )
              
              (2,711,243
              )6,337,047
              
              
              7,552,969Land
              
              
              1,258,643
              
              
              1,389,420Net investment in real estate
              
              
              7,595,690
              
              
              8,942,389Other
                  assets:Goodwill
              
              
              647,043
              
              
              908,523Deferred financing costs, net of amortization of $72,047 and
                    $79,643 at
                    December 31, 2004 and 2003, respectively
              
              
              133,902
              
              
              175,054Due
                  from affiliates
              
              
              65,289
              
              
              --Escrowed funds
              
              
              140,809
              
              
              107,540Total other assets
              
              
              987,043
              
              
              1,191,117Total
                  assets
              
              $
              9,064,078
              
              $
              11,381,167**LIABILITIES
                  AND SHAREHOLDERS' DEFICIT**Current
                  liabilities:Accounts payable, trade
              
              $
              41,938
              
              $
              191,233Accrued liabilities
              
              
              202,041
              
              
              438,008Income taxes payable
              
              
              307,912
              
              
              253,000Line of credit
              
              
              --
              
              
              750,000Current portion - notes payable
              
              
              5,007,717
              
              
              279,152Other notes payable
              
              
              914
              
              
              42,665Total current liabilities
              
              
              5,560,522
              
              
              1,954,058Long-term
                  debt
              
              
              3,939,676
              
              
              9,632,435Commitments
                  and contingencies (Note 11)Shareholders'
                  equity (deficit):Preferred stock, $.001 par value, 5,000,000 shares authorized,
                  none
                  issued
              
              
              --
              
              
              --Common stock, $.001 par value, 70,000,000 shares authorized, 39,655,068
                  shares issued and outstandingat December 31, 2004 and 2003
              
              
              39,655
              
              
              39,655Additional paid-in capital
              
              
              607,163
              
              
              607,163Accumulated deficit
              
              
              (1,082,938
              )
              
              (852,144
              )Total shareholders’ deficit
              
              
              (436,120
              )
              
              (205,326
              )Total
                  liabilities and shareholders' deficit
              
              $
              9,064,078
              
              $
              11,381,167
 
 See
        accompanying notes to consolidated financial statements.
  
  **STERLING
        EQUITY HOLDINGS, INC.**
 **AND
        SUBSIDIARY**
 **CONSOLIDATED
        STATEMENTS OF OPERATIONS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2004 AND 2003**
 
 
 Twelve
                  Months EndedDecember
                  31,2004
              
              2003Rental
                  revenue
              
              $
              1,150,455
              
              $
              1,144,808Real
                  estate operating expenses:Interest expense
              
              
              575,228
              
              
              666,707Real estate taxes
              
              
              163,650
              
              
              197,596Depreciation and amortization
              
              
              455,976
              
              
              565,409Repairs and maintenance
              
              
              43,449
              
              
              34,353Utilities
              
              
              18,703
              
              
              18,763Professional and consulting fees
              
              
              514,331
              
              
              556,310Other
              
              
              156,218
              
              
              79,843Total
                real estate operating expenses
              
              
              1,927,555
              
              
              2,118,981Penalties
              
              
              55,491
              
              
              --Bad debt expense
              
              
              87,196
              
              
              1,694,264Total operating expenses
              
              
              2,070,242
              
              
              3,813,245Other
                  income:Interest income
              
              
              19,488
              
              
              47,175Recovery of bad debts
              
              
              85,000
              
              
              --Settlement of lawsuits
              
              
              707,000
              
              
              --Other
              
              
              22,431
              
              
              --Total other income
              
              
              833,919
              
              
              47,175Loss
                  before income taxes
              
              
              (85,868
              )
              
              (2,621,262
              )Benefit
                  (provision) for income tax expense
              
              
              (53,178
              )
              
              811,290Net
                  loss from continuing operations
              
              
              (139,046
              )
              
              (1,809,972
              )Discontinued
                  operations:Gain (loss) from discontinued operations, including loss of $37,015
                  in
                  2004 and gainof $3,632,981 in 2003 from disposition
              
              
              (139,104
              )
              
              3,199,334Benefit (provision) for income tax expense
              
              
              47,356
              
              
              (1,339,144
              )Net gain (loss) from discontinued operations
              
              
              (91,748
              )
              
              1,860,190Net
                  income (loss)
              
              $
              (230,794
              )
              $
              50,218Basic
                  and diluted net income (loss) per share:Loss from continuing operations
              
              $
              (0.01)
              
              $
              (0.05
              )Gain (loss) from discontinued operations
              
              
              --
              
              
              0.05Net
                  income (loss) per share
              
              $
              (0.01
              )
              $
              --Weighted
                  average number of common shares outstanding:Basic and diluted
              
              
              39,655,068
              
              
              39,655,068
 
 
 See
        accompanying notes to consolidated financial statements.
  
  **STERLING
        EQUITY HOLDINGS, INC.**
 **AND
        SUBSIDIARY**
 **CONSOLIDATED
        STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT**
 **FOR
        THE PERIOD JANUARY 1, 2003 THROUGH DECEMBER 31, 2004**
 
 
 Additional
              
              
              
              TotalCommon
                  Stock
              
              Paid-in
              
              Accumulated
              
              Shareholders’Shares
              
              Amount
              
              Capital
              
              Deficit
              
              DeficitBalances
                  January 1, 2003
              
              
              39,655,068
              
              $
              39,655
              
              $
              607,163
              
              $
              (902,362
              )
              $
              (255,544
              )Net
                  income
              
              
              --
              
              
              --
              
              
              --
              
              
              50,218
              
              
              50,218Balances
                  December 31, 2003
              
              
              39,655,068
              
              
              39,655
              
              
              607,163
              
              
              (852,144
              )
              
              (205,326
              )Net
                  loss
              
              
              --
              
              
              --
              
              
              --
              
              
              (230,794
              )
              
              (230,794
              )Balances
                  December 31, 2004
              
              
              39,655,068
              
              $
              39,655
              
              $
              607,163
              
              $
              (1,082,938
              )
              $
              (436,120
              )
 
 
 See
        accompanying notes to consolidated financial statements.
  
  **STERLING
        EQUITY HOLDINGS, INC.**
 **AND
        SUBSIDIARY**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2004 AND 2003**
 
 2004
              
              2003Cash
                  flows from operating activities:Net income (loss)
              
              $
              (230,794
              )
              $
              50,218Adjustments to reconcile net income (loss) to net cash provided
                  by (used
                  in) operating activities:Depreciation and amortization
              
              
              507,897
              
              
              645,677Expenses paid directly from new borrowings
              
              
              --
              
              
              140,801Gain from settlement of law suit
              
              
              (200,000
              )
              
              --Gain from settlement of notes payable
              
              
              (12,300
              )
              
              --(Gain) loss from discontinued operations
              
              
              37,015
              
              
              (3,379,557
              )Changes in assets and liabilities:Accounts receivable
              
              
              405,406
              
              
              (375,094
              )Prepaid items and other
              
              
              12,672
              
              
              (20,937
              )Other assets
              
              
              --
              
              
              177,402Due from affiliates
              
              
              (65,289
              )
              
              --Accounts payable
              
              
              (149,295
              )
              
              37,854Income taxes payable
              
              
              54,912
              
              
              253,000Accrued liabilities
              
              
              (235,967
              )
              
              89,103Net
                  cash provided by (used in) operating activities
              
              
              124,257
              
              
              (2,381,533
              )Cash
                  flows from investing activities:Net proceeds from sale of discontinued operations
              
              
              --
              
              
              2,142,566Payment of closing expenses from sale of property
              
              
              45,287
              
              
              --Certificate of deposit for security line of credit
              
              
              --
              
              
              (759,947
              )Decrease in restricted cash
              
              
              8,601
              
              
              --Increase in escrowed funds
              
              
              (33,269
              )
              
              --Land, building and improvements
              
              
              --
              
              
              (12,800
              )Net
                  cash provided by investing activities
              
              
              20,619
              
              
              1,369,819Cash
                  flows from financing activities:Proceeds from borrowings, net of repayments
              
              
              40,487
              
              
              --Repayment of mortgage and other notes payable
              
              
              --
              
              
              (210,436
              )Proceeds from line of credit
              
              
              25,000
              
              
              750,000Net
                  cash provided by financing activities
              
              
              65,487
              
              
              539,564Net
                  increase (decrease) in cash
              
              
              210,363
              
              
              (472,150
              )Cash
                  and cash equivalents, beginning of year
              
              
              3,695
              
              
              475,845Cash
                  and cash equivalents, end of year
              
              $
              214,058
              
              $
              3,695
  Supplemental
                  cash flow disclosures:Interest paid
              
              $
              649,917
              
              $
              522,222Income taxes paid
              
              
              16,900
              
              
              --Supplemental
                  non-cash disclosures:Certificate of deposit used to pay line of credit
              
              
              750,000
              
              
              --Cash proceeds from sale of assets deposited intoCash proceeds from sale of assets deposited into affiliate’s bank
                  account
              
              
              --
              
              
              363,620Proceeds from sale of assets
              
              
              --
              
              
              16,398,850Liabilities liquidated with proceeds from asset sales
              
              
              --
              
              
              (16,398,850
              )Increase in notes payable
              
              
              --
              
              
              228,828Increase in loan costs
              
              
              --
              
              
              73,851New borrowings used to pay existing notes payable
              
              
              --
              
              
              5,741,172Decrease in goodwill
              
              
              --
              
              
              109,194
 
 See
        accompanying notes to consolidated financial statements.
  
