Annual Report For Small Business Issuers Subject
                     to the 1934 Act Reporting Requirements

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                  FORM 10-KSB/A
                                 AMENDMENT NO. 1

(X)  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934 
                      For the Year Ended October 31, 1996

( )  TRANSITION  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
     EXCHANGE ACT OF 1934
                           Commission File No. 0-21417


                            CAPITAL TITLE GROUP, INC.
                            -------------------------
                 (Name of Small Business Issuer in its charter)

         Delaware                                        87-0399785
         --------                                        ----------
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation or organization)


4808 N. 22nd Street, Phoenix, Arizona                      85016
-------------------------------------                      -----
(Address of principal executive offices)                 (Zip Code)


                    Issuer's telephone number: (602) 954-0022
                                              -----------------

             Securities registered under Section 12(b) of the Act:
                                      NONE


             Securities registered under Section 12(g) of the Act:

                          Common Stock, $.001 par value
                          -----------------------------
                                (Title of class)


The undersigned  registrant  hereby amends Part I-Item 1, Part II-Items 6 and 8,
and Part III-Items 9, 10, 11 and 12, of its Annual Report on Form 10-KSB for the
fiscal year ended October 31, 1996, in their entirety to read as follows:
<PAGE>

                                     PART I

ITEM 1.  BUSINESS

COMPANY HISTORY AND OVERVIEW

         Capital Title Group,  Inc., a Delaware  corporation  (the  "Company" or
"Capital  Title  Group"),  through its wholly owned  subsidiary,  Capital  Title
Agency, Inc., an Arizona corporation ("Capital Title"),  operates an independent
title agency and escrow  business  headquartered  in Phoenix,  Arizona.  Capital
Title  Group  was  formed  under  the  laws of Utah in 1983 and  redomiciled  in
Delaware in 1989. Capital Title was formed as an Arizona corporation in 1981 and
has engaged in business as an independent  title agency and escrow company since
that time.

         On May 23,  1996,  the  Board of  Directors  of  Capital  Title  Group,
(formerly Norvex, Inc.), and the Board of Directors of Capital Title, approved a
Share Exchange  Agreement.  Per the agreement,  Capital Title Group issued 5.781
shares of Capital  Title's,  $.001 par value,  common stock in exchange for each
share held by Capital Title's shareholders. Immediately prior to the Acquisition
Transaction, Capital Title Group had 1,686,164 shares issued and outstanding and
approximately 75 shareholders. Irwin Jacobson and Mark Scharmann each held 5% or
more of Capital Title Group's outstanding stock. In the Acquisition Transaction,
Capital  Title Group issued  6,734,865  shares to the existing  shareholders  of
Capital Title. See Item 11. "Security Ownership of Certain Beneficial Owners and
Management" for the current 5% or greater  beneficial owners. The share exchange
ratio was determined by arm's length negotiations  between the respective boards
of  directors  of Capital  Title Group and Capital  Title,  based on a number of
factors,  including  the  business  prospects  and  financial  condition  of the
respective entities.

         Prior to the merger,  Capital Title Group had no  significant  business
operations  or holdings.  As a result of the  Acquisition  Transaction,  Capital
Title Group now operates Capital Title as a wholly owned subsidiary.

         Since 1981,  Capital Title has provided  continuous title insurance and
escrow  services  to the  real  estate  industry  in  Yavapai  County,  Arizona.
Recently,  Capital  Title  expanded its  operations  into  Phoenix,  Arizona and
relocated its corporate headquarters from Prescott, Arizona to Phoenix, Arizona.
The  Company  has nine  branch  offices,  five of which are  located  in Yavapai
County,  Arizona  and five of which were  recently  opened by the Company in the
Phoenix  metropolitan  area. The Company plans to continue its growth in Yavapai
and Maricopa Counties and, as conditions merit, expand outside Arizona.  The two
areas  outside  Arizona,   which  the  Company  believes  it  could  effectively
penetrate,  are Southern  California and Nevada.  This planned expansion will be
accomplished   through  acquisition  or  recruitment  of  escrow  officers  with
significant existing revenue production based upon their relationships with real
estate brokers,  mortgage lenders and other industry  participants.  The Company
will attempt to attract these significant  producers through employment packages
that  include  stock  options  and  stock   purchase   programs  as  substantial
motivational incentives.

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<PAGE>

          The principal  executive offices of the Company are located at 4808 N.
22nd Street, Phoenix, Arizona 85016 and the Company's telephone number is: (602)
954-0022.

COMPANY OPERATIONS

         Capital Title is an independent  title agency providing escrow services
and, as an agent for First American Title Insurance  Company ("First  American")
and Old Republic  Insurance  Company ("Old  Republic"),  issuing title insurance
policies  to service the real estate  industry  in Yavapai  County and  Maricopa
County,  Arizona.  Capital  Title's  operations  commenced  in 1981 in Prescott,
Arizona.  By 1987, Capital Title was the largest title company in Yavapai County
based on market share,  and by 1994,  its market share had reached 24%. In early
1994,  Money magazine  listed  Prescott,  Arizona as the number one place in the
United States to retire.  During the next ten months,  the real estate market in
Yavapai County  increased by 38%, but Capital  Title's  staffing levels were not
increased quickly enough to capitalize on this increase. As a result, by the end
of 1994,  Capital Title found that its market share in Yavapai County had fallen
to approximately 16%.

         During 1995 and 1996, Capital Title began an expansion program, opening
additional  offices in the Yavapai County population centers of Prescott Valley,
Cottonwood  and Sedona.  Capital  Title  estimates  its current  market share is
approximately  23%,  second to First  American Title which has a market share of
approximately  35%.  During 1996,  Capital  Title opened four branch  offices in
Maricopa County,  Arizona. In January, 1997 the Company opened another branch in
Maricopa County and as conditions and operating  results  warrant,  plan to open
additional branch offices in Maricopa and Yavapai Counties,  Arizona. Phoenix is
currently the 7th largest city in the United States with an estimated population
of 1.08 million,  and its  projected  growth is expected to boost Phoenix to the
6th  largest  city in the  nation by the year 2000.  The  Company  believes  the
surrounding  metropolitan areas in Maricopa County have the potential to grow at
an even more accelerated pace. Capital Title's expansion plans also call for the
opening of offices  outside of Arizona.  The Company  believes that the Southern
California real estate market is at its lowest recent historical level, and most
predictions  are that a recovery  will  commence in the near future.  The Nevada
market has been growing for a number of years.

INDUSTRY OVERVIEW

         Title  Insurance  has become  accepted as the most  efficient  means of
determining  title to, and the priority of  interests  in, real estate in nearly
all parts of the United  States.  Virtually  all real property  lenders  require
their  borrowers to obtain title  insurance  policies at the time mortgage loans
are made.

         TITLE POLICIES. Title insurance policies state the terms and conditions
upon  which  a  title  underwriter  will  insure  title  to  real  estate.   The
beneficiaries of title insurance  policies are generally buyers of real property
or secured lenders.

         Title  insurance is different from other types of insurance  because it
relates to past events that affect  title to property at the time of closing and
not  unforeseen  future  events.  Prior to issuing  policies,  underwriters  can
eliminate future losses by accurately performing searches and examinations.  The

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major  expense of a title  company is the search  and  examination  function  in
preparing  preliminary  reports,  commitments and policies and is not from claim
losses.  The premium for title  insurance  is due in full on the closing date of
the real estate transaction and is based upon the purchase price of the property
insured or the amount of the secured loan.  Coverage under the policy  generally
terminates upon resale or refinance of the property.  The terms of coverage have
become standardized in accordance with forms approved by trade associations such
as American Land Title Association and Land Title Association of Arizona.

         Title  insurance  policies  are  issued on the  basis of a  preliminary
report  or  commitment.  These  reports  are  prepared  after a search of public
records,  maps and other relevant documents to ascertain title ownership and the
existence of easements, restrictions, rights of way, conditions, encumbrances or
other  matters  affecting  the  title  to,  or use of real  property.  A  visual
inspection  of the  property  may also be made prior to the  issuance of certain
title insurance policies.

