SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-KSB

(MARK ONE)
[X]  ANNUAL  REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
     ACT  OF  1934

                        For the Fiscal Year Ended December 31, 2002

[ ]  TRANSITION  REPORT  UNDER  SECTION  13 OR 15(D) OF THE SECURITIES
     EXCHANGE  ACT  OF  1934

          For the transition period from              to
                                         -------------   ------------

                          Commission File No. 0-33239

                         STERLING EQUITY HOLDINGS, INC.
                 ----------------------------------------------
                 (Name of Small Business Issuer in its charter)


            Nevada                                       88-0485488
-------------------------------             ----------------------------------
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
 incorporation or organization)


                        1600 Airport Freeway, Suite 370
                              Bedford, Texas 76022
                ------------------------------------------------
               (Address of principal executive offices)(Zip code)


Issuer's telephone number, including area code:     (817) 358-0551


Securities to be registered pursuant to Section 12(b) of the Act:

  Title of each class          Name of each exchange on which each is registered
  -------------------          -------------------------------------------------
         None                                          None

Securities to be registered pursuant to Section 12(g) of the Act:

                         Common Stock, $0.001 par value
                         ------------------------------
                                (Title of Class)

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

     Check  if  disclosure  of  delinquent  filers  in  response  to Item 405 of
Regulation  S-B is not contained in this form, and will not be contained, to the
best  of  registrant's  knowledge, in definitive proxy or information statements
incorporated  by  reference  in Part III of this Form 10-KSB or any amendment to
this  Form  10-KSB.  [ ]

     The  Issuer's  revenues  for  the  fiscal year ended December 31, 2002 were
$275,887.

     The  number of shares of the registrant's common stock, $.001 par value per
share,  outstanding  as of August 20, 2004 was 39,655,068.  The aggregate market
value  of  the voting and non-voting common equity held by non-affiliates of the
registrant  on August 20, 2004, based on the last sales price on the Pink Sheets
as  of  such  date,  was  approximately  $1,437,750.

                      DOCUMENTS INCORPORATED BY REFERENCE

None

     Transition  Small  Business  Disclosure  Format:  Yes  [ ]  No  [X]

<PAGE>




                                TABLE OF CONTENTS


                                                                         Page
                                                                      ----------
PART I

  ITEM 1.                 DESCRIPTION OF BUSINESS                          1
  ITEM 2.                 DESCRIPTION OF PROPERTY                          7
  ITEM 3.                 LEGAL PROCEEDINGS                                8
  ITEM 4.                 SUBMISSION OF MATTERS TO A VOTE OF
                          SECURITY HOLDERS                                 8

PART II

  ITEM 5.                 MARKET FOR COMMON EQUITY AND
                          RELATED STOCKHOLDER MATTERS                      8
  ITEM 6.                 MANAGEMENT'S DISCUSSION AND ANALYSIS            10
  ITEM 7.                 FINANCIAL STATEMENTS                            16
  ITEM 8.                 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                          ON ACCOUNTING AND FINANCIAL DISCLOSURE          16
  ITEM 8A.                CONTROLS AND PROCEDURES                         16

PART III

  ITEM 9.                 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
                          CONTROL PERSONS; COMPLIANCE WITH
                          SECTION 16(a) OF THE EXCHANGE ACT               17
  ITEM 10.                EXECUTIVE COMPENSATION                          18
  ITEM 11.                SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                          OWNERS AND MANAGEMENT                           18
  ITEM 12.                CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS  19
  ITEM 13.                EXHIBITS AND REPORTS OF FORM 8-K                20
  ITEM 14.                PRINCIPAL ACCOUNTANT FEES AND SERVICES          21

SIGNATURES                                                                22

<PAGE>

                           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 our expectations and beliefs
about  the market and industry, our goals, plans, and expectations regarding our
properties  and  services,  our  intentions  and  strategies  regarding  future
acquisitions  and  sales  of  properties  and  businesses,  our  intentions  and
strategies  regarding  the  formation  of  strategic  relationships, our beliefs
regarding  the  future  success of our properties and services, our expectations
and beliefs regarding competition, competitors, the basis of competition and our
ability  to  compete, our beliefs and expectations regarding our ability to hire
and  retain  personnel,  our  beliefs  regarding  period  to  period  results of
operations,  our  expectations  regarding  revenues,  our expectations regarding
future  growth and financial performance, our beliefs and expectations regarding
the  adequacy  of our facilities, and our beliefs and expectations regarding our
financial  position,  ability to finance operations and growth and the amount of
financing necessary to support operations. These statements are subject to risks
and  uncertainties  that  could  cause  actual  results  and  events  to  differ
materially.  These  risks  and  uncertainties  include  without limitation those
identified in the section of this annual report on Form 10-KSB entitled "Factors
That  May  Affect  Future  Results"  below. We undertake no obligation to update
forward-looking  statements  to  reflect events or circumstances occurring after
the  date  of  this  annual  report  on  Form  10-KSB.

As  used  in  this  annual  report  on Form 10-KSB, unless the context otherwise
requires,  the terms "we," "us," "the Company," and "Sterling Holdings" refer to
Sterling Equities Holdings, Inc., a Nevada corporation, and its subsidiaries and
"BlueStar"  refers  to  the  Company  prior  to  September  30,  2002.

                                     PART I

ITEM 1.     BUSINESS

GENERAL

Sterling  Equities  Holdings,  Inc.,  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  the small business owner 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 ("FBOs") 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  FBOs.

                                      -1-
<PAGE>

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.

Commodore  Plaza,  Ltd.  was  acquired  from  Hugo Verhaeghe, Chaz Glace, Thomas
Mathew  and Sterling REIT, Inc., each of which may be deemed to be affiliates of
the  Company  by  reason  of  the  holdings of common stock by those persons and
entities  or  affiliates  of  those entities and, with respect to Sterling REIT,
Inc.,  by  reason  of  the  service  of  Ron F. Bearden as President of both the
Company  and  Sterling  REIT,  Inc.

Commodore  Plaza,  Ltd.  owns  the  Commodore Plaza Shopping Center in Gulfport,
Mississippi  which  leases  retail shopping space to various establishments on a
net  lease  basis.

On  October  30,  2002,  the  Company,  through  Sterling  FBO,  completed  the
acquisition  of  a  100%  ownership  interest  in  both  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.

Both  Greeley FBO and Sterling Austin Aero were acquired from Geld Fund II, LLC,
Chasco  Investments, Inc., Mathew Investment Partnership and Sterling REIT, Inc.
Geld Fund II, LLC, Chasco Investments, Inc. and Sterling, REIT, Inc. may each be
deemed to be affiliates of the Company by reason of the holdings of common stock
by  those entities or affiliates of those entities and, with respect to Sterling
REIT,  Inc., by reason of the service of Ron F. Bearden as President of both the
Company  and  Sterling,  REIT,  Inc.

Greeley  FBO  owned  and  operated  a private airport facility under the name of
Greeley-Weld  Jet  Center,  in Greeley, Colorado. The center opened in 2000 and,
during 2002, moved into a newly renovated facility, complete with a new terminal
building, an 81,000-foot ramp and a 10,000-foot runway. On-site services include
fueling,  hangar  space,  tie  down,  Jet  A,  100LL,  Oxygen, GPU, pre-heating,
de-icing  and  self  serve  100LL.

Sterling  Austin  Aero owned a private airport facility located in Austin, Texas
and  leased  to  Austin  Aero  FBO,  Ltd.  Constructed in 1999 at the new Austin
Bergstrom  International  Airport  (AUS),  the FBO includes a 15,000 square foot
terminal  with  boarding and waiting area, nine acres of ramp space, 65 tie-down
spaces,  five  14,000-square-foot hangars, exercise/workout room, pilots lounge,
weather  information system, flight planning room, showers, offices, secretarial
services,  fax  machines  and  computers.

On  November  25  2002,  the  Company,  through  Sterling  FBO,  completed  the
acquisition  of  a  100%  ownership  interest in both 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. Mathew Investment Partnership, L.P., Geld Fund II,
LLC., and Sterling REIT, Inc. may each be deemed to be affiliates of the Company
by  reason  of  the  holdings of common stock by those entities or affiliates of
those  entities  and,  with  respect  to  Sterling  REIT, Inc., by reason of the
service  of  Ron F. Bearden as President of both the Company and Sterling, REIT,
Inc.

Casper  Jet  Center,  L.L.C.  owned  and  operated a private airport facility in
Casper,  Wyoming.  The  recently renovated facility includes a large comfortable
pilot  lounge,  conference  room  and  offers  essential  pilot  supplies at the
professional  customer service counter. Casper Jet Center is also a full service
center  for  Cessna  Aviation  and  Commander  Aviation.

Austin  Aero FBO, Ltd. managed Sterling Austin Aero FBO, L.P., a private airport
facility  located  in  Austin,  Texas.

Sterling-Ft.  Worth Jet Center, Ltd. owned a private airport facility located at
Ft.  Worth  Meacham  International  Airport.  The  162,000 square foot facility,
managed  by  Ft. Worth Jet Center, Inc., offers hangar space, tie down services,
Jet  A and Avgas, computerized weather information, quick turn service, complete
line  service  and  the  availability  of  aircraft  cleaning  services.

                                      -2-
<PAGE>

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.

Ft.  Worth  Jet  Center,  Inc.  was acquired from Mathew Investment Partnership,
Sterling,  REIT,  Inc,  and Geld Fund II, LLC, each of which may be deemed to be
affiliates  of  the  Company  by reason of the holdings of common stock by those
entities  or  affiliates  of  those entities and, with respect to Sterling REIT,
Inc.,  by  reason  of  the  service  of  Ron F. Bearden as President of both the
Company  and  Sterling  REIT,  Inc.

Ft.  Worth  Jet  Center,  Inc., owned and operated a private airport facility in
Tucson,  Arizona,  under  the  name  of  Gate  One  Tucson.

In  December  of  2002,  the  Company  entered  into  an  agreement  to sell the
underlying assets of each of its airport operating companies, being Greeley FBO,
Sterling Austin Aero, Casper Jet Center, Austin Aero FBO, Sterling-Ft. Worth Jet
Center,  and Ft. Worth Jet Center, to an unaffiliated third party. On January 6,
2003,  Sterling  Austin Aero and Austin Aero FBO were sold for $8.5 million with
the  Company  receiving  $1.5  in  cash before payment of settlement charges and
providing $7 million in seller financing to the buyer. The sale of the assets of
the  other  operating  companies  was  completed  on February 27, 2003, with the
Company  receiving  $10  million in cash plus the payoff of the seller financing
notes  of $7 million issued on January 6, 2003. Additional consideration, not to
exceed  $6  million, was payable over the three year period following closing in
the  form of an earnout calculated based on $2.00 per gallon of jet fuel sold in
excess  of  an  increasing minimum sales level. From these proceeds, the Company
paid  all  debts  related  to  the  assets sold and $880,000 was set aside as an
escrow  for  contingencies  over  an  eighteen  month  period.

In  March  2003,  the  Company  changed  its name from BlueStar Leasing, Inc. to
Sterling  Equities  Holdings,  Inc.

As  a  result  of  the Exchange, the acquisitions during 2002 and the subsequent
sale  of  operating  FBOs, the Company altered its business plan to focus on the
acquisition,  ownership  and  operation  of income producing real estate with an
emphasis  on  FBOs  and  leased properties. The Company terminated the equipment
leasing  operations  originally conducted by BlueStar. Following the sale of FBO
properties in 2003, operations during 2003 were limited to operation of the four
state-leased  properties and the Commodore Plaza property and ongoing efforts to
acquire  certain  properties  from  Sterling  REIT.

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.

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 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.

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 earnout was
terminated and $350,000 was distributed to the Company in full settlement of the
contingency  escrow.


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.

                                      -3-
<PAGE>

PROPERTIES

As  of  December  31,  2002, we owned interests in ten properties, consisting of
five  properties  owned  in  fee  simple and five "FBO" properties consisting of
leasehold  improvements  to  properties  leased  from  third  parties.