  **STERLING
        EQUITY HOLDINGS, INC.**
 **AND
        SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 
 **NOTE
        1.**  **HISTORY
        AND DEVELOPMENT OF THE COMPANY**
 
 Sterling
        Equity Holdings, Inc. (the “Company”) was chartered as BlueStar Leasing, Inc.
        (”BLS”) in January 2001 and in March 2003 the name was changed with a charter
        amendment. In July 2002, the majority shareholders of BLS reached an agreement
        with the shareholders of Sterling FBO Holdings, Inc. (“SFBO”). The Company
        exchanged its stock with the shareholders of SFBO resulting in SFBO becoming
        a
        wholly-owned subsidiary of the Company. SFBO, a Nevada corporation, was formed
        in May 2002 to acquire, own and operate income producing real estate and
        airplane service operations.
 
 The
        exchange, completed through a series of stock for stock exchanges between
        BLS
        and SFBO, commenced at the close of business on September 25, 2002, and was
        completed on December 30, 2002. At the time of the September 25, 2002 stock
        exchange, SFBO owned interests in, and operated, four office facilities that
        were leased to state governmental units located in Austin, Texas. SFBO acquired
        these interests from Sterling REIT, Inc., (“SRI”) and other affiliated parties
        in exchange for shares of common stock. SFBO owns 100% interest in three
        of the
        office facilities and approximately 89% in one of the office facilities.
        These
        facilities are hereinafter referred to as the “Austin Properties”. This
        acquisition was accounted for as a purchase. Contemporaneously with that
        acquisition, SFBO exchanged 100% of its then outstanding common shares, on
        a
        share for share basis, for 5,638,334 common shares of BLS.
 
 In
        a
        series of transactions consummated during the period between October 30,
        2002
        and December 30, 2002, the Company exchanged shares of its common stock for
        a
        100% interest that SFBO had acquired or exchanged common stock for outstanding
        stock of a corporation in five private aircraft flight service organizations
        and
        the real estate and operating licenses associated with each. Such service
        organizations are generally referred to as Fixed Base Operations or
“FBO’s.”
 
 SFBO
        acquired these FBO’s from SRI and affiliated shareholders for common stock in
        three planned separate transactions occurring in October, November and December
        of 2002. Those shareholders then immediately traded common shares, on a one
        for
        one basis, for common stock of BLS, except for the December 30, 2002 acquisition
        of operations in Fort Worth, Texas. For the December 30, 2002 acquisition,
        the
        Company exchanged its stock for the outstanding stock of Ft. Worth Jet Center,
        Inc. resulting in it becoming a wholly owned subsidiary of the Company. The
        acquisition of the five FBO’S was treated as a purchase as of the various
        effective dates, with its assets and obligations recorded at their fair
        value.
 
 On
        October 28, 2002, the Company acquired Commodore Plaza, Ltd, a limited
        partnership for an aggregate of 2,000,000 shares of its common stock. Commodore
        Plaza, Ltd. was acquired from four shareholders, each of which may be deemed
        to
        be affiliates of the Company by reason of the holdings of common stock.
        Commodore Plaza, Ltd. owns the Commodore Plaza Shopping Center in Gulfport,
        Mississippi which leases retail-shopping space to two major tenants on a
        net
        lease basis. The acquisition was accounted for as a purchase with its assets
        and
        obligations recorded at their fair value.
 22
  **NOTE
          2.**  **SUMMARY
          OF SIGNIFICANT ACCOUNTING POLICIES**
 
 **Critical
        Accounting Policies** - The
        Company believes that the following critical accounting policies affect its
        more
        significant judgments and estimates used in the preparation of its consolidated
        financial statements.
 
 *a)*
              *Acquired
                  Companies*
 
 The
        Company has fully implemented Statement of Financial Accounting Standards
        No.
        141 “Business Combinations”. As required by that standard, all acquired
        companies and properties were accounted for utilizing the “purchase method” of
        accounting and the fair value of the assets received and obligations assumed
        was
        the valuation basis for recording these transactions.
 
 The
        assets acquired and the liabilities assumed were recorded at their fair values
        as of the closing dates of the transactions. Additionally, in accordance
        with
        the rules of the Securities and Exchange Commission, the recorded fair value
        was
        not in excess of the “cash cost” of assets acquired from affiliated parties. The
        acquired companies’ results of operations are included in the consolidated
        statement of operations from the closing date of their acquisition.
 
 *b)*
              *Use
                  of Estimates*
 
 The
        preparation of the Company’s financial statements in conformity with accounting
        principles generally accepted in the United States of America requires the
        Company’s management to make estimates and assumptions that affect the reported
        amounts of assets and liabilities and disclosure of contingent assets and
        liabilities at the date of the financial statements and the reported amounts
        of
        revenues and expenses during the reporting period. Actual results could differ
        from those estimates.
 
 *c)*
              *Fair
                  Value of Financial
                  Instruments*
 
 Financial
        instruments that are subject to fair disclosure requirements are carried
        in the
        financial statements at amounts that approximate fair value and include cash
        and
        cash equivalents, accounts receivable and accounts payable. Fair values are
        based on assumptions concerning the amount and timing of estimated cash flows
        and assumed discount rates reflecting varying degrees of perceived
        risk.
 
 *d)*
              *Long-lived
                  Assets*
 
 The
        Company reviews for impairment of long-lived assets whenever events or changes
        in circumstances indicate that the carrying amount of an asset may not be
        recoverable. An impairment loss would be recognized when future cash flows
        expected to result from the use of the asset and its eventual disposition
        are
        less than its carrying amount. As of December 31, 2004, the Company has not
        identified any such impairment losses.
 
 *e)*
              *Comprehensive
                  Income (Loss)*
 
 Comprehensive
        income is defined as all changes in shareholders’ equity, exclusive of
        transactions with owners, such as capital instruments. Comprehensive income
        includes net income or loss, changes in certain assets and liabilities that
        are
        reported directly in equity such as translation adjustments on investments
        in
        foreign subsidiaries, changes in market value of certain investments in
        securities and certain changes in minimum pension liabilities. The Company’s
        comprehensive loss was equal to its net loss for the year ended December
        31,
        2004, and comprehensive income was equal to its net income for the year ended
        December 31, 2003.
 23
 *f)*
              *Discontinued
                  Operations*
 
 In
        accordance with SFAS 144 “Accounting for the Impairment or Disposal of Long
        Lived Assets”, effective for financial statements issued for fiscal years
        beginning after December 15, 2001, the results of operations and gain from
        the
        sale of the Company’s FBO entities sold in 2003 are reflected in the
        consolidated statements of operations as “Gain (loss) from discontinued
        operations” for the year ended December 31, 2003.
 
 The
        results of operations and loss from the sale of the Company’s property known as
        4719-4735 South Congress in 2004 are reflected in the consolidated statements
        of
        operations as “Gain (loss) from discontinued operations” for the years ended
        December 31, 2004 and 2003.
 
 *g)*
              *Real
                  Estate and Depreciation*
 
 Costs
        incurred for the acquisition, development, construction and improvement of
        real
        properties, as well as significant renovations and betterments to the
        properties, are capitalized.  Maintenance and repairs are charged
        to
        expense as incurred. Depreciation and amortization expense for the years
        ended
        December 31, 2004 and 2003, was $455,976 and $565,409,
        respectively.
 