         To  facilitate  the  preparation  of  preliminary  reports  without the
necessity of manually searching public records,  copies of public records,  maps
and other  relevant  historical  documents  are compiled and indexed in a "title
plant." Each title plant relates to a particular county and is kept current on a
daily or other  frequent  basis by the addition of copies of recorded  documents
that affect rights in real property in the particular  county.  Title  companies
often  subscribe  to  independent  title  information  services to assist in the
updating of their title plants and the maintenance of title records.

         DIRECT VS. AGENCY SALES. Preliminary reports and commitments to issue a
policy are  prepared  by title  underwriters  (direct  sales) or by  independent
agents on behalf of the  underwriters  (agency sales).  The terms and conditions
upon which the real property will be insured are  determined in accordance  with
the standard policies and procedures of the title underwriter.  In direct sales,
the title underwriter  issues the preliminary  report and commitment and retains
the entire title  premium paid in  connection  with the  transaction.  In agency
sales, the search and examination function is performed by the independent agent
and the  majority of the premium  collected  is retained by the agent,  with the
balance remitted to the title  underwriter.  Independent agents may select among
several title underwriters based upon the amount of the premium "split" offered,
the  overall   terms  and   conditions  of  the  agency   agreement,   including
indemnification  obligations of the agent,  and the scope of services offered to
the agent by the title underwriter. Agent commissions vary by geographic region.

          THE TITLE  POLICY  PROCESS.  A brief  description  of the  process  of
issuing a title insurance policy is as follows:

         (i)      The customer,  typically a real estate  salesperson or broker,
                  escrow agent or lender, places an order for a title policy.

         (ii)     Sales  personnel  note the  specifics of the order and place a
                  request with the title department for a preliminary report.

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<PAGE>

         (iii)    After  the  relevant   historical  data  on  the  property  is
                  compiled, the title officer prepares a preliminary report that
                  documents (a) the current status of title to the property, (b)
                  any exemptions,  exceptions  and/or  limitations that might be
                  attached to the policy and (c) specific issues that need to be
                  addressed  and  resolved  by the  parties  to the  transaction
                  before  the title  policy  will be issued  (such as removal of
                  prior tax liens and payment of prior  loans on the  property).
                  The  preliminary  report is  circulated to all the parties for
                  satisfaction of any specific issues.

         (iv)     After all specific issues identified in the preliminary report
                  are  satisfied,  the escrow  agent closes the  transaction  in
                  accordance with the instructions of the parties and the policy
                  conditions.

         (v)      Once the  transaction  is  closed  and all  monies  have  been
                  released, the policy is issued (a) to the owner and the lender
                  on a  resale  transaction  or  (b)  to the  lender  only  on a
                  refinancing transaction.

         LOSSES AND  RESERVES.  The maximum  amount of  liability  under a title
insurance  policy is  usually  the face  amount of the  policy  plus the cost of
defending the insured's  title against an adverse  claim.  The reserve for claim
losses is based upon known claims as well as losses the insurer expects to incur
based on historical  experience and other factors,  including industry averages,
claims loss history,  current legal environment,  geographic  considerations and
type of policy written.

         ECONOMIC FACTORS AFFECTING INDUSTRY. Title insurance revenue is closely
related to the level of activity in the real estate market and the average price
of  real  estate  sales.   Real  estate  sales  are  directly  affected  by  the
availability of money to finance purchases.  Other factors affecting real estate
activity  include  demand,  mortgage  interest  rates,  family income levels and
general economic conditions.

         It is estimated that title industry revenue for 1995 was  approximately
$6  billion,  which  reflected  no  significant  change in  comparison  to 1994.
Although  recovery  from a weak year in 1994  appeared to commence in the second
half of 1995,  continued weakness in the California  market,  which accounts for
25% or more  of all  mortgage  originations  nationwide,  precluded  substantial
growth.  The long-term growth rate for the industry  approximates  nominal gross
domestic product growth, or about 5%.

COMPANY STRATEGY

         The  Company's  strategy  is to pursue  aggressive  growth in the title
insurance industry in the Southwestern United States.  Essential elements of the
Company's strategy are as follows:

         COMMITMENT   TO   SERVICE.   The   Company  is  built  on  three  basic
entrepreneurial  premises:  (1) every employee is a salesperson for the Company;
(2) the  Company's  services are a one-stop,  computer-based  contact  point for
complete real estate transactions;  and (3) success is achieved through focus on
an unequaled quality of customer service.  Because title insurance  policies and
escrow  functions are generally  standardized,  the level of service provided is
the key differentiating  factor among competitors in the title industry.  One of
the  Company's  foremost  objectives  is  to  issue  written  title  reports  in
substantially  all its transactions  within two working days from the opening of

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<PAGE>

escrow.  Through its commitment to customer service,  the Company seeks to build
lasting relationships with its real estate industry clients.

          MARKET FOCUS. The Company's market focus is on real estate brokers and
mortgage lenders,  which the Company believes generate  approximately 70% of the
transactions  involving  title and escrow fees. To set itself apart as a service
company, Capital Title has developed industry specific information technology in
Maricopa County that it provides to its clients.  The Company trains real estate
agents and their  administrative  assistants in the use of a customized computer
program  which  enhances  their  client  presentations.  The  Company  has  also
developed  "Plain  Language  Escrow  Instructions"  in an effort to simplify the
escrow  process  and  minimize  the  numerous  questions  that can  arise in the
preparation of escrow  documents.  These simplified  instructions have been well
received in the  Yavapai  County real estate  community  and have  provided  the
Company with an opportunity to conduct educational seminars directed at its real
estate agent clients.

          MANAGEMENT.  The Company  recognizes  that its aggressive  growth plan
calls for executive management with extensive industry operational and expansion
experience.  Capital Title  appointed  Mr.  Andrew Johns as President  effective
April 16, 1996. Mr. Johns,  the former  President of Stewart Title for the State
of California, has over 28 years of industry experience, including the expansion
of United Title's Orange County  operations  throughout the Southern  California
market.  The Company believes that Mr. Johns has the leadership,  experience and
industry  contacts required to effect Capital Title's  expansion.  Capital Title
also has an experienced and dedicated group of executive officers to support Mr.
Johns in this effort. See Item 9 - "Directors, Executive Officers, Promoters and
Control Persons."

         EQUITY PARTICIPATION BY ESCROW OFFICERS.  Escrow officers are the major
revenue producers for title insurance companies.  It is their relationships with
real estate brokers,  lenders and other industry participants that are primarily
responsible for the direction of escrow and title  business.  Capital Title will
seek to attract the most successful  escrow  officers (and the related  revenue)
through  employment  packages  that  include  stock  options and stock  purchase
programs in the Company as added motivational  incentives.  The Company believes
such programs will also promote Company loyalty, which will help to insulate the
Company's escrow officers from competitive recruiting efforts.

         EXPANSION.  The Company  intends to  accomplish  its planned  expansion
through  acquisitions  of  existing  title  agencies,  the opening of new branch
offices and the development of "Home-Based  Relationship"  ("HBR")  arrangements
with escrow  officers.  The HBR program  will allow  escrow  officers to work in
their own homes doing escrow processing functions through the Company's computer
network, thereby reducing the Company's administrative and office expense.

CAPITAL TITLE OPERATIONS

         In the  years  ended  October  31,  1996 and  1995,  revenues  from the
issuance of title insurance policies represented 56.2% and 53.7%,  respectively,
of the Company's consolidated revenues.  Escrow fees for the years ended October
31, 1996 and 1995 represented  26.9% and 26.6%,  respectively,  of the Company's
consolidated revenue.

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<PAGE>

         MARKETING. The Company believes that the primary source of its business
is from referrals from  participants in the real estate  industry,  such as real
estate brokers,  mortgage lenders,  developers and attorneys. In addition to the
referral  market,   Capital  Title  markets  its  services  directly  to  larger
brokerages and real property lenders.  Marketing activities are performed by the
escrow  officers  of Capital  Title and a  marketing  representative  whose sole
function  is the  solicitation  of business  from major real estate  brokers and
lenders.  Escrow officers, in addition to their escrow service duties,  maintain
and further develop relationships  established with current clients for on-going
business.  The  marketing  representative  holds  educational  seminars for real
estate brokers, offers the use of "Dataquick" as a service that provides ease in
placing  valuations  on  surrounding   property  and  trains  brokers  or  their
assistants  in  the  use  of  Capital  Title's  proprietary   industry  specific
information technology.