Lease  Properties.  Four of our leased properties held at December 31, 2002 were
located  in  Austin,  Texas  and  were leased to agencies of the State of Texas.
Under those leases, we receive fixed monthly rental payments and the tenants are
responsible  for  payment of various operating costs of the property. All of our
Austin  leases  specify  a  minimum  amount of insurance coverage required to be
carried  by  each  tenant. We believe 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.

The  following  table  summarizes  the  principal  terms  and  significant  data
regarding  each  of  the  leased  properties  in  Austin,  Texas:

<TABLE>
<CAPTION>

                         4719 - 4735         4501          4405
                          Congress        Springdale     Springdale      4708 MLK
                      ---------------  ---------------  -------------  ------------
<S>                         <C>                <C>       <C>       <C>       <C>
Lease term (1)
-  Suite A                 5 Yrs           Vacant             5 Yrs     5 Yrs
-  Suite B                  NA             8 Yrs              5 Yrs       NA
-  Suite C                  NA               NA               5 Yrs       NA
-  Warehouse                NA               NA               NA        7 Yrs
Expiration - primary term
-  Suite A                3/31/07            NA             1/31/07   7/31/07
-  Suite B                  NA             1/31/04          1/31/07       NA
-  Suite C                  NA               NA             1/31/07       NA
-  Warehouse                NA               NA               NA      9/30/04
Renewal options             NA               NA               NA          NA
Square footage
-  Suite A                6,695             4,663            16,475    12,000
-  Suite B                  NA              7,945            10,975       NA
-  Suite C                  NA               NA              16,470       NA
-  Warehouse                NA               NA               NA       32,800
Base annual rental
-  Suite A             $ 72,306              NA            $135,852  $108,000
-  Suite B                  NA           $ 81,039          $ 80,432       NA
-  Suite C                  NA               NA            $107,573       NA
-  Warehouse                NA               NA               NA     $135,852
<FN>


(1)     Each of the leases include a right on the part of the state tenant to terminate the lease based on
budgetary restraints.
</TABLE>


The  fifth  leased  property  held  at  December 31, 2002 is the Commodore Plaza
Shopping  Center  located  in  Gulfport,  Mississippi  and  leased  to  retail
establishments. Under those leases, we receive 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.

                                      -4-
<PAGE>

The  following  table  summarizes  the  principal  terms  and  significant  data
regarding  each  of  the  tenants  of  Commodore  Plaza  Shopping  Center:

<TABLE>
<CAPTION>

                                                          Mulberry Bush  Mulberry Bush  Clark Temp
                           OfficeMax           Michaels     Maternity     (addition)      Service
                    -----------------------  -------------  -----------   ----------  -------------
<S>                 <C>                      <C>            <C>        <C>      <C>
Lease term                  15 Yrs               10 Yrs        5 Yrs        5 Yrs         Monthly
Expiration -
Primary term                 6/03                 7/08          4/07         4/07            NA
Renewal option            4 options -          4 options -   1 option -    1 option -        NA
                         5 years each         5 years each    5 years       5 years
Square footage              23,500               19,834         2,500        1,800         1,525
Base annual rental         $246,750             $175,950       $35,000      $25,200       $18,306
</TABLE>



FBO  Properties.  At  December  31,  2002,  our  FBO  Properties  consisted of 2
properties  located in Texas, 1 property located in Colorado, 1 property located
in  Arizona  and  1  property  located  in  Wyoming.  Each of the FBO properties
consisted of physical improvements, generally consisting of offices, hangers and
related improvements typically used in conducting airport operations, located on
airport  property  and  leased  from the airport. All of our FBO property leases
specified  a minimum amount of insurance coverage required to be carried by each
tenant.

FBO OPERATIONS

With  the acquisitions completed during 2002, our FBO business included aviation
fueling services, aircraft ground services and other aviation services. Aviation
fueling services were comprised primarily of into-plane fueling, maintenance and
operation  of  fuel  storage  and  delivery  systems and the retail sale of fuel
products.  Aircraft  ground  services  consisted  primarily  of ground handling,
aircraft  interior  grooming, cargo handling, passenger and traffic services and
fixed  base  operations.  FBOs  generally  include  the  provision  of  terminal
services,  pilot  facilities,  maintenance, weather service, flight planning and
hangar  space  to  private,  executive  and  corporate  aircraft.

At December 31, 2002, we conducted FBO operations at five airports. During 2002,
we  provided  services  to  customers  pursuant  to  contractual agreements. The
following  table  lists  the airports where we provided services at December 31,
2002  as  well  as  the year such operations were commenced by the entities from
which  we  acquired  those operations and the fuel sales at each location during
the  year  ended  December  31,  2002:

<TABLE>
<CAPTION>

LOCATION           OPERATING SINCE  FUEL SALES 12/31/02
-----------------  ---------------  --------------------
<S>                <C>              <C>
Austin, Texas           1996            $  4,860,817
Fort Worth, Texas       1994            $  1,620,795
Tucson, Arizona         1998            $  1,659,537
Casper, Wyoming         2000            $  1,451,063
Greeley, Colorado       2000            $    565,201
</TABLE>



The  demand  for  independent  aviation  services  depends on both the amount of
airline  traffic  and  the  extent  to which airlines outsource the provision of
these  services. Based on airport traffic figures, our own market experience and
estimates  of  revenue received for services rendered per plane, we believe that
as  much  as  90% of the total commercial aviation fueling market and 30% of the
total  commercial  ground  services  market  are  outsourced  by  airlines  to
independent  providers  and that, as a result, the aggregate independent markets
for  fueling services and ground services at the top 100 North American airports
are  approximately  $300 million and $1.9 billion, respectively. The independent
aviation  services  industry  is  highly fragmented and is characterized by many
operators  that provide services at a single or small number of locations. Small
operators are likely to face significant competitive pressures as large airlines
increasingly  deal  with fewer and larger suppliers providing a broader range of
services  at  multiple  locations.  This  trend  is  expected  to  encourage the
consolidation of the industry and enable suppliers to capitalize on economies of
scale.

                                      -5-
<PAGE>

As  noted  below,  subsequent  to  December  31,  2002,  we  sold all of our FBO
properties  and  FBO  operations  (see  "Sale  of  FBO  Operations").

SALE OF FBO OPERATIONS

On  February 27, 2003, we completed the sale of all of the assets and operations
of  our  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 our FBO properties and operations. The assets and operations
sold  consist  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 was paid $11.5 million 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  our  sale  to  Trajen  was  terminated.

OPERATING STRATEGY

We  intend to continue our business of acquiring, operating and holding FBOs and
real properties for investment. Our principal strategy has expanded to acquiring
equity  interests in aviation and real estate related businesses with a focus on
(1)  FBO operations and (2) leased properties. We will seek to acquire operating
business  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 our management. While it is not a principal objective, we
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  our  cost  of  capital.

Our  objectives  are: (1) to preserve and protect our 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; (3) to obtain capital appreciation through increases in the value of our
businesses  and properties; and (4) to the extent that funds from operations are
available  for  such  purpose,  to provide shareholders with cash distributions.
There  can  be  no  assurance  that  such  objectives  can  be  attained.

BUSINESS MANAGEMENT

The  operations  of  FBO  related  property  will  be  the responsibility of our
subsidiary,  Sterling  FBO. The management of Sterling FBO developed and managed
the  operations  of  the five FBO properties sold to Trajen, Inc. Other aviation
related  businesses  that  are  acquired  will  be  managed  by  the  management
professionals  of  that  business  or  management will be employed. All aviation
related  businesses will be the responsibility of Sterling FBO. Other businesses
which  might be acquired will be operated by management in place as a subsidiary
reporting  directly  to  Sterling  Holdings.

PROPERTY MANAGEMENT

The  supervision  of  the operations of the properties is managed principally by
management  of  our  subsidiary,  Sterling  FBO.  Because  of  the nature of our
properties  and  the  leases on those properties, necessary management functions
are  limited.  If  and when needed to supplement the efforts and capabilities of
our  management,  we 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.

                                      -6-
<PAGE>

FINANCING

We  have  no  specific guidelines relating to the manner in which we finance 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.

At  December  31, 2002, various of our FBO properties were subject to mortgages,
other debt and first lien positions securing indebtedness totaling approximately
$17.0  million.  In  conjunction  with  the  sale of FBO properties in 2003, all
indebtedness  secured  by  our  FBO  properties  has  been  paid  in  full.

COMPETITIVE CONDITIONS

The  properties  we  owned  in  Austin  at December 31, 2002, other than the FBO
properties  that  have been sold, are leased to various agencies of the State of
Texas  and  retail  tenants.  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 our other retail property in Mississippi have
long-term  leases  with  options  to  extend;  upon  expiration, other competing
tenants  will be sought. Similarly, properties that we 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  we operate 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 our properties for tenants.
Many  property  owner/operators  may  be  willing  to  lease  space  on  terms
significantly  more  favorable  to tenants than are we in which case we may lose
tenants. We attempt to mitigate competitive factors by acquiring properties with
existing  tenants  that  are  financially  sound  and  long-term  leases.

EMPLOYEES

As  of  August  20,  2004,  we  employed  one  full-time employee/officer of the
Company.  With  the  disposition  of  our  FBO  operating companies, our 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, we may, from time to time retain consultants
or  part-time  employees  to  provide  services.

ITEM 2.     PROPERTIES

As of December 31, 2002, we owned properties that are described more fully under
Item  1.  Business  -  Properties  above.

As  of  August  20,  2004,  our  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 our facilities are adequate to support operations for
the  foreseeable  future.

                                      -7-
<PAGE>

ITEM 3.     LEGAL PROCEEDINGS

The  Company  may  from  time  to  time be a party to lawsuits incidental to its
business.  With  the  change  of  management in 2004, the Company entered into a
settlement  with  Sterling  REIT  pursuant  to  which  Sterling  REIT  pledged
substantially  all  of  its  assets  as security for the repayment of $2,553,261
advanced  made  by  the  Company  to  Sterling  REIT  at  the direction of Lucky
Srinivasan,  a  former officer of the Company, but without proper authorization.
The  Company  is continuing to evaluate potential claims it may have against Mr.
Srinivasan.  Additionally,  the  Company  is  evaluating  other potential claims
against  former  management  personnel.

Our  subsidiary,  Austin  Aero  FBO,  Limited  is  party to a suit styled Travis
                                                                          ------
Central Appraisal District and Travis Appraisal Review Board v. Signature Flight
--------------------------------------------------------------------------------
Support  Corporation,  et.al.,  originally  filed in the 261st Judicial District
----------------------------
Court  of Travis County, Texas and currently on appeal before the Third Court of
Appeals  in  Austin,  Texas.  The  plaintiffs  in  the  suit  asserted  that the
defendants,  including  Austin  Aero, were liable for property taxes relating to
certain  improvements  constructed  at  Austin-Bergstrom Airport and used by the
defendants  pursuant  to  a  lease  of  the  facilities  and  operations  of the
improvements  as  part  of  fixed base operations of the airport. The defendants
asserted  that  the  facilities were exempt from property tax under an exemption
covering  property  used as part of a public transportation facility owned by an
incorporated  city.  The  defendants  were granted summary judgment at the trial
court.  The  taxing authorities have appealed the trial court's summary judgment
and  that appeal is currently pending. We believe that the trial court's summary
judgment  was appropriate. We have escrowed funds in an amount sufficient to pay
the  contested  taxes.

Except  as  noted,  we  are  not  aware  of  any current, pending, or threatened
litigation  or  proceedings  that  could  have  a material adverse effect on our
results  of  operations,  cash  flows  or  financial  condition.

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

None.

                                     PART II

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

MARKET  INFORMATION

On  December  31,  2002, our common stock traded on the OTC Bulletin Board under
the  symbol  "BLSL".  In  March  2003,  the  name  of the Company was changed to
"Sterling  Equity  Holdings,  Inc."  with  the  common  stock trading on the OTC
Bulletin  Board  under  the  symbol "SEQU." In 2003, trading in our common stock
moved  from  the  OTC  Bulletin  Board  to  the  Pink  Sheets.

