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, 2003

[ ]  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
 incorporation or organization)                         Identification No.)


                        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, 2003 were
$1,231,921.

     The  number of shares of the registrant's common stock, $.001 par value per
share,  outstanding  as of October 1, 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 October 1, 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                              6
     ITEM  3.     LEGAL  PROCEEDINGS                                     7
     ITEM  4.     SUBMISSION  OF  MATTERS  TO  A  VOTE  OF
                  SECURITY  HOLDERS                                      7

PART  II

     ITEM  5.     MARKET  FOR  COMMON  EQUITY  AND
                  RELATED  STOCKHOLDER  MATTERS                          7
     ITEM  6.     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS                8
     ITEM  7.     FINANCIAL  STATEMENTS                                 13
     ITEM  8.     CHANGES IN  AND DISAGREEMENTS WITH ACCOUNTANTS
                  ON  ACCOUNTING  AND  FINANCIAL  DISCLOSURE            14
     ITEM  8A.    CONTROLS  AND  PROCEDURES                             14

PART  III

     ITEM  9.     DIRECTORS,  EXECUTIVE  OFFICERS,  PROMOTERS  AND
                  CONTROL  PERSONS;  COMPLIANCE  WITH
                  SECTION  16(a)  OF  THE  EXCHANGE  ACT                15
     ITEM  10.     EXECUTIVE  COMPENSATION                              16
     ITEM  11.     SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL
                   OWNERS  AND  MANAGEMENT                              17
     ITEM  12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS       17
     ITEM  13.     EXHIBITS  AND  REPORTS  OF  FORM  8-K                19
     ITEM  14.     PRINCIPAL  ACCOUNTANT  FEES  AND  SERVICES           20

SIGNATURES

<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 that 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.

On January 6 and February 7, 2003, the Company completed the sale of its FBO's
in Fort Worth and Austin, Texas; Casper, Wyoming; Tucson, Arizona; and Greeley,
Colorado for approximately $20,787,000 in cash and liquidation of debts and an
"earn-out" of up to $6,000,000 in future revenues in excess of a specified base.
Under the terms of the sale, the Company agreed to liquidate outstanding
liabilities and obligations associated with the FBO operations and properties.
Consequently, the Company creditors approximately $17,476,000, established an
escrow fund of $589,000 to satisfy potential claims and obligations and
deposited approximately $2,556,000 in the bank.

In March 2003, the Company changed its name from BlueStar Leasing, Inc. to
Sterling 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.  All amounts owed by Sterling REIT have been
written off as bad debts.

On January 20, 2004, the Company entered into a Settlement Agreement relating to
the 2003 sale of FBO properties pursuant to which the $6 million earn-out was
terminated and $350,000 was distributed to the Company in full settlement of the
contingency escrow.

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, 2003, we owned interests in five properties owned in fee
simple.

Four of our properties held at December 31, 2003 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, as of October 1, 2004, 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>
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 includes 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, 2003 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, as of October 1, 2004, 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 -
                     5 years each  5 years each  5 years         5 years            NA
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>



DISCONTINUED OPERATIONS - SALE OF FBO OPERATIONS

From their acquisition, between October and December 2002, and their sale in
February 2003, we operated 5 FBO properties, consisting 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.  Our FBO business included aviation fueling services,
aircraft ground services and other aviation services.

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 operating and holding real properties for
investment and may evaluate the acquisition of aviation related businesses.  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.

                                        5
<PAGE>


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.

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.

COMPETITIVE CONDITIONS

The properties we owned in Austin at December 31, 2003 are leased to various
agencies of the State of Texas.  While those state agencies are not subject to
competition, upon the expiration of the leases those agencies may seek out other
space to lease.  The tenants of 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 October 1, 2004, we employed one full-time employee/officer of the
Company.  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, 2003, we owned properties that are described more fully under
Item 1.  Business - Properties above.

As of October 1, 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.

                                        6
<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 was 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 appealed to 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 appealed the trial court's summary judgment.  In September 2004, the
appeals court affirmed the trial court's summary judgment in favor of the
defendants, all claims against our subsidiary were dropped and funds escrowed to
pay the contested taxes were released to us.

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

Our common stock trades on the Pink Sheets under the symbol "SEQU".

There is no established trading market in the Company's Common Stock and trading
therein is sporadic.  The last reported price of the Company's Common Stock, as
of October 1, 2004, was $0.30.

HOLDERS

As of October 1, 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.

                                        7
<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 that 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.

                                        8
<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.

On January 6 and February 7, 2003, the Company completed the sale of its FBO's
in Fort Worth and Austin, Texas; Casper, Wyoming; Tucson, Arizona; and Greeley,
Colorado for approximately $20,787,000 in cash and liquidation of debts and an
"earn-out" of up to $6,000,000 in future revenues in excess of a specified base.
Under the terms of the sale, the Company agreed to liquidate outstanding
liabilities and obligations associated with the FBO operations and properties.
Consequently, the Company creditors approximately $17,476,000, established an
escrow fund of $589,000 to satisfy potential claims and obligations and
deposited approximately $2,556,000 in the bank.

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

                                        9
<PAGE>

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.  All amounts owed by
Sterling REIT have been written off as bad debts.

On January 20, 2004, the Company entered into a Settlement Agreement relating to
the 2003 sale of FBO properties pursuant to which the $6 million earn-out was
terminated and $350,000 was distributed to the Company in full settlement of the
contingency escrow.

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 ownership and operation of income producing real estate with an emphasis on
leased properties and evaluation of potential acquisitions of businesses
operating in the aviation industry.  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 office and other
commercial properties.