         ESCROW  SERVICE.  Capital  Title's escrow  department has the fiduciary
responsibility of handling the consummation of real estate sales,  exchanges and
a  variety  of other  transactions  involving  the sale or  encumbrance  of real
property, refinance of real property, sales of assets of businesses and sales of
promissory notes secured by deeds of trust.

         The  escrow  officer  and  assistant  typically  prepare  their  escrow
documents pursuant to the real estate contract.  The escrow instructions provide
guidance to all  concerned  parties as to the  conditions  required for the real
estate transaction.  Furthermore, the instructions provide authorization for the
escrow agent to request information  concerning matters appearing of record, the
receipt of all earnest  monies and closing  funds,  the  disbursement  of seller
proceeds,  payoff of underlying liens, judgments, real property taxes, insurance
and any other  disbursement  as set forth in the  instructions or parties to the
transaction.  The instructions also include  authorization to prepare and obtain
documents necessary to complete the real estate transaction.

         The escrow agent is held accountable by state governmental agencies for
strict  compliance  with its fiduciary  responsibilities  outlined by the escrow
instructions.  The officer must possess a high degree of skill,  professionalism
and confidentiality in the handling, preparation,  collecting and recordation of
all escrow  matters  between the buyer,  seller,  real estate  brokers and their
agents, developers, lenders and investors.

         TITLE  DEPARTMENT.  The primary function of the title department is the
accumulation  and analysis of various  documents from the many sources that make
up the  public  record.  From this  analysis,  a  preliminary  report is written
showing  the  present  condition  of title.  This  report is given to the escrow
officer  who, in turn,  distributes  it to the parties  involved in the purchase
agreement.  After the  preliminary  report has been read and approved by all the
parties and the requirements of the report have been fulfilled,  the escrow will
proceed to closing and a final title insurance policy will be issued.

         Capital  Title  owns a "title  plant," a listing  and  history  of each
parcel of ground in a  particular  county,  for  Yavapai  County,  Arizona.  The
Company can use the  services  of a third party title plant  provider or acquire
additional  title plants for  purposes of  conducting  its title  research as it
expands into additional  geographic  areas. The cost of obtaining "title plants"
varies with economic and market  conditions in the geographic  area to which the
title  plants  relate.  The Company  believes  it will be able to obtain  "title

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plants"  on  terms  and  conditions  that  are  acceptable  to  it  through  the
acquisition  of title  companies  as the  Company  expands  into other  markets.
However, there can be no assurance in this regard.

         CLAIMS AND  UNDERWRITING.  Capital Title provides title insurance as an
agent of First American and Old Republic.  First American has a Best's Insurance
rating of A. Old Republic has a Standard and Poor's rating of A+. These services
are provided  pursuant to  Underwriting  Agreements  with First American and Old
Republic,  which state the  conditions  on which  Capital Title is authorized to
issue a title  insurance  policy on behalf of First American or Old Republic and
prescribe  the  circumstances  under which  Capital Title may be liable to First
American  or Old  Republic if a policy  loss is  attributable  to errors made by
Capital Title. The underwriting  agreements with First American and Old Republic
provide that the Company:  (1) must fully comply with all requirements  relating
to the  issuance of title  insurance  within  each of the  counties in which the
Company  does  business  and must comply with  generally  accepted  standards of
underwriting;  (2) will be liable for any losses payable on a basis of erroneous
reports or in excess of the stated liability on the policy when an insured makes
a successful claim based on negligence;  (3) may not write a policy in excess of
the stated  contract  amount without prior approval from the insurance  company;
and (4) will be liable for the first  $5,000 of each loss,  unless  specifically
waived by the  insurance  company.  The  Company  is not a sole  agent for First
American or Old Republic.

         Claims  against  the policy of title  insurance  normally  arise out of
human  error.  During the  process of  accumulation  and  analysis of the public
record,  certain  inaccuracies and  inconsistencies  are often  encountered that
sometimes result in a situation in which interpretation of these documents could
lead to a claim.  Such  claims are  reviewed  by Capital  Title's  staff and, if
warranted, sent to the insurance carrier for final disposition.

         Underwriting  is the  process of  analyzing  risk  assumption.  As each
individual situation arises, the local staff makes a risk analysis. If the local
underwriting  staff decides that the risk assumption is outside its underwriting
authority, the insurance carrier is contacted for its underwriting approval.

         ACCOUNT SERVICING. The account servicing department handles the receipt
and disbursement of monies for accounts with respect to which Capital Title acts
as servicing agent for a transaction. Its responsibility as trustee includes the
maintenance of all records reflecting receipts and disbursements, calculation of
total  interest,  principal  and  any  other  sums  due as  required  under  the
agreement/note  between the buyer and the seller. This information is summarized
and reported to the Internal  Revenue  Service  with the  appropriate  Form 1098
and/or  1099  supplied  to the buyer and the  seller.  Following  the  payoff of
accounts,  the servicing  agent prepares and records the  appropriate  documents
necessary  to  substantiate  accounts as paid in full in the  applicable  county
records.  Typically,  transactions  serviced by Capital Title include promissory
notes secured by deeds of trust and agreements of sale.

         FORECLOSURES.  Both  promissory  notes  secured  by deeds of trust  and
agreements of sale can be foreclosed  nonjudicially  by the servicing  agent. As
trustee of the  documents  being  serviced by Capital  Title,  the seller and/or
beneficiary can direct the servicing  agent, at the time of default,  to proceed
with foreclosure of the lien.

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         The  maintenance of accurate  up-to-date  accounting and control of all
original   documents  enable  the   trustee/servicing   agent  to  expedite  the
nonjudicial trustee sale or foreclosure.

          ADMINISTRATION.  Capital Title's  administrative staff handles general
accounting and finance,  human  resources,  purchasing,  management  information
systems and regulatory compliance.

         The Company  has  initiated  its  expansion  plans in Maricopa  County.
Recently, the Company relocated its headquarters to Phoenix, and has opened five
branch  office  locations  in  Maricopa  County.  In  addition,  the Company has
retained the services of escrow officers with significant production capacity in
the Phoenix metropolitan area.

CUSTOMERS

         Capital Title is not dependent upon any single customer or single group
of  customers.  The loss of any one customer  would not have a material  adverse
effect on the Company.

SEASONALITY

         The title  insurance  business is closely  related to overall levels of
real estate  activity.  Historically,  real estate  activity has been  generally
slower in the winter months with volumes showing significant improvements in the
spring and summer months. In addition,  the title insurance business is cyclical
due to the effect of  interest  rate  fluctuations  on the level of real  estate
activity.  Periods of high interest rates adversely  effect real estate activity
and therefore premium revenues.

COMPETITION

         The title  insurance  business is highly  competitive.  Companies  with
significant market share in Arizona include First American Title, Security Title
and  Chicago  Title.  The  number  and size of  competing  companies  varies  in
different  geographic  areas.  In those  areas where the  Company  operates  and
intends to  operate,  the  Company  will face  competition  from major  national
insurance  underwriters  and  other  independent  agencies,  many of which  have
greater  financial and other  resources than the Company.  The Company  believes
that quality and  timeliness of service are the key  competitive  factors in the
industry,  because parties to a real estate  transaction  are usually  concerned
with  time  schedules  and  costs  associated  with  delays  in the  closing  of
transactions.  In those states where prices are not  established  by regulation,
the price of title insurance is also an important competitive factor.

REGULATION

         Capital Title conducts its business under licenses granted by the State
Banking and Insurance  Departments of the State of Arizona.  The title insurance
and escrow  businesses  generally  are  subject to  extensive  regulation  under

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applicable  state laws.  These laws  establish  supervisory  agencies with broad
administrative  powers  relating to issuing and  revoking  licenses,  regulating
trade  practices,  licensing  agents,  approving policy forms and approving rate
schedules. Failure to comply with these regulations or an inability to secure or
maintain any required  licenses could materially  adversely affect the Company's
business. The Company believes that it is in material compliance with applicable
laws and regulations, and that it will maintain and obtain all licenses required
for the conduct of its business.