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  August  20,  2004,  was  $0.30.

HOLDERS

As  of  August  20,  2004,  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.

                                      -8-
<PAGE>

SALES  OF  UNREGISTERED  SECURITIES

During  the  fourth  quarter  of  2002,  we  issued  the  following unregistered
securities:

-    In  October  2002,  the  Company issued 2,000,000 shares of common stock to
     acquire  a  99%  limited  partnership  interest  in  Commodore  Plaza, Ltd.
     Commodore  Plaza,  Ltd.  was  acquired from, and the shares were issued to,
     Hugo  Verhaeghe, Chaz Glace, Thomas Mathew and Sterling REIT, Inc., each of
     which  may  be  deemed  to  be  affiliates  of  the  Company.

-    In  October  2002,  the  Company issued 3,143,334 shares of common stock to
     acquire  a  100%  ownership  interest  in Greeley FBO, L.L.C. and 2,166,666
     shares  of  common  stock  to acquire a 100% ownership interest in Sterling
     Austin  Aero,  L.P. Both Greeley FBO and Sterling Austin Aero were acquired
     from, and the shares were issued to, Geld Fund II, LLC, Chasco Investments,
     Inc.,  Mathew  Investment  Partnership  and  Sterling  REIT,  Inc.

-    In  November  2002,  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 issued 8,223,953 shares of common stock to
     acquire  100%  of  the  outstanding shares of common stock of Ft. Worth Jet
     Center, Inc. Ft. Worth Jet Center, Inc. was acquired from Mathew Investment
     Partnership,  Sterling,  REIT,  Inc,  and  Geld  Fund  II,  LLC.

-    In  October  2002,  the  Company issued 1,500,000 shares of common stock to
     R.F.  Bearden  Associates, Inc. and 1,500,000 shares of common stock to Old
     Capitol Club, Inc. as payment in full for services rendered by R.F. Bearden
     Associates  in  the  form  of  management services of Ron F. Bearden in the
     invoiced  amount  of  $173,754.

The  issuance  of all shares of our common stock described above was pursuant to
the  exemption  from registration provided by Section 4(2) of the Securities Act
of  1933,  as  amended and related state private offering exemptions. All of the
investors  were  Accredited  Investors  as  defined  in  the  Securities Act, or
sophisticated  investors  with existing relationships with the Company, who took
their  shares  for  investment  purposes  without a view to distribution and had
access  to  information  concerning  the  Company and its business prospects, as
required  by  the  Securities  Act.

In  addition,  there was no general solicitation or advertising for the purchase
of  our  shares.  Our  securities  were  sold only to persons with whom we had a
direct  personal  preexisting relationship, and after a thorough discussion. All
certificates  for  our  shares  contain a restrictive legend. Finally, our stock
transfer  agent  has  been instructed not to transfer any of such shares, unless
such  shares  are registered for resale or there is an exemption with respect to
their  transfer.

No  commissions  were  paid  in  connection  with the issuances described above.

                                      -9-
<PAGE>

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

The  following  discussion  and  analysis should be read in conjunction with the
financial  statements  and notes thereto included elsewhere in this Form 10-KSB.
Except  for  the historical information contained herein, the discussion in this
Form  10-KSB  contains certain forward-looking statements that involve risks and
uncertainties,  such  as  statements  of our plans, objectives, expectations and
intentions.  The  cautionary  statements made in this Form 10-KSB should be read
as  being  applicable  to all related forward statements wherever they appear in
this  Form  10-KSB.  Our  actual  results  could  differ  materially  from those
discussed  here.

HISTORY  AND  DEVELOPMENT  OF  COMPANY

Sterling  Equities  Holdings,  Inc.,  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.

BlueStar  was  formed  as  a  "small  ticket"  regional  leasing  company.

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 ("FBOs") 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  six  FBOs.

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.

Commodore  Plaza,  Ltd.  was  acquired  from  Hugo Verhaeghe, Chaz Glace, Thomas
Mathew  and Sterling REIT, Inc., each of which may be deemed to be affiliates of
the  Company  by  reason  of  the  holdings of common stock by those persons and
entities  or  affiliates  of  those entities and, with respect to Sterling REIT,
Inc.,  by  reason  of  the  service  of  Ron F. Bearden as President of both the
Company  and  Sterling  REIT,  Inc.

Commodore  Plaza,  Ltd.  owns  the  Commodore Plaza Shopping Center in Gulfport,
Mississippi  which  leases  retail shopping space to various establishments on a
net  lease  basis.

On  October  30,  2002,  the  Company,  through  Sterling  FBO,  completed  the
acquisition  of  a  100%  ownership  interest  in  both  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.

Both  Greeley FBO and Sterling Austin Aero were acquired from Geld Fund II, LLC,
Chasco  Investments, Inc., Mathew Investment Partnership and Sterling REIT, Inc.
Geld Fund II, LLC, Chasco Investments, Inc. and Sterling, REIT, Inc. may each be
deemed to be affiliates of the Company by reason of the holdings of common stock
by  those entities or affiliates of those entities and, with respect to Sterling
REIT,  Inc., by reason of the service of Ron F. Bearden as President of both the
Company  and  Sterling,  REIT,  Inc.

Greeley  FBO  owned  and  operated  a private airport facility under the name of
Greeley-Weld  Jet  Center,  in Greeley, Colorado. The center opened in 2000 and,
during 2002, moved into a newly renovated facility, complete with a new terminal
building, an 81,000-foot ramp and a 10,000-foot runway. On-site services include
fueling,  hangar  space,  tie  down,  Jet  A,  100LL,  Oxygen, GPU, pre-heating,
de-icing  and  self  serve  100LL.

                                      -10-
<PAGE>

Sterling  Austin  Aero owned a private airport facility located in Austin, Texas
and  leased  to  Austin  Aero  FBO,  Ltd.  Constructed in 1999 at the new Austin
Bergstrom  International  Airport  (AUS),  the FBO includes a 15,000 square foot
terminal  with  boarding and waiting area, nine acres of ramp space, 65 tie-down
spaces,  five  14,000-square-foot hangars, exercise/workout room, pilots lounge,
weather  information system, flight planning room, showers, offices, secretarial
services,  fax  machines  and  computers.

On  November  25  2002,  the  Company,  through  Sterling  FBO,  completed  the
acquisition  of  a  100%  ownership  interest in both 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. Mathew Investment Partnership, L.P., Geld Fund II,
LLC., and Sterling REIT, Inc. may each be deemed to be affiliates of the Company
by  reason  of  the  holdings of common stock by those entities or affiliates of
those  entities  and,  with  respect  to  Sterling  REIT, Inc., by reason of the
service  of  Ron F. Bearden as President of both the Company and Sterling, REIT,
Inc.

Casper  Jet  Center,  L.L.C.  owned  and  operated a private airport facility in
Casper,  Wyoming.  The  recently renovated facility includes a large comfortable
pilot  lounge,  conference  room  and  offers  essential  pilot  supplies at the
professional  customer service counter. Casper Jet Center is also a full service
center  for  Cessna  Aviation  and  Commander  Aviation.

Austin  Aero FBO, Ltd. managed Sterling Austin Aero FBO, L.P., a private airport
facility  located  in  Austin,  Texas.

Sterling-Ft.  Worth Jet Center, Ltd. owned a private airport facility located at
Ft.  Worth  Meacham  International  Airport.  The  162,000 square foot facility,
managed  by  Ft. Worth Jet Center, Inc., offers hangar space, tie down services,
Jet  A and Avgas, computerized weather information, quick turn service, complete
line  service  and  the  availability  of  aircraft  cleaning  services.

On  December  30, 2002, the Company, through Sterling FBO, 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.

Ft.  Worth  Jet  Center,  Inc.  was acquired from Mathew Investment Partnership,
Sterling,  REIT,  Inc,  and Geld Fund II, LLC, each of which may be deemed to be
affiliates  of  the  Company  by reason of the holdings of common stock by those
entities  or  affiliates  of  those entities and, with respect to Sterling REIT,
Inc.,  by  reason  of  the  service  of  Ron F. Bearden as President of both the
Company  and  Sterling  REIT,  Inc.

Ft.  Worth  Jet  Center,  Inc., owned and operated a private airport facility in
Tucson,  Arizona,  under  the  name  of  Gate  One  Tucson.

In  December  of  2002,  the  Company  entered  into  an  agreement  to sell the
underlying assets of each of its airport operating companies, being Greeley FBO,
Sterling Austin Aero, Casper Jet Center, Austin Aero FBO, Sterling-Ft. Worth Jet
Center,  and Ft. Worth Jet Center, to an unaffiliated third party. On January 6,
2003,  Sterling  Austin Aero and Austin Aero FBO were sold for $8.5 million with
the  Company  receiving  $1.5  in  cash before payment of settlement charges and
providing $7 million in seller financing to the buyer. The sale of the assets of
the  other  operating  companies  was  completed  on February 27, 2003, with the
Company  receiving  $10  million in cash plus the payoff of the seller financing
notes  of $7 million issued on January 6, 2003. Additional consideration, not to
exceed  $6  million, was payable over the three year period following closing in
the  form of an earnout calculated based on $2.00 per gallon of jet fuel sold in
excess  of  an  increasing minimum sales level. From these proceeds, the Company
paid  all  debts  related  to  the  assets sold and $880,000 was set aside as an
escrow  for  contingencies  over  an  eighteen  month  period.

In  March  2003,  the  Company  changed  its name from BlueStar Leasing, Inc. to
Sterling  Equities  Holdings,  Inc.

                                      -11-
<PAGE>

As  a  result  of  the Exchange, the acquisitions during 2002 and the subsequent
sale  of  operating  FBOs, the Company altered its business plan to focus on the
acquisition,  ownership  and  operation  of income producing real estate with an
emphasis on FBOs and net leased properties. The Company terminated the equipment
leasing  operations  originally conducted by BlueStar. Following the sale of FBO
properties in 2003, operations during 2003 were limited to operation of the four
state-leased  properties and the Commodore Plaza property and ongoing efforts to
acquire  certain  properties  from  Sterling  REIT.

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.

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 team, 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.

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 earnout was
terminated and $350,000 was distributed to the Company in full settlement of the
contingency  escrow.

The  Exchange  was  accounted  for  as  a  recapitalization  of the Company with
Sterling  FBO  as  the  acquirer  (a  "reverse acquisition"). On this basis, the
historical  consolidated financial statements of BlueStar prior to September 25,
2002  are  those  of  Sterling  FBO  and  its  subsidiaries  and  the historical
shareholders' equity of BlueStar as of September 25, 2002 has been retroactively
restated  to reflect the equivalent number of shares of BlueStar issued for such
acquisition.  The  acquisition  of the various affiliated entities in the fourth
quarter  of  2002  has  been  accounted  for  as  a  purchase.

PLAN  OF  OPERATIONS

As  a  result  of  the Exchange, the acquisitions during 2002 and the subsequent
sale  of  operating  FBOs, the Company has altered its business plan to focus on
the acquisition, ownership and operation of income producing real estate with an
emphasis  on  FBOs  and  leased  properties. Following the Exchange, the Company
terminated  BlueStar's  equipment  leasing  operations.

The  Company  intends  to  derive  fixed monthly rental income from its existing
properties,  and  properties  acquired  in  the future, under leases wherein the
tenant  pays  a  negotiated  portion of the operating costs of the property. The
Company's  leasing  operations  are  expected  to  focus on (1) office and other
commercial  properties  and  (2)  FBO  properties.

                                      -12-
<PAGE>

OVERVIEW  OF  OPERATIONS

The  Company's  business  during  2002 included (1) operation of five properties
under leases, and (2) operation of 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  Statement  of  Operations.