 Amounts  included
        under the caption land, improvements and leaseholds on the consolidated balance
        sheets include the cost of the land fee interest, the land improvements,
        the
        leasehold improvements paid for tenants and are depreciated on the straight-line
        method over their estimated useful lives of 15 to 20 years.
 
 The
        Company’s rental properties are individually evaluated for impairment when
        conditions exist that may indicate that it is probable that the sum of their
        expected future cash flows (over the anticipated holding period on an
        undiscounted basis) is less than its historical net cost carrying value.
        Upon
        determination that a permanent impairment has occurred, rental properties
        are
        reduced to their fair value. For properties to be disposed of, an impairment
        loss is recognized when the fair value of the property, less the estimated
        cost
        to sell, is less than the carrying amount of the property measured at the
        time
        the Company has a commitment to sell the property and/or is actively marketing
        the property for sale. Subsequent to the date that a property is held for
        disposition, depreciation expense is not recorded.
 
 The
        Company evaluated for impairment its four remaining properties as of December
        31, 2004, and has determined no impairment is warranted.
 
 *h)*
              *Cash
                  and Cash Equivalents*
 
 Cash
        and
        cash equivalents consist of cash on hand and held in banks in unrestricted
        accounts. The Company considers all liquid investments with an original maturity
        date of three months or less to be cash equivalents.
 
 *i)*
              *Restricted
                  Cash*
 
 Restricted
        cash consists of a $200,000 certificate of deposit which has been placed
        in
        trust with Plains Capital Bank to fulfill the loan ratio covenant of the
        mortgage agreement with the bank. The bank orally agreed to release the
        certificate of deposit when vacant office space in one of the Austin, Texas
        buildings has been rented.
 
 *j)*
              *Escrowed
                  Funds*
 
 Escrowed
        funds primarily consist of amounts held by lenders to provide for future
        real
        estate tax expenditures and tenant improvements.
 
 24
 *k)*
              *Rental
                  Revenue Recognition*
    Rental
        revenue is recognized on a straight-line basis over the term of the lease,
        including any rent holiday periods and giving effect to any significant
        escalation or tenant incentive provisions.  If the Company has excess
        of
        rents recognized over  amounts contractually due pursuant
        to the
        underlying leases, the excess will be included in deferred rents receivable
        on
        the accompanying balance sheet.  The Company establishes, on a current
        basis, an allowance for potential tenant credit losses that may occur against
        this account.  The balance, if any, reflected on the balance sheet
        is net
        of such allowance.
  The
        Company maintains an allowance for doubtful accounts for estimated losses
        resulting from the inability of its tenants to make required rent
        payments.  If the financial condition of a specific tenant were to
        deteriorate, resulting in an impairment of their ability to make payments,
        additional allowances may be required.  No allowance was required
        as of
        December 31, 2004.
  
 
 *l)*
              *Deferred
                  Financing Co*sts
 
 Deferred
        financing costs represent commitment fees, legal and other third party costs
        associated with obtaining commitments for financing which result in a closing
        of
        such financing. These costs are amortized over the terms of the respective
        agreements. Unamortized deferred financing costs are expensed when the
        associated debt is refinanced before maturity. Costs incurred in seeking
        financial transactions, which do not close, are expensed in the period incurred.
        The amortization of loan costs for the years ended December 31, 2004 and
        2003,
        was $41,152 and $174,941, respectively.
 
 *m)*
              *Goodwill*
 
 The
        Company has adopted Statement of Financial Accounting Standards No. 142,
        "Goodwill and Other Intangible Assets." The adoption of FAS 142 requires
        an
        initial impairment assessment involving a comparison of the fair value of
        goodwill to current carrying value. Goodwill represents the excess of cost
        over
        the fair value of net assets acquired and is not amortized. The Company performs
        tests for impairment of goodwill annually or more frequently if events or
        circumstances indicate it may be impaired. Such tests include comparing the
        fair
        value of a reporting unit with its carrying value, including goodwill.
        Impairment assessments are performed pursuant to appropriate
        guidance.
 
 The
        Company’s recorded goodwill is associated with the acquisition of the three
        office facilities in Austin, Texas. This goodwill represents the difference
        between the net assets and liabilities acquired in exchange for Company common
        stock. None of the recorded goodwill is deductible for tax purposes. As of
        December 31, 2004, the Company had goodwill of $647,043 related to the remaining
        office facilities in Austin, Texas.
 
 The
        Company performed an impairment test of its three Austin, Texas properties
        as of
        December 31, 2004, and determined an impairment was not warranted.
 
 *n)*
              *Concentrations
                  of Risk*
 
 Financial
        instruments that potentially subject the Company to concentrations of credit
        risk are primarily accounts receivable. The Company performs ongoing credit
        evaluations of its customers' financial condition and, generally, requires
        no
        collateral from its tenants. The allowance for non-collection of accounts
        receivable is based upon the expected collection of all accounts receivable.
        As
        of December 31, 2004, the Company did not have an allowance for uncollectible
        accounts receivable.
 
 The
        Company does not rely on any one vendor or supplier for its raw materials
        and
        management believes that alternative suppliers are available that could provide
        for the Company's needs on comparable terms.
 
 The
        Company’s three office and shop facilities in Austin, Texas are leased to
        various State of Texas governmental units. Such leases are subject to short-term
        cancellation upon the occurrence of adverse state budgetary
        reductions.
 25
 *o)*
              *Income
                  Taxes*
 
 The
        Company recognizes deferred tax assets and liabilities for the expected future
        tax consequences of temporary differences between the carrying amounts and
        the
        tax bases of assets and liabilities. Temporary differences in financial and
        tax
        bases giving rise to deferred tax assets and liabilities include fixed assets,
        certain accrued liabilities and net operating loss carry forwards. The provision
        for income taxes includes the amount of income taxes for the year that would
        be
        paid by the Company without its net operating loss carry forwards, as determined
        by applying the provisions of the current tax law to taxable income for the
        year; and the net change during the year in the Company's deferred tax assets
        and liabilities. In determining the amount of any valuation allowance required
        to offset deferred tax assets, an assessment is made that includes anticipating
        future income and determining the likelihood of realizing deferred tax
        assets.
 
 The
        carrying value of the Company's net deferred tax assets assumes that the
        Company
        will be able to generate sufficient future taxable income, which is based
        on
        estimates and assumptions. If these estimates and assumptions change in the
        future, the Company may be required to record additional valuation allowances
        against its deferred tax assets, resulting in increased income tax expense.
        The
        Company continually reviews the adequacy of the valuation allowance and
        recognizes deferred tax asset benefits only as reassessment indicates that
        it is
        more likely than not that the benefits will be realized.
 
 The
        utilization of the Company's net operating loss and tax credit carry forwards
        may be impaired or reduced under certain circumstances. Events which may
        affect
        the Company's ability to utilize these carry forwards include, but are not
        limited to, future profitability, or stock ownership changes as defined by
        Section 382 of the Internal Revenue Code.
 
 *p)*
              *Advertising*
 
 Advertising
        costs are expensed as incurred and for the year ended December 31, 2004 was
        $325
        and there were no advertising expenses incurred in the year ended December
        31,
        2003.
 
 *q)*
              *Earnings
                  Per Share*
 
 The
        Company computes net income (loss) per share pursuant to Statement of Financial
        Accounting Standards No. 128 “Earnings Per Share”. Basic net income or loss per
        share is computed by dividing income or loss applicable to common shareholders
        by the weighted average number of shares of the Company’s common stock
        outstanding during the period. Diluted net income per share is determined
        in the
        same manner as basic net income per share except that the number of shares
        is
        increased assuming exercise of dilutive stock options and warrants using
        the
        treasury stock method and dilutive conversion of the Company’s convertible debt
        and preferred stock.
 
 During
        the years ended December 31, 2004 and 2003, there were no stock options or
        warrants outstanding, no convertible debt outstanding and no preferred stock
        outstanding.
  *r)*
              *Consolidation
                  and Basis of Presentation*
 The
        accompanying consolidated
        financial statements include the accounts of the Company and its subsidiary.
        All
        significant intercompany balances and transactions have been
        eliminated.
 