EMPLOYEES

         As of December 31, 1996, the Company had a total of 112  employees,  of
which  59  (including  officers  of the  Company)  were in the  marketing/escrow
department, 20 were in the title department, eight were in customer service, one
was in  trustee  sales,  six  were in  account  services  and  eighteen  were in
administration. Capital Title believes that its relations with its employees are
good.

                                     PART II

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

         The following discussion of the results of the operations and financial
condition  of the  Company  should  be read in  conjunction  with the  Company's
Consolidated  Financial  Statements and Notes thereto included elsewhere in this
statement.  Historical results and percentage  relationships  among accounts are
not  necessarily  an  indication  of trends in operating  results for any future
period.  The discussion of the results of operations and financial  condition is
based  solely upon the  activity of Capital  Title and  excludes the activity of
Capital Title Group which was inactive until the Acquisition Transaction.

OVERVIEW

         During the fiscal year ended October 31, 1996, the Company undertook an
expansion program which doubled the number of branch offices and employees. This
expansion  was funded  primarily  through a private  placement of the  Company's
common stock which was initiated in July, 1996.  Through the private  placement,
approximately  $1,157,000  was raised,  net of offering  costs.  During 1996, an
additional  $325,000 was obtained  through the sale of 165,000  shares of common
stock  for  $100,000  and  borrowings  of  $225,000.  Out of  the  approximately
$1,482,000 raised by the Company through financing activities, the Company spent
approximately  $725,000 on fixed assets for the Phoenix  corporate  headquarters
and four (4) new branches in Maricopa County. Approximately $680,000 was used to
fund operations during the growth period and  approximately  $72,000 was used to
pay debt obligations.

         Subsequent  to the  Company's  fiscal year end, the Company  obtained a
loan from Imperial Bank for $350,000 and has initiated another private placement
of the Company's  common  stock.  The  Company's  Board of Directors  authorized
another placement of 500,000 shares of common stock. As of February 5, 1997, the
Company has sold an additional  555,000 shares of common stock for approximately
$538,000,  net of  offering  costs.  The  approximately  $888,000,  subsequently
raised, has been used primarily to fund operations open one additional branch in
Maricopa County.
                                       10
<PAGE>

RESULTS OF OPERATIONS

          REVENUE.  The  following  table  presents  information  regarding  the
components of the Company's revenue:

                                          For The Years Ended Oct. 31,
                                          ----------------------------
                                             1996            1995
                                             ----            ----
Title Insurance Premiums                 $1,451,479       $1,099,666
Escrow Fees                                 695,995          544,357
Account Servicing                           314,939          263,695
Other Fees and Revenue                       16,947           43,085
Interest Income                             103,295           98,809
                                         ----------       ----------
                                         $2,582,655       $2,049,612
                                         ==========       ==========
Orders Closed by Direct Orders                2,748            2,029
                                         ==========       ==========
Average Fee Per file from Direct
Operations                               $      780       $      810
                                         ==========       ==========
                                                                          
         Title insurance premium and escrow fees revenue increased approximately
$503,000 or 30% from 1995. Of this  increase,  approximately  $261,000 or 16% is
from  Maricopa  County  operations.  Capital  Title  opened its first  branch in
Maricopa  County in August,  1996.  The  following  table  presents  information
regarding the approximate monthly revenue from Maricopa operations:

                         For The Month Ended       Revenue
                         -------------------       -------
                         August 31, 1996          $ 54,000
                         September 30, 1996         99,000
                         October 31, 1996          108,000
                         November 30, 1996         163,000
                         December 31, 1996        $215,000

         Management  expects revenues from its Maricopa operation to continue to
grow as the inventory of orders that has been building over the past five months
begins to close and escrow  officers  begin to reach their full  potential.  The
inventory  of  orders is  comprised  of  escrows  opened  but not yet  closed or
cancelled.  There can be no  assurance  that an escrow will close,  but based on
management's  experience,  80% of the  opened  escrows  are  expected  to close.
Management  believes  it takes  between  five (5) and six (6)  months  for a new
branch to reach its expected revenue and profit model.

                                       11
<PAGE>

         The  remaining  increase  in  insurance  premiums  and  escrow  fees of
approximately $242,000 or 14% is from expansion in Yavapai County,  Arizona. The
Company's  market  share in Yavapai  County has  increased  from a low of 16% in
fiscal year 1995 to 23% in November,  1996. Due to the  recruitment of three (3)
escrow officers and the anticipated opening of two (2) new offices,  the Company
plans to increase its market share in 1997.

         The decrease in the average fee per file from direct  operations is due
to a decrease in the average fee earned in Yavapai  County  which  dropped  from
$810 for fiscal year 1995 to $750 in fiscal year 1996.  The  decrease was due to
an increase in refinance  business  which  occurred when interest rates dropped.
For 1997, the Company is refocusing on resale business which  typically  charges
higher fees than fees from  refinancing  transactions.  Fees for Maricopa County
for the period end October 31, 1996 averaged approximately $1,240. Orders closed
by direct  operations in Yavapai County increased from 2,029 in 1995 to 2,538 in
1996 or  approximately  25%.  Orders closed by direct  operations  from Maricopa
County were 210 in 1996.

          EXPENSES. The following table presents the components of the Company's
expenses.
                            For The Years Ended Oct. 31,
                            ----------------------------
                                1996          1995
                                ----          ----
Personnel Cost                $1,958,292   $1,161,622
Other Operating Expense        1,526,312    1,059,846
Agent Commissions                 24,768        4,016
Acquisition Cost Write Down      103,441         --
Interest Expense                  17,835        6,289
                              ----------   ----------
                              $3,630,648   $2,231,773
                              ==========   ==========

         Personnel costs are the most significant  operating expense incurred by
the Company. Personnel costs increased in 1996 compared to 1995 by approximately
$797,000, or 68.5%. Personnel costs increased  approximately  $402,000, or 34.6%
due  to  employees   being  hired  for  the  Maricopa   County   operations  and
approximately  $395,000,  or 33.9% for  increased  staff in  Yavapai  County and
additional  administrative  and  executive  personnel.  Personnel  costs,  as  a
percentage of total revenue, have increased to 75.8% in 1996 from 56.6% in 1995.
This increase is due  primarily to expansion  into  Maricopa  County.  Personnel
costs, as a percentage of total revenue,  was 152.5% in 1996 for Maricopa County
operations and 63.1% for Yavapai County operations respectively. Personnel costs
fluctuate  as the level of direct  orders  opened and closed  fluctuate.  As the
Company's  current  inventory of orders begins  closing and branches  reach full
potential,   the  Company  believes  Maricopa  County's  personnel  costs  as  a
percentage  of total revenue will  decrease.  The increase from 56.6% in 1995 to
63.1% in 1996 for  Yavapai  County  is due to the  Company's  hiring  additional
employees.  The increase  resulted in a  substantial  increase in the  Company's
market share;  however,  the extra payroll expense prior to the increased orders
closed resulted in an increase in payroll expense compared to total revenue.

         Other  operating  expenses  increased  in  1996  compared  to  1995  by
approximately  $466,000  or  44%.  A  majority  of the  increase,  approximately
$368,000 or 34.6%, was due to the expansion into Maricopa County.

                                       12
<PAGE>


         Acquisition  cost write down relates to costs incurred when the Company
initiated its expansion  program.  The Company initially  anticipated  expanding
into the  California  and  Texas  markets  by  December,  1996.  Management  has
postponed expansion outside of Arizona until 1998, if conditions warrant, and is
now considering the Nevada market instead of Texas. Accordingly, the acquisition
costs the Company was capitalizing  have been expensed for the fiscal year ended
October 31, 1996.


LIQUIDITY AND CAPITAL RESOURCES

         Capital Title Group requires capital to expand its  geographical  base,
make acquisitions, further implement its market penetration program, recruit and
train new personnel, and purchase additional property and equipment to implement
its  expansion  program.  During the year ended  October 31,  1996,  the Company
financed its operating and business  development  activities  primarily  through
operating  revenue,  obtaining a $150,000  term loan, a $75,000 short term loan,
and the private  placement of shares of common stock,  resulting in net proceeds
to the Company of $1,156,999.