OVERVIEW  OF  OPERATIONS

The Company's business during 2003 included operation of five properties under
leases. The Company also operated five FBO properties offering aviation fueling
services, aircraft ground services and other aviation services.  As a result of
the disposal of all FBO operations in 2003, all operating results relating to
the FBO operations have been reclassified as discontinued operations and are
reported as a single entry on the Statement of Operations.

Leased properties held during 2003 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 2003, the Company also
owned one retail property in Gulfport, Mississippi, leased to multiple retail
tenants on a "net lease" basis.

                                       10
<PAGE>


Revenues

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

Costs and Expenses

Our principal expenses associated with leased property operations in Austin are
administrative expenses, real estate taxes, hazard insurance and maintenance.
Additionally, we pay utilities and janitorial costs on selected properties.
Because of the nature of net lease property operations of Commodore Plaza, we
have no direct cost of revenues.

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 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.

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, 2003, we recorded no
impairments of our long-lived assets.

Revenue  Recognition

Rental income is recognized on a straight-line basis over the term of the lease.
The Company establishes, on a current basis, an allowance for future potential
tenant credit losses that may occur against this account.  Amounts reflected as
accounts receivable on the balance sheet are net of such allowance, if required.
In establishing the allowance, the Company evaluates the ability of each tenant
to make required rental payments.  If the financial condition of a specific
tenant were to deteriorate, resulting in an impairment of their ability to make
payments, additional allowances will be required.

Based on our review of the ability of our tenants to pay required rental
payments, no allowance for tenant credit losses were established as of December
31, 2003.

RESULTS  OF  OPERATIONS

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

Revenues

Revenues totaled $1,231,921 during 2003 as compared to $275,887 during 2002.
All revenues were derived from the leases of the five properties owned and
operated by the Company.  The increase in rental revenues during 2003 was
attributable to a full year of operations being reported in 2003 as compared to
approximately three months of operations in 2002.  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 approximately $1,000,000
annually through 2006 and decrease thereafter.

                                       11
<PAGE>

Real Estate Operating Expenses

Real estate operating expenses are costs associated with the ownership and
operation of rental properties.  Principal rental operating expenses consist of
interest, taxes, depreciation, professional and consulting fees.  Real estate
operating expenses totaled $2,308,254 in 2003 as compared to $384,406 in 2002.
The increase in real estate operating expenses in 2003 was primarily
attributable to the operation of properties during the full year in 2003 as
compared to approximately three months of operations in 2002.  Additionally,
real estate operating expenses include $556,829 of professional and consulting
fees in 2003 as compared to $3,080 of professional and consulting fees in 2002,
which increase was primarily attributable to non-recurring legal fees associated
with certain disputes and transactions.

Other Operating Expenses

Other operating expenses related to bad debts, totaling $1,694,264 in 2003 and
$699,342 in 2002, and merger and consulting expenses of $301,677 in 2002.  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 and 2003, respectively, were
determined to be uncollectible.  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.

Income Taxes

A deferred income tax benefit of $811,290 in 2003 and $246,413 in 2002 was
recorded reflecting the net operating losses for the periods.

Discontinued  Operations

As a result of the sale of all FBO operations in 2003, all revenue and expenses
relating to those operations has been reclassified as discontinued operations
and is recorded, net of a gain arising from the sale, as a net amount.  During
2003, we recorded a gain from discontinued operations of $3,301,494, including a
gain on the sale of the FBO operations of $3,632,981.  During 2002, we recorded
a loss from our discontinued FBO operations of $104,102.

We also recorded a tax provision of $1,339,144 in 2003 in connection with the
discontinued operations and a tax benefit of $64,865 in 2002.

LIQUIDITY  AND  CAPITAL  RESOURCES

Cash and Working Capital Position

At December 31, 2003 we had a cash balance of $763,642 and a working capital
deficit of $86,268 as compared to a cash balance of $475,845 and a working
capital deficit of approximately $134,244 at December 31, 2002.  The 2003 cash
balance included $759,947 of restricted cash reserved pursuant to the terms of a
$750,000 line of credit obtained by the Company.  An additional $107,540 was
held in escrow at December 31, 2003 by the lender for the Commodore Plaza
Shopping Center.  Subsequent to December 31, 2003, we entered into a settlement
agreement relating to certain disputes arising in connection with the sale of
the FBO properties.  Pursuant to that settlement, we released to the purchaser
of the FBO properties the amount in escrow other than $350,000 that we retained.

Cash Flows

Cash flows for the period from inception (September 25, 2002) to December 31,
2003, 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 and the 2003 sale of the FBO properties.

                                       12
<PAGE>

Operations used $2,381,533 of cash during 2003 and $17,930 of cash during 2002.
The increase in cash used in operations during 2003 related primarily to a
$1,613,884 increase in the loss from continuing operations before income taxes
during 2003 as compared to 2002.

Investing activities provided net cash of $1,369,819 during 2003 as compared to
$128,411 provided during 2002.  The increase in cash provided by investing
activities related primarily to the receipt of net proceeds from the sale of
discontinued operations of $2,142,566.

Financing activities provided net cash of $539,564 during 2003 as compared to
$365,364 provided during 2002.  The increase in cash provided by financing
activities related primarily to the receipt of $750,000 during 2003 from a line
of credit facility.

Long-Term Debt

At December 31, 2003, the Company had long-term debt, consisting of real estate
notes payable, of $9,675,300 as compared to $24,760,358 of long-term debt at
December 31, 2002.  The reduction in long-term debt during 2003 was attributable
to the retirement of approximately $17,476,000 of debt and liabilities related
to FBO assets held for sale.  That debt and liabilities was paid in full upon
the sale of the FBO assets in 2003.