Lease  Operations.  Leased  properties  held  during  2002  consisted  of  four
properties  located  in Austin, Texas each of which is 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
2002,  the  Company  also  owned  one  retail property in Gulfport, Mississippi,
leased to multiple retail tenants on a "net lease" basis.

FBO  Operations.  Aviation fueling services during 2002 were comprised primarily
of  into-plane  fueling,  maintenance and operation of fuel storage and delivery
systems  and  the retail sale of fuel products. Aircraft ground services consist
primarily  of  ground  handling,  aircraft  interior  grooming,  cargo handling,
passenger  and  traffic  services  and  FBOs.

Revenues

-    Leased  Properties. Revenues from operation of leased properties consist of
     fixed  monthly  rental  payments.

-    FBO  Operations. Into-plane fueling service consists of providing airplanes
     with  specified amounts of fuel from fuel storage facilities located at the
     airport.  We  generally  record  revenue  from into-plane fueling contracts
     based  on a fee per gallon of fuel delivered. In addition, we sell aviation
     fuel  to  private  aircraft  at retail prices at locations where we operate
     FBOs.  FBOs  generally  include  the  provision of terminal services, pilot
     facilities,  maintenance, weather service, flight planning and hangar space
     to  private,  executive  and  corporate  aircraft.  Substantially  all  FBO
     services,  other  than  hangar  and  pilot  facility  usage  and  aircraft
     maintenance,  were provided without separate fees but were reflected in per
     gallon  fees  charged for fuel. Hangar and pilot facility usage, as well as
     aircraft  maintenance  at  some locations, were subject to separate charges
     based  on  a  fixed  fee  schedule.

Costs and Expenses

-    Leased  Operations.  Our principal expenses associated with leased property
     operations in Austin are administrative expenses, real estate taxes, hazard
     insurance  and  maintenance.  The  tenant  in each of those leases pays all
     utilities and janitorial costs. Because of the nature of net lease property
     operations  of  Commodore  Plaza,  we  have  no  direct  cost  of revenues.

-    FBO  Operations.  Our  principal FBO operating expenses are labor costs and
     direct  supervision  at  stations  along  with related benefits and payroll
     taxes,  cost  of  fuel  sold, workers' compensation, property and liability
     insurance, rent expense, repairs and maintenance expenses and miscellaneous
     other  direct  station-related  expenses.  Certain  of  these  expenses are
     relatively  fixed,  regardless  of the extent of operations at a particular
     station,  including  the  cost  of  the facility and related administrative
     expenses. Selling, general and administrative expenses include the costs of
     marketing  FBO  services,  and  accounting,  finance  and personnel related
     expenses.  These  costs  are generally comprised of labor costs and related
     benefits  and  payroll  taxes,  legal  and  other  professional  fees  and
     miscellaneous  expenses.

CRITICAL  ACCOUNTING  POLICIES

The  following  describes the critical accounting policies used in reporting our
financial  condition  and  results  of  operations.  In  some  cases, accounting
standards  allow  more  than one alternative accounting method for reporting. In
those  cases,  our  reported  results of operations would be different should we
employ  an  alternative  accounting  method.

Impairment of Long-Lived Assets

We  review  all  long-lived  assets on a regular basis to determine if there has
been  an  impairment  in  the  value  of  those  assets.  If, upon review, it is
determined  that  the  carrying value of those assets may not be recoverable, we
will  record  a  charge  to  earnings  and  reduce the value of the asset on the
balance  sheet  to  the  amount  determined  to  be  recoverable.

                                      -13-
<PAGE>

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  our  review  of our present operating properties and other long-lived
assets,  during  the  fiscal  year  ended  December  31,  2002,  we  recorded no
impairments  of  our  long-lived  assets.

RESULTS  OF  OPERATIONS

As  a  result  of  the  Exchange,  results  of  operations reported are those of
Sterling  FBO  from  the  date  of  commencement  of operations by Sterling FBO,
September  25,  2002,  to  December  31,  2002.

Following  is  summary  financial  information reflecting the operations for the
period  indicated.

<TABLE>
<CAPTION>



                                        Period from Inception
                                        (September 25, 2002)
                                        to December 31, 2002
                                       -----------------------
<S>                                    <C>
Rental revenues                        $              275,887
Rental operating expenses                             384,406
Other operating expenses                            1,001,019
                                       -----------------------
Loss from operations, before tax                   (1,109,538)
Income tax benefit                                    246,413
                                       -----------------------
Net loss from continuing operations                  (863,125)
Net loss from discontinued operations                 (39,237)
                                       -----------------------
Net loss                               $             (902,362)
                                       =======================
</TABLE>

Revenues

All  revenues for the period from inception (September 25, 2002) to December 31,
2002  were  derived from the leases of the five properties owned and operated by
the  Company  during  that  period.  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
rental payments to the Company are $1,088,605 annually through 2006 and decrease
thereafter.

Rental Operating Expenses

Rental  operating expenses are costs associated with the ownership and operation
of  rental  properties.  Principal  rental  operating expenses during the period
related to interest expense ($145,303) and depreciation and amortization expense
($122,247)  associated  with  ownership  of,  and  debt  service  on, the rental
properties  and  property  taxes  ($67,592), repairs, maintenance, utilities and
other  costs.

Other Operating Expenses

Other  operating  expenses during the period related to bad debts ($699,342) and
merger  and  consulting  expenses  ($301,677).  Bad  debt expense for the period
related  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, 2002 were determined to be uncollectible and advances made in 2003
will  be  similarly  treated.  Merger and consulting expenses related to amounts
paid  in  connection  with  proposed  or  actual  acquisitions of properties and
financing  of  those  properties,  a substantial of those expenses being amounts
paid  to  related  parties.

                                      -14-
<PAGE>

Income Taxes

A  deferred  income  tax  benefit  of  $246,413  was recorded reflecting the net
operating  loss  for  the  period.

LIQUIDITY  AND  CAPITAL  RESOURCES

Cash  and  Working  Capital  Position

At  December  31, 2002, the Company had a cash balance of $475,845 and a working
capital deficit of approximately $134,244, including current maturities on notes
payable  of  $195,793.  The  working  capital  deficit excludes current payables
relating  to  assets  held  for  sale.

Cash Flows

Cash  flows  for  the period from inception (September 25, 2002) to December 31,
2002,  were  derived  from,  or  related to, the various acquisitions during the
period  as  well  as  ongoing  operations,  investments and financing activities
undertaken  during  the  period.

Operations  during  the  period  used  $17,930  of  cash,  including  changes in
operating  assets and liabilities that provided $560,277 of operating cash flow.

Investing  activities  during the period provided net cash of $128,411, of which
$544,474 represented cash held by acquired entities with $1,598 being applied to
land, buildings and improvements and $414,465 being applied as advances relating
to  construction  in  progress.

Financing activities during the period provided net cash of $365,364, consisting
of  proceeds of notes payable in the amount of $487,160 partially offset by note
payments  of  $87,101  and  deferred  loan  costs  of  $34,695.

Long-Term Debt

At  December  31,  2002,  the  Company  had  long-term  debt  of  approximately
$24,760,358.  Of the long-term debt at December 31, 2002, $15,115,614 related to
FBO  assets  held  for sale. That debt was paid in full upon the sale of the FBO
assets  in  2003.

The  balance  of the long-term debt consisted principally of indebtedness on the
Company's  leased  real  estate  properties  in  the  amount  of $9,644,744. The
indebtedness  is  comprised  of  separate  loans  on  each of the Company's five
properties,  each  of  which is secured by first lien positions on the Company's
real  estate.

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.

Our only material contractual obligations requiring determinable future payments
on our part are our 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,  2002  were  as  follows:
<TABLE>
<CAPTION>


                                  Payments due by period
                ---------------------------------------------------------------
                   Total        2003       2004 - 2005  2006 - 2007  Thereafter
                ----------  ------------  ------------  -----------  ----------
<S>             <C>         <C>           <C>           <C>          <C>
Long-term debt  $9,840,537  $    195,793  $    439,009  $   509,916  $8,695,819
                ----------  ------------  ------------  -----------  ----------
     Total      $9,840,537  $    195,793  $    439,009  $   509,916  $8,695,819
                ----------  ------------  ------------  -----------  ----------
</TABLE>

                                      -15-
<PAGE>

INFLATION

Inflation has historically not had a material effect on our operations. When the
price  of  products  and  services increases, we believe that we will be able to
pass  those  higher prices on to the customer. Accordingly, we believe inflation
will  not  have  a  material  effect  on  our  future  operations.

ITEM  7.     FINANCIAL  STATEMENTS

The financial statements, together with the independent auditors' report thereon
of  Thomas  Leger  &  Co.,  L.L.P.,  appear beginning on page 23 of this report.

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

In 2003, following the Exchange, our 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  our  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., we 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. We also did not consult with Thomas
Leger  & Co., L.L.P. regarding the type of audit opinion which might be rendered
on our financial statements and no oral or written report was provided by Thomas
Leger  &  Co.,  L.L.P.

ITEM  8A.     CONTROLS  AND  PROCEDURES

The  Company  has evaluated, under the supervision and with the participation of
management,  including the Chief Executive Officer and Chief Accounting Officer,
the  effectiveness  of  the  design  and  operation  of the Company's disclosure
controls  and  procedures (as that term is defined under Rule 13a-15(e) and Rule
15d-15(e)  of  the Securities Exchange Act of 1934). Based upon this evaluation,
the  Chief  Executive Officer and Chief Accounting Officer concluded that, as of
the  fiscal  year  ended  December  31,  2002,  except  as  described below, the
disclosure  controls  and  procedures  were  effective.

During  2004,  following  a  change  in management and an internal review by new
management,  the  Company  determined that certain internal controls relating to
the  control  of  cash  were  inadequate. With the change in management, we have
implemented  certain  procedures  designed  to  properly  control  cash  and
authorization  with  respect  to  Company  bank  accounts.

                                      -16-
<PAGE>

                                    PART III

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

The  following  table sets forth certain information regarding the directors and
executive  officers  of  the  Company  as  of  August  20,  2004.
<TABLE>
<CAPTION>


      Name           Age                Position
      ----         -----  ---------------------------------
<S>               <C>   <C>                                <C>

  Thomas Mathew     46    President, Treasurer and Director
  Lloyd Shoppa      72    Chairman, Secretary and Director
  Ron F. Bearden    62    Director
</TABLE>

There  are no family relationships among any of the directors or officers of the
Company.

BUSINESS EXPERIENCE

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.

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  which  is  operated  by  Prosperity  Bancshares,  Inc.

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  February  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 5 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.

COMPLIANCE WITH SECTION 16(A) OF EXCHANGE ACT

Under  the  securities  laws  of the United States, the Company's directors, its
executive  officers,  and  any  person  holding  more  than  ten  percent of the
Company's  Common  Stock  are  required to report their initial ownership of the
Company's  Common  Stock  and  any  subsequent  changes in that ownership to the
Securities  and  Exchange  Commission. Specific due dates for these reports have
been  established and the Company is required to disclose any failure to file by
these  dates  during  fiscal  year  2002. To the Company's knowledge, all of the
filing requirements were satisfied on a timely basis in fiscal year 2002, except
for  the following: (1) E Corp, Hugo Verhaeghe and Chaz Glaz each failed to file
Forms  3 reporting their initial acquisition of 10% of the Company's shares, and
(2)  Ron  F.  Bearden  failed  to  file on a timely basis a Form 3 reporting his
initial  appointment as President and a Director of the Company. In making these
disclosures,  the Company has relied solely on copies of reports provided to the
Company.

                                      -17-
<PAGE>

ITEM 10.     EXECUTIVE COMPENSATION

The  following  table  sets  forth  information  concerning  cash  and  non-cash
compensation  paid  or  accrued  for  services  in all capacities to the Company
during  the  year  ended  December  31,  2002  of  each person who served as the
Company's  Chief  Executive  Officer  during  fiscal 2002 and the next four most
highly  paid  executive  officers  (the  "Named  Officers").