 26
 *s)*
              *Going
                  Concern*
   The
          Company’s consolidated financial statements are prepared using generally
          accepted accounting principles applicable to a going concern, which contemplates
          the realization of assets and liquidation of liabilities in the normal
          course of
          business.  However, the Company has suffered recurring losses from
          continuing operations through the year ended December 31, 2004. 
          Net losses
          from continuing operations in 2004 and 2003 were $139,046 and $1,809,972,
          respectively.  At December 31, 2004, the Company had negative working
          capital of $5,079,177 and was not in compliance with the debt service coverage
          ratio of the note relating to its Austin, Texas properties. 
          The
          Company has also experienced cash flow problems with cash flows from its
          individual properties being inadequate to support overhead after paying
          debt
          service.
  Continued
          inadequate cash flows to cover overhead creates uncertainty as to the Company’s
          ability to carry out its business plan and refinance its real estate loans
          at
          maturity.  Should the Company be unable to improve its cash flows
          to cover
          overhead and support refinancing of its real estate loans, the Company
          may be
          required to sell assets or seek other means of increasing revenues and
          reducing
          overhead.
 
 As
          a
          result of the Company’s non-compliance with the debt coverage ratio in its
          Austin, Texas real estate loan, the Company has been required to
          deposit in
          escrow approximately $205,000 and amounts due under that loan in March
          2006 have
          been classified as current liabilities.
 
 Losses
          during 2003 and 2004 reflected certain one-time charges and revenue items,
          including one-time gains from the sale of the Company’s FBO operations and the
          sale of one property in Austin as well as a gain from the settlement of
          a
          lawsuit offset by a bad debt charge and increased professional fees associated
          with litigation and bringing delinquent reports current with the SEC. 
          Notwithstanding the anticipated one-time nature of those items of income
          and
          loss, the Company believes that the normalized cash flows from its current
          real
          estate holdings, after debt service, are inadequate to support overhead
          unless
          vacant space in its properties is leased, expenses are further reduced
          or assets
          are sold.
 
 In
          response to the uncertainties noted, the Company has reduced certain expenses
          and is actively evaluating additional cost reductions, possible sales of
          assets,
          measures to increase its revenues and strategic transactions that might
          improve
          operating results.  The Company has engaged an experienced real
          estate
          broker with a view to leasing vacant space in its Austin properties or,
          in the
          alternative, selling one or more properties.  Additionally, management
          is
          pursuing discussions with various financing sources and potential strategic
          acquisition partners with a view to refinancing and extending the maturity
          of
          the loan on its Austin properties, securing financing to support existing
          operations or entering into an acquisition or other strategic transaction
          with
          the goal of improving cash flow.
 
 The
          Company believes that its current efforts to improve cash flows will allow
          the
          Company to meet its existing and ongoing obligations and achieve
          profitability.  However, the Company has no present commitments
          or
          agreements with third parties to lease vacant space, provide any financing
          or
          with respect to potential strategic transactions.  In the event
          that the
          Company is unable to supplement its cash flow through those efforts, the
          Company
          may be required to liquidate some or all of its real estate
          holdings.
  *t)*
              *Recent
                  Accounting Pronouncements*
 
 In
        December 2004, the Financial Accounting Standards Board, or FASB, issued
        Statement of Financial Accounting Standards No. 123R “Share-Based Payment” (SFAS
        123R). This statement revises SFAS No. 123, supersedes APB No. 25, and requires
        companies to recognize the cost of employee stock options and other awards
        of
        stock-based compensation based on the fair value of the award as of the grant
        date. The effective date of this pronouncement is as of the beginning of
        the
        first interim or annual period that begins after June 15, 2005. The adoption
        of
        FASB No. 123R will not have a material effect on the Company’s consolidated
        financial position, results of operations or cash flows.
 
 In
        December 2004, the FASB published the following two final FASB Staff Positions,
        effective immediately. FAS 109-1, "Application of FASB Statement No. 109,
        Accounting for Income Taxes, to the Tax Deduction on Qualified Production
        Activities Provided by the American Jobs Creation Act of 2004," giving guidance
        on applying FASB Statement No. 109, Accounting for Income Taxes, to the tax
        deduction on qualified production activities provided by the American Jobs
        Creation Act of 2004. FAS 109-2 "Accounting and Disclosure Guidance for that
        Foreign Earnings Repatriation Provision within the American Jobs Creation
        Act of
        2004" provides guidance on the Act's repatriation provision. The Company
        does
        not believe that the adoption of FAS 109-1 or FAS 109-2 will have a material
        impact on its consolidated financial position, results of operations or cash
        flows.
 
 In
        November 2004, the FASB Emerging Issues Task Force, or EITF, reached a consensus
        in applying the conditions in Paragraph 42 of SFAS No. 144, "Accounting for
        the
        Impairment or Disposal of Long-Lived Assets, in Determining Whether to Report
        Discontinued Operations" (EITF 03-13). Evaluation of whether operations and
        cash
        flows have been eliminated depends on whether (1) continuing operations and
        cash
        flows are expected to be generated, and (2) the cash flows, based on their
        nature and significance, are considered direct or indirect. This consensus
        should be applied to a component that is either disposed of or classified
        as
        held for sale in fiscal periods beginning after December 15, 2004. The Company
        does not believe that the adoption of EITF 03-13 will have a material impact
        on
        its consolidated financial position, results of operations or cash
        flows.
 
 In
        November 2004, the FASB issued SFAS No. 151, "Inventory Costs—An Amendment of
        ARB No. 43, Chapter 4" (SFAS No. 151). SFAS No. 151 amends the guidance in
        ARB
        No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal
        amounts of idle facility expense, freight, handling costs, and wasted material
        (spoilage). Among other provisions, the new rule requires that items such
        as
        idle facility expense, excessive spoilage, double freight, and rehandling
        costs
        be recognized as current-period charges regardless of whether they meet the
        criterion of "so abnormal" as stated in ARB No. 43. SFAS No. 151 is effective
        for fiscal years beginning after June 15, 2005 and is required to be adopted
        by
        the Company in the first quarter of fiscal 2006, beginning on January 1,
        2006.
        The Company does not believe the adoption of SFAS No. 151 will have a material
        impact on the consolidated financial position, results of operations and
        cash
        flows.
 
 Reclassifications - The
        accompanying consolidated financial statements for the prior year contain
        certain reclassifications to conform with current year
        presentation.
 27
  **NOTE
          3.**  **SALE
          OF DISCONTINUED OPERATIONS**
 
 On
        December 15, 2004, the Company completed the sale of its property known as
        4719-4735 South Congress in Austin, Texas, consisting of approximately 1.14
        acres with improvements, which property was leased by the Company to agencies
        of
        the State of Texas. The property was sold to SAGA Building, LLP, an unaffiliated
        third party. The sale price of the property was $1,200,000, the proceeds
        of
        which were applied in full to transaction costs and reduction of the Company’s
        secured debt. Included in the loss from the sale is $261,480 of goodwill
        associated with this building. The Company recorded a loss of approximately
        $37,000, which loss is included in “Gain (loss) from discontinued operations” on
        the consolidated statements of operations.
 
 Following
        are the results of operations of the property known as 4719-4735 South Congress
        included in the consolidated statements of operations for the years ended
        December 31, 2004 and 2003.
 
 2004
              
              2003Revenue
              
              $
              75,872
              
              $
              87,113Cost
                  of revenue
              
              
              178,141
              
              
              189,274Loss
                  before sale of asset
              
              
              (102,269
              )
              
              (102,161
              )Loss
                  on sale of asset
              
              
              (37,015
              )
              
              --Loss
                  from discontinued operations before income taxes
              
              $
              (139,284
              )
              $
              (102,161
              )
 
 On
        January 6 and February 27, 2003, the Company completed the sale of its FBO’s in
        Fort Worth and Austin, Texas; Casper, Wyoming; Tucson, Arizona; and Greeley,
        Colorado for approximately $20,787,000 in cash and liquidation of debts and
        an
“earn-out” of up to $6,000,000 in future revenues in excess of a specified base.
 
 Under
        the
        terms of the sale, the Company agreed to liquidate outstanding liabilities
        and
        obligations associated with the FBO operations and properties. Consequently,
        the
        Company paid creditors approximately $17,476,000, established an escrow fund
        of
        $589,000, to satisfy potential claims and obligations, and deposited
        approximately $2,556,000 in the bank.
 
 On
        January 20, 2004, the Company and the purchaser entered into a “Settlement
        Agreement and Mutual Release” to resolve the disputes, lawsuits and arbitration
        demands arising out of the Purchase Agreements and the Escrow Agreement relating
        to the transaction for the sale and transfer of the FBO assets. Included
        in the
        settlement was the termination of the $6,000,000 “earn out”, termination of the
        escrow fund of $589,000 by disbursing $350,000 to the Company in 2004 and
        various other matters.
 