The long-term indebtedness at December 31, 2003 was comprised of one loan on
four of the Company's properties and one loan on the fifth property, both of
which are 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, 2003 were as follows:

<TABLE>
<CAPTION>


                           Payments due by period
------------------------------------------------------------------------------
                   Total        2004       2005 - 2006  2007 - 2008  Thereafter
                ----------  ------------  ------------  -----------  ----------
<S>             <C>         <C>           <C>           <C>          <C>
Long-term debt  $9,954,452  $    279,152  $  5,777,444  $    92,907  $3,804,949
                ----------  ------------  ------------  -----------  ----------
     Total      $9,954,452  $    279,152  $  5,777,444  $    92,907  $3,804,949
                ----------  ------------  ------------  -----------  ----------
</TABLE>



INFLATION

Inflation has historically not had a material effect on our operations.  Each of
our  leases  includes  escalation  provisions based on cost-of-living increases.
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 22 of this report.

                                       13
<PAGE>

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, 2003, 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.

                                       14
<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 October 1, 2004.

     Name               Age               Position
     ----               ---               --------
     Thomas Mathew       46          President, Treasurer and Director
     Lloyd Shoppa        72          Chairman, Secretary and Director
     Ron F. Bearden      62          Director

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 that 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.

COMMITTEES OF THE BOARD

We do not presently maintain an audit committee, a compensation committee, a
nomination committee or any other committees of our board of directors.
Similarly, we do not have an "audit committee financial expert".

At such time as our Board determines that the size and scope of our operations
and our available financial resources warrant such, we expect to seek to add
independent directors and to form committees to perform the functions of an
audit committee, compensation committee and nominating committee.

                                       15
<PAGE>


CODES OF ETHICS

The Board of Directors has adopted a Code of Business Ethics covering all of our
officers, directors and employees.  We require all employees to adhere to the
Code of Business Ethics in addressing legal and ethical issues encountered in
conducting their work. The Code of Business Ethics requires that our employees
avoid conflicts of interest, comply with all laws and other legal requirements,
conduct business in an honest and ethical manner and otherwise act with
integrity and in the company's best interest.

The Board of Directors has also adopted a separate Code of Business Ethics for
the CEO and Senior Financial Officers.  This Code of Ethics supplements our
general Code of Business Ethics and is intended to promote honest and ethical
conduct, full and accurate reporting, and compliance with laws as well as other
matters.

The Code of Business Ethics for the CEO and Senior Financial Officers is filed
as an exhibit to this Annual Report on Form 10-KSB for the year ended December
31, 2003 and is available for review at the SEC's web site at www.sec.gov.
                                                              -----------

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 2003.  To the Company's knowledge, all of the
filing requirements were satisfied on a timely basis in fiscal year 2003.

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, 2003 of each person who served as the
Company's Chief Executive Officer during fiscal 2003 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>                <C>
Ron F. Bearden (1)(2)       2003   117,500        -            -                -
  President and             2002    46,323        -       173,754               -
  Chief Executive Officer   2001         -        -            -                -
<FN>


(1)     Salary shown as paid or accrued for services of Mr. Bearden during 2002 and 2003 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 October 1, 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.

                                       16
<PAGE>

ITEM 11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table is furnished as of October 1, 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>


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 2003 were acquired through the
acquisition of various entities previously controlled by the referenced
principal shareholders.  Those acquisitions included the acquisition by the
Company, pursuant to the Exchange, in September 2002 of Sterling FBO, including
the four state leased properties, for 5,638,334 shares of common stock.  As a
result of the Exchange, each of the referenced shareholders became shareholders
of the Company.

                                       17
<PAGE>

Following the Exchange, and pursuant to acquisitions planned to occur before the
Exchange but which were deferred until following the Exchange, during 2002, the
Company acquired the following interests in entities and/or properties from
shareholders:

     -    In October 2002, the Company acquired a 99% limited partnership
          interest in Commodore Plaza, Ltd. in exchange for 2,000,000 shares of
          common stock. Commodore Plaza, Ltd. was acquired from Hugo Verhaeghe,
          Charles Glace, Thomas Mathew and Sterling REIT, Inc.

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

     -    In November 2002, the Company acquired a 100% ownership interest in
          Casper Jet Center, L.L.C., Austin Aero FBO, Ltd., and Sterling-Ft.
          Worth Jet Center, Ltd. The Company issued an aggregate of 3,723,894
          shares of common stock to acquire Casper Jet Center, L.L.C., 4,355,554
          shares of common stock to acquire Austin Aero FBO, Ltd., and 1,153,333
          shares of common stock to acquire Sterling-Ft. Worth Jet Center, Ltd.
          Both Casper Jet Center, L.L.C. and Austin Aero FBO, Ltd. were acquired
          from Mathew Investment Partnership and Sterling, REIT, Inc.
          Sterling-Ft. Worth Jet Center, Ltd. was acquired from Mathew
          Investment Partnership, Sterling, REIT, Inc., and Geld Fund II, LLC.

     -    In December 2002, the Company acquired 100% of the outstanding shares
          of common stock of Ft. Worth Jet Center, Inc. in exchange for
          8,223,953 shares of common stock. Ft. Worth Jet Center, Inc. was
          acquired from Mathew Investment Partnership, Sterling, REIT, Inc, and
          Geld Fund II, LLC.