         During the year ended October 31, 1996, Capital Title Group commenced a
private placement of common stock intending to sell a minimum of 500,000 shares,
and a maximum of  1,500,000  shares at $1 per share.  As of October 31,  1996, a
total of 1,275,000  shares had been sold in the  offering.  The expenses of this
offering  were  approximately  $118,100  which  generated  net  proceeds for the
Company of  approximately  $1,156,900.  Subsequent  to the fiscal year end,  the
Company's  Board of Directors  authorized the issuance of an additional  550,000
shares of its  Common  Stock at $1.00 per share.  As of  February  5, 1997,  the
Company has sold 550,000 shares for proceeds,  net of expenses, of approximately
$538,000.

         The Company  believes that the net proceeds of this offering,  together
with its existing cash resources and  financing,  will be sufficient to meet the
Company's  working capital needs for the next 12 months.  The Company,  however,
may raise capital  through the issuance of long-term or  short-term  debt or the
issuance  of  securities  in  private  or  public  transactions  to fund  future
expansion of its business either before or after the end of the 12 month period.
There can be no assurance that acceptable  financing for future transactions can
be obtained on terms acceptable to the Company.


         As  of  December  31,  1996,   the  Company  had  net  operating   loss
carryforwards  of  approximately  $1,187,000  that will be  available  to offset
future state income taxes and  approximately  $756,000 that will be available to
offset future federal income taxes. The state net operating  carryforwards  will
expire  October 31, 2001.  The federal net operating  carryforwards  will expire
October 31, 2011.

                                       13
<PAGE>

IMPACT OF NEW ACCOUNTING STANDARDS

         During October,  1995, the Financial  Accounting Standards Board issued
Statement No. 123 (SFAS 123), "Accounting for Stock-Based  Compensation",  which
establishes a fair value-based method of accounting for stock-based compensation
plans and requires additional  disclosures for those companies that elect not to
adopt the new method of  accounting.  The Company  will  continue to account for
employee purchase rights and stock options under APB Opinion No.25,  "Accounting
for Stock Issued to  Employees."  SFAS 123  disclosures  will be  effective  for
fiscal years beginning after December 31, 1995.

RECENT DEVELOPMENTS


         On December  10, 1996,  the  Company's  Board of  Directors  elected to
change to corporate year end from October 31 to December 31. The fiscal year end
was changed to December 31 to be consistent with year end closings of most major
title  companies.  A current report on Form 8-K has been filed  announcing  this
change.


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


          The Capital Title Group,  which, until the Acquisition  Transaction on
          May 23, 1996, had no substantial business operations, has nevertheless
          been audited in each of the last two fiscal years. For the fiscal year
          ended 1994, the Company's  financial  statements were audited by Duane
          V. Midgley  ("Midgley").  In 1995,  with the approval of the Company's
          Board  of  Directors,  the  Company  engaged  Schvaneveldt  &  Company
          ("Schvaneveldt") as its independent auditors for the fiscal year ended
          December 31, 1995 to replace Midgley.

          The reports of Midgley on the Company's  financial  statements for the
          fiscal year ended  December 31, 1994  contained an adverse  opinion in
          that they expressed  substantial  doubt about the Company's ability to
          continue as a going concern.

          In connection with the audit of the Company's financial statements for
          the year ended  December 31, 1994,  there were no  disagreements  with
          Midgley on any matters of accounting principle or practices, financial
          statement disclosure,  or auditing scope and procedures,  which if not
          resolved to the satisfaction of Midgley,  would have caused Midgley to
          make reference to the matter in his report.

          The Company  authorized  Midgley to respond fully to any inquires from
          Schvaneveldt & Company.

          The Company  requested Midgley to furnish it a letter addressed to the
          Securities and Exchange  Commission stating whether it agrees with the
          above  statements.  A copy of that letter,  dated  September 23, 1996,
          incorporated by reference in this Form 10-KSB.

                                       14
<PAGE>

          The financial  statements of Capital  Title,  the Company's  operating
          subsidiary, for the fiscal years ending October 31, 1994 and 1995 were
          audited by John E.  Jones,  CPA  ("Jones").  After  completion  of the
          Acquisition Transaction in 1996 and with the approval of the Company's
          Board of  Directors,  the Company  engaged  Semple & Cooper,  CPA, PLC
          ("Semple")  as its  independent  auditors  for the  fiscal  year ended
          October 31, 1996 to replace Schvaneveldt and Jones.

          The report of Schvaneveldt on the Company's  financial  statements for
          the fiscal  year ended  December  31, 1995 and the reports of Jones on
          Capital  Title's  financial  statements  for the  fiscal  years  ended
          October  31, 1994 and 1995 did not  contain an adverse  opinion,  or a
          disclaimer  of  opinion,  nor were they  qualified  or  modified as to
          uncertainty, audit scope or accounting principles.

          In connection with the audit of the Company's financial statements for
          the year ended December 31, 1995 and in connection  with the audits of
          Capital  Title's  financial  statements  for the  fiscal  years  ended
          October  31,  1994  and  1995,  there  were  no   disagreements   with
          Schvaneveldt  or Jones  on any  matters  of  accounting  principle  or
          practices,  financial  statement  disclosure,  or  auditing  scope and
          procedures,  which if not resolved to the satisfaction of Schvaneveldt
          or Jones,  would have caused  either of them to make  reference to the
          matter in their respective reports.

          The Company and Capital Title have authorized  Schvaneveldt  and Jones
          to respond fully to any inquires from Semple.

          The Company and Capital Title have requested Schvaneveldt and Jones to
          furnish them with letters  addressed  to the  Securities  and Exchange
          Commission  stating  whether  they  agree  with the above  statements.
          Copies of those  letters,  each of which is dated  September 23, 1996,
          are incorporated by reference in this Form 10-KSB.

                                       15
<PAGE>
                                    PART III

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

         The  following  table  sets  forth the  names,  ages and  positions  of
directors  and  executive  officers  of the Company as of January  15,  1997.  A
summary of the  background  and  experience of each of these  individuals is set
forth after the table.

         The directors and executive officers of the Company are:

Name                    Age                       Position
----                    ---                       --------
     Donald R. Head          58          Chairman of the Board; Chief Executive
                                         Officer

     Andrew A. Johns         59          President; Director

     James Clifford          36          Vice President

     James P. Stamas         36          Vice President

     Nick Velimirovich       46          Vice President

     Michael J. Benjamin     35          Vice President, Controller

     Deborah Campbell        39          Treasurer

     Kimberly Sue DeJong     28          Secretary

     Jeffrey P. Anderson     46          Director

     James R. Evans          49          Director

     Theo F. Lamb            54          Director

     Robert B. Liverant      67          Director

     Stephen A McConnell     44          Director


         Directors hold office until the next annual meeting of  stockholders or
until their successors have been duly elected and qualified. Officers are chosen
by and serve at the discretion of the Board of Directors.

                                       16
<PAGE>

         DONALD R. HEAD is  co-founder of Capital Title Agency and has served as
Chairman of the Board since its inception.  Mr. Head is also the Chairman of the
Board and Chief Executive  Officer of Capital Title Group.  Mr. Head has engaged
in a number of  entrepreneurial  activities within the real estate industry.  He
was a co-founder of the Prescott  Mining  Company  Restaurant  and developed the
Prescott Air Park, a 35,000 square foot  industrial  and office park,  the Plaza
West Commerce Centre, a five acre office park, and a 112 unit townhouse complex,
all in Prescott, Arizona. Since 1988, Mr. Head has lived in Scottsdale,  Arizona
where he has continued  his real estate  development.  He  co-founded  Centurian
Development  and  Investments,  Inc.,  which is a custom designer and builder of
residential  homes for some of the most prestigious  residential  communities in
the exclusive North  Scottsdale area. Mr. Head is also a partner in America West
Capital One LC, which acquired 677 acres of land currently under  development as
a residential community in Verde Valley in Yavapai County, Arizona. Mr. Head has
served as a board  member on both U.S. and Canadian  public  companies.  He is a
graduate  of Arizona  State  University  with a BA in  Business  and holds a law
degree from the University of Arizona.