<TABLE>
<CAPTION>

                                                                               Long Term
                                           Annual Compensation                Compensation
Name and                                 ----------------------              ---------------
Principal Position           Year      Salary($)  Bonus($)  Other ($)        Stock Options(#)
--------------------------  -----     ----------  -------  ----------   -----------------------
<S>                         <C>                   <C>       <C>                        <C>
Ron F. Bearden (1)(2)       2002        46,323      -0-      173,754                       -
  President and             2001             -      -0-            -                       -
  Chief Executive Officer   2000             -      -0-            -                       -

<FN>


(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.
</TABLE>


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,  at  August  20,  2004,  had  no  employment  agreements  with any
employees.

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.

ITEM 11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  following  table is furnished as of August 20, 2004, to indicate beneficial
ownership of shares of the Company's Common Stock by (1) each shareholder of the
Company  who is known by the Company to be a beneficial owner of more than 5% of
the  Company's Common Stock, (2) each director and named officer of the Company,
individually,  and  (3)  all  officers  and directors of the Company as a group.
<TABLE>
<CAPTION>


Name and address                                    Number of shares
of beneficial owner (1)                            beneficially owned  Percent
-------------------------------------------------  ------------------  --------
<S>                                                <C>                 <C>

Sterling REIT, Inc. (2)                                    11,320,007     28.5%
Thomas Mathew (3)                                           8,788,422     22.2%
Hugo Verhaghe (4)                                           6,812,088     17.2%
Charles Glace (5)                                           3,484,550      8.8%
Lucky Srinivasan (6)                                        2,500,000      6.3%
Ron F. Bearden (7)                                          1,500,000      3.8%
Lloyd Shoppa                                                  457,500      1.2%
All officers and directors as a group (3 persons)          10,745,922     27.1%
<FN>


(1)  Unless  otherwise  noted,  each  person  or group identified possesses sole
     voting  and  investment power with respect to the shares shown opposite the
     name  of  each  person  or  group.
(2)  Ownership and control of Sterling REIT, Inc. is subject to disputed claims.
     Charles Glace is Chairman of Sterling REIT and may be deemed to control the
     shares  held  by  Sterling REIT. All shares held by Sterling REIT have been
     pledged  to  the  Company  to secure repayment of advances to Sterling REIT
     totaling  $2,553,261.
(3)  All  shares are held of record by Mathew Investment Partnership. Address is
     7401  Windswept  Trail,  Colleyville,  TX  76034.
(4)  All  shares  are  held of record by Geld Fund II LC. Address is 7705 Debbie
     Dr.,  Leander,  Texas  78641.
(5)  All shares are held of record by Chasco Investments, Inc. Address is PO Box
     1057,  Round  Rock,  Texas  78680.
(6)  All  shares are held of record by E Corp. Lucky Srinivasan holds voting and
     investment  power  with  respect  to  the  shares.
(7)  All  shares  are  held  of record by R.F. Bearden Associates, Inc. The sole
     shareholder  of  R.F.  Bearden  Associates,  Inc. is Rebecca Bearden who is
     married  to  Ron  F.  Bearden,  a  director  of the Company. Ron F. Bearden
     disclaims  beneficial  ownership  of  all  shares  held  by  R.F.  Bearden
     Associates, Inc. Address is 2800 Post Oak Blvd., Suite 5260, Houston, Texas
     77056.
</TABLE>

                                      -18-
<PAGE>

ITEM  12.  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS

The  Company  and its subsidiary, Sterling FBO, have, from time to time, entered
into  transactions  with  various entities controlled by the Company's principal
shareholders and/or by Ron F. Bearden. The principal shareholders of the Company
include  Sterling  REIT,  Inc.,  Chasco Investments, Inc., Geld Fund II, LLC, AM
Pacific Group and Mathew Investment Partnership. Those entities may be deemed to
be  controlled by Hugo Verhaeghe, Charles Glace, Thomas Mathew, Lucky Srinivasan
and  Ron  F.  Bearden.

All  of  our  assets  owned  and  operated during 2002 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.

                                      -19-
<PAGE>

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. 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 were determined to be uncollectible and advances made
in  2003  will  be  similarly  treated.

Payments  by  the  entities  acquired  by  the Company, during 2002 but prior to
acquisition  of  those  entities by the Company, to persons or entities that are
controlling  persons  of  the  Company  following  the  acquisitions  included:
<TABLE>
<CAPTION>


Recipient              Nature of Amounts Paid        Amount
---------         --------------------------------  --------
<S>               <C>                               <C>

AM Pacific Group  Structure finance brokerage fee   $192,000
AM Pacific Group  Consulting fee                      54,300
Sterling REIT     Management fee                     437,500
Sterling REIT     Lease payments - Austin facility   489,292
Sterling REIT     Other fees                         124,853
Thomas Mathew     Management fee                     176,280
Hugo Verhaeghe    Management fee                      12,000
</TABLE>

Management fees paid by the Company to Thomas Mathew during 2002 totaled $7,500.

During 2002, the Company issued 1,500,000 shares of common stock to R.F. Bearden
Associates,  Inc. and 1,500,000 shares to Old Capitol Club, Inc. in full payment
of  a $173,754 fee payable to R.F. Bearden Associates for management services of
Ron  F.  Bearden,  which  amount is reflected in the compensation reported under
Item  10  above.

ITEM  13.     EXHIBITS  AND  REPORTS  ON  FORM  8-K

     (a)     Exhibits

 Exhibit
  Number        Description  of  Exhibit
  ------        ------------------------

   2.1          Exchange Agreement dated June 1, 2002, by and among BlueStar
                Leasing, Inc. and Sterling FBO Holdings, Inc. (1)
   2.2          Amendment to Exchange Agreement dated September 25, 2002 (1)
   2.3          Exchange Agreement dated December 30, 2002, by and among
                BlueStar Leasing, Inc., Sterling FBO Holdings, Inc. and Ft.
                Worth Jet Center, Inc. (3)
   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. (4)
   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-Forth Worth JC, LP. (4)
   3.1          Articles of Incorporation (2)
   3.2          Bylaws (2)
  10.1          Settlement Agreement, dated January 14, 2004, between Sterling
                Equity Holdings, Inc. and Sterling REIT, Inc. (5)
  10.2          Promissory Note, dated January 14, 2004, from Sterling REIT,
                Inc. to Sterling Equity Holdings, Inc. (5)
  10.3          Pledge Agreement, dated January 14, 2004, from Sterling REIT,
                Inc. to Sterling Equity Holdings, Inc. (5)
  10.4          Security Agreement, dated January 14, 2004, from Sterling REIT,
                Inc. in favor of Sterling Equity Holdings, Inc. (5)
  21.1*         List of subsidiaries
  31.1*         Section 302 Certifications
  32.1*         Section 906 Certifications
-----------------------
*     Filed herewith.

(1)  Incorporated  by  reference  to  the  respective  exhibits  filed  with
     Registrant's  Current  Report  on  Form  8-K  dated  September  30,  2002.
(2)  Incorporated  by  reference  to  the  respective  exhibits  filed  with
     Registrant's  Registration  Statement on Form 10-SB filed October 10, 2001.
(3)  Incorporated  by  reference  to  the  respective  exhibits  filed  with
     Registrant's  Current  Report  on  Form  8-K  dated  December  30,  2002.
(4)  Incorporated  by  reference  to  the  respective  exhibits  filed  with the
     Registrant's  Current  Report  on  Form  8-K  dated  February  27,  2003.
(5)  Incorporated  by  reference  to  the  respective  exhibits  filed  with the
     Registrant's  Current  Report  on  Form  8-K  dated  January  13,  2004.

                                      -20-
<PAGE>

     (b)     Reports  on  Form  8-K

     Current  Report  on  Form  8-K  dated September 30, 2002 (filed October 15,
     2002)  reporting under Item 1, a change in control of the registrant, under
     Item  2  the  acquisition of Sterling FBO Holdings, Inc. and under Item 5 a
     change  in  the  registrant's  principal  offices.

     Current Report on Form 8-K dated October 30, 2002 (filed November 12, 2002)
     reporting  under  Item  2  the  acquisition of Greeley FBO LLC and Sterling
     Austin  Aero,  L.P.

     Current Report on Form 8-K dated November 25, 2002 (filed December 2, 2002)
     reporting  under  Item  2  the  acquisitions  of Casper Jet Center, L.L.C.,
     Austin  Aero  FBO,  Ltd.,  and  Sterling-Ft.  Worth  Jet  Center,  Ltd.

     Current  Report  on  Form  8-K  dated December 30, 2002 (filed December 31,
     2002)  reporting under Item 2 the acquisition of Ft. Worth Jet Center, Inc.

ITEM 14.     PRINCIPAL ACCOUNTANT FEES AND SERVICES

Not  applicable.

                                      -21-
<PAGE>

                                   SIGNATURES

     In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
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  and  Chief  Executive Officer

Dated:     August  23,  2004

     In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.


    Signature                         Title                    Date
    ---------                         -----                    ----

/s/  Thomas  Mathew    President,  Chief Executive Officer     August 23, 2004
Thomas  Mathew         (Principal  Executive  Officer  and
                       Principal  Financial  and  Accounting
                       Officer)  and  Director

/s/  Lloyd Shoppa      Director                                August 23, 2004
Lloyd  Shoppa

/s/  Ron  F.  Bearden  Director                                August  23, 2004
Ron  F.  Bearden

                                      -22-
<PAGE>

                         STERLING EQUITY HOLDINGS, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS




Report of Independent Public Accountants                              F-1 - F-2

Consolidated Balance Sheet - December 31, 2002                              F-3

Consolidated Statement of Operations - Period
  from Inception (September 30, 2002)
  to December 31, 2002                                                      F-4

Consolidated Statement of Shareholders' Deficit - Period
  from Inception (September 30, 2002) to December 31, 2002                  F-5

Consolidated Statement of Cash Flows - Period from
  Inception (September 30, 2002) to December 31, 2002                       F-6

Notes to Consolidated Financial Statements                           F-7 - F-23

<PAGE>

                          INDEPENDENT AUDITOR'S REPORT


To  the  Board  of  Directors
Sterling  Equity  Holdings,  Inc.
Houston,  Texas


We  have  audited the accompanying consolidated balance sheet of Sterling Equity
Holdings,  Inc.  as of December 31, 2002 and the related consolidated statements
of  operations,  shareholders'  deficit,  and  cash  flows  for  the period from
inception (September 25, 2002), to December 31, 2002. These financial statements
are  the  responsibility  of  the Company's management. Our responsibility is to
express  an  opinion  on  these  financial  statements  based  on  our  audit.

We  conducted our audit in accordance with auditing standards generally accepted
in  the  United  States  of  America.  Those  standards require that we plan and
perform  the audit to obtain reasonable assurance about whether the consolidated
financial  statements  are  free  of  material  misstatement.  An audit includes
examining,  on  a test basis, evidence supporting the amounts and disclosures in
the  financial  statements.  An  audit  also  includes  assessing the accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating  the  overall  financial  statement presentation. We believe that our
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. as of December 31, 2002 and the results of its operations and its
cash  flows  for  the period from inception (September 25, 2002) to December 31,
2002  in  conformity with accounting principles generally accepted in the United
States  of  America.

As  more  fully  discussed  in  Note  3,  during 2004, the Company sold its five
private airplane flight service organizations.  The assets and operations of the
five  private  airplane  flight  service organizations represented a substantial
portion  of  the  Company's  total  assets  and  results  of  operations.