Prior to the Company's acquisition of each of the referenced entities, Sterling
REIT served as general partner or managing member of each of the entities.  Ron
F. Bearden served as President of both the Company and Sterling REIT during
2002.  Prior to the Company's acquisition of the entities, Sterling REIT
periodically received management and other fees in conjunction with, and from,
those entities and received advances from and made advances to those entities.
Net advances to Sterling REIT by the Company, including entities acquired by the
Company, totaled $686,142 at December 31, 2002 and $1,693,151 at December 31,
2003.  Subsequently, in 2004, pursuant to the terms of a Settlement Agreement,
Sterling REIT pledged substantially all of its assets to the Company to secure
repayment of amounts advanced by the Company.  Based on an evaluation by
management, all advances made to Sterling REIT at December 31, 2002 and 2003,
respectively were determined to be uncollectible.

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 totaled $7,500 during 2002
and  $174,000  during  2003.

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.

                                       18
<PAGE>


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-Fort 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)
14.1*        Code of Ethics for CEO and Senior Financial Officers
21.1         List of subsidiaries (6)
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.
(6)  Incorporated by reference to the respective exhibits filed with the
     Registrant's Annual Report on Form 10-KSB for the year ended December 31,
     2002.

     (b)     Reports  on  Form  8-K

          None

                                       19
<PAGE>

ITEM 14.     PRINCIPAL ACCOUNTANT FEES AND SERVICES

FEES PAID TO INDEPENDENT PUBLIC ACCOUNTANTS

The following table presents fees for professional audit services rendered by
Thomas Leger & Co., L.L.P. for the audit of the Company's annual financial
statements for the years ended December 31, 2003 and December 31, 2002 and fees
billed for other services rendered by Thomas Leger & Co., L.L.P. during those
periods.

<TABLE>
<CAPTION>

                     FISCAL 2003   FISCAL 2002
                     ------------  ------------
<S>                      <C>           <C>
Audit fees (1)       $    110,045  $          -
Audit related fees              -             -
Tax fees                    5,925             -
All other fees                  -             -
                     ------------  ------------
Total                $    115,970  $          -
                     ============  ============
<FN>


(1)  Audit Fees consist of fees billed for professional services rendered for
     the audit of the Company's consolidated annual financial statements and
     review of the interim consolidated financial statements included in
     quarterly reports and services that are normally provided by Thomas Leger &
     Co., L.L.P. in connection with statutory and regulatory filings or
     engagements.
</TABLE>


POLICY ON PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES OF INDEPENDENT AUDITOR

At such time, if ever, as we form an audit committee, we intend that the audit
committee will establish a specific policy relating to pre-approval of all audit
and non-audit services provided by our independent auditors.  As we do not
presently maintain an audit committee, no such policy has been adopted to date.

                                       20
<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:     October  8,  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      October 8, 2004
Thomas  Mathew          (Principal  Executive  Officer  and
                         Principal  Financial  and  Accounting
                         Officer)  and  Director

/s/  Lloyd Shoppa        Director                                October 8, 2004
Lloyd  Shoppa

                         Director                                October  , 2004
------------------                                                      --
Ron  F.  Bearden

                                       21
<PAGE>

                         STERLING EQUITY HOLDINGS, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS




Report of Independent Registered Public Accounting Firm                 F-2

Consolidated Balance Sheet as of December 31, 2003                      F-3

Consolidated Statements of Operations for year ended
  December 31, 2003 and for the Period from
  Inception (September 25, 2002) to December 31, 2002                   F-4

Consolidated Statement of Shareholders' Deficit for the Period
   from Inception (September 25, 2002)
   to December 31, 2003                                                 F-5

Consolidated Statement of Cash Flows for the year ended
  December 31, 2003 and for the Period from
  Inception (September 25, 2002) to December 31, 2002                   F-6

Notes to Consolidated Financial Statements                        F-7 - F-18

                                       F-1
<PAGE>

            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


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

We  have  audited the accompanying consolidated balance sheet of Sterling Equity
Holdings,  Inc.  as of December 31, 2003 and the related consolidated statements
of operations, shareholders' deficit, and cash flows for the year ended December
31, 2003 and  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  standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audit  to  obtain  reasonable  assurance  about  whether  the
consolidated  financial  statements  are free of material misstatement. An audit
includes  examining,  on  a  test  basis,  evidence  supporting  the amounts and
disclosures  in  the 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, 2003 and the results of its operations and its
cash flows for the year ended December 31,2003 and 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.

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
September 12, 2004

                                       F-2

<PAGE>

<TABLE>
<CAPTION>
                         Sterling Equity Holdings, Inc.
                           Consolidated Balance Sheet
                                December 31, 2003
                                -----------------



                                     ASSETS
<S>                                                           <C>
Investment in real estate
    Land, improvements and leaseholds                         $     10,264,212
    Accumulated depreciation                                        (2,711,243)
                                                              -----------------
       Net                                                           7,552,969
    Land                                                             1,389,420
                                                              -----------------
       Net investment in real estate                                 8,942,389
    Cash                                                                 3,695
    Restricted cash                                                    759,947
    Accounts receivable                                                441,098
    Prepaid expenses                                                    42,921
    Deferred financing - net of amortization of $79,643                175,054
    Goodwill                                                           908,523
    Escrowed funds                                                     107,540
                                                              -----------------

    Total Assets                                              $     11,381,167
                                                              =================

                                  LIABILITIES
    Accounts payable                                          $        191,233
    Accrued expenses                                                   438,008
    Income taxes payable                                               253,000
    Line of credit                                                     750,000
    Real estate notes payable                                        9,911,587
    Other notes payable                                                 42,665
                                                              -----------------

    Total Liabilities                                               11,586,493
                                                              -----------------

                              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                                               (852,144)
                                                              -----------------

    Total Shareholders' Deficit                                       (205,326)
                                                              -----------------

    Total Liabilities and Shareholders' Deficit               $     11,381,167
                                                              =================
</TABLE>