         ANDREW A. JOHNS joined Capital Title in April 1996 as Vice President in
charge of Special Projects and shortly thereafter was named President. Mr. Johns
has also been a Director of Capital Title since March 1996 and a Director of the
Company since the  Acquisition  Transaction  in May 1996.  Mr. Johns is also the
President of the Company.  Mr. Johns has more than 28 years of experience in the
title insurance  industry.  Prior to joining the Company,  Mr. Johns served in a
senior management position with United Title Company for 12 years, expanding its
operational  presence  from Orange  County,  California  to encompass the entire
Southern California market.  United Title purchased TRW Title, Inc. changing its
name to Nations Title,  Inc. When Nations Title,  Inc.  expanded into Arizona in
1994 through  Nations Title of Arizona,  Mr. Johns was selected to establish and
implement  its  operations.  Nations  Title of Arizona was merged  into  Network
Escrow Title Agency,  which later changed its name to Nations Title Insurance of
Arizona,  Inc.,  and operated under Mr. Johns as Executive  Vice  President.  In
January  1996,  Nations  Title  Insurance of Arizona,  Inc.,  and its  operating
entities were acquired by Fidelity  National Title  Company,  one of the top ten
title  companies in the nation,  for in excess of $30  million.  Prior to United
Title  Company,  Mr. Johns was employed by Stewart Title of California  for nine
years holding several executive positions including  President.  He was directly
responsible for developing  fourteen  profitable  branches for Stewart Title. He
began his career with First American Title Insurance Company in California.  Mr.
Johns is a graduate of Compton College.

          JIM CLIFFORD joined Capital Title in July 1996 as a Vice President and
was named Vice President of the Company in June 1996.  Mr.  Clifford also serves
as the President of Capital Title's Maricopa County operations. Prior to joining
the Company,  Mr.  Clifford was employed by United Title  Agency,  Inc. for more
than 17 years, where he most recently served as the Chief Operating Officer.

         JAMES P. STAMAS  joined the Company in July 1996 as Vice  President and
also serves as the Executive Vice  President-Legal  of Capital  Title.  Prior to
joining  Capital  Title  Agency,  Mr.  Stamas was Senior Vice  President/General
Counsel for United Title Agency of Arizona,  Inc. Mr. Stamas has over nine years
of  experience  in the  industry.  He is also an active member of the Land Title
Association  of Arizona,  its  Legislative  Committee and  California  Trustee's
Association.

                                       17
<PAGE>

          NICK  VELIMIROVICH  joined  Capital  Title  in  July  1996  as a  Vice
President  and was  named  Vice  President  of the  Company  in June  1996.  Mr.
Velimirovich  also  serves as the Chief  Executive  Officer of  Capital  Title's
Maricopa  County,  Arizona  operations.   Prior  to  joining  the  Company,  Mr.
Velimirovich  was employed by United Title Agency,  Inc. for more than 23 years,
where he most recently served as the Arizona District Manager.

         MICHAEL J.  BENJAMIN  joined the  Company in  November,  1996 as a Vice
President and serves as the Corporate  Controller  responsible for all financial
functions  for Capital  Title's  operations.  Prior to joining the Company,  Mr.
Benjamin  was  employed  by Semple & Cooper,  PLC as an Audit  Manager.  He is a
graduate  of  Florida  Atlantic  University  with  a BA in  Accounting  and is a
Certified Public Accountant.

          DEBORAH L.  CAMPBELL is a Vice  President  of Capital  Title.  In such
capacity,  she is  responsible  for all  administrative  functions  for  Capital
Title's  operations.  Ms.  Campbell has been  employed by Capital Title for more
than 13 years  and has held  various  positions,  including  serving  as a trust
officer and  overseeing  all compliance  regulations.  Ms.  Campbell is also the
Company's  Treasurer.  Ms.  Campbell is an active member of the Arizona  Trustee
Association and Land Title Association of Arizona.

          KIMBERLY SUE DEJONG is the Secretary of the Company and is responsible
for the accounting services,  including escrow services  accounting,  of Capital
Title.  Ms. DeJong has been with Capital Title since 1992.  Prior to joining the
Company in 1992, Ms. DeJong was employed by Lifeline Ambulance.

         JEFFREY P.  ANDERSON  has been a Director of Capital  Title Group since
September 1996. From 1992 until 1996, Mr. Anderson was Executive Vice President,
Southwest Region, for First Interstate Bank in Phoenix,  Arizona. He also served
concurrently as Chairman of the Board of First Interstate Bank of Colorado. From
1986 until 1992,  Mr.  Anderson  was  employed by Security  Pacific  Corporation
serving at various periods as Senior Vice President or Managing  Director in the
Energy/Utilities  Group,  Corporate  Finance and Banking  Department and Special
Industries Department.  Mr. Anderson holds a BS degree in Finance and Management
from the  University of Southern  California  and an MBA from  California  State
University, Long Beach.

         JAMES R.  EVANS  has been a  Director  of  Capital  Title  Group  since
September  1996.  Since 1980,  Mr. Evans has been the Chairman and  President of
Sunrise  Preschools,  Inc. Sunrise  Preschools is a public company that operates
and provides management contracts for child care centers offering  comprehensive
child care services  primarily for children ages six weeks to twelve years. From
1960 to 1980,  Mr. Evans was an executive  with  Smitty's,  a major  grocery and
general merchandise  retailer in Phoenix,  Arizona.  While employed by Smitty's,
Mr.  Evans  was   responsible  for  opening  a  number  of  new  facilities  and
participated in the sale of the corporation in 1981.

                                       18
<PAGE>

         THEO F.  LAMB is  co-founder  of  Capital  Title  and has  served  as a
Director since its inception.  Mr. Lamb has been a Director of the Company since
the Acquisition Transaction in May 1996. He is the owner of Lamb Chevrolet, Inc.
in  Prescott,  Arizona,  a  retail  car  dealership  for  Cadillac,  Oldsmobile,
Chevrolet,  Subaru  and  Nissan  automobiles.  He has  served as a member of the
Chevrolet and Subaru  National  Dealer  Counsels and was elected to the Regional
Dealer  Counsels for  Oldsmobile  and Cadillac.  He was the managing  partner in
several  successful  land and commercial  property  developments in the Prescott
area.  Mr.  Lamb is a graduate  of Southern  Methodist  University  holding a BS
degree in Business.

          ROBERT B. LIVERANT is a retired Chartered  Accountant who was a Senior
Partner in the Firm of Liverant  Yip and Co. in British  Columbia  for 20 years,
specializing in audits of public  companies.  Mr. Liverant was also a partner in
the firm of Smythe  Ratcliffe and Associates and a member of the firm of Pannell
Kerr Forester,  an international  accounting firm. Mr. Liverant has several real
estate investments  including significant holdings in Saturna Beach Estates LTD,
an 80-acre recreation and vineyard development in British Columbia, for which he
also serves as a director.  He has served as a director of more than 15 Canadian
public  companies.  Mr.  Liverant holds a BA degree with an economics major from
the University of British Columbia. He now resides in Cave Creek, Arizona.

         STEPHEN A MCCONNELL  has been a Director  of Capital  Title Group since
September  1996.  He is the  President of Solano  Ventures,  a firm  involved in
private capital  investments.  He has served since 1991 as Chairman of the Board
and  majority  shareholder  in  Mallco  Lumber &  Building  Materials,  Inc.,  a
wholesale  distributor of construction  lumber and doors. From 1991 to 1995, Mr.
McConnell  was President of Belt Perry  Associates,  Inc., a property tax appeal
firm.  He was  President  and Chief  Executive  Officer  of N-W Group,  Inc.,  a
publicly held  corporation,  from 1985 through  1991.  Mr.  McConnell  presently
serves on the board of a number of public companies.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

         Section 16(a) of the Exchange Act requires the  Company's  officers and
directors,  and persons who beneficially own more than 10% of a registered class
of the Company's equity securities,  to file reports of ownership and changes in
ownership with the SEC.  Officers,  directors and greater than 10%  shareholders
are required by Exchange Act  regulations  to furnish the Company with copies of
all Section 16(a) forms they file.

         The Company filed a Form 10-SB with the Securities  Exchange Commission
on September 24, 1996, which became effective under the Securities  Exchange Act
of 1934 on November 25, 1996. The Company's officers,  directors and persons who
beneficially own 10% or more of the Company's common stock were required to file
Form 3's with the Securities and Exchange  Commission on or before the effective
date of the Form 10-SB. Such persons failed to timely file their respective Form
3's.