                                       F-1

<PAGE>

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 9, 2004



                                       F-2
<PAGE>

<TABLE>
<CAPTION>

                                   Sterling Equity Holdings, Inc.
                                 (Formerly Blue Star Leasing, Inc.)
                                     Consolidated Balance Sheet
                                         December 31, 2002
                                         -----------------


                                     ASSETS
<S>                                                           <C>
    Investment in real estate
      Land, improvements and leaseholds                       $               10,245,266
      Accumulated depreciation                                                (2,255,722)
                                                              ---------------------------
          Net                                                                  7,989,544
      Land                                                                     1,389,420
                                                              ---------------------------
          Net investment in real estate                                        9,378,964
    Cash                                                                         475,845
    Accounts receivable                                                           66,004
    Prepaid insurance                                                             21,984
    Deferred financing - net of amortization of $47,832                          261,967
    Goodwill                                                                   1,017,717
    Assets held for sale                                                      15,167,128
    Escrowed funds                                                                10,088
    Deferred tax asset                                                           165,660
    Due from affiliates                                                           30,000
                                                              ---------------------------

    Total Assets                                              $               26,595,357
                                                              ===========================

                                  LIABILITIES
    Accounts payable                                          $                  153,379
    Accrued expenses                                                             348,905
    Real estate notes payable                                                  9,840,537
    Other notes payable                                                           87,800
    Indebtedness on assets to be sold                                         16,369,780
    Due to affiliates                                                             50,500
                                                              ---------------------------

    Total Liabilities                                                         26,850,901
                                                              ---------------------------

                              SHAREHOLDERS' DEFICIT
    Preferred stock, par value $.001,  authorized 5,000,000,
       none issued and outstanding                                                     -
    Common stock, par value $.001, authorized 70,000,000,
        39,655,068 issued and outstanding                                         39,655
    Additional paid-in capital                                                   607,163
    Accumulated deficit                                                         (902,362)
                                                              ---------------------------

    Total Shareholders' Deficit                                                 (255,544)
                                                              ---------------------------

    Total Liabilities and Shareholders' Deficit               $               26,595,357
                                                              ===========================
</TABLE>

The accompanying footnotes are an integral party of these financial statements.

                                      F-3

<PAGE>

<TABLE>
<CAPTION>

                 Sterling Equity Holdings, Inc.
               (Formerly Blue Star Leasing, Inc.)
             Consolidated Statement of Operations
         Period from Inception (September 25, 2002)
                  through December 31, 2002
                  -------------------------


<S>                                            <C>
    Rental revenue                             $   275,887
                                               ------------
    Real estate operating expenses
    Interest                                       145,303
    Taxes                                           67,592
    Depreciation and amortization                  122,247
    Repairs and maintenance                         18,946
    Utilities                                        6,637
    Other                                           23,681
                                               ------------
    Total                                          384,406
    Bad debt expense                               699,342
    Merger and consulting expense                  301,677
                                               ------------

    Total operating expenses and costs           1,385,425
                                               ------------

    Loss before income tax                      (1,109,538)
                                               ------------

    Current income tax                                   -
    Deferred income tax                            246,413
                                               ------------
    Provision for income tax                       246,413
                                               ------------

       Net loss from continuing operations        (863,125)

       Net loss from discontinued operations,
           net of tax benefit of $64,865           (39,237)
                                               ------------

    Net loss                                   $  (902,362)
                                               ============

    Basic and diluted loss per share:
      Loss from continuing operations          $     (0.04)
      Loss from discontinued operations                  -
                                               ------------
      Total loss                               $     (0.04)
                                               ============

    Basic and diluted weighted average shares   23,642,363
                                               ============
</TABLE>

The accompanying footnotes are an integral party of these financial statements.

                                      F-4

<PAGE>




<TABLE>
<CAPTION>

                                 Sterling Equity Holdings, Inc.
                               (Formerly Blue Star Leasing, Inc.)
                         Consolidated Statement of Shareholders' Deficit
              Period from Inception (September 25, 2002) through December 31, 2002
              --------------------------------------------------------------------


                                        Common Stock      Additional
                                   ----------------------  Paid-In  Accumulated
                                     Shares      Amount    Capital    Deficit      Total
                                   ----------  ----------  --------  ----------  ----------
<S>                                <C>         <C>         <C>       <C>         <C>
  Balance December 31, 2001         6,250,000  $   6,250   $818,750  $(741,895)  $  83,105

  To record asset distribution              -   (825,000)   741,895    (83,105)
  To record merger with
    Sterling FBO Holdings, Inc.
    and Fort Worth Jet
    Center, Inc.                   30,405,068     30,405    439,659          -     470,064

  To record shares issued
    for consulting services         3,000,000      3,000    173,754          -     176,754

  To reflect consolidated loss
    for the period                          -          -          -   (902,362)   (902,362)
                                   ----------  ----------  --------  ----------  ----------

  Balance December 31, 2002        39,655,068  $  39,655   $607,163  $(902,362)  $(255,544)
                                   ==========  ==========  ========  ==========  ==========
</TABLE>

The accompanying footnotes are an integral party of these financial statements.

                                      F-5

<PAGE>

<TABLE>
<CAPTION>

                                Sterling Equity Holdings, Inc.
                             Consolidated Statement of Cash Flows
                              (Formerly Blue Star Leasing, Inc.)
                          Period from Inception (September 25, 2002)
                                   through December 31, 2002
                                   -------------------------


 OPERATING ACTIVITIES
<S>                                                           <C>
    Net loss from operations                                  $            (902,362)
    Adjustments to reconcile net income to net
      net cash provided by operating activities:
    Depreciation and amortization                                           147,401
    Expenses paid with stock                                                176,754
    Changes in operating assets and liabilities:
      Tenant and other receivables                                           16,855
      Prepaid Insurance                                                      14,695
      Related party (receivables) or payables                                94,653
      Other assets                                                         (307,822)
      Accounts payable, accrued expenses and other liabilities              741,896
                                                              ----------------------
        Net cash provided by operating activities                           (17,930)

 INVESTING ACTIVITIES
    Land, buildings and improvements                                         (1,598)
    Advances on construction in progress                                   (414,465)
    Cash of acquired entities                                               544,474
                                                              ----------------------
        Net cash provided by investing activities                           128,411
                                                              ----------------------

 FINANCING ACTIVITIES
    Proceeds from property notes payable                                    487,160
    Repayments of mortgage and other notes payable                          (87,101)
    Deferred loan costs                                                     (34,695)
                                                              ----------------------
        Net cash provided by financing activities                           365,364
                                                              ----------------------

 NET INCREASE IN CASH  AND CASH EQUIVALENTS                                 475,845
    Cash and cash equivalents at beginning of period
      At beginning of period                                                      -
                                                              ----------------------
      At end of period                                        $             475,845
                                                              ======================

 SUPPLEMENTAL CASH FLOW DISCLOSURES
    Interest paid                                             $              85,792
    Income taxes paid                                                             -

 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
    Assets acquired
      Land, buildings and improvements of acquired companies  $          15,388,523
      Other assets of acquired companies                                        997
      Current assets                                                      1,688,271
      Related party receivables                                             841,743
      Deferred loan costs                                                   505,057
      Escrowed funds                                                         80,455
      Deferred tax asset                                                  1,983,847
      Goodwill                                                            6,521,766

    Liabilities assumed
      Account payable and accrued expenses                    $           1,896,702
      Mortgage notes  and other notes payable                            24,643,892
      Issuance of common stock                                              470,065

    Common stock issued for services                                        176,754
</TABLE>

The accompanying footnotes are an integral party of these financial statements.

                                      F-6

<PAGE>

                         STERLING EQUITY HOLDINGS, INC.
                       (FORMERLY BLUE STAR LEASING, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2002
                                -----------------

1.     -  HISTORY  AND  DEVELOPMENT  OF  THE  COMPANY

Sterling  Equity  Holdings,  Inc.  (the  "Company")  was  chartered  as BlueStar
Leasing,  Inc.  ("BLS")  in  January  of  2001 and in March of 2003 the name was
changed  with  a charter amendment.  BLS was formed as a "small ticket" regional
leasing  company  working within select niche markets of vendors, small business
owners  and brokers.  Their strategy was to provide a funding alternative to the
typical  "credit  scoring matrix" of leasing companies.  In July of 2002, as the
original  business plan became less attractive, 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  and  it  became the
financial  vehicle  to  consummate  the  exchange.

At the time of the exchange, BLS was a "1934 Act" reporting company with minimal
assets  and  liabilities.  For  financial  reporting  purposes, the exchange was
treated as a reverse merger whereby the acquiring company (SFBO) carries-forward
the  historical  recorded  value  of  its  resources  and  obligations.

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.  SBFO 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 and the operations for the four
Austin  Properties  are included in the Consolidated Statement of Operations for
the period from September 25, through December 31, 2002.  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.

Additionally,  at  the  time  of  the  stock  exchange,  SFBO  was  engaged  in
negotiations with SRI and its affiliates to acquire common shares, member shares
and  partnership  interest  in  additional  properties  and  operations.

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, the real estate and operating licenses associated with each. Such
service  organizations  are  generally  referred  to as Fixed Base Operations or
"FBO's."

                                      F-7

<PAGE>

1.     HISTORY  AND  DEVELOPMENT  OF  THE  COMPANY  (CONTINUED)

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  Ft.  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.   Following  is  a  summary  of  the  acquisitions  and share exchanges
between  the  Company  and  SFBO  shareholders:

     o    On  October 30, 2002, the Company exchanged 5,310,000 shares of common
          stock  for the FBO operations in Greeley, Colorado and the real estate
          leaseholds  of  the  Austin,  Texas  FBO

     o    On November 25, 2002, the Company exchanged 9,212,781 shares of common
          stock  for the FBO operations in Casper, Wyoming and Austin, Texas and
          the  real  estate  leaseholds  of  the  Fort  Worth,  Texas  FBO.

     o    On December 30, 2002, the Company exchanged 8,233,953 shares of common
          stock  for  the  FBO  operations  in  Fort  Worth,  Texas.

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,
and  their  operations  from  the  date  of  acquisition to December 31, 2002 is
included  in  the  Consolidated  Statement  of  Operations.

On  December  6,  2002,  the Company executed a letter of intent for the sale of
substantially  all  of  the  assets  of  the  aforementioned  FBO operations for
approximately $20,800,000 in cash with an "earn-out" provision that could pay up
to  an  additional $6,000,000 over a three-year period commencing in March 2004.

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 and various
small  establishments  on  a  net  lease  basis.

The  acquisition was accounted for as a purchase with its assets and obligations
recorded  at  their  fair value, and its operations from the date of acquisition
through  December  31,  2002  are  included  in  the  Consolidated  Statement of
Operations.

                                      F-8

<PAGE>


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.

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 transaction.

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 were included in the
consolidated statement of operations from the closing date of their acquisition.

Basis  of  Financial Presentation - The enclosed financial presentation reflects
---------------------------------
the  operations  of  the Company from its date of inception, September 25, 2002,
through  the  end  of  the  adopted  fiscal  period,  December  31,  2002.

Use  of  Estimates  - The preparation of financial statements in conformity with
------------------
accounting  principles  generally  accepted  in  the  United  States  of America
requires  management  to make estimates and assumptions that affect the reported
amounts  of  assets  and  liabilities  and  disclosure  of contingent assets and
liabilities  at the date of the financial statements and the reported amounts of
revenues  and expenses during the reporting period.  Actual results could differ
from  those  estimates.

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  on  the  Company's  FBO  entities held for sale are reflected in the
consolidated  statements  of operations as "Income from Discontinued Operations"
for  all periods presented and in the consolidated balance sheet as "Assets held
for  sale  and Indebtedness  on assets held for sale".  As of December 31, 2002,
the  Company had a letter of intent and subsequently closed transactions for the
sale  of  certain  assets  and  the  liquidation  of specific obligations of the
following  FBO  operations:

     Fort  Worth  Jet  Center,  Inc.
     Tucson  Jet  Center,  a  DBA  of  Ft.  Worth  Jet  Center,  Inc.
     Casper  Jet  Center,  LLC
     Greeley  Jet  Center,  LLC
     Austin  Aero  FBO,  Ltd.

                                      F-9

<PAGE>

2.  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)

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 period from inception (September 25, 2002) to December 31, 2002
is  $122,247.