  The accompanying footnotes are an integral part of these financial statements

                                      F-3

<PAGE>

<TABLE>
<CAPTION>
                         Sterling Equity Holdings, Inc.
                      Consolidated Statements of Operations
                      For the Year Ended December 31, 2003
    and Period from Inception (September 25, 2002) through December 31, 2002
    ------------------------------------------------------------------------

                                                    2003          2002
                                                ------------  ------------
<S>                                             <C>           <C>
Rental revenue                                  $ 1,231,921   $   275,887
                                                ------------  ------------
Real estate operating expenses:
  Interest                                          725,114       145,303
  Taxes                                             258,755        67,592
  Depreciation and amortization                     628,670       122,247
  Repairs and maintenance                            38,459        18,946
  Utilities                                          18,763         6,637
  Professional and consulting fees                  556,829         3,080
  Other                                              81,664        20,601
                                                ------------  ------------
Total                                             2,308,254       384,406

  Bad debt expense                                1,694,264       699,342
  Merger expense                                          -       301,677
                                                ------------  ------------

Total operating expenses and costs                4,002,518     1,385,425
                                                ------------  ------------

Interest income                                      47,175             -
                                                ------------  ------------

Loss before income tax                           (2,723,422)   (1,109,538)

Benefit for income tax expense                      811,290       246,413
                                                ------------  ------------

Net loss from continuing operations              (1,912,132)     (863,125)
                                                ------------  ------------

Discontinued operations:
  Gain (loss) from discontinued operations,
   including gain of $3,632,981 from disposition  3,301,494      (104,102)
  (Provision) benefit for income tax expense     (1,339,144)       64,865
                                                ------------  ------------

Net gain (loss) from discontinued operations      1,962,350       (39,237)
                                                ------------  ------------

Net income (loss)                               $    50,218   $  (902,362)
                                                ============  ============

Basic and diluted income (loss) per share:
  Loss from continuing operations               $     (0.05)  $     (0.04)
  Gain (loss) from discontinued operations             0.05             -
                                                ------------  ------------
  Net income (loss)                             $      0.00   $     (0.04)
                                                ============  ============

Basic and diluted weighted average shares        39,655,068    23,642,363
                                                ============  ============
</TABLE>

  The accompanying footnotes are an integral part of these financial statements

                                      F-4

<PAGE>

<TABLE>
<CAPTION>
                                Sterling Equity Holdings, Inc.
                       Consolidated Statements of Shareholders' Deficit
             Period from Inception (September 25, 2002) through December 31, 2003
             --------------------------------------------------------------------


                                     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)

To reflect consolidated income
for the period                            -        -          -      50,218      50,218
                                 ----------  -------  ----------  ----------  ----------

Balance December 31, 2003        39,655,068  $39,655  $ 607,163   $(852,144)  $(205,326)
                                 ==========  =======  ==========  ==========  ==========
</TABLE>

  The accompanying footnotes are an integral part of these financial statements

                                      F-5

<PAGE>

<TABLE>
<CAPTION>

                            Sterling Equity Holdings, Inc.
                        Consolidated Statements of Cash Flows
                         For the Year Ended December 31, 2003
                    and Period from Inception (September 25, 2002)
                              through December 31, 2002
                              -------------------------


                                                              2003           2002
                                                          -------------  ------------
<S>                                                       <C>            <C>
OPERATING ACTIVITIES
Net Income (loss) from operations                         $     50,218   $  (902,362)
Adjustments to reconcile net income to net
  net cash provided by operating activities:
Depreciation and amortization                                  645,677       147,401
Common stock issued for services                                     -       176,754
Expenses paid directly from new borrowings                     140,801             -
Gain from sale of discontinued operations                   (3,379,557)            -
Changes in operating assets and liabilities:
  Tenant and other receivables                                (375,094)       16,855
  Prepaid expenses                                             (20,937)       14,695
  Related party (receivables) or payables                            -        94,653
  Other assets                                                 177,402      (307,822)
  Accounts payable, accrued expenses and other liabilities     379,957       741,896
                                                          -------------  ------------
    Net cash used in operating activities                   (2,381,533)      (17,930)

INVESTING ACTIVITIES
Net proceeds from sale of discontinued operations            2,142,566             -
Certificate of deposit for security for line of credit        (759,947)            -
Land, buildings and improvements                               (12,800)       (1,598)
Advances on construction in progress                                 -      (414,465)
Cash of acquired entities                                            -       544,474
                                                          -------------  ------------
    Net cash provided by investing activities                1,369,819       128,411
                                                          -------------  ------------

FINANCING ACTIVITIES
Proceeds from line of credit                                   750,000             -
Proceeds from property notes payable                                 -       487,160
Repayments of mortgage and other notes payable                (210,436)      (87,101)
Deferred loan costs                                                  -       (34,695)
                                                          -------------  ------------
    Net cash provided by financing activities                  539,564       365,364
                                                          -------------  ------------

NET INCREASE (DECREASE) IN CASH  AND CASH EQUIVALENTS        (472,150)      475,845
Cash and cash equivalents
  At beginning of period                                       475,845             -
                                                          -------------  ------------
  At end of period                                        $      3,695   $   475,845
                                                          =============  ============

SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid                                             $    522,222   $    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
  Accounts 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
Cash proceeds for sale of asset deposited into
  affiliate's bank account                                     363,620             -
Proceeds from sale of assets                                16,398,850             -
Liabilities liquidated from proceeds from sale of assets   (16,398,850)            -
Increase in notes payable                                      228,828             -
Increase in loan costs                                          73,851             -
New borrowings used to pay existing notes payable            5,741,172             -
Decrease in goodwill                                           109,194             -
</TABLE>

  The accompanying footnotes are an integral part of these financial statements

                                      F-6

<PAGE>

                         STERLING EQUITY HOLDINGS, INC.
                   Notes to Consolidated Financial Statements
                                December 31, 2003


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.  In July of 2002, the majority shareholders of
BLS  reached  an  agreement with the shareholders of Sterling FBO Holdings, Inc.
("SFBO").  The  Company  exchanged  its  stock  with  the  shareholders  of SFBO
resulting  in  SFBO  becoming  a wholly owned subsidiary of the Company. SFBO, a
Nevada  corporation,  was  formed in May 2002 to acquire, own and operate income
producing  real  estate  and  airplane  service  operations.