                                       19
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

         The following table summarizes all  compensation  paid to the Company's
Executive Officers (the "Named Executive Officer"), for services rendered in all
capacities to Capital Title during the fiscal years ended October 31, 1996, 1995
and 1994.

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                               Long Term Compensation
                                                              ------------------------
                                   Annual Compensation                  Awards          Payouts
                              ------------------------------   ----------------------   -------
                                                               Restricted  Securities
     Name and        Fiscal                     Other Annual     Stock     Underlying    LTIP      All Other
Principal Position    Year    Salary    Bonus   Compensation    Award(s)    Option(s)   Payouts  Compensation
------------------    ----    ------    -----   ------------    --------    ---------   -------  ------------
<S>                   <C>     <C>         <C>       <C>          <C>            <C>      <C>       <C> 
Donald R. Head        1996    $64,000     $0        $-0-         $-0-           0        $-0-      $-0-
Chairman of the
Board and Chief
Executive Officer
                      1995    $48,000     $0        $-0-         $-0-           0        $-0-      $-0-

                      1994    $38,000     $0        $-0-         $-0-           0        $-0-      $-0-
</TABLE>

COMPENSATION OF DIRECTORS


         Directors  who are  not  employees  of the  Company  are not  currently
receiving compensation for their services other than reimbursement of reasonable
expenses  if any.  Directors  who are  employees  of the  Company do not receive
compensation  for such services.  Directors who are not employees of the Company
also participate in the Company's Non-Employee Directors Stock Option Plan.


EMPLOYMENT CONTRACTS

         DONALD R. HEAD:

         On June 1, 1996,  Donald R. Head entered into an  Employment  Agreement
with the Company,  which  provides for his services as Chairman of the Board and
Chief  Executive  Officer (the "Head  Agreement").  The initial term of the Head
Agreement  expires on May 31, 2001.  The Head  Agreement is subject to automatic
renewal for additional ten-year terms on the initial expiration date and on each
renewal date  thereafter  unless notice of  termination  is provided to Mr. Head
sixty days prior to the expiration  date or if Mr. Head provides  written notice
of resignation  to the Board sixty days prior to the  expiration  date. The Head
Agreement  may be  terminated  by the  Company  for  cause  including  upon  (i)
conviction of a willful or  intentional  crime,  (ii) absence from work for more
than 180 consecutive  days and (iii) the material failure by Mr. Head to perform
his duties.

         The Head  Agreement  provides for an initial  salary of $96,000 for the
first year and an annual  salary of $150,000 for the second and each  succeeding
year,  plus an annual bonus equal to 6% of the  Company's  pretax net profits on
all Company  operations,  calculated  according to generally accepted accounting
principles  applicable to title insurance agencies  consistently  applied.  Such
bonus shall be prorated in the first year of employment for the period remaining

                                       20
<PAGE>

in the  Company's  fiscal year if less than twelve  months.  Such bonus shall be
determined  and paid within three months  following the end of each fiscal year.
Beginning with the second year of employment, estimated compensation can be paid
with appropriate adjustments spread over twelve months in the event of any under
or over estimated payments.  In addition,  the Head Agreement provides for a car
allowance of $800 per month.

         The Head  Agreement  provides  that if Mr. Head  resigns or if the Head
Agreement  is  terminated  by the  Company for any reason  during a  sixty-month
period following a  Change-in-Control  (as defined in the Head Agreement) of the
Company, the Company shall continue to pay to Mr. Head all compensation which he
is entitled to under the Head Agreement for its remaining term.

         ANDREW A. JOHNS:

         On June 1, 1996,  Andrew A. Johns entered into an Employment  Agreement
with the Company,  which  provides  for his  services as  President  (the "Johns
Agreement").  The initial term of the Johns  Agreement  expires on May 31, 2001.
The Johns  Agreement is subject to  automatic  renewal for  additional  ten-year
terms on the initial  expiration date and on each renewal date thereafter unless
notice  of  termination  is  provided  to Mr.  Johns  sixty  days  prior  to the
expiration  date. The Johns Agreement may be terminated by the Company for cause
including upon (i) conviction of a willful or  intentional  crime,  (ii) absence
from work for more than 180 consecutive  days and (iii) the material  failure by
Mr. Johns to perform his duties.

         The Johns  Agreement  provides for an initial salary of $72,000 for the
first year and an annual  salary of $114,000 for the second and each  succeeding
year,  plus an annual bonus equal to 4% of the  Company's  pretax net profits on
all Company  operations,  calculated  according to generally accepted accounting
principles  applicable to title insurance agencies  consistently  applied.  Such
bonus shall be prorated in the first year of employment for the period remaining
in the  Company's  fiscal year if less than twelve  months.  Such bonus shall be
determined  and paid within three months  following the end of each fiscal year.
Beginning with the second year of employment, estimated compensation can be paid
with appropriate adjustments spread over twelve months in the event of any under
or over estimated payments. In addition,  the Johns Agreement provides for a car
allowance of $800 per month.

         The Johns Agreement  provides that if Mr. Johns resigns or if the Johns
Agreement  is  terminated  by the  Company for any reason  during a  sixty-month
period  following  a  Change-in-Control  (as  defined in the  Agreement)  of the
Company,  the Company shall continue to pay to Mr. Johns all compensation  which
he is entitled to under the Johns Agreement for its remaining term.

         JAMES A. CLIFFORD:

         On May 17, 1996, James A. Clifford entered into an Employment Agreement
(the "Clifford Agreement") with the Company. The Clifford Agreement was based on
certain  conditions  which were met on July 1, 1996,  the effective  date of the
Clifford  Agreement,  which  provides  for his  services as President of Capital
Title Agency's Maricopa County operations. The term of the Clifford Agreement is
for a period of three (3) years.  Compensation  under the Clifford  Agreement is
$120,000 per year plus additional compensation equal to five percent (5%) of the
Company's pre-tax net profit on operations in Maricopa County.

                                       21
<PAGE>

         JAMES P. STAMAS:

         On July 22, 1996, James P. Stamas entered into an Employment  Agreement
(the "Stamas  Agreement")  with the Company,  which provides for his services as
Executive Vice  President/General  Counsel for general  business  operations for
Maricopa  County.  The term of the Stamas Agreement is for a period of three (3)
years. Compensation under the Stamas Agreement is $75,000 per year.

         NICK VELIMIROVICH:

         On May 17, 1996, Nick Velimirovich entered into an Employment Agreement
(the "Velimirovich  Agreement") with the Company. The Velimirovich Agreement was
based on certain  conditions  which were met on July 1, 1996, the effective date
of the  Velimirovich  Agreement,  which  provides  for  his  services  as  Chief
Executive Officer of Capital Title Agency's Maricopa County operations. The term
of the Velimirovich  Agreement is for a period of three (3) years.  Compensation
under  the   Velimirovich   Agreement  is  $120,000  per  year  plus  additional
compensation  equal to five percent (5%) of the Company's  pre-tax net profit on
operations in Maricopa County.

STOCK OPTION PLANS

         1996 STOCK OPTION PLAN

         The Company's  1996 Stock Option Plan (the "1996 Plan")  authorizes the
Board  to grant  options  to  employees  of the  Company  to  purchase  up to an
aggregate of 1,000,000  shares of Common Stock.  Officers and other employees of
the Company who, in the opinion of the Board of Directors,  are  responsible for
the continued  growth and development  and the financial  success of the Company
are  eligible  to be  granted  options  under  the  1996  Plan.  Options  may be
non-qualified  options,  incentive  stock  options,  or any  combination  of the
foregoing. In general,  options granted under the 1996 Plan are not transferable
and expire five years after the date of grant.  The per share  exercise price of
an incentive  stock option  granted under the 1996 Plan may not be less than the
fair  market  value of the Common  Stock on the date of grant.  Incentive  stock
options  granted  to persons  who have  voting  control  over 10% or more of the
Company's  capital  stock are  granted at 110% of the fair  market  value of the
underlying  shares on the date of grant. No option may be granted after December
31, 2006.

         The 1996 Plan  provides the Board of Directors  with the  discretion to
determine  when  options  granted  thereunder  will become  exercisable.  Unless
otherwise provided,  50% of the options granted may be exercised after two years
from the date of grant and the  remaining  50% of the options  may be  exercised
after  three  years from the date of grant at any time prior to  expiration,  so
long as the optionee  remains  employed by the Company.  No option granted under
the 1996 Plan is  transferable by the optionee other than by will or the laws of
descent and distribution,  and each option is exercisable during the lifetime of
the optionee only by the optionee.