Amounts  included  under  the  caption  land,  improvements and leasehold on the
consolidated  balance  sheet 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 FASB issued Statement of Financial Accounting Standards No. 144, "Accounting
for  the  Impairment  or Disposal of Long Lived Assets". Statement 144 addresses
financial  accounting and reporting for the impairment or disposal of long-lived
assets.  The  provisions of Statement 144 are effective for financial statements
issued  for  fiscal years beginning after December 15, 2001, and interim periods
within those fiscal years. We adopted the standard in 2002 and it did not have a
material  effect  on  our  financial  condition  or  results  of  operations.

Cash Equivalents - The Company considers all liquid investments with maturity of
----------------
three  months  or  less  when  purchased  to  be  cash  equivalents.

Escrowed  Funds-  Escrowed funds primarily consist of amounts held by lenders to
---------------
provide  for  future  real  estate  tax  expenditures  and  tenant improvements.

Rental  Revenue  Recognition  -  Rental revenue 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.  The  amount  reflected  on  the  balance  sheet  is  net of such
allowance,  if  required.

The  Company  maintains  an allowance for doubtful accounts for estimated losses
resulting from the inability of its tenants 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.

                                      F-10

<PAGE>

2.-  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)

Inventories  -  Inventories  of  the airport service companies are stated at the
-----------
lower  of  cost  or  market  determined  by  the  average  cost  method.

Deferred  Financing  Costs - 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.

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  will  perform  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  will  be  performed  pursuant  to
appropriate  guidance.

The Company's recorded goodwill represents the difference between the net assets
and  liabilities acquired in the exchange of stock for the five acquired airport
service  organizations  and  is  reflected  in  the  accompanying  consolidated
financial  statements  under  "Asset  held  for sale".  None of this goodwill is
deductible  for  tax  purposes.

There  is  also  goodwill  associated  with  the  acquisition  of  the  four
office/facilities  in  Austin,  Texas.  This  goodwill represents the difference
between  the  net assets and liabilities acquired in exchange for Company stock.
None  of  this  goodwill  is  deductible  for  tax  purposes.

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  customers. The
allowance  for  non-collection of accounts receivable is based upon the expected
collection  of  all  accounts  receivable.

Except as noted in the following, 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.

                                      F-11

<PAGE>

2.  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)

The  Company's  four  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.

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 basis 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.

Advertising  - Advertising costs are expensed as incurred and totaled $4,800 for
-----------
the  Company's  fiscal  period  for  2002.

Earnings  Per  Share - The Company presents "basic" earnings per share, which is
--------------------
net  loss  available  to  shareholders  divided  by  weighted  average  shares
outstanding  during  the  period, and "diluted" earnings per share, if required,
which  considers  the  impact  of  common  stock  equivalents.

Consolidation  and  Presentations  -  The  accompanying  consolidated  financial
---------------------------------
statements  include  the  accounts  of  the  Company  and  subsidiaries.  All
significant  intercompany  balances  and  transactions  have  been  eliminated.

Going  Concern  -  The  Company's consolidated financial statements are prepared
--------------
using  generally accepted accounting principles applicable to a  going  concern,
which

                                      F-12

<PAGE>

2.  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)

contemplates  the  realization  of  assets and liquidation of liabilities in the
normal  course  of business.  However, the Company has suffered recurring losses
from  operations  and is experiencing cash flow problems.  This raises questions
as  to  the  ability of the Company to continue as a going concern.  The Company
has  cut  expenses  and  is  developing a strategy to provide sufficient capital
through  possible  sale  of  assets  and  other  means.

3.  -  DISCONTINUED  OPERATIONS

During  the  fourth  quarter  of  2002,  the  Company  was  negotiating  for the
acquisition  of a private airport flight service organization.  In that process,
the  potential  "acquisition  target" ("Purchaser") proposed that it acquire the
operating assets and intangible rights of the Company for cash and an "earn-out"
of  up  to  $6,000,000  in  future  revenues  in  excess  of  a  specified base.

On December 31, 2002, the Company and the Purchaser signed a letter of intent to
consummate  the  proposed  sale.  On  January  6, 2003, certain of the Company's
assets  and  rights  to  its  "FBO" operations at Austin-Bergstrom International
Airport  in  Austin,  Texas  were  sold  for  cash  and a "seller" financed note
receivable  of  $7 million.  On February 27, 2003, the transaction was completed
with  the  liquidation of the aforementioned note and the transfer of its assets
and  rights in the Company's four remaining "FBO" operations (Fort Worth, Texas,
Casper,  Wyoming,  Tucson,  Arizona  and Greeley, Colorado) to the purchaser for
aggregate  consideration  of  approximately  $20,800,000 million in cash and the
Company's  commitment to liquidate all liens and primary obligations of the five
FBO's  included  in  the  transaction.

Consequently  at  December  31,  2002,  for  financial presentation purposes the
Company  has  classified  its  FBO  operations  as  a  discontinued business and
reflected  the  following  assets  and  obligations  as  being  held  for  sale.



                                                        Carrying
                       Description                        Value
                       -----------                        -----

                 Assets  held  for  sale:
                   Accounts  receivable               $  608,437
                   Inventories                           397,434
                   Property  and  equipment            6,272,192
                   Goodwill                            5,504,057
                   Deferred  financing  costs            253,815
                   Deferred  tax  asset                2,129,465
                   Other  assets                           1,728
                                                 ----------------

                  Total                              $15,167,128
                                                 ================

                                      F-13

<PAGE>


3.  -  DISCONTINUED  OPERATIONS  (CONTINUED)

                 Obligations  to  be  paid:
                   Notes  and  mortgages  payable     $15,115,614
                   Accrued  interest                      335,609
                   Accounts  payable                      709,416
                   Unearned  revenue                      109,910
                   Other  accounts  and  obligations       99,231
                                                   ---------------

                   Total                              $16,369,780
                                                  ================

Management  estimated  that  the  sale  will  result  in  a  financial  gain  of
approximately  $3,500,000  million,  and an estimated federal income tax gain of
approximately  $5,600,000.

Following  are  the  results  of  operations  of  acquired FBO's included in the
Consolidated  Statement  of  Operations  from  their  date  of acquisition.  The
entities  are  Austin  Aero,  LLC  (acquired  November 30, 2002) and Greeley Jet
Center,  LLC (acquired October 25, 2002).  The Fort Worth Jet Center, Inc., with
its  DBA's  Tucson  Jet  Center  and  Casper  Jet  Center,  LLC were acquired on
December  30,  2002 and, consequently, their effect on the results of operations
was  nil.

                 Revenues                              $  496,949
                                                   ---------------
                 Costs  and  expenses
                   Costs  of  revenues                    294,581
                   General  and  administrative           306,470
                                                   ---------------
                     Total  expenses                      601,051
                                                   ---------------
                 Loss  before  income  taxes              104,102
                 Federal  income  tax  benefit           (64,865)
                                                   ---------------

Net  loss  from  discontinued  operations              $   39,237
                                                  ================

On  January  20,  2004,  the  Company  and  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.  See Note 12 -
Subsequent  Events  for  a  more  complete  discussion.

4.  -  PRO  FORMA  INFORMATION

The  following  table  summarizes, on an unaudited pro forma basis, the combined
results  of  operations  of  the Company for the year ended December 31, 2002 as
though  the  acquisitions of the Austin Properties, the Commodore Plaza property
and  the  five  FBO  had  occurred  on  January  1,  2002.

                                      F-14

<PAGE>


4.  -  PRO  FORM  INFORMATION  (CONTINUED)


                                                        2002
                                                     -----------
        Pro forma revenues                           $14,726,782
        Pro forma net loss                           $ 2,416,056
        Pro forma basic and diluted loss per share   $       .06
        Pro forma basic and diluted weighted average
          Share                                       39,655,068

5.  -  RELATED  PARTY  TRANSACTIONS

There are several business relationships and transactions with entities owned or
controlled by principal shareholders of the Company.  These shareholders include
Geld  Fund  II,  LLC,  Chasco Investments, Inc., Sterling REIT, Inc., AM Pacific
Group,  Mathew Investment Partnership and their principal owners, Hugo Verhaege,
Charles  Glace,  Thomas  Mathew  and  Lucky  Srinivasan.

Those  business  relationships  involve  management,  brokering and construction
fees,  loans  and  advances  and management control.  These transactions for the
year  ended  December  31,  2002  include  the  following:

             Fees
             ----

     AM  Pacific  Group
       Broker  fee  for  Fort  Worth  Jet  Center,  Inc.
         sale/lease  back  financing                           $192,000
       Consulting                                                54,300
     Sterling  REIT,  Inc.
       Management  fees                                         437,500
       Lease  payments  for  Austin  facility                   489,292
       Other  fees  and  Charges                                124,853
     Management  fees  to  individuals
       Thomas  Mathew                                           183,780
       Hugo  Verhaeghe                                           12,000

The  financial effect of the above transactions on the Company's profit and loss
for  2002  were  part  of  the  management  fees paid to Thomas Mathew ($7,500).

Prior to the acquisition of the Austin Properties by Sterling FBO Holdings, Inc,
the  following  amount  due  to/from  Sterling REIT, Inc. for each of the Austin
Properties  was  distributed  to  these  affiliated  entities  and  individuals:

                                      F-15

<PAGE>

5.  -  RELATED  PARTY  TRANSACTIONS  (CONTINUED)

             Amount
           ---------

     Sterling  REIT,  Inc.                                     $182,949
     Charles  Glace  and  affiliates                             64,501
     Hugo  Verhaeghe  and  affiliates                            69,812
     Others                                                      27,715
                                                             ----------

                 Total                                         $344,977
                                                             ==========

Following  is a summary of cash transactions between the Company, Sterling REIT,
Inc.,  a major shareholder and other affiliates during the period ended December
31,  2002.

                                                                Receivable

             Transaction                                        (Payable)
          --------------                                       -----------

 Due  from  Sterling  REIT,  Inc.  December  31,  2002
  Balance  January  1,  2002                                   $   469,342
    Funds  received  from  refinancing  assets                     247,101
    Expenses  paid  for  the  acquired  companies                 (170,830)
    Distribution  to  Austin  properties  partners                (121,605)
    Cash  advanced  to  Sterling  REIT,  Inc.                      262,134
                                                               -----------
    Balance  December  31,  2002  which  was
      written  off  as  a  bad  debt  (See  Note  7)           $   686,142
                                                               ===========
 Due  from  (to)  other affiliates - Transactions for
 the year were minimal
  Chasco,  Inc.                                                $   (30,000)
  Hugo  Verhaegae                                                  (20,500)
  Hugo  Verhaegae                                                   30,000

All  of  the  Company's  subsidiaries  and  acquired assets were, prior to their
acquisition,  owned  and  managed  by  one or more of the aforementioned related
entities  or  parties.  (See  Note 1 -  History and Development of the Company).
Historically,  except  for  the Fort Worth Jet Center, Inc., all of the entities
were  partnerships  or  limited liability companies that passed their profits or
losses  through  to  the  owners.  The  FBO's and the four Austin Properties had
recorded  liabilities  and obligations greater than their recorded assets.  This
asset  deficiency  is  recorded  as  an  intangible asset and is included in the
balance  sheet  as  Goodwill  for  the  four  Austin Properties in the amount of
$1,017,717  and  under  the caption "Asset held for Sale" for the FBO'S totaling
$5,504,075.  The FBO'S Goodwill was realized in the first quarter of fiscal 2003
when  the  FBO's assets were sold for approximately $3,500,000 million more than
their  recorded  financial  statement  value.

The  Company's  four Austin Properties were managed by Sterling REIT, Inc (SRI).
SRI  collected  all lease payments, disburses all expenditures and served as the
general  partner  to  the  limited  partnerships  that  owned  the  properties
prior  to  their

                                      F-16

<PAGE>


5.  -  RELATED  PARTY  TRANSACTIONS  (CONTINUED)

transfer  to  the  Company.  Consequently,  the  business  relationship  has
historically  resulted  in  amounts  due to or from the property owners and SRI.