The  exchange,  completed  through a series of stock for stock exchanges between
BLS  and  SFBO, commenced at the close of business on September 25, 2002 and was
completed  on  December  30,  2002.  At the time of the September 25, 2002 stock
exchange,  SFBO  owned  interests  in, and operated, four office facilities that
were leased to state governmental units located in Austin, Texas.  SFBO acquired
these  interests  from Sterling REIT, Inc., ("SRI") and other affiliated parties
in exchange for shares of common stock.  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.

In  a  series  of transactions consummated during the period between October 30,
2002 and December 30, 2002, the Company exchanged shares of its common stock for
a 100% interest that SFBO had acquired or exchanged common stock for outstanding
stock of a corporation in five private aircraft flight service organizations and
the  real  estate  and  operating  licenses  associated  with each. Such service
organizations  are  generally  referred  to as Fixed Base Operations or "FBO's."

SFBO  acquired these FBO's from SRI and affiliated shareholders for common stock
in  three  planned  separate  transactions  occurring  in  October, November and
December  of 2002.  Those shareholders then immediately traded common shares, on
a  one  for one basis, for common stock of BLS, except for the December 30, 2002
acquisition  of  operations  in  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.  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.

                                      F-7

<PAGE>

1.  -  HISTORY  AND  DEVELOPMENT  OF  THE  COMPANY  (CONTINUED)

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.


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 transactions.

The  assets  acquired  and  the  liabilities assumed were recorded at their fair
values as of the closing dates of the transactions.  Additionally, in accordance
with  the  rules  of  the  Securities and Exchange Commission, the recorded fair
value  was  not  in excess of the "cash cost" of assets acquired from affiliated
parties.  The  acquired  companies  results  of  operations were included in the
consolidated statement of operations from the closing date of their acquisition.

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 and gain from the sale of the Company's FBO entities sold in 2003 are
reflected  in  the  consolidated  statements  of  operations  as  "Loss  from
discontinued  operations"  for  all  periods  presented  and  "Gain from sale of
discontinued  operations"  for  2003.

                                      F-8

<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  year ended December 31 2003 and for the period from inception
(September  25,  2002)  to  December  31,  2002  is  $453,730  and  $103,562,
respectively.

Amounts  included  under  the  caption  land, improvements and leaseholds 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.

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

Restricted  Cash  -  Restricted  cash consists of a certificate of deposit which
----------------
secures  the  line  of  credit.

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-9

<PAGE>

2.  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)

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.  The amortization of loan cost for the year ended December
31,  2003 and for the period from inception (September 25, 2002) to December 31,
2002  was  $174,941  and  $43,839,  respectively.

Goodwill  -  The Company has adopted Statement of Financial Accounting Standards
--------
No.  142,  "Goodwill  and  Other  Intangible  Assets."  The  adoption of FAS 142
requires  an  initial  impairment  assessment involving a comparison of the fair
value  of  goodwill to current carrying value. Goodwill represents the excess of
cost  over  the  fair  value  of  net assets acquired and is not amortized.  The
Company performs tests for impairment of goodwill annually or more frequently if
events  or  circumstances  indicate  it  may  be  impaired.  Such  tests include
comparing  the fair value of a reporting unit with its carrying value, including
goodwill.  Impairment  assessments  are  performed  pursuant  to  appropriate
guidance.

The  Company's  recorded goodwill is associated with the acquisition of the 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  the  recorded  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.

The  Company  does  not rely on any one vendor or supplier for its raw materials
and  management  believes  that  alternative  suppliers are available that could
provide  for  the  Company's  needs  on  comparable  terms.

The  Company's  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

                                      F-10

<PAGE>

2.  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)

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 was $4,800 for the
-----------
Company's  fiscal  period  for  2002.  The Company did not incur any advertising
expense  in  2003.

Earnings  Per  Share - The Company presents "basic" earnings per share, which is
--------------------
net  income or 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  Basis  of  Presentation  -  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  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  plans  to  reduce  expenses  and  is  developing  a strategy to provide
sufficient  capital  through  possible  sale  of  assets  and  other  means.

                                      F-11

<PAGE>

2.  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)

Recent  Accounting  Pronouncements  -  In  January  2003,  the  FASB  issued
----------------------------------
Interpretation  No. 46, "Consolidation of Variable Interest Entities," ("FIN No.
46")  as  superseded  in  December  2003  by FASB issued Interpretation No. 46R,
"Consolidation  of Variable Interest Entities-an interpretation of ARB 51 (("FIN
No.  46R").  FIN No. 46R requires the primary beneficiary of a variable interest
entity  ("VIE")  to  consolidate  the  entity  and  also  requires  majority and
significant  variable  interest investors to provide certain disclosures.  A VIE
is  an  entity in which the equity investors do not have a controlling interest,
equity  investors participate in losses or residual interests of the entity on a
basis that differs from its ownership interest, or the equity investment at risk
is  insufficient to finance the entity's activities without receiving additional
subordinated  financial  support  from  the  other  parties.  FIN  No.  46R  is
applicable  for  the  Company  starting  February 1, 2004.  We do not expect the
adoption  of FIN No. 46R to have a material impact on our financial condition or
results  of  operations.