 The
        sale
        resulted in a financial gain before income taxes of approximately $3,633,000,
        and a federal income tax gain of approximately $6,127,000. The financial
        gain on
        the sale of discontinued operations includes approximately $5,504,000 of
        goodwill.
 
 Following
        are the results of operations of acquired FBO’s included in the consolidated
        statements of operations for the year ended December 31, 2003.
 
 Revenue
              
              $
              1,593,111Cost
                  of revenue
              
              
              1,012,934General
                  and administrative expenses
              
              
              911,664Total costs and expenses
              
              
              1,924,598Loss
                  from discontinued operations before income taxes
              
              $
              (331,487
              )
 
 28
 **NOTE
          4.**  **OTHER
          INCOME**
 
 *Settlement
        of Lawsuits*
 
 In
        April
        2004, the Company received $485,000 from the settlement of a lawsuit relating
        to
        the Fort Worth Jet Center property that was sold in 2003. The property incurred
        hail damage to its roof and, in lieu of replacing the roof, the Company's
        insurer recommended that repairs be made by contractors and used products
        recommended by the insurer. The repairs performed by the contractor were
        ineffective. As a result, the Company filed suit against the insurer, the
        contractor and the product manufacturer. The Company retained the rights
        under
        the suit following the sale of the Fort Worth Jet Center property.
 
 In
        September 2004, the Company settled a lawsuit with the City of Austin, Texas
        related to property taxes. This resulted in a release of escrowed funds of
        $222,000 established in the sale of assets in 2002. This amount is included
        in
        other income.
 
 *Recovery
        of Bad Debts*
 
 In
        2004,
        Sterling REIT sold an existing property on which the Company had a junior
        lien
        position granted in connection with the previous settlement of claims regarding
        amounts advanced to Sterling REIT. In connection with the Company's agreement
        to
        release its junior lien, Sterling REIT remitted excess proceeds from the
        sale,
        in the amount of $85,000. As amounts owed by Sterling REIT had previously
        been
        written off as bad debts, the receipt of the payment was reflected as a recovery
        of bad debt.
 
 **NOTE
        5.**  **DUE
        FROM AFFILIATES**
 
 Due
        from
        affiliates represents amounts owed to the Company by Sterling REIT. The amounts
        due from Sterling REIT represent rents previously collected by Sterling REIT
        and
        belonging to the Company and amounts advanced by the Company to Sterling
        REIT to
        facilitate the sale by Sterling REIT of various properties with the agreement
        that Sterling REIT will repay all amounts owed to the Company from the proceeds
        of the sale of properties. This amount due from affiliates was collected
        in full
        in 2005.
 
 **NOTE
        6.**  **RELATED
        PARTY TRANSACTIONS**
 
 All
        of
        the Company’s subsidiaries and acquired assets were, prior to their acquisition,
        owned and managed by one or more of the current major shareholders of the
        Company. Historically, all of the entities were partnerships or limited
        liability companies that passed their profits or losses through to the owners.
        The original four Austin and Gulfport, Mississippi properties had recorded
        liabilities and obligations greater than their recorded assets. This asset
        deficiency was recorded as an intangible asset and is included on the balance
        sheet as goodwill for the three remaining Austin properties in the amount
        of
        $647,043 as of December 31, 2004.
 
 During
        the year ended December 31, 2003 and for the period from inception (September
        25, 2002) to December 31, 2002, Sterling REIT, Inc., (“SRI”), a major
        shareholder, on behalf of the Company, received income from Austin buildings
        and
        paid the expenses and note payments for the same buildings. In addition,
        proceeds received from refinancing assets and cash was advanced to SRI by
        the
        Company. Expenses of the Company were paid by SRI on behalf of the Company.
        The
        net of these cash transactions amounted to $1,693,151 and $686,142 for the
        year
        ended December 31, 2003 and for the period from inception (September 25,
        2002)
        to December 31, 2002, respectively. These amounts were written off as bad
        debts
        by the Company during the year ended December 31, 2003. (See Note 7 - Advances
        to a Principal Shareholder).
 
 The
        Company paid a management fee of $180,000 to a major shareholder, who is
        the
        current President, during the year ended December 31, 2004 and paid a management
        fee of $174,000 to the same major shareholder and a consulting fee to another
        major shareholder of $7,500 during the year ended December 31,
        2003.
 
 29
 **NOTE
        7.**  **ADVANCES
        TO A PRINCIPAL SHAREHOLDER**
 
 On
        January 13, 2004, new management and a new Board of Directors were
        appointed.
 
 In
        conjunction with the change of management, the new management team began
        an
        investigation of circumstances and events at the Company with the intent
        of
        bringing all financial statements and SEC reports current and implementing
        various procedures and initiatives to improve internal controls and protect
        corporate assets.
 
 Initial
        results of the investigation conducted by the new management team indicated
        that
        during 2002 and 2003 substantial funds (in excess of $2,000,000) of the Company
        had been advanced to SRI. It appears that the funds were advanced without
        proper
        authorization. The funds advanced to SRI were purportedly used to pay certain
        expenses of the Company and to pay certain expenses relating to properties
        of
        SRI which were to be transferred to the Company.
 
 Based
        on
        the initial findings of the new management team, the Company and SRI entered
        into a Settlement Agreement pursuant to which SRI delivered to the Company
        a
        Promissory Note evidencing the obligation of SRI to pay the amounts advanced
        by
        the Company and a Pledge Agreement, Security Agreement and multiple Deeds
        of
        Trust securing repayment of the note with substantially all of the assets
        of SRI
        and 11,320,007 shares of Company common stock owned by SRI.  (See
        Note 12 -
        Subsequent Events).
 
 After
        further investigation, the new management team reached the conclusion that
        in
        all probability the Company would receive little, if any, money from SRI
        or the
        assets securing the repayment of the note discussed above. As a result of
        the
        investigation, the Company wrote off $699,342 for the period ended December
        31,
        2002 and $1,693,151 for the year ended December 31, 2003 of the receivable
        from
        Sterling REIT and a related entity.
 
 **NOTE
        8.**  **REAL
        ESTATE, OTHER NOTES PAYABLE AND LINE OF CREDIT**
 
 *Real
        Estate Notes Payable* -
        The
        real estate notes payable, collateralized by the respective properties and
        assignment of leases, at December 31, 2004 and 2003 are as follows:
 
 December
                  31,Property
                  and Note Description
              
              2004
              
              2003Commodore
                  Plaza - Gulfport, Mississippi:
                First lien note datedOctober
                  28, 2002, with interest at 7.48%,monthly
                  installments of $28,263 includingprincipal
                  and interest and due in fullNovember
                  1, 2012
              
              $
              3,978,452
              
              $
              4,013,588Three
                  Austin Buildings - Austin, Texas:
                First lien bearing interest at 5.5% with thirty-fivemonthly
                  installments of $41,067 includingprincipal
                  and interest starting July 5, 2003 anda
                  final payment on March 27, 2006
              
              
              4,968,941
              
              
              5,897,999Total
                  real estate notes
              
              
              8,947,393
              
              
              9,911,587Less
                  current maturities of long-term debt
              
              
              (5,007,717
              )
              
              (279,152
              )Long-term
                  debt
              
              $
              3,939,676
              
              $
              9,632,435
 
 The
        note
        on the three Austin buildings has normal covenants regarding liquidation,
        merger, sale of assets, indebtedness, transfer of ownership, payment of
        dividends and other restrictions. The note also has a “debt service coverage
        ratio, as defined in the note agreement and reporting requirements. At December
        31, 2004, the Company was in default of the debt service coverage ratio and
        received a verbal waiver of this covenant until September 30, 2005. The entire
        amount of this note, which is due on March 27, 2006, has been classified
        as a
        current liability on the balance sheet. The Company is currently seeking
        alternative financing to retire this note and extend the due date.
 
 30
 At
        December 31, 2004, the net carrying value of the properties collateralizing
        the
        real estate notes was $7,595,690. The real estate note secured by the three
        Austin buildings is guaranteed by shareholders of the Company.
 