6.  -ADVANCES  TO  A  PRINCIPAL  SHAREHOLDER

On  January  13, 2004, new management and 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 Sterling REIT, Inc. It appears that the
funds  were  advanced  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 which were to be
transferred  to  the  Company.

Based  on  the  initial  findings  of  the  new management team, 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.

After further investigation, the new management team reached the conclusion that
in all probability the Company would receive little, if any, money from Sterling
REIT  or  the  assets  securing the repayment of the note discussed above.  As a
result  of  the  investigation, the Company wrote off $699,342 of the receivable
from  Sterling  REIT and a related entity.  Additional amounts advanced in 2003,
will  also  be  written  off.


7.  -  NOTES  PAYABLE  FOR  ASSETS  HELD  FOR  SALE

The  December 31, 2002 notes payable on the assets held for sale which were sold
is  summarized  as  follows:

Acquisition  Financing  - Effective in August 2001, new FBO owners purchased the
----------------------
equity interests of the then majority owners (aggregating 75%).  The acquisition
price  ($6,000,000)  was funded through a series of "bridge" loans commencing in
August  of  2001  and  concluding in December of 2002.  The final payment on the
acquisition amount and the "bridge" loans were liquidated with the proceeds from
the  sale  of  the  FBO's  assets in February of 2003.  In addition, the new FBO
owners  obtained  replacement  financing  to liquidate certain FBO  indebtedness
existing  at  August  2001

                                      F-17

<PAGE>

7.  -  NOTES  PAYABLE  FOR  ASSETS  HELD  FOR  SALE  (CONTINUED)

that  had been guaranteed by the former owners.  Thomas Mathew or Sterling REIT,
Inc.  and/or  one  of  its  affiliates  guaranteed  all  of  these bridge loans.
Following  is  a  recapitulation  of  those  loans  as  of  December  31,  2002.


A  one-year  note  for  the  initial  down  payment  of
$4,000,000  for  the  acquired  majority  interest;
issued  August  9,  2001  and  due  September  1,
2002,  but  was  delayed  to  the  closing  date  of
the  FBO  sale,  the  note  was  co-signed  by  Sterling
REIT,  Inc.  and  Thomas  Mathew,  the  interest
rate  was  15%  with  interest  due  monthly
and  principal  payments  of  $50,000  starting
April  1,  2002                                                     $  5,000,000

A  $2,400,000  note  used  to  liquidate  certain
FBO  indebtedness  debt  guaranteed  by
the  former  owners,  totaling  $2,039,000;  collateralized
by  certain  tangible  and  intangible  assets  of  the
Fort  Worth  Jet  Center,  Inc.;  issued  May  16,  2002
and  due  June  1,2004  with  interest  at  13%  requiring
monthly  payments  of  principal  and  interest  in  the
amount  of  $28,230  and  a  final  payment  on  the  due
date  and  an  early  exit  fee  of  $480,000.                         2,384,685

A  $1,000,000  loan  used  to  pay  down  the  former
owner's  note,  collateralized  by  the  land
improvements  to  be  constructed  at  Tucson  Jet
Center;  issued  November  29,  2002  and  due
December  1,  2003  with  interest  at  14%,  interest
only  payments  and  an  early  exit  fee  of  $272,000.               1,000,000

A  note  issued  in  August  of  2001  to  the  former
owners;  scheduled  to  mature  in  November  9,
2002,  but  was  extended  to  the  closing  date  of  the
FBO  sale,  with  various  interest  rates  up  to  12%                  983,240
                                                                  --------------

     Total                                                          $  9,367,925
                                                                    ============


All  of  the  FBO's tangible and intangible assets were pledged as collateral on
these loans and notes.  In addition, the FBO's principal equity owners (Sterling
REIT,  Inc. and Thomas Mathew) pledged their common stock, partnership interests
and  certificates  of  ownership  and  served as guarantor's on the debt used to
purchase  the  majority  owners  interest.

                                      F-18

<PAGE>

7.  -  NOTES  PAYABLE  FOR  ASSETS  HELD  FOR  SALE  (CONTINUED)

Other Notes Payable - In addition to the indebtedness for the acquisition of the
-------------------
former majority ownership, the FBO operations had the following note obligations
that  were  liquidated  upon  the  sale  of  its  assets.

A  mortgage  note  for  the  construction  of
improvements  at  Austin  Bergstrom
International  Airport;  issued  November  15,
2001  and  due  September  17,  2004  with  interest
at  published  prime  rate  plus  .75%  but  not  less
that  7.5%                                                          $  4,964,373

Two  construction  loans  for  land  improvements
at  Tucson  and  Greeley;  issued  November  29,
2002  and  due  in  December  1,  2003  with  interest
at  14%,  interest  only  payments                                       597,498

Vendor's  construction  assistance  note;  maturing
in  2004  with  interest  ranging  from  9.8%
to  11.3%.                                                               105,133

Line  of  credit  $50,000  maximum                                        47,000

Various  installment  contracts  due  within one year                     33,685
                                                                 ---------------

     Total                                                            $5,747,689
                                                                 ===============

8.  -  REAL  ESTATE  NOTES  PAYABLE  AND  OTHER  NOTES  PAYABLE

Real Estate Notes Payable - The real estate notes payable, collateralized by the
-------------------------
respective  properties  and  assignment  of  leases, at December 31, 2002 are as
follows:

Property               Note  Description                                  Amount
--------            --------------------------                            ------

Commodore  Plaza  -  Gulf  Port,  Mississippi
                     First  lien  note  dated  October  28,  2002
                     with  interest  at  7.48%,  monthly  installments
                     of  $28,263  including  principal  and
                     interest  and  due  in  full  November
                     1,  2012                                       $  4,046,982

4405  Springdale  -  Austin,  Texas
                     First  lien  note  with  interest  pay-
                     able  at  not  less  than  7%  for  3
                     years,  then  at  Wall  Street  Journal
                     prime  rate  plus  1%  with  monthly
                     installments  interest  of  $20,224
                     from  including  principal  and  interest         2,146,349

                                      F-19

<PAGE>

8.  -  REAL  ESTATE  NOTES  PAYABLE  AND  OTHER  NOTES  PAYABLE  (CONTINUED)

4708  MLK  - Austin,  Texas
                     First  lien  note  with  interest  pay-
                     able,  initially,  at  7.5%,  adjusted
                     annually  to  Wall  Street  Journal
                     prime  rate  plus  .75%,  interest  of
                     5.5%  at  December  31,  2002,  with  monthly
                     installments  of  $12,435  including
                      principal  and  interest                         1,733,971

4735  South  Congress  -  Austin,  Texas
                     First  lien  note  with  interest  payable,
                     initially, at  the  lesser  of  the  maximum
                     allowable  interest  rate  or  8.5%,  interest
                     of  8%  at December  31,  2002,  with  monthly
                     installments  of  $10,637  including  principal
                     and  interest                                     1,118,984

4501  Springdale  -  Austin,  Texas
                     First  lien  note  with  interest  payable
                     at  the  lesser  of  the  maximum  allowable
                     interest  rate  or  6.5%,  (rate  at
                     December  31,  2002)  with  monthly
                     installments  of  $6,010  including
                     including  principal  and  interest                 794,250
                                                                       ---------

                  Total  real  estate  notes                          $9,840,537
                                                                       =========


At  December  31, 2002, the net carrying value of the properties collateralizing
the  real  estate notes was $9,378,964.  Some of the above notes were guaranteed
by  shareholders  of  the  Company.

On  May  27,  2003,  the  Company  refinanced  its  indebtedness  on  the Austin
properties  (four  real  estate notes totaling $5,793,554 and unpaid real estate
taxes) for $5,970,000 in a single new term loan.  The loan bears interest at 5.5
%  with  thirty-five  installments  of  $41,067 including principal and interest
starting  July  5,  2003  and  a  final  payment  on  March  27,  2006.

Other  Notes Payable - An affiliate of the prior owner of Commodore Plaza loaned
--------------------
the  Company  $122,374  that  is  being  repaid  out  of  the cash flow from the
property's  net rental income.  The loan matures in April, 2003 with interest at
18%  and  has  a  balance  owing  of  $87,800  at  December  31,  2002.

Principal  Maturities  -  Combined aggregate principal maturities of real estate
---------------------
and  other  notes  payable,  as  of  December  31,  2002,  are  as  follows:

                                      F-20

<PAGE>

8.  -  REAL  ESTATE  NOTES  PAYABLE  AND  OTHER  NOTES  PAYABLE  (CONTINUED)

                         Year                  Amount
                         ----               ------------

                         2003               $    195,793
                         2004                    211,296
                         2005                    227,713
                         2006                    245,415
                         2007                    264,501
                         Thereafter            8,695,819
                                            ------------

                         Total              $  9,840,537
                                            ============

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.  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, 2002
are  as  follows:

                         Year                  Amount
                         ----               ------------

                         2003               $  1,088,605
                         2004                  1,088,605
                         2005                  1,088,605
                         2006                  1,088,605
                         2007                    632,935
                         Thereafter            1,639,102
                                             -----------

                         Total                $6,626,457
                                             ===========

10.  -  INCOME  TAXES

The  following table sets forth a reconciliation of the statutory federal income
tax  for  the  year  ended  December  31,  2002.

                                      F-21

<PAGE>

10.  -  INCOME  TAXES  (CONTINUED)


                                                   2002
                                                ----------

    Loss before income taxes                    $ (902,362)
                                                ==========

    Income tax computed at statutory rates      $ (306,803)
    Other                                           (4,475)
                                                ----------

    Tax Provision                               $  311,278
                                                ==========

No  federal income taxes have been paid since the inception of the Company.  The
Company has a net operating loss carry forward of approximately $1,386,000 which
will  expire  in  2024.

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,  2002  are  set  out  below.

                                                     2002
                                                  ----------

  Deferred tax asset:
    Deferred tax asset at dates of acquisitions  $ 1,983,847
    Net operating loss carryforwards                 326,635
                                                  ----------
      Deferred tax asset                           2,310,482
                                                  ----------

  Deferred tax liability:
    Book over tax depreciation                        15,357
                                                  ----------
  Net deferred tax asset                         $ 2,295,125
                                                  ==========


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, 2003 there are no
known  assertions,  claims  or  legal  actions  pending.

                                      F-22

<PAGE>

12.  -  SUBSEQUENT  EVENTS

Sale  of  FBO Assets - 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 $20,800,000 in cash. (See Note
3.  -  Discontinued  Operations  and Note 6. - Notes Payable for Assets Held For
Sale).

Under  the  terms  of  the  sale,  the  Company  agreed to liquidate outstanding
liabilities  and  obligations associated with the FBO operations and properties.
Consequently,  during  the  two months ended February 27, 2003, the Company paid
creditors  $17,455,000,  established  an  escrow  fund  of  $589,000, to satisfy
potential  claims  and  obligations,  and  deposited  $2,553,000  in  the  bank.
Management's  preliminary  estimate  is  that  the  sale  will  reflect a pretax
financial  gain  of  approximately  $3,500,000  million.

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.  In order to
settle  and  compromise  all  matters  in  contention  the  parties  agreed:

o    To  terminate  the  obligation  to pay the Company any money based upon the
     purchaser's  sale  of  fuel  as  set forth in the Purchase Agreement, which
     voids  the  $6,000,000  "earn  out"  originally  anticipated,
o    To  consummate  the $500,000 Escrow Agreement by disbursing $350,000 to the
     Company  with  the  residue  going  to  the  purchaser,
o    To settle disputes arising from accounts receivable in the transactions and
     terminate  the  purchaser's  right  to seek reimbursement for such accounts
     receivable,
o    That the Company reimburse the US Government for an ACH deposit erroneously
     deposited  to  the  Company's  account,
o    That  this  agreement  would  supercede  those  sections  of  the  original
     agreement  that  covered  these  matters,  and
o    That  each  would  hold  the other harmless from all matters related to the
     original  agreements.

                                      F-23

<PAGE>