In  May  2003,  the  FASB  issued  SFAS  150,  "Accounting for Certain Financial
Instruments  with  Characteristics  of  Both  Liabilities and Equity."  SFAS 150
changes  the  accounting  for  certain financial instruments that under previous
guidance  issuers  could  account  for  as  equity.  It  requires  that  those
instruments  be  classified  as  liabilities in balance sheets.  The guidance in
SFAS  150  is  generally effective for all financial instruments entered into or
modified  after  May  31, 2003, and otherwise is effective on July 1, 2003.  The
adoption  of  SFAS  150  did  not  impact  our financial position, cash flows or
results  of  operations.

In  December  2003,  the  SEC  issued  SAB  104.  This staff accounting bulletin
revises  or  rescinds  certain  sections  of SAB 101, which gives interpretation
guidance  about revenue recognition.  SAB 104 makes the interpretive guidance of
SAB  101  consistent with current authoritative accounting and auditing guidance
and SEC rules and regulations.  The adoption of SAB 104 in the fourth quarter of
fiscal  2003  did  not  impact  our financial position, cash flows or results of
operations.

Reclassifications  -  The accompanying consolidated financial statements for the
-----------------
prior  year  contain  certain  reclassifications  to  conform  with current year
presentation.

3.  -  SALE  OF  DISCONTINUED  OPERATIONS

On  January 6 and February 27, 2003, the Company completed the sale of its FBO's
in  Fort Worth and Austin, Texas; Casper, Wyoming; Tucson, Arizona; and Greeley,
Colorado  for  approximately $20,787,000 in cash and liquidation of debts and an
"earn-out" of up to $6,000,000 in future revenues in excess of a specified base.

Under  the  terms  of  the  sale,  the  Company  agreed to liquidate outstanding
liabilities  and  obligations associated with the FBO operations and properties.
Consequently,  the Company paid creditors approximately $17,476,000, established
an  escrow  fund  of  $589,000, to satisfy potential claims and obligations, and
deposited  approximately  $2,556,000  in  the  bank.

                                      F-12

<PAGE>

3.  -  SALE  OF  DISCONTINUED  OPERATIONS  (CONTINUED)

On  January  20,  2004, the Company and the purchaser entered into a "Settlement
Agreement  and  Mutual  Release"  to  resolve  the  disputes,  lawsuits  and
arbitration  demands  arising  out  of  the  Purchase  Agreements and the Escrow
Agreement  relating  to  the  transaction  for  the sale and transfer of the FBO
assets.  Included  in the settlement was the termination of the $6,000,000 "earn
out",  termination  of the escrow fund of $589,000 by disbursing $350,000 to the
Company  in  2004  and  various  other  matters.

The  sale  resulted  in  a  financial  gain before income taxes of approximately
$3,633,000,  and  a  federal  income  tax gain of approximately $6,127,000.  The
financial  gain  on  the  sale of discontinued operations includes approximately
$5,504,000  of  goodwill.

Following  are  the  results  of  operations  of  acquired FBO's included in the
Consolidated  Statements  of Operations for the year ended December 31, 2003 and
for  the  period  ended  December  31,  2002.

<TABLE>
<CAPTION>



                                            December 31,
                                           ------------
                                        2003         2002
                                   ------------  ----------
<S>                                <C>           <C>
Revenues                           $ 1,593,111   $ 496,949
                                   ------------  ----------
Costs and expenses
      Costs of revenues              1,012,934     294,581
      General and administrative       911,664     306,470
                                   ------------  ----------
Total expenses                       1,924,598     601,051
                                   ------------  ----------
Loss from discontinued operations
      before income taxes          $  (331,487)  $(104,102)
                                   ============  ==========
</TABLE>

4.  -  RELATED  PARTY  TRANSACTIONS

All  of  the  Company's  subsidiaries  and  acquired assets were, prior to their
acquisition,  owned  and managed by one or more of the major shareholders of the
Company's.  Historically,  all  of  the  entities  were  partnerships or limited
liability  companies  that passed their profits or losses through to the owners.
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 $908,523.

During  the  year  ended  December  31,  2003  and for the period from inception
(September 25, 2002) to December 31, 2002, Sterling REIT, Inc., ("SRI"), a major
shareholder, on behalf of the Company, received income from Austin buildings and
paid  the  expenses  and  note  payments for  the  same buildings.  In addition,
proceeds

                                      F-13

<PAGE>

4.  -  RELATED  PARTY  TRANSACTIONS  (CONTINUED)

received  from  refinancing  assets and cash was advanced to SRI by the Company.
Expenses  of  the Company were paid by SRI on behalf of the Company.  The net of
these  cash  transactions  amounted  $1,693,151  and $686,142 for the year ended
December  31,  2003  and  for  the period from inception (September 25, 2002) to
December 31, 2002, respectively.  These amounts were written off as bad debts by
the  Company  (See  Note  5  -  Advance  to  a  Principal  Shareholder).

The  Company paid a management fee of $174,000 and $7,500 to a major shareholder
and a consulting fee of $117,500 and $46,373 to another major shareholder during
the  year  ended  December 31, 2003 and for the period from inception (September
25,  2002)  to  December  31,  2002,  respectively.

At  December  31,  2002,  the  Company had accounts receivable of $30,000 from a
shareholder  and  payables of $50,500 due to two shareholders.  The amounts were
collected  and  paid  in  2003.