                                       22
<PAGE>

         As of December 31, 1996,  the Board has  authorized the grant under the
1996 Plan of  options  to  purchase  937,600  shares of Common  Stock,  with the
exercise  prices of all such  options  being $1.00 per share.  Of such  options,
60,000  were  granted to Mr.  Head,  40,000  were  granted  to Mr.  Johns and an
aggregate  of  470,000  were  granted  to the other  executive  officers  of the
Company.

         NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN

         The Company also has a  Non-Employee  Directors  Stock Option Plan (the
"Directors  Plan"),  under which only  non-employee  directors  are  eligible to
receive  options.  Options to purchase up to 100,000  shares are  authorized for
issuance under the Directors Plan. As of December 31, 1996,  75,000 options have
been granted under the Directors  Plan at an exercise  price of $1.00 per share.
All options granted under the Directors Plan will be subject to the same vesting
schedule  applicable to options granted under the 1996 Plan. All options granted
or to be granted under the Directors Plan are non-qualified stock options.

         Each  non-employee  director  who  joins the  Board of  Directors  will
receive an option to acquire  15,000  shares of the Company's  Common Stock.  In
addition to the foregoing option grants, each year, every non-employee  director
automatically  receives  an option to  acquire  10,000  shares of the  Company's
Common Stock on the third  business day following the date the Company  publicly
announces its annual financial results; provided that such director has attended
at  least  75% of the  meetings  of the  Board  of  Directors  and of the  Board
Committees  of which such  non-employee  director  is a member in the  preceding
fiscal year. The exercise price of all options  granted under the Directors Plan
is the fair market value of the Company's Common Stock on the date of grant.

         No option  granted  under the  Directors  Plan is  transferable  by the
optionee  other than by will or the laws of descent and  distribution,  and each
option is exercisable during the lifetime of the optionee only by the optionee.

                                       23
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following  table sets forth the  beneficial  ownership of shares of
Common  Stock of the  Company  as of  December  31,  1996 by each  director  and
executive officer, by all directors and executive officers as a group and by all
persons known by the Company to be the beneficial  owners of more than 5% of the
Company's Common Stock.

                                              Number of Shares      Percent of
Name and Address                            Beneficially Held(1)     Ownership
----------------                            --------------------     ---------
Donald R. Head(2)                             2,627,345(3)             24.7%

Andrew A. Johns                                 963,502                 9.3%

Theo F. Lamb(4)                               2,225,205                21.6%

Robert B. Liverant                              100,000                 1.0%

Stephen A McConnell                              50,000                  .5%

James R. Evans                                   25,000                  .2%

Dorothy Eichbaum, Trustee of The
William and Dorothy Orth Eichbaum
Trust Dated November 19, 1986                   603,791                 5.9%

John M. Redfield, Jr. And Linda N 
Redfield, as Trustees under a Revocable
Declaration of Trust dated October 29, 1982     600,490                 5.9%

Mark A. Scharmann                               606,833                 5.9%

Irwin Jacobson                                  520,833                 5.0%

Miller Capital Corporation(5)                   590,000                 5.7%

All directors and executive officers as
a group (12 persons)                          6,191,052                60.0%
----------

(1)  Does not include options to purchase shares of the Company's  Common Stock,
     none of which are currently vested. See "Executive Compensation."
(2)  Shares beneficially held in The Head Revocable Trust Dated April 1, 1975.
(3)  Includes  301,895  and  300,245  shares of Common  Stock which Mr. Head has
     options to  purchase  from The William  and  Dorothy  Eichbaum  Trust dated
     November  19, 1986 and from John N.  Redfield,  Jr. and Linda N.  Redfield,
     respectively,  anytime  during the period  ending May 23, 1999 for $.52 per
     share.
(4)  Shares beneficially held in The Lamb Trust Dated October 11, 1983.
(5)  Capital Title has entered into a financial  advisory  agreement with Miller
     Capital  Corporation  dba The Miller  Group  ("TMG")  pursuant to which TMG
     provides  certain  financial   advisory,   valuation   business   planning,
     consulting and other services.  Under the financial advisory agreement, TMG
     purchased  590,000 shares of the Company's Common Stock for a total of $100
     upon  completion  of the  Acquisition  Transaction.  In  connection  with a
     private  placement  by the  Company of a maximum of  1,500,000  shares at a
     price of $1.00 per share (the  "Private  Placement"),  TMG is  entitled  to
     receive  an  amount  equal  to 7% of the  gross  proceeds  of  the  Private
     Placement.
                                       24
<PAGE>

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

          In January 1996,  Capital Title assumed a 10% note from PWCC,  Inc. to
Bank One Arizona, NA in the amount of $150,000. At October 31, 1996, the balance
of the note was  $131,974.  The terms of the note require  Capital Title to make
sixty equal monthly  installment  payments to Bank One Arizona, NA in the amount
of $3,187.05. In consideration of such assumption,  PWCC contributed $150,000 to
Capital Title.  PWCC, Inc. is a corporation wholly owned equally by Mr. Head and
Mr. Lamb.

         During  fiscal 1996 and 1995,  Capital  Title  Agency paid  $43,319 and
$86,546,  respectively,  to Dale A. Head for legal services  rendered to Capital
Title Agency. Dale A. Head is Donald R. Head's brother. In September,  1996, the
Company  granted  an option to Dale A. Head to acquire  20,000  shares of Common
Stock of the Company at an exercise price of $1.00 per share.

         Theo F. Lamb has advanced  the Company  $8,000 for  operating  purposes
pursuant to a Note  Agreement.  The eight and a half percent  (8.5%) note is due
October 31, 1997 and is unsecured.


         Donald R. Head  advanced  the  Company  $8,000 for  operating  purposes
pursuant to a Note  Agreement.  The eight and a half percent (8.5%) note was due
October 31, 1997 and was unsecured. The note was paid in November, 1996.

         The Company  received  management  and  consulting  services  from Head
Management Group, a Company owned by Donald R. Head.  Charges for these services
were  $28,800 and $48,000  for the years  ended  October 31, 1996 and 1995.  The
agreement was terminated May, 1996.

         The Company had a lease with Lamb Chevrolet Profit Sharing Trust,  Inc.
for computer equipment. The balance owed under this lease as of October 31, 1996
and 1995 was $0 and $1,582,  respectively.  During fiscal 1995, the Company paid
$38,244 in lease payments relating to the computer equipment.


                                       25
<PAGE>
                                   SIGNATURES

          In accordance with Section 13 or 15(d) of the Securities  Exchange Act
of 1934, the registrant caused this amended report to be signed on its behalf by
the undersigned, thereunto duly authorized.

                                                 CAPITAL TITLE GROUP, INC.


                                                 By /s/ Donald R. Head
                                                   ---------------------------
                                                        Donald R. Head
                                                        Chief Executive Officer

Date:    March 7, 1997

          In accordance with the  requirements of the Securites  Exchange Act of
1934,  this  amended  report has been signed below by the  following  persons on
behalf of the Registrant and in the capacities and on the dates indicated.

      Signatures                      Title                             Date
      ----------                      -----                             ----

/s/ Donald R. Head            Chairman of the Board                          
-------------------------             and             
    Donald R. Head            Chief Executive Officer              March 7, 1997

/s/ Andrew A. Johns
-------------------------
    Andrew A. Johns             President, Director                March 7, 1997

/s/ Michael J. Benjamin       Vice President, Controller                        
-------------------------     (Principal Financial and               
   Michael J. Benjamin           Accounting Officer)               March 7, 1997

/s/ Jeffrey P. Anderson
-------------------------
   Jeffrey P. Anderson              Director                       March 7, 1997

/s/ James R. Evans
-------------------------
    James R. Evans                  Director                       March 7, 1997

/s/ Theo F. Lamb
-------------------------
    Theo F. Lamb                    Director                       March 7, 1997

/s/ Robert B. Liverant
-------------------------
    Robert B. Liverant              Director                       March 7, 1997

/s/ Stephen A.McConnell
-------------------------
    Stephen A McConnell             Director                       March 7, 1997

                                       26