 *Principal
        Maturities* -
        Combined aggregate principal maturities of real estate and other notes payable,
        as of December 31, 2004, are as follows:
 
 Years
                  Ending December 31,
              
              Amounts2005
              
              $
              5,007,7172006
              
              
              41,8212007
              
              
              45,1062008
              
              
              47,8032009
              
              
              52,401Thereafter
              
              
              3,752,545Total
              
              $
              8,947,393
 
 *Line
        of Credi* *t* - The
        Company had a $750,000 line of credit which was due March 6, 2004 with interest
        at 4.25% and was secured by a certificate of deposit in the amount of $759,946,
        which was shown as restricted cash on the balance sheet at December 31, 2003.
        This line of credit was subsequently repaid during 2004.
 
 *Other
        Notes Payable* - During
        May 2004, the Company borrowed $300,000 from a bank. The note was due June
        5,
        2005, with an interest rate of 5.5% and interest only was due for the first
        three months. The note was repaid during 2004. As of December 31, 2004, the
        Company does not have any material other notes payable.
 
 **NOTE
        9.**  **RENTAL
        INCOME**
 
 The
        Company’s Austin Properties and Commodore Plaza Shopping Center are the lessors
        to tenants under operating leases with expiration dates ranging from 2007
        to
        2013. The minimum rental amounts due under the leases for the Austin Properties
        are generally subject to an increase based on a percentage of the Consumer
        Price
        Index. Each of the leases for the Austin Properties includes a right on the
        State of Texas tenant to terminate the lease based on budgetary restraints.
        The
        Commodore Plaza leases require that the tenants reimburse the Company for
        certain operating costs and real estate taxes. Approximate future minimum
        rents
        to be received over the next five years and thereafter for non-cancelable
        operating leases in effect at December 31, 2004 are as follows:
 
 Years
                  Ending December 31,
              
              Amounts2005
              
              $
              959,6302006
              
              
              959,6302007
              
              
              598,9422008
              
              
              507,2432009
              
              
              268,463Thereafter
              
              
              884,209Total
              
              $
              4,178,117
 
 31
 **NOTE
          10.**  **INCOME
          TAXES**
 
 The
        following table sets forth a reconciliation of the statutory federal income
        tax
        for the years ended December 31, 2004 and 2003.
 
 2004
              
              2003Income
                  (loss) before income taxes
              
              $
              (224,972
              )
              $
              578,073Income
                  tax computed at statutory rates
              
              $
              (76,327
              )
              $
              196,544Increase
                  (decrease) in valuation allowance
              
              
              (157,934
              )
              
              56,309Utilization
                  of prior year net operating loss
              
              
              --
              
              
              326,636Utilization
                  of acquired deferred tax asset
              
              
              --
              
              
              (54,315
              )Book
                  tax differences on sale of building
              
              
              94,521
              
              
              --Book
                  tax differences on income
              
              
              119,000
              
              
              --Permanent
                  differences
              
              
              18,525
              
              
              2,680Other
              
              
              8,037
              
              
              --Tax
                  provision (benefit)
              
              $
              5,822
              
              $
              527,854Current
                  tax provision
              
              $
              5,822
              
              $
              253,000Deferred
                  tax provision
              
              
              --
              
              
              274,854Total
                  tax provision
              
              $
              5,822
              
              $
              527,854
 
 The
        effects of the temporary differences between financial statement income and
        taxable income are recognized as a deferred tax asset and liability. Significant
        components of the deferred tax asset and liability as of December 31, 2004
        and
        2003 are as follows:
 
 2004
              
              2003Deferred
                  tax asset:Tax basis of assets greater than book
              
              $
              461,363
              
              $
              619,297Valuation allowance
              
              
              (461,363
              )
              
              (619,297
              )Deferred
                  tax asset
              
              $
              --
              
              $
              --
 
 **NOTE
        11.**  **COMMITMENTS**
 
 *Legal
        Contingencies*
 
 The
        Company is subject to legal proceedings, claims and liabilities that arise
        in
        the ordinary course of its business. The Company accrues for losses associated
        with legal claims when such losses are probable and can be reasonably estimated.
        These accruals are adjusted as further information develops or circumstances
        change. At December 31, 2004 there were no known assertions, claims or legal
        actions pending.
 
 **NOTE
        12.**  **SUBSEQUENT
        EVENTS**
 
 During
        April 2005, the Company foreclosed, cancelled and returned to unissued
        11,320,007 shares of its common stock owned by Sterling REIT and pledged
        to the
        Company to secure repayment of advances to Sterling REIT totaling
        $2,553,261.
  
  **ITEM
        8.****CHANGES
        AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
        DISCLOSURE**
 
 In
        2003,
        following the Exchange, the Company’s Board of Directors dismissed Chavez &
        Koch, CPA, Ltd. as the Company's independent accountants and selected Thomas
        Leger & Co., L.L.P. as the Company's new independent
        accountants.
 
 Chavez
        & Koch's report on the financial statements for the period from inception
        (January 31, 2001) to December 31, 2001 did not contain an adverse opinion
        or
        disclaimer, and were not qualified or modified as to uncertainty, audit scope,
        or accounting principles. During the Company’s two most recent fiscal years and
        any subsequent interim period preceding the dismissal of Chavez & Koch,
        there were no disagreements with Chavez & Koch on any matter of accounting
        principles or practices, financial statement disclosure, or auditing scope
        or
        procedure, which disagreement(s) if not resolved to the satisfaction of Chavez
        & Koch, would have caused Chavez & Koch to make reference to the subject
        matter of the disagreement(s) in connection with its report.
 
 During
        the Company's two most recent fiscal years and any subsequent interim period
        preceding the dismissal of Chavez & Koch, there have been no reportable
        events of the type required to be disclosed by Item 304(a)(1)(v) of Regulation
        S-K.
 
 Prior
        to
        the engagement of Thomas Leger & Co., L.L.P., the Company did not consult
        with such firm regarding the application of accounting principles to a specific
        completed or contemplated transaction, or any matter that was either the
        subject
        of a disagreement or a reportable event. The Company also did not consult
        with
        Thomas Leger & Co., L.L.P. regarding the type of audit opinion which might
        be rendered on the Company’s financial statements and no oral or written report
        was provided by Thomas Leger & Co., L.L.P.
 
 **ITEM
        8A.** **CONTROLS
        AND PROCEDURES**
  As
        of the end
        of the period covered by this report, the Company has evaluated the
        effectiveness of the design and operation of its disclosure controls and
        procedures under the supervision and with the participation of its chief
        executive officer (“CEO”) who also serves as chief financial officer (“CFO”).
        Based on this evaluation, management, including the CEO, concluded that the
        Company’s disclosure controls and procedures were effective.
  During
        the
        quarter ended December 31, 2004, there were no significant changes in the
        Company’s internal controls over financial reporting that materially affected,
        or are reasonably likely to materially affect, internal controls over financial
        reporting.
 The
            weaknesses in question were detected during the audit of the Company’s financial
            statements for the fiscal year ended December 31, 2004, which audit occurred
            in
            March 2005.
 
 The
            weaknesses were detected in the routine course of the audit review of
            accounting
            for certain non-routine transactions.
 
 The
            specific
            problems identified by the auditor to the Company were (1) the lack of
            segregation of duties necessary to maintain proper checks and balances
            between
            functions and (2) the failure of internal personnel to adequately communicate
            the scope and nature of non-routine transactions.  The absence
            of qualified
            full time accounting personnel in the Company was a contributing factor
            to the
            problems identified by the auditor.  The specific circumstances
            giving rise
            to the weaknesses including the Company’s President serving as both Chief
            Executive Officer and as Chief Financial Officer and the Company’s utilizing the
            services of contract accountants on a part time basis in the absence
            of internal
            accounting personnel.  As a result of the absence of full time
            in-house
            accounting personnel and the failure of in-house personnel to adequately
            communicate information to the Company’s outside contract accountants, certain
            journal entries were not made until the time of the audit when the need
            for such
            entries was identified by the auditor.
 
 Because
            the
            Company lacks the financial resources to support in-house accounting
            personnel
            at this time, no formal steps have as yet been taken to resolve the weaknesses
            identified by the auditor.  The Company is, however, emphasizing
            improvement in its communications with its outside accounting personnel
            to
            assure that non-routine transactions are accounted for in a timely
            manner.
 
 Management
            concluded that the Company’s disclosure controls and procedures were effective
            because the relevant information and data in question were known to proper
            members of management to allow proper and timely disclosure in its reports
            filed
            with the SEC and was, in fact, timely reported.  The weaknesses
            in question
            appear to relate to internal control over financial reporting and not
            weaknesses
            in disclosure controls and procedures.
  **ITEM
        8B.****OTHER
        INFORMATION**
 
 Not
        applicable.
 