The  Company's  four  Austin  Properties were managed by 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 transfer to
the  Company.  Consequently, the business relationship has historically resulted
in  amounts  due  to  or  from  the  property  owners  and  SRI.


5.  -  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 SRI. It appears that the funds were advanced
without  proper  authorization.  The funds advanced to SRI were purportedly used
to  pay  certain expenses of the Company and to pay certain expenses relating to
properties  of  SRI  which  were  to  be  transferred  to  the  Company.

Based  on  the  initial findings of the new management team, the Company and SRI
entered  into  a  Settlement  Agreement  pursuant  to which SRI delivered to the
Company  a  Promissory  Note evidencing the obligation of SRI to pay the amounts
advanced  by the Company and a Pledge Agreement, Security Agreement and multiple
Deeds  of  Trust  securing  repayment  of the note with substantially all of the
assets  of  SRI.


                                      F-14

<PAGE>

5.  -  ADVANCES  TO  A  PRINCIPAL  SHAREHOLDER

After further investigation, the new management team reached the conclusion that
in  all  probability the Company would receive little, if any, money from SRI or
the  assets  securing the repayment of the note discussed above.  As a result of
the  investigation, the Company wrote off $699,342 for the period ended December
31,  2002  and $1,693,151 for the year ended December 31, 2003 of the receivable
from  Sterling  REIT  and  a  related  entity.


6.  -  REAL  ESTATE,  OTHER  NOTES  PAYABLE  AND  LINE  OF  CREDIT

Real Estate Notes Payable - The real estate notes payable, collateralized by the
-------------------------
respective  properties  and  assignment of leases, at December 31, 2003 and 2002
are  as  follows:

<TABLE>
<CAPTION>

                                                                          2003          2002
                                                                      -----------  -----------
<S>                                                                   <C>          <C>
Property and Note Description
-----------------------------
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                                                      $ 4,013,588  $ 4,046,982

4405 Springdale - Austin, Texas
  First lien note with interest payable 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

4708 MLK - Austin, Texas
  First lien note with interest payable, 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 principal
   and interest                                                                 -        794,250

Four Austin Buildings
  First lien bearing interest at 5.5% with thirty-five
  Monthly installments of $41,067 including
  principal and interest starting July 5, 2003 and
  a final payment on March 27, 2006                                       5,897,999            -
                                                                      -------------  -----------

        Total real estate notes                                         $ 9,911,587  $ 9,840,537
                                                                      =============  ===========
</TABLE>

                                      F-15

<PAGE>

At  December  31, 2003, the net carrying value of the properties collateralizing
the  real  estate  notes  was  $8,938,034.  The  four  Austin building's note is
guaranteed  by  shareholders  of  the  Company.

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 matured in April, 2003 with interest at
18%  and  has a balance owing of approximately $38,300 at December 31, 2003.  In
addition,  the  Company has two small installment notes with a balance of $4,365
at  December  31,  2003.

Principal  Maturities  -  Combined aggregate principal maturities of real estate
---------------------
and  other  notes  payable,  as  of  December  31,  2003,  are  as  follows:

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

2004              $    279,152
2005                   222,847
2006                 5,554,597
2007                    45,105
2008                    47,802
Thereafter           3,804,949
                     ---------

Total             $  9,954,452
                  ============


                                      F-16

<PAGE>

6. - REAL ESTATE, OTHER NOTES PAYABLE AND LINE OF CREDIT (CONTINUED)

Line of Credit - The Company has a $750,000 line of credit which is due March 6,
--------------
2004  with  interest  at 4.25% and is secured by a certificate of deposit in the
amount  of  $759,946,  which  is  shown as restricted cash in the balance sheet.


7.  -  RENTAL  INCOME

The  Company's  Austin  Properties  and  Commodore Plaza Shopping Center are the
lessors  to  tenants  under  operating leases with expiration dates ranging from
2007  to  2013.  The  minimum rental amounts due under the leases for the Austin
Properties  are  generally  subject  to an increase based on a percentage of the
Consumer  Price Index. Each of the leases for Austin Properties includes a right
of  the State tenants to terminate the lease based on budgetary constraints. 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,  2003  are  as  follows:

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

  2004               $1,206,736
  2005                1,046,742
  2006                1,046,742
  2007                  620,720
  2008                  507,243
  Thereafter          1,152,672
                     -----------

     Total           $5,580,855
                     ===========

                                      F-17

<PAGE>

8.  -  INCOME  TAXES

The following table sets forth a reconciliation of the statutory federal income
tax for the period ended December 31, 2002 and for the year ended December  31,
2003.

<TABLE>
<CAPTION>

                                                 2003        2002
                                               ---------  ----------
<S>                                            <C>        <C>
Income (loss) before income taxes              $578,073   $(902,362)
                                               =========  ==========

Income tax computed at statutory rates         $196,544   $(306,803)
Increase in valuation allowance                  56,309           -
Utilization of prior year net operating loss    326,636           -
Utilization of acquired deferred tax asset      (54,315)          -
Other                                             2,680      (4,475)
                                               ---------  ----------

Tax Provision (Benefit)                        $527,854   $(311,278)
                                               =========  ==========

Current tax provision                          $253,000   $       -
Deferred tax provision (Benefit)                274,854    (311,278)
                                               ---------  ----------

Total tax provision (Benefit)                  $527,854   $(311,278)
                                               =========  ==========
</TABLE>

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,  2003  are  set  out  below.

                                                  2003
                                              -------------
Deferred tax asset:
Tax basis of assets greater than book         $     619,297
Valuation allowance                                (619,297)
                                              --------------

   Deferred tax asset                         $          -
                                             ===============

9.  -  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-18

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