 
 **PART
        III**
  **ITEM
        9.****DIRECTORS,
        EXECUTIVE OFFICERS; PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION
        16A
        OF THE SECURITIES EXCHANGE ACT**
 
 The
        Company’s executive officers and directors, and their ages and positions as of
        April 1, 2005 are as follows:
 
 **Name**
              **Age**
              **Position**Lloyd
                  Shoppa
              73
              Chairman,
                  Secretary and DirectorThomas
                  Mathew
              47
              President,
                  Treasurer and DirectorRon
                  F. Bearden
              63
              Director
 
 There
        are
        no family relationships among any of the directors or officers of the
        Company.
 
 Lloyd
        Shoppa has served as Chairman, Secretary and a director of the Company since
        February 2004. Since 1992, Mr. Shoppa has served as Chairman of Shoppa's
        Material Handling, a Toyota industrial equipment distributor. Since 1997,
        Mr.
        Shoppa has served as Chairman of Clean Air Flow, Inc., a manufacturer of
        emissions reduction products. Since 1985, Mr. Shoppa has also served as Chairman
        and a director of Shoppa Farm Supply. From 1964 to 1997, Mr. Shoppa served
        in
        various executive positions, including President and Vice-Chairman, with
        Bell
        Helicopter Textron, a worldwide manufacturer and distributor of helicopters.
        Since 2002, Mr. Shoppa has served on the East Bernard Community Development
        Board that is operated by Prosperity Bancshares, Inc.
 
 Thomas
        Mathew has served as President, Treasurer and a director of the Company since
        February 2004. Since 1984, Mr. Mathew has operated Mathew Aviation Services,
        providing aircraft management, VIP air transportation and other aviation
        services. From 1994 to 2002, Mr. Mathew served as President and Chief Executive
        Officer of GateOne, Inc., and its predecessors, a five location fixed base
        operator (“FBO”). All of the FBO operations and assets of GateOne were
        transferred to the Company in 2002.
 
 Ron
        F.
        Bearden has served as a director of the Company since the acquisition by
        the
        Company of Sterling FBO Holdings in September 2002 and served as Chairman,
        President and Chief Executive Officer of the Company from the acquisition
        of
        Sterling FBO Holdings until January 13, 2004. From 1998 to February 2004,
        Mr.
        Bearden also served as President of Sterling REIT, Inc., a real estate
        investment and development company. For more than five years, Mr. Bearden
        has
        served as the principal officer of R.F. Bearden Associates, a management
        consulting firm. Since December 2003, Mr. Bearden has served as a principal
        of
        Old Capital Partners, L.P., a commercial real estate lender.
 
 *Term
        of Office*
 
 The
        directors named above will serve until the next annual meeting of the Company's
        shareholders. Officers will hold their positions at the pleasure of the Board
        of
        Directors, absent any employment agreement.
 
 *Committees
        of the Board*
 
 The
        Company does not presently maintain an audit committee, a compensation
        committee, a nominating committee or any other committees of the board of
        directors. Similarly, the Company does not have an "audit committee financial
        expert".
 
 At
        such
        time as the Board determines that the size and scope of the Company’s operations
        and its available financial resources warrant such, the Company expects to
        seek
        to add independent directors and to form committees to perform the functions
        of
        an audit committee, compensation committee and nominating
        committee.
 
 34
 *Code
        of Ethics*
 
 The
        Board
        of Directors has adopted a Code of Business Ethics covering all of its officers,
        directors and employees. The Company requires all employees to adhere to
        the
        Code of Business Ethics in addressing legal and ethical issues encountered
        in
        conducting their work. The Code of Business Ethics requires that the Company’s
        employees avoid conflicts of interest, comply with all laws and other legal
        requirements, conduct business in an honest and ethical manner and otherwise
        act
        with integrity and in the Company's best interest.
 
 The
        Board
        of Directors has also adopted a separate Code of Business Ethics for the
        CEO and
        Senior Financial Officers. This Code of Ethics supplements its general Code
        of
        Business Ethics and is intended to promote honest and ethical conduct, full
        and
        accurate reporting, and compliance with laws as well as other
        matters.
 
 The
        Code
        of Business Ethics for the CEO and Senior Financial Officers was filed as
        an
        exhibit to the Company’s Annual Report on Form 10-KSB for the year ended
        December 31, 2003 and is available for review at the SEC's web site at
        www.sec.gov.
 
 *Section
        16(a) Beneficial Ownership Reporting Compliance*
 
 Section
        16(a) of the Securities Exchange Act of 1934 requires the Company’s directors,
        executive officers and persons who own beneficially more than ten percent
        of the
        Company’s common stock, to file reports of ownership and changes of ownership
        with the SEC. Based solely on the reports received by the company and on
        written
        representations from certain reporting persons, the Company believes that
        the
        directors, executive officers and greater than ten percent beneficial owners
        have complied with all applicable filing requirements.
 
 **ITEM
        10. EXECUTIVE COMPENSATION**
 
 The
        following table provides information about the compensation received during
        the
        last three fiscal years to the Company’s “named executive officers”. None of the
        Company’s other employees received greater than $100,000 in salary and bonus
        during the last three fiscal years.
 
 **Summary
        Compensation Table**
 
 **Annual
                  Compensation**
              
              **Long-Term**
                **Compensation****Name
                  and****Principal
                  Position**
              
              **Year**
              
              **Salary**
                **($)**
              
              **Bonus**
                **($)**
              
              **Other**
                **($)**
              
              **Stock**
                **Options**Thomas
                  Mathew,President(3)
              
              
              2004
              
              $
              180,000
              
              
              --
              
              
              --
              
              
              --2003
              
              $
              174,000
              
              
              --
              
              
              --
              
              
              --2002
              
              $
              7,500
              
              
              --
              
              
              --
              
              
              --Ron
                  F. Bearden,Former
                  President(3)
              
              
              2003
              
              $
              117,500
              
              
              --
              
              
              --
              
              
              --2002
              
              $
              46,323(1)
              
              
              --
              
              $
              173,754(2)
              
              
              --
 
 (1)  Salary
        shown as paid or accrued for services of Mr. Bearden during 2002 consisted
        of
        amounts paid to R.F. Bearden Associates, Inc. for services in connection
        with
        the Exchange.
 (2)
              Other
                  compensation paid consisted of the market value of 3,000,000 shares
                  of
                  common stock issued in conjunction with services provided through
                  R.F.
                  Bearden Associates, Inc. relating to the formation of Sterling
                  FBO
                  Holdings and related services. Such shares were issued 1,500,000
                  to R.F.
                  Bearden Associates, Inc. and 1,500,000 to Old Capitol
                  Corp.
 (3)
              Mr.
                  Bearden’s service as President and CEO ended in January 2004 at which time
                  Mr. Mathew was appointed President and
                  CEO.
 
 The
        Company currently pays no compensation for service of directors. The Company
        may
        consider payment of certain amounts to attract the services of independent
        directors.
 
 The
        Company expects to enter into employment agreements with key employees, to
        implement comprehensive compensation arrangements with its officers and to
        adopt
        benefit plans in the future at the discretion of the Board of Directors to
        attract and retain officers and key employees
  35
 **ITEM
        11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
        MANAGEMENT AND RELATED STOCKHOLDER MATTERS**
 
 As
        of
        April 6, 2005, 28,335,061 shares of common stock were outstanding. The following
        table sets forth, as of such date, information with respect to shares
        beneficially owned by:
 
 §
              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.
 
 Beneficial
        ownership has been determined in accordance with Rule 13d-3 of the Exchange
        Act.
        Under this rule, shares may be deemed to be beneficially owned by more than
        one
        person (if, for example, persons share the power to vote or the power to
        dispose
        of the shares). In addition, shares are deemed to be beneficially owned by
        a
        person if the person has the right to acquire shares (for example, upon exercise
        of an option) within 60 days of the date of this table. In computing the
        percentage ownership of any person, the amount of shares includes the amount
        of
        shares beneficially owned by the person by reason of these acquisition rights.
        As a result, the percentage of outstanding shares of any person does not
        necessarily reflect the person’s actual voting power.
 
 To
        the
        Company’s knowledge, except as indicated in the footnotes to this table and
        pursuant to applicable community property laws, the persons named in the
        table
        have sole voting and investment power with respect to all shares of common
        stock
        shown as beneficially owned by them. Unless otherwise indicated, the business
        address of the individuals listed is 1600 Airport Freeway, Suite 370, Bedford,
        Texas 76022.
 
 **Name
                  and Address of****Beneficial
                  Owner**
              **Number
                  of****Shares**
                **Beneficially****Owned**
              **Percentage
                  of**
                **Outstanding
                  Shares**Lloyd
                  Shoppa
              457,500
              1.6%Thomas
                  Mathew(1)
              8,788,422
              31.0%Ron
                  F. Bearden(2)
              1,500,000
              5.3%All
                  Executive Officers andDirectors
                  as a group (3 persons)
              10,745,922
              37.9%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 former 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.
 
 36
 **ITEM
        12.****CERTAIN
        RELATIONSHIPS AND RELATED PARTY TRANSACTIONS**
 
 The
        Company and its subsidiary, Sterling FBO, have, from time to time, entered
        into
        transactions with various entities controlled by the Company's current or
        former
        principal shareholders and/or by Ron F. Bearden. The principal shareholders
        of
        the Company include Chasco Investments, Inc., Geld Fund II, LLC, AM Pacific
        Group and Mathew Investment Partnership. Sterling REIT, Inc. was a principal
        shareholder of the Company prior to the foreclosure and cancellation of shares
        held by Sterling REIT. Those entities may be deemed to be controlled by Hugo
        Verhaeghe, Charles Glace, Thomas Mathew and Lucky Srinivasan.
 
 All
        of
        the Company assets owned and operated during 2003 were acquired through the
        acquisition of various entities previously controlled by the referenced
        principal shareholders. Those acquisitions included the acquisition by the
        Company, pursuant to the Exchange, in September 2002 of Sterling FBO, including
        the four state leased properties, for 5,638,334 shares of common stock. As
        a
        result of the Exchange, each of the referenced shareholders became shareholders
        of the Company.
 
 Following
        the Exchange, and pursuant to acquisitions planned to occur before the Exchange
        but which were deferred until following the Exchange, during 2002, the Company
        acquired the following interests in entities and/or properties from
        shareholders:
 
 -
              In
                  October 2002, the Company acquired a 99% limited partnership interest
                  in
                  Commodore Plaza, Ltd. in exchange for 2,000,000 shares of common
                  stock.
                  Commodore Plaza, Ltd. was acquired from Hugo Verhaeghe, Charles
                  Glace,
                  Thomas Mathew and Sterling REIT,
                  Inc.
 
 -
              In
                  October 2002, the Company acquired a 100% ownership interest in
                  both
                  Greeley FBO, L.L.C. and Sterling Austin Aero, L.P. in exchange
                  for
                  3,143,334 shares of common stock and 2,166,666 shares of common
                  stock,
                  respectively. Both Greeley FBO and Sterling Austin Aero were acquired
                  from
                  Geld Fund II, LLC, Chasco Investments, Inc., Mathew Investment
                  Partnership
                  and Sterling REIT, Inc.
 
 -
              In
                  November 2002, the Company acquired a 100% ownership interest in
                  Casper
                  Jet Center, L.L.C., Austin Aero FBO, Ltd., and Sterling-Ft. Worth
                  Jet
                  Center, Ltd. The Company issued an aggregate of 3,723,894 shares
                  of common
                  stock to acquire Casper Jet Center, L.L.C., 4,355,554 shares of
                  common
                  stock to acquire Austin Aero FBO, Ltd., and 1,153,333 shares of
                  common
                  stock to acquire Sterling-Ft. Worth Jet Center, Ltd. Both Casper
                  Jet
                  Center, L.L.C. and Austin Aero FBO, Ltd. were acquired from Mathew
                  Investment Partnership and Sterling, REIT, Inc. Sterling-Ft. Worth
                  Jet
                  Center, Ltd. was acquired from Mathew Investment Partnership, Sterling,
                  REIT, Inc., and Geld Fund II, LLC.
 
 -
              In
                  December 2002, the Company acquired 100% of the outstanding shares
                  of
                  common stock of Ft. Worth Jet Center, Inc. in exchange for 8,223,953
                  shares of common stock. Ft. Worth Jet Center, Inc. was acquired
                  from
                  Mathew Investment Partnership, Sterling, REIT, Inc, and Geld Fund
                  II,
                  LLC.
 
 Prior
        to
        the Company's acquisition of each of the referenced entities, Sterling REIT
        served as general partner or managing member of each of the entities. Ron
        F.
        Bearden served as President of both the Company and Sterling REIT during
        2002.
        Prior to the Company's acquisition of the entities, Sterling REIT periodically
        received management and other fees in conjunction with, and from, those entities
        and received advances from and made advances to those entities. Net advances
        to
        Sterling REIT by the Company, including entities acquired by the Company,
        totaled $686,142 at December 31, 2002 and $1,693,151 at December 31, 2003.
        Subsequently, in 2004, pursuant to the terms of a Settlement Agreement, Sterling
        REIT pledged substantially all of its assets to the Company to secure repayment
        of amounts advanced by the Company. Based on an evaluation by management,
        all
        advances made to Sterling REIT at December 31, 2002 and 2003, respectively
        were
        determined to be uncollectible.
 
 At
        December 31, 2004, due from affiliates totaled $65,289 representing amounts
        owed
        to the Company by Sterling REIT. The amounts due from Sterling REIT at December
        31, 2004, represent rents previously collected by Sterling REIT and belonging
        to
        the Company and amounts advanced by the Company to Sterling REIT to facilitate
        the sale by Sterling REIT of various properties with the agreement that Sterling
        REIT will repay all amounts owed to the Company from the proceeds of the
        sale of
        the properties.  This anount was paid in full in 2005.
  
  **ITEM
        13.****EXHIBITS**
 
 Exhibit
                    Number
                Description
                    of Exhibit2.1
                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)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.)16.1*
                Letter
                  from Chavez & Koch CPA's, former Accountants21.1
                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 Certifications32.1*
                Section
                    906 Certifications
 
 *  Filed
        herewith
 
 39
 **ITEM
        14.****PRINCIPAL
        ACCOUNTANT FEES AND SERVICES**
 
 *Fees
        Paid to Independent Public Accountants*
 
 The
        following table presents fees for professional audit services rendered by
        Thomas
        Leger & Co., L.L.P. for the audit of the Company's annual financial
        statements for the years ended December 31, 2004 and December 31, 2003 and
        fees
        billed for other services rendered by Thomas Leger & Co., L.L.P. during
        those periods.
 
 Fiscal
                  2004
              
              Fiscal
                  2003Audit
                  fees (1)
              
              $
              93,820
              
              $
              110,045Audit
                  related fees
              
              
              --
              
              
              --Tax
                  fees
              
              
              22,112
              
              
              5,925All
                  other fees
              
              
              --
              
              
              --Total
              
              $
              115,932
              
              $
              115,970
 
 (1)  Audit
        Fees consist of fees billed for professional services rendered for the audit
        of
        the Company's consolidated annual financial statements and review of the
        interim
        consolidated financial statements included in quarterly reports and services
        that are normally provided by Thomas Leger &Co., L.L.P. in connection with
        statutory and regulatory filings or engagements.
 
 *Policy
        on Pre-Approval of Audit and Non-Audit Services of Independent
        Auditor*
 
 At
        such
        time, if ever, as the Company forms an audit committee, the Company intends
        that
        the audit committee will establish a specific policy relating to pre-approval
        of
        all audit and non-audit services provided by the Company’s independent auditors.
        As the Company does not presently maintain an audit committee, no such policy
        has been adopted to date.
  
  **SIGNATURES**
  
 Pursuant
        to the requirements of Section 13 or 15(d) of the Securities Exchange Act
        of
        1934, the Registrant has duly caused this report to be signed on its behalf
        by
        the undersigned, thereunto duly authorized.
 
 **STERLING EQUITY HOLDINGS, INC.**
 
 By: /s/
        Thomas Mathew ___________
 Thomas
        Mathew, President
 Date: 
October
        14, 2005
 
 
 
  **INDEX
        TO EXHIBITS**
 
 Exhibit
                  Number
              Description
                  of Exhibit2.1
              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)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.)16.1*
              Letter
                from Chavez and Koch CPA's, former Accountants21.1
              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 Certifications32.1*
              Section
                  906 Certifications
 
  *  Filed
        